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*** Due Diligence *** Business Intelligence *** Asset Retrieval *** *** Debt Recovery *** Disappearance Response ***  TT Business Intelligence Report Vol. 2, No. 55, 18 September 2003 Business Intelligence, Crime, Corruption and Debt in C&E/SE Europe and the FSU UPCOMING CONFERENCES LVA'S "METEX 2003 - 5th EURASIAN METAL TRADE, MINING AND INVESTMENT FORUM" This event will take place on 13-17 October 2003 (during LME week) in London, United Kingdom. For further information, please contact Arthur Poliakov, tel: +44 (0)20 8795 2970; fax: +44 (0)20 8795 2977; email: [email protected]; W: www.lva.co.uk 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 THE ENERGY EXCHANGE'S "OIL AND GAS TRANSIT AND SUPPLY IN CENTRAL AND EASTERN EUROPE AND THE BALKANS" This event will take place on 23-24 October 2003 at the Radisson SAS Palais Hotel, Vienna, Austria. For further information, please contact Steve Church, tel: +44 (0)1242 529 090; fax: +44 (0)1242 529 060; email: [email protected]; W: www.theenergyexchange.co.uk IPC'S "NEW DEVELOPMENTS IN ANTI-MONEY LAUNDERING MEASURES" This event will take place on 25-26 November 2003 at the Radisson SAS Daugava Hotel, Riga, Latvia. For further information, please contact Judith Halliwell, tel: +44 (0)20 8943 4903; fax: +44 (0)20 8977 7150; email: [email protected]; W: www.ipc-conferences.co.uk BELARUS BELARUS: NGOs IN THE CROSSHAIRS Belarusian authorities recently reprimanded one civic group because of missing quotation marks on letterhead. Another was closed down for using the word "organization" instead of "association" on official papers. The most recent nongovernmental organization to lose its official standing is a legal-aid and human rights monitoring group, Legal Assistance to the Population (LAP). Minsk city judge Natalia Zhupikova made the ruling on 8 September on grounds that the group had improperly rendered paid legal services to the public. She also said LAP had the wrong official stamp. LAP became the first human-rights nongovernmental organization to be closed by the courts or the government. On 13 September, a second human-rights group, Viasna, was notified that the Supreme Court will consider a Justice Ministry lawsuit to close it down, according to the Web site of the Charter 97 opposition group. After Zhupikova's ruling, LAP released a statement saying the group would continue monitoring human-rights violations committed by the Belarusian government and the judicial system, Charter 97 reported. The judge ordered the hearing to be held on video, because there was no suitable hall for an open hearing. LAP head Aleh Volchak demanded the hearing be moved to a larger space and refused to participate in the proceedings, which went ahead in the absence of any representative of the organization. LAP was founded in 1998 to help citizens who were unable to pay for legal services. It became well-known for its role in the investigations related to disappearances of opposition politicians Yuri Zakharanka and Viktar Hanchar, businessman Anatol Krasowski, journalist Dzmitry Zavadski, and also for assisting the relatives of victims of a stampede at a Minsk subway station in 1999. LAP members said the judge's ruling was ordered by the government. The International Helsinki Federation for Human Rights (IHF) agreed, saying it was deeply concerned about the decision, which seemed to be part of an ongoing process of thwarting the work of human-rights defenders. The IHF charged that "a new, orchestrated campaign against civil society" was under way in Belarus. The ambassador of the Organization for Security and Cooperation in Europe (OSCE) to Belarus, Eberhard Heyken, reacted to the court ruling in a more measured tone, commenting on 12 September that "To liquidate an established and well-functioning NGO under such circumstances seems too harsh a measure and disproportionate in relation to [its] deeds." Heyken also communicated his concern over the government's crackdown on nongovernmental organizations in a letter to Justice Minister Viktar Galavanaw. The OSCE cooperates with a number of these organizations, including the Belarusian Helsinki Committee, the Lev Sapeha Foundation, and LAP. In late August, authorities denied a visa to the OSCE's Representative on Freedom of the Media, Freimut Duve, who had intended to meet with independent journalists. (TOL 15.ix.03) BOSNIA AND HERZEGOVINA BOSNIAN SERBS SELLING OFF SURPLUS WEAPONS On 15 September, the Bosnian Serb authorities began their review of bids from 11 foreign and local firms to buy huge quantities of arms and ammunition left over from the 1992-95 Bosnian war, regional and international media reported.The final decision will be made once NATO peacekeepers have vetted the applicants, who come from Canada, Bosnia, and Serbia and Montenegro. A Bosnian Serb Defense Ministry spokesman said most of the offers are for ammunition. He noted that prices range from $19 for 1,000 rounds of pistol ammunition, to $1,500 for an anti-aircraft gun. The spokesman stressed that all prices have been made public to ensure transparency. In former Yugoslavia, much of the arms industry and many military storage areas were located in Bosnia, which the leadership of Josip Broz Tito considered relatively inaccessible to any potential invader. (RFE/RL 16.ix.03) BRINGING WAR CRIMES HOME After 10 years, the Bosnian-Croat survivors of a massacre perpetrated by the Bosnian Army are hopeful that justice will finally be served. On 22 August, police arrested Mustafa Hota and Enes Sakrak, both in their mid-30s, for direct involvement in the killing of 33 Bosnian-Croat civilians in the village of Grabovica in September 1993. Both men were members of the largely Bosniak (Bosnian