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*** Due Diligence *** Business Intelligence *** Asset Retrieval *** *** Debt Recovery *** Disappearance Response *** *** TT Meerkat 500 ***  TT Business Intelligence Report - CE/SEE & FSU Vol. 3, No. 69, 22 April 2004 Business Intelligence, Crime, Corruption and Debt in C&E/SE Europe and the former Soviet Union UPCOMING CONFERENCES ADVANTIX'S "RAISING FUNDS ON THE LONDON STOCK EXCHANGE ON AIM" This event will take place on 2 June 2004 at the London Stock Exchange, London, UK. For further information, please contact Arthur Poliakov, tel: +44 (0)20 8429 0920; fax: +44 (0)20 8429 0912; email: [email protected]; W: www.advantix.co.uk/target-invest ADVANTIX'S "ALTERNATIVE FUNDRAISING OPPORTUNITIES FOR GROWING RUSSIAN AND CIS COMPANIES" This event will take place on 3-4 June 2004 at The Grosvenor House Hotel, London, UK. For further information, please contact Arthur Poliakov, tel: +44 (0)20 8429 0920; fax: +44 (0)20 8429 0912; email: [email protected]; W: www.advantix.co.uk/target-invest WRA'S "CENTRAL AND EASTERN EUROPEAN REFINING AND PETROCHEMICALS - 7th ANNUAL ROUNDTABLE" This event will take place on 18-20 October 2004 in Prague, Czech Republic. For further information, please contact Sapna Khimani, tel: +44 (0)20 7067 1800; fax: +44 (0)20 7430 9513; email: [email protected]; W: www.wraconferences.com BELARUS BELARUS MAY IMPOSE RESTRICTIONS ON EU TEXTILE IMPORTS Belarus may impose restrictive measures against textile imports from Europe; if the EU does not raise import quotas for Belarusian textiles after 10 new countries join it on May 1 2004, Deputy Foreign Minister Alexander Mikhnevich said. The countries that are to join the EU on May 1 are major consumers of Belarusian textile products with exports totaling around $100 million a year, he said. "We will hold new talks with the EU on Belarusian textile import quotas in mid-May and if we do not achieve an increased quota we will impose similar restrictive measures on European textiles. We are not planning to launch a textiles war, but we will not be open if the EU maintains the current quotas," Mikhnevich said. (Interfax 15.iv.04) BOSNIA AND HERZEGOVINA HUNDREDS FLEE FLOODS IN BOSNIA-HERZEGOVINA Several days of heavy rains have caused the Vrbas, Sana, Pliva, Lasva, Una, and some other rivers in central and northwestern Bosnia to overflow their banks, prompting hundreds of local residents to flee. About 400 people abandoned their homes in Srbac alone. Some districts of Banja Luka are flooded, and Jajce is without drinking water. A state of emergency has been declared in Travnik, Vitez, Bugojno, Gornji Vakuf-Uskoplje, and Jajce, Deutsche Welle's Bosnian Service reported. Many roads and highways in both the Republika Srpska and the Croat-Muslim federation are closed to traffic. (RFE/RL 13.iv.04) BULGARIA 40% STAKE IN MOBILTEL MOBILE OPERATOR TO BE SOLD A price of between 600 and 700 million euros has been negotiated for the sale of a 40% stake in Bulgarian mobile operator MobilTel, according to local press reports on April 17. The Bulgarian Commission for the Protection of Competition (CPC) has been informed of the deal and is expected to come up with a decision within days, the daily Trud said. The buyer is said to be a consortium of world banks, headed by US financial giant Citigroup. The consortium also includes ABN AMRO, ING bank and a number of smaller West European investment funds. At the end of March Telekom Austria AG confirmed its interest in buying a majority stake in MobilTel that is valued at up to 1.5 billion euros. In October last year the Austrian incumbent phone company pulled out of talks to buy MobilTel after the Bulgarian operator's owners said they were only interested in selling a minority stake. Telekom Austria expects MobilTel owners to put up for sale a majority stake after the sale of the minority holding, and it expects to start negotiations in the middle of this year. (NewsBase 20.iv.04) BULGARIAN SOCIALISTS DEMAND RENEGOTIATIONS WITH EU ON NUCLEAR POWER PLANT Opposition Socialist Party (BSP) Chairman Sergey Stanishev said on 19 April that this is the last chance for the government to reopen talks with the EU on the closure of blocks No. 3 and No. 4 of the controversial nuclear power plant in Kozloduy, mediapool.bg reported. Slightly changing the BSP's position on this issue, Stanishev warned the government to tread carefully in its relations with the EU and to avoid confrontation. The BSP has to this point categorically opposed the closure of the reactors, accusing the government of working against the interests of the Bulgarian people. According to observers cited by the news agency, Stanishev's change of heart is due to his party's ambition to present itself as a reliable partner to the EU member states ahead of next year's parliamentary elections. (RFE/RL 20.iv.04) CROATIA WARTIME BOSNIAN CROATS PLEAD NOT GUILTY AT THE ICTY With the voluntary surrender of six high-ranking Bosnian Croats to face charges of war crimes, Croatia seems to have passed another hurdle on its way toward receiving candidate status from the European Union. The Bosnian Croat officials pleaded not guilty at the International Criminal Tribunal for the former Yugoslavia (ICTY) in The Hague on 5 April to charges of atrocities committed against Bosnian Muslims in the 1990s. Those indicted include: Jadranko Prlic, former prime minister of the Republic