Muslim) Army of Bosnia and Herzegovina (ABiH). According to Sarajevo Canton police spokesperson Ljiljana Sakic, Sakrak was arrested in his apartment and Hota at Sarajevo's general hospital, where he was admitted two nights earlier for injuries sustained during a fight. Neither suspect resisted arrest. The arrests already are seen as a significant step toward post-war reconciliation-especially as the case has largely been kept low profile, while local and international prosecutors focused mostly on rounding up indicted Bosnian-Serb and -Croat war criminals charged with killing Bosniaks during the war. The case also will be seen as another test for Bosnia's judiciary to prove its ability to fairly try indicted war criminals. Both Hota and Sakrak will be tried in Bosnia, since local judicial authorities were given the green light by the International Criminal Tribunal for the former Yugoslavia (ICTY). Bosnian courts may conduct war crimes trials only after gaining approval from the ICTY under procedures established to eliminate biased trials in the ethnically divided country and to reduce the international court's workload. "It is important that Hota and Sakrak are prosecuted in domestic courts. . The Hague Tribunal designated the cases against Hota and Sakrak as category 'A,' meaning that there are grounds to suspect they had committed war crimes in Grabovica in 1993," Refik Hodzic, spokesperson for Sarajevo's ICTY office, told TOL. The arrest of Hota and Sakrak is only the beginning. TOL has learned that Sarajevo prosecutors and The Hague have several other suspects in the Grabovica massacre, and plans for their arrest are already underway. (TOL 11.ix.03) BULGARIA BULGARIAN PRIME MINISTER NOMINATES CONTROVERSIAL COORDINATOR FOR SPECIAL SERVICES In a surprising move, a government spokesman announced on 15 September that Prime Minister Simeon Saxecoburggotski has nominated retired General Brigo Asparuhov as coordinator for the country's special services, which include the National Intelligence Service (NRS), the National Security Service (NSS), the National Service for Combating Organized Crime (NSBOP), police services, and the Defense Ministry's special services, mediapool.bg reported. Asparuhov, now a lawmaker for the opposition Socialist Party (BSP), headed the NRS until 1997, when he was sacked by the now-opposition conservative United Democratic Forces (ODS). Earlier this year, NATO members protested the planned nomination of Asparuhov as head of the NRS for his involvement in the communist-era secret service and his contacts with the KGB. (RFE/RL 16.ix.03) CROATIA PRESIDENT STJEPAN MESIC GIVES ASSURANCES CONCERNING CROATIA AND EU ENLARGEMENT PLANS President Stjepan Mesic has said there is no dilemma for his country concerning European Union enlargement and the question of whether this process is at the first or the last stage, Jutarnji List reported. In a speech before his Polish, Macedonian and Romanian counterparts, Aleksandar Kwasniewski, Boris Trajkovski and Ion Iliescu, and gathered business people, politicians and experts, Mesic said that the process of integration of European countries was based on economic foundations and if there was any dilemma it only referred to the dynamics of the process. He voiced confidence that around 2006 a new wave of EU expansion would ensue and in this regard Croatia expected the Stabilisation and Association Agreement (SAA) to become a bridge connecting it with the second wave of EU enlargement. Every south-eastern European country should become capable of crossing that bridge based on its own abilities. This should not be only the result of political decisions but must also be based on the assessment of each country's individual progress, Mesic told the forum. He stressed that his country would also bring its own potential into the Union such as "a favourable maritime position and the coastline suitable for the development of tourism". "We are considering the possibility of proclaiming an economic zone in the Adriatic Sea, and the decision on the matter will be made in compliance with the new EU policy and international law," Mesic said, adding that such a decision would be in the best interest of the Union. He reiterated that 2007 would be the year when Croatia could join the EU, while it was realistic to expect the country to join the European monetary union around 2010. (NewsBase 09.ix.03) CZECH REPUBLIC FALKON CAPITAL EXPECTED TO LOSE CONTRACT AS MEDIATOR FOR EXACTING RUSSIA'S DEBT Falkon Capital, the company which the previous government of Milos Zeman picked as mediator for exacting Russia's debt to the Czech Republic, will lose the order, according to a report in Mlada fronta Dnes, citing Czech Deputy Finance Minister Ladislav Zelinka. Russian ministers reportedly do not want private firms to assist in settling debts from the past between Russia and the Czech Republic, the paper wrote. "I will have to propose to the [Finance] Minister to reject Falkon's offer for the solution to the remaining part of the debt, and to the government to stop co-operating with Falkon," the paper wrote, citing Zelinka. Last week, Russian Deputy Finance Minister visited Zelinka with this request. The Russian side does not want Russian firms to get involved in the settlement of its debts with the Czech Republic. One of the reasons is that due to that Russian ministers have been criticised by deputies and the media. Falkon obtained exclusivity for talks with Russia in 2001 in spite of warning by Czech security services. Originally, Russia owed $3.6 billion, 110 billion crowns, to the Czech Republic. When Falkon Capital bought a $2.5 billion claim from the Czech government for some 22% of its value, the Russian debt was lowered to $1.1 billion, including unpaid interest. (NewsBase 16.ix.03) GOVERNMENT FACES NEW POLITICAL CRISIS The Czech coalition government was badly shaken again late last week by a fresh crisis as the Senate rejected a new excise duty bill with the help of rebel Freedom Union senators. With the senators voting against their own government, leaders of the three coalition parties were due to meet Sunday to form a strategy for getting the bill through the lower house a second time. The Senate vote will make it harder to get the government's fiscal reform package through Parliament, especially if the excise duty bill is voted down in the lower house. If it and the government's VAT bill both fail, the Ministry of Finance warned on Friday that the 2004 budget deficit would go up by Kc 23 billion to over Kc 140 billion. With the lower house due to debate next week the fiscal reform package, which is aimed at reducing budget deficit spending to 4 percent of GDP by 2006, many analysts were reluctant to predict which way the reform debate would go. But if the reform package does pass, they say, it will likely be in a somewhat diluted form. The government has staked its survival on getting the package approved. The government's reform package is based on cutting some expenditures but also increasing revenues. As part of that process, the excise duty bill was meant to raise taxes on cigarettes, alcohol and gasoline. The vote in the Senate on Thursday was seen as a victory for the transport lobby, which was vehemently opposed to the fuel tax hikes. Although the Senate vote apparently took many people by surprise, not least the government, others said the warning signals were there. Pavel Mertlik, chief economist at Raiffeisenbank and a former finance minister, pointed out that the Senate avoided voting on the government's VAT bill-which would have raised most items in the lower 5 percent bracket to the upper rate of 22 percent-earlier this summer. President Vaclav Klaus vetoed the VAT bill, which the lower house can override as it can the Senate's objections to the excise duty bill. The problem is that the government has just 101 votes out of 200 in the lower house. One MP, Hana Marvanova of the Freedom Union, was expecting a baby and unlikely to be present to vote. Another Social Democrat (CSSD) MP, Josef Hojdar, has rebelled in the lower house, making him a loose cannon for the government. Without these two bills and the extra Kc 23 billion in additional revenues they would raise, finance ministry officials warned last week, the reform package is doomed. For that reason, the government will be hard pressed to get the bills back through the lower house before the fiscal reform debate Sept. 22. If both bills pass, the government's real headache will begin with the fiscal reform debate. The trade unions intend to have amendments introduced during the debate to water down the reforms, and the Czech Chamber of Commerce is prepared to counter with measures to make the reforms tougher. (PBJ 15.ix.03) ESTONIA ESTONIA GIVES YES TO EU ENTRY Estonia is on track to join the European Union after official results from Sunday's referendum in the Baltic state showed two-thirds had backed membership. According to final results declared by the Central Election Commission 66.9% supported EU entry, with 33.1% voting 'No'. Turnout was put at 63% of the 850,000 voters. "Spring has arrived in Estonia - we're back in Europe," Prime Minister Juhan Parts told a news conference. Estonia was one of eight east European countries invited to join the EU next May and joins Slovenia, Hungary, Lithuania, Slovakia, Poland and the Czech Republic have already voted "yes" in referendums. Latvia votes next week. While EU supporters in Estonia have argued that membership will bring economic benefits and safeguard the independence the nation gained in 1991, opponents feared the nation's economy would get bogged down in EU red tape and that taxes would be raised. Opponents were also concerned about sacrificing sovereignty after just 12 years of independence. (NewsBase 16.ix.03) GEORGIA PRESIDENT ORDERS INVESTIGATION OF MASS ESCAPE FROM GEORGIAN PRISON President Eduard Shevardnadze on 11 September ordered an immediate investigation by national security officials into the mass escape of some 138 prisoners from the Rustavi penal facility, 24 kilometers south of Tbilisi, Reuters and the "Georgian Times" reported. One hundred prisoners remain at large after the 10 September escape, which was reportedly carried out with the assistance of armed accomplices who entered the prison facility and provided transportation for the escapees. With a mere handful of guards responsible for overseeing more than 1,000 prisoners, this is the third successful escape from the Rustavi prison. Justice Minister Roland Giligashvili, widely believed to be in danger of being dismissed for the incident, explained that the repeated escapes are "largely due to the scarcity of finances," and warned that escapes "might recur in the penitentiary system of Georgia." (RFE/RL 12.ix.03) HUNGARY RICHTER UPS STAKE IN ARMEDICA The drug maker Richter Gedeon Rt has increased its majority stake in the Romanian firm Armedica S.A. to more than 97% as a result of a merger between Armedica and Richter's Romanian subsidiary Gedeon Richter Romania SRL. Richter also reported a new shares issue at the September weighted average price of Richter shares of Ft 20,806. The new shares replace 7,986 ordinary shares, which were declared null and void as their holders failed to submit them for dematerialization. These shareholders will be paid Ft 20,806 per share as Richter deducts neither costs nor adds interest. (BBJ 17.ix.03) MOL STAKE TO SELL ON BOURSE The government wants to sell a 13% stake in oil and gas company MOL Rt this