of Herceg-Bosna, the self-proclaimed statelet of the Bosnian war; Bruno Stojic, former defense minister of Herceg-Bosna; Valentin Coric, former Herceg-Bosna interior minister; Berislav Pusic, a commander in the military police and in charge of prisons; and Slobodan Praljak and Milivoj Petkovic -- both chiefs of Herceg-Bosna's armed forces, the Croatian Defense Council (HVO). The consolidated indictment against the six charges them on the basis of individual and command responsibility with 26 counts of crimes against humanity, violations of the laws and customs of war, and grave breaches of the Geneva Conventions. According to the indictment, the aim of the accused was to "politically and militarily subjugate, permanently remove, and ethnically cleanse" areas under control of the HVO in southern Bosnia and to annex them to Croatia. The six men are charged with participating in a joint criminal enterprise -- along with Croatia's late President Franjo Tudjman and former Defense Minister Gojko Susak -- aimed at establishing a "Greater Croatia" and at "engineering the political and ethnic map of Herceg Bosna so that it would be Croat-dominated, both politically and demographically," the indictment reads. Allegedly, they were engaged in the expulsion of tens of thousands of Muslims and other non-Croats, the setup of notorious detention camps, rape, destruction of cities, terrorizing of civilians, murders, and plunder. General Praljak is specifically charged with ordering the destruction of the 16th-century bridge in Mostar in 1993. Before leaving for The Hague, the six wartime officials said they were convinced they would be able to prove their innocence at the ICTY. Jadranko Prlic issued a press release, saying that he was shocked over the accusations against him but convinced that he would prove his own innocence, as well as explain the true goal and purpose of organizing and running Herceg-Bosna at that time. The six accused received a warm send-off in Croatia, with an estimated 300 people singing the national anthem as they boarded the plane for the Netherlands. The international community praised their voluntary surrender. The ICTY chief prosecutor, Carla Del Ponte, hailed the steps Croatia had taken in transferring indictees to The Hague. The State Department issued a statement welcoming "the Croatian government’s efforts to cooperate with the ICTY." Deputy Spokesperson Adam Ereli also said that "all governments in the region should follow Croatia’s example" -- an obvious jab at Serbia, which was recently "penalized" with a suspension of millions of dollars in U.S. aid for failing to cooperate with the ICTY. The United States also renewed calls for all at-large indictees to turn themselves in and on Serbia and Bosnia and Herzegovina to cooperate fully with the tribunal. Local media was rife with speculation about who will be next on the Hague prosecutor’s indictment list. However, Croatian Justice Minister Vesna Skare Ozbolt has asserted there will be no more indictments for Croats, claiming that it has been agreed with the ICTY that Croatian courts will take over some war crimes cases by the end of this year. (TOL 21.iv.04) CZECH REPUBLIC PRESIDENT KLAUS SIGNS SIX NEW LAWS President Vaclav Klaus signed six laws on Tuesday, including legislation on customs offices, collective investments, and bonds, says presidentialspokesman Petr Hajek. The new customs law will cut the number of customs offices in the CR from 91 to 54, due to the Czech Republic’s upcoming EU accession. The law will mean the dismissal of 2,350 of the 9,440 workers employed in these offices. About 80 % of the lay-offs will take place this year, the rest in 2005. The law on collective investments will open Czech companies’ access to EU markets and enable them to extend the range of the products and services they offer. The law on international assistance in the exaction of financial claims should facilitate and accelerate the process of the collection of customs duty and tax arrears thanks to the on-line interconnection of tax administrators in EU member states. The new law on bonds will allow people to use a mortgage for the purchase of not only a home but cars and other items. (Interfax 16.iv.04) BIDS FOR 63% STAKE IN UNIPETROL PETROCHEMICAL HOLDING COMPANY TO BE SUBMITTED BY APRIL 23 Investors interested in buying the state-owned 63% stake in petrochemical holding company Unipetrol have completed due diligence at and should submit binding bids within two weeks, Unipetrol spokesman Tomas Zikmund said on April 9. Unipetrol is one of the largest Czech companies by sales, and employs 14,000 people. Due diligence has been performed for over two months by Hungarian MOL, Polish PKN Orlen and British-Dutch concern Royal Dutch/Shell. The winner is likely to be made known on April 26. Analysts have valued the company at up to 15 billion crowns. Unipetrol was already been privatised, but the winner of the tender, Agrofert, failed to pay the price of 361 million euros (11.5 billion crowns) in September 2002 and the government called a new tender. (NewsBase 14.iv.04) CZECH POWER GIANT CEZ EYES CEE POWER DISTRIBUTORS The Czech state-owned power giant CEZ is interested in regional power distributors throughout the CEE. "My goal is to make CEZ one of the strongest companies in the CEE region", CEZ CEO Martin Roman told the business daily Hospodarske noviny (HN). "Poland remains a priority, but the