year through the Budapest Stock Exchange Rt (BET) or a foreign bourse, CEO Zsolt Hernadi told newswire MTI last Thursday. The stake is worth about $329 million, based on the stock's current market price. The choice to use a stock exchange to sell shares in MOL - in which, according to its articles of incorporation, no investor can buy more than 10% - is wise, according to Tamas Simonyi, corporate finance partner of KPMG Hungaria Kft. He explained that selling even a 10% package of shares in MOL to an industry investor would endow that investor with an undesirable amount of influence in the company. "Ten percent is a strategic share in the case of a company with MOL's shareholder structure. It would be groundless to sell a 10% share in a package to one investor, as MOL gets on well on its own," Simonyi said. Hernadi confirmed that the 10% limit renders it unlikely that an industry investor would buy a stake, and added that this limit is expected to remain in force for five years after Hungary joins the EU. He said any investor can buy MOL shares. MOL is expected to achieve sufficient growth by following its own strategy and does not need help from a professional investor, Hernadi asserted. This was decided back in 1996, when MOL was first privatized, he added. The government in June revealed plans to sell its 23% holding in MOL in stages. (BBJ 15.ix.03) KAZAKHSTAN KAZAKHSTAN AND RUSSIA TO DEVELOP THEIR CASPIAN SEA DEPOSITS JOINTLY Andrei Kuzyayev, president of Lukoil Overseas, Lukoil's major operator for foreign projects, and Timur Kulibayev, KazMunaiGaz's first vice president, have signed two option contracts for the exploration and extraction of hydrocarbon resources at the Russian and Kazakh sectors of the Caspian Sea. Russia and Kazakhstan will develop their Caspian sectors as equal partners. These documents come as a follow-up to a memorandum of understanding signed in February and a cooperation agreement signed in June as part of a joint project to develop deposits off the Caspian coast. The June agreement envisions work on the Tyub-Karagan and Kazakhstan deposits of the Kazakh sector. Under the two countries' agreement on the division of the Caspian, Russia's Khvalynskoye and Central fields will be developed by Russia and Kazakhstan on a parity basis. Lukoil and KazMunaiGaz have been authorized to develop the deposits. The Khvalynskoye field is estimated to hold 127 billion cubic meters of gas and 9.6 million tonnes of gas condensate. These figures have been confirmed by the Miller & Lents auditor company. The licenses to the Khvalynskoye and Central deposits are held by Lukoil. (Interfax 11.ix.03) LITHUANIA EESTI ENERGIA TO BID FOR ELECTRICITY DISTRIBUTION COMPANY Gunnar Okk, the executive director and board chairman of Eesti Energia, announced in Vilnius on 3 September that his company will make a bid to acquire a 71.35 percent stake in the distribution company Rytu Skirstomieji Tinklai (RST), ELTA reported. The state-owned Eesti Energia fulfills all the requirements for participation in the contest, but has not yet decided whether it will do so alone or with an unnamed Western investor. In any case, it will face serious competition from other energy companies that have expressed their interest in buying the company, including Germany's E.ON Energie, Finland's Fortum, France's Electricite de France, Poland's Polskie Sieci Elektroenergetyczne, and the U.S. group AES. Okk said that Baltic ownership of RST would be the best alternative and that, if successful, Eesti Energia would leave local management in charge but would introduce effective cost management and make targeted investments. (RFE/RL 16.ix.03) POLAND BANKS DISCUSS CONVERTING DAEWOO-FSO DEBTS INTO SHARES Bank Pekao SA Spokesman Robert Moren informed PAP that his institution was in favour of dividing half of Daewoo-FSO liabilities into installments with maturity at the end of 2006, and annulling the remaining amount. Total debt of Daewoo-FSO to Pekao SA amounts to zl. 29 million. However, its total liabilities towards BPH PBK, Bank Handlowy, Pekao SA, Millenium, ING Bank Slaski and KB amount to zl. 591 million. Moren added that conditions for reaching agreement were allowing banks to include the losses connected with the restructuring Daewoo debts into operating costs and then in turn, banks would demand paying off the liabilities without regular interest. However, it is unknown what percentage of debts the other institutions will annul, as negotiations are continuing and so far none of them have commented on the talks. Both Daewoo-FSO's President and the State have proposed converting the company's liabilities into shares. (WBJ 16.ix.03) GLOBAL BANKING SUPERPOWER HSBC MULLS UPHILL BATTLE ON LOCAL MARKET HSBC Bank Polska, the local subsidiary of the world's second-largest banking company, faces a number of tough hurdles in the country's competitive, almost saturated banking market, as it sets out to launch consumer finance products later this year, and corporate-geared services next year. Banking analysts, who have been anticipating HSBC's decision to increase its Polish operations for more than a year, say that the company is a little late in getting to the market. Other global banks carved out substantial footprints in the market years ago. Chris Ignatowicz, chief executive designate for HSBC Bank Polska and HSBC country manager, agrees with sector analysts in some ways: "That's correct: this is a highly competitive market," Ignatowicz confirms. "We are under no illusions that we have an automatic right to make money." Because of these factors, market watchers dismiss any talk that HSBC's new presence here is a major event. They add that the recognition of HSBC's eminent name abroad does not necessarily translate to Poland. However, the bank remains undeterred. Last week, local authorities gave HSBC the green light to buy Polski Kredyt Bank (PKB) for zl.31 million. Given the dearth of existing operations at PKB - most had been transferred to its parent bank Kredyt Bank - the deal basically amounts to HSBC paying for a Polish banking license. It has been tough for analysts to figure what direction the banking giant is taking here. Nevertheless, HSBC is pleased with its decision to increase its operations on the local market. It had already offered corporate finance and stock-broking services. Like many international companies, HSBC chose Poland because of its impending European Union membership and the country's size, as compared to others in Europe. (WBJ 15.ix.03) ROMANIA MINISTER FACES AN EU INQUIRY INTO HER FAMILY'S ACQUISITION OF $150,000 First it was sick palm trees. Now Prime Minister Adrian Nastase's government is facing another corruption allegation--the foul play of the Minister for European Integration, Hildegard Puwak. In late July, investigative journalist Liviu Avram of the Adevarul daily uncovered evidence that companies run by Puwak's husband and son received a total of $150,000 in grants from the European Union after she took office following the November 2000 elections. The government's efforts to downplay the reports backfired. Now, Prime Minister Adrian Nastase's government faces an investigation by the EU's European Anti-Fraud Office (OLAF) and Nastase, himself, is in the bad books of the American ambassador. Initially, both the government and the ruling Social Democratic Party (SDP) closed ranks against the media's continual harping on the Puwak story. The case was closed, said spokespersons for both the government and the party. On his recent visit to France, Nastase addressed the issue to the foreign media that, until now, he had reserved for domestic use, saying the Romanian correspondent of Le Monde was at fault for printing such bad news about Romania. As for Romanian journalists, they were accused by both Nastase and Foreign Minister Mircea Geoana of endangering Romania's chances of achieving full European integration by 2007. On 1 September Geoana said the media had overplayed the Puwak affair, which he called a "tempest in a teacup." (TOL 15.ix.03) RUSSIA RUSSIA AGAINST SENDING NORTH KOREAN ISSUE TO UN SECURITY COUNCIL Russia has criticized the idea of the UN Security Council taking up the North Korean nuclear issue. Russian Deputy Foreign Minister Sergei Kislyak said in an interview published in Wednesday's issue of the Vremya Novostei newspaper that "everyone is interested in resolving the dispute over North Korea's nuclear program within six-sided talks, and I think that this format of talks is integral to settling this issue. The United States has been using its 'axis of evil' term less and less, at least during conversations with us," Kislyak noted. He said that "ideological labels only hamper resolution of the problem." The deputy foreign minister said that the North Korean issue cannot be settled through political pressure. "We need serious dialogue that will take account of the interests of all parties concerned," he added. (Interfax 17.ix.03) CENTRAL BANK WARNS OF LIQUIDITY CRUNCH The Central Bank said ruble supply was likely to be tight in September, discouraging local banks from mopping up the U.S. currency, Oleg Vyugin, first deputy chairman of the Central Bank, was quoted as saying by Interfax on Tuesday. Ruble liquidity traditionally narrows in the middle and at the end of the month, fueling the rise of interbank lending rates when firms pay taxes to the budget. Higher demand drives up interbank rates and usually firms up the ruble, which gained in the first half of the year thanks to Russia's robust balance of payments. But in September, ruble sentiment appeared to have changed because of a seasonal weakness in the current account and lower capital inflows after the Central Bank in July halved to 25 percent the amount Russian exporters had to sell at home. The dollar drought sparked speculative pressure on the ruble and the Central Bank was forced to sell about $700 million for rubles in the first week of September to defend the national currency, which traded at 30.70 per dollar on Tuesday. The ruble shortage led to double-digit overnight ruble lending rates, which stood at 13 percent to 17 percent by 2 p.m. To offset the liquidity squeeze, banks rushed to the Central Bank, putting up as collateral about 17 billion rubles worth of ruble-denominated securities at Monday's one-day repo auction. Dealers said the comments were unlikely to boost the ruble. "Now the dollar rise trend is stronger, and the only question is how fast it will gain, but that fully depends on the Central Bank," said Alexei Bukleyev of Alfa Bank. "If at the end of the third quarter there is a liquidity crisis, people will roll over it to make a profit buying dollars afterwards." Banks' balances in their correspondent accounts at the Central Bank -- a key sector liquidity indicator -- rose by about 6 billion rubles to 91 billion rubles on Tuesday but were still some 14 billion below the daily average in August. (The Moscow Times 17.ix.03) RUSSIA TO DISCUSS OIL PIPELINE ROUTE WITH CHINA Russian Prime Minister Mikhail Kasyanov said on Monday that one of the main subjects in his planned visit to China next week would be the route for a planned pipeline to export oil from Russia to China. The Russian government has promised to choose the route before the end of the year. The pipeline, to connect Angarsk, Russia, to Daqing, China, would be a branch of a pipeline running from Angarsk to the Russian port of Nakhodka. The Angarsk-Nakhodka pipeline project is part of a Russian energy strategy spanning the period until 2020. The pipeline would have an annual capacity of 50 million tonnes. Two route options have been proposed for the Daqing branch, which would have a yearly capacity of 30 million tonnes. One of the proposed routes runs along the Baikal-Amur Rail Mainline. The other, backed by major Russian oil company Yukos, lies along the Trans-Siberian Railway and runs off to Daqing. Earlier, Russian Deputy Natural Resources Minister Kirill Yankov said his ministry "does not recognize [either option] as acceptable". One of the routes would pass through Russia's Tunkin Valley National Park, the other along the banks of Lake Baikal. Yankov said that the pipeline would be impossible to mend quickly if it were damaged and leaked oil and so an accident could spark an environmental disaster. Kasyanov told a news conference in Moscow on Monday that the route issue "is clearly represented in joint documents with China, and various options for the route of the pipeline are being considered, with ecological requirements taken into account." (Interfax 16.ix.03) BOMBING ROCKS FSB'S INGUSH OFFICES A truck laden with explosives blew up Monday outside the Federal Security Service's headquarters in Ingushetia, killing at least two people and injuring at least 25, officials said. The explosion blew all the windowpanes and ripped part of the roof open, leaving the three-story building severely damaged but still standing. Overturned cars lay crumpled near the pockmarked FSB building in Ingushetia's capital, Magas, and nearby buildings were also damaged, but there was very little rubble. An Associated Press reporter saw at least one dead body inside one of the cars. The force of the blast was so great, said Muslim Dudarov, a man who works in a nearby building, that he was thrown out of his office and into the building's lobby. He said that numerous people were hit by flying glass. The bombing in Ingushetia, which has close ethnic ties to Chechnya and shelters tens of thousands of Chechen refugees, came ahead of a planned Oct. 5 presidential election in Chechnya. The Kremlin has touted the vote as a key step toward peace, but the campaign has been tarnished by accusations of intimidation tactics by supporters of Chechnya's Moscow-appointed acting leader, Akhmad Kadyrov. Officials gave varying casualty tolls. Yury Miroshnichenko, a duty officer at the Emergency Situations Ministry's headquarters for southern Russia, said two people were killed and 32 were wounded, including four people in intensive care. Sergei Ignatchenko, an FSB spokesman in Moscow, said two people were killed and 25 injured. But Yakhiya Khadziyev, a spokesman for the Ingush Interior Ministry, said three people were killed on the scene. Accounts also differed as to whether the truck had been driven by a suicide bomber or parked outside the building. There was no immediate claim of responsibility for the blast. Officials called it a terrorist act but did not say who they believed was behind it. (The Moscow Times 16.ix.03) SISTEMA HEAD SPEAKS OUT ON YUKOS Vladimir Yevtushenkov, who heads the powerful Sistema financial-industrial group, said on 9 September that the bulk of the Russian business community supports the authorities in the standoff between law enforcement and oil major Yukos, RosBalt reported the same day. Speaking about business and government at the International University, Yevtushenkov told listeners: "If many people in our business community feel that [Yukos CEO Mikhail] Khodorkovskii made mistakes, he made them. We have a better view from the inside." Arkadii Volskii, the president of the Russian Union of Industrialists and Entrepreneurs, echoed Yevtushenkov in comments to "Vedomosti" on 10 September, saying: "I've always been against businessmen having political ambitions. That's an oligarchy -- when money tries to get into power." Meanwhile, the newspaper's editors linked Yevtushenkov's remarks with upcoming parliamentary and presidential elections and the impending formation of a new cabinet: "Yevtushenkov's statement is probably just the beginning. In accordance with the constitution, a new government (and likely a new prime minister) will be appointed in six months, and big business is entering the fray for the right to influence the decisions new ministers will make." In a parallel development, "The Moscow Times" reported on 10 September that Khodorkovskii is set to receive some $1.3 billion in cash in the course of the Yukos-Sibneft merger. The embattled oil tycoon may well use the money to support various political parties -- from liberal warhorse Yabloko to the quasi-oppositional Communist Party -- in December elections to the State Duma. (RFE/RL 16.ix.03) BRITAIN WON'T EXTRADITE BEREZOVSKY Boris Berezovsky cannot be extradited from Britain to face fraud charges in Moscow because the British government granted him political asylum, a London court ruled. District Judge Timothy Workman ended extradition proceedings in a hearing Friday at the Bow Street Magistrates Court. Russia may challenge Home Secretary David Blunkett's decision to grant Berezovsky refugee status, British prosecutor James Lewis, who is acting for the Russian government, told the court. Berezovsky is wanted on fraud and embezzlement charges that he says stem from his disagreement with President Vladimir Putin's policies and support for opposition parties and the media. Berezovsky has said he plans to lead the Liberal Russia party's list of candidates for State Duma elections in December. If successful, he will be immune from prosecution. Russian prosecutors accuse Berezovsky and long-time business associate Yuly Dubov of defrauding 60 billion rubles ($1.9 billion) relating to car sales by AvtoVAZ. Berezovsky also faces charges he embezzled money from Aeroflot. The Russian government is still pursuing Dubov's extradition, Lewis said. Dubov, who refuses to return to Russia, is a "whipping boy to get Mr. Berezovsky,'' said Dubov's lawyer, Clare Montgomery QC. "We have good reason to state that the organs of the Russian state have tried to use the proceedings of this court to murder Mr. Berezovsky,'' she told the court. Dubov is awaiting a decision from the Home Office on his request for asylum, which was made last October. His application is linked to Berezovsky's, and the businessman will have to testify if a trial is held for Dubov's extradition, Montgomery said. Dubov is expected to take the third position on Liberal Russia's list of candidates for the Duma. A hearing will be held Wednesday on his extradition. Berezovsky's party may be unable to participate in the December elections because a rival wing of the party has already been registered under the same name by the Justice Ministry, Alexander Veshnyakov, chairman of the Central Election Commission, told journalists at a briefing in Moscow. Berezovsky's party has appealed the decision in a court in southern Russia, he told reporters. Berezovsky lives in Surrey, south of London. Sergei Yushenkov, who founded Liberal Russia with Berezovsky, was shot dead in April. A 20-year-old was arrested less than a week later on suspicion of killing Yushenkov. Liberal Russia co-chairman Vladimir Golovlyov was killed by gunmen in Moscow in August last year. Alun Jones QC and the law firm Peter Carter-Ruck & Partners acted for Berezovsky. A three-week trial was scheduled to begin Oct. 6 for the extradition of Dubov and Berezovsky. (The Moscow Times 15.ix.03) PUTIN SUSPENDS NORTHERN FLEET COMMANDER President Vladimir Putin on 11 September "temporarily suspended" the commander of the Northern Fleet, Admiral Gennadii Suchkov, in connection with the investigation into the 30 August sinking of the K-159 decommissioned nuclear submarine, which took the lives on nine seamen, Russian media reported. Earlier, Defense Minister Sergei Ivanov accused the officers involved in the towing operation of negligence, while investigators brought an indictment on charges of violating navigation rules against second-rank Captain Sergei Zhemchuzhnyi, who was in charge of the operation. Other experts, however, said that Ivanov was too quick to judge and that it was the Northern Fleet command that hindered efforts by the submarine's crew to save the vessel after a leak was discovered. Suchkov took command of the fleet in 2001 after Putin dismissed his predecessor, Admiral Vyacheslav Popov, in connection with the sinking of the "Kursk" nuclear submarine in August 2000. (RFE/RL 12.ix.03) SUPREME COURT REJECTS PASKO'S APPEAL TO OVERTURN TREASON CONVICTION Russia's Supreme Court refused on 4 September to hear an appeal by Russian journalist Grigory Pasko challenging a Moscow City Court ruling denying him a foreign passport. Ivan Pavlov, Pasko's attorney, told the Committee to Protect Journalists (CPJ) that he had received a letter from the Supreme Court's deputy chairman, Anatoli Merkushov, informing him that the court would not hear an appeal to review the December 2001 ruling. Pavlov said that this appeal was the third attempt this year to overturn the conviction and clear the journalist's name, the CPJ reported on 8 September. On 25 December 2001, Pasko was convicted of treason and sentenced to four years in prison for intending to leak classified information to the Japanese media about the Russian Pacific Fleet's dumping of nuclear waste in the Sea of Japan. The journalist was paroled from prison on good behavior in January, after having served two-thirds of his sentence. Moscow's Southeastern District Visa and Registration Authorities (OVIR) denied Pasko's foreign passport application, submitted in March, on the basis that he was released from prison before completing his full sentence. According to Pasko and his attorney, Russian law does not contain such restrictions and have challenged the OVIR in court. (RFE/RL 11.ix.03) SERBIA AND MONTENEGRO SERBIA TO VOTE FOR A PRESIDENT -- AGAIN Natasa Micic, who is speaker of the Serbian parliament and acting Serbian president, announced on 17 September that a presidential vote will be held on 16 November, dpa reported. She stressed that "the authority and legitimacy of an elected president would contribute to the adoption of the new [Serbian] constitution more than any acting president could," adding that campaigning can begin on 18 September. Anticipating her announcement, the governing Democratic Opposition of Serbia (DOS) coalition announced the previous day that it will nominate a candidate "next week,." Serbia and Montenegro's Defense Minister Boris Tadic said that it would be "irresponsible" of him to seek the presidency because he has important tasks to carry out in reforming the military. Previous Serbian presidential elections in October and December 2002 were inconclusive or invalid. Critics say that the new election is likely to fail too, unless the rules are changed first. The post is little more than symbolic, since real power lies with the prime minister and the government. The last president, Milan Milutinovic, left office in January. (RFE/RL 17.ix.03) LUKOIL ENTERS SERBIAN MARKET In one of this year's largest privatizations of a Serbian company, Russia's Lukoil beat out Hungary's MOL in late August for a 79 percent stake in Serbia's Beopetrol oil company. Reformers in the government say that the arrival of Lukoil is significant, as it will force other companies already in the market to modernize and increase competition. Experts had predicted that Hungary's MOL would have a better chance of winning the tender because it has established itself in a number of countries in central, eastern, and southeastern Europe, including its recent purchase of 25 percent of Croatia's INA oil company. After a month's consideration, however, the decision to award the tender to Russia's Lukoil was a relatively easy one as the firm bid 117 million euros ($130 million), while MOL offered 101 million euros ($113 million). Lukoil also offered more money than MOL for future investment in Beopetrol and more funds for the social program. Serbian Privatization Minister Aleksandar Vlahovic was clearly pleased when he announced that Lukoil's bid was higher than he had hoped. Beopetrol currently employs around 1,500 workers and has over 200 petrol stations in Serbia. Lukoil is the sixth largest oil company in the world and the first Russian firm to obtain listing on the London Stock Exchange in 2002. It employs 150,000 in 30 countries. Lukoil representatives say that they are investing in the Serbian market because of its key position in the Balkans and expected economic growth. Analysts say that the move is part of a broader strategy of the Russian giant's expansion in the region. Lukoil is already a player in the Romanian and Bulgarian oil industries, and analysts say that it may also compete in a future government sell-off of Serbia's largest petrol operator, NIS. A potential bid from Lukoil for NIS would raise serious questions about a market monopoly, but, for now, Vlahovic says that Lukoil's presence will enhance the competitiveness of NIS. There were a number of potential bidders for Beopetrol, including Greece's Hellenic Petroleum, which is a majority shareholder in Montenegro's Jugopetrol. Hellenic Petroleum initially participated in the process, but its bid was rejected as incomplete. In any case, Lukoil is part owner of Hellenic. Austria's OMV was thought to be interested, but did not bid. Both firms were reported to be concerned about Beopetrol's facilities, which they saw as outdated and requiring substantial investment. (TOL 11.ix.03) SLOVAKIA PM DZURINDA SUMMONS MEETING TO EXPLAIN WHY DEFENSE MINISTER SIMKO SHOULD RESIGN Chairman of the Slovak Democratic and Christian Union (SDKU) Prime Minister Mikulas Dzurinda summoned a meeting of leaders of district organisations of the party on Friday to explain why former SDKU deputy chairman and Defence Minister Ivan Simko lost his confidence and has to leave, Sme reported. According to preliminary information, the district leaders support the decision of the party boss, which has been confirmed by a vote in the SDKU presidium earlier in the week. On Wednesday night, the party's leadership accepted the arguments presented by Dzurinda and enabled the departure of Ivan Simko from the cabinet and party structures. The only member of the SDKU presidium who abstained from voting was SDKU deputy chairperson Zuzana Martinakova, who considers Simko a good cabinet minister. The prime minister will submit a proposal to the president to dismiss the defence minister on September 16th. At a cabinet session on Wednesday, Ivan Simko, was the only minister nominated by the SDKU who abstained from voting on the dismissal of National Security Office director Jan Mojzis, despite a recommendation of SDKU leadership to vote for the dismissal. The prime minister later said that he lost confidence in Simko after he ignored a recommendation of the party. "I am very sorry, but I do not understand this behaviour," he said them. Simko remains a regular member of the SDKU, and he will take up his deputy mandate in parliament. The prime minister expects him to be a member of the SDKU deputy faction and support the government. (NewsBase 16.ix.03) UKRAINE UKRAINIAN PARLIAMENT DISCUSSES DRAFT ACCORD ON CIS SINGLE ECONOMIC AREA Following a request from Prime Minister Viktor Yanukovych, the Verkhovna Rada on 16 September began to mull the controversial draft accord between Russia, Kazakhstan, Belarus, and Ukraine on the creation of a single economic zone, Ukrainian news agencies reported. Deputy Premier Mykola Azarov, who represented Kyiv in drafting the accord, told lawmakers that the document does not threaten Ukraine's accession to the World Trade Organization or its future integration with the European Union. Azarov also argued that the accord will not impair the country's sovereignty. Meanwhile, Foreign Minister Kostyantyn Hryshchenko said Kyiv should sign this accord with "reservations" in order to avoid violating the country's constitution and legislation. Our Ukraine, led by Viktor Yushchenko, issued a statement on 15 September calling on President Leonid Kuchma not to sign this accord. (RFE/RL 16.ix.03) UKRAINIAN DEPUTIES MAY BAR TATNEFT FROM BUYING SHARES IN UKRTATNAFTA Deputies in Ukraine's parliament, the Supreme Rada, might bar TATNEFT from buying 43.054% of shares in UKRTATNAFTA, Ukraine's largest oil refinery. The Rada is discussing a new bill on the privatisation of a state-run UKRTATNAFTA stake, under which its co-owners, TATNEFT and its affiliates, will forfeit the pre-emptive right to buy shares. Earlier, Russia's TNK and Ukraine's PRIVATBANK and UKRSIBBANK had announced plans to bid in a tender for the sale of the stake. (NewsBase 16.ix.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. 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 INTERFAX Interfax News Agency is part of Interfax Information Services Group. Interfax is a provider of accurate and reliable general news as well as financial and industry specific news and data from the emerging markets of Europe and Asia. Contact: Roland Hewes T: +44 (0)20 7467 2734 F: +44 (0)20 7486 1826 E: [email protected] W: www.interfax.ru/english 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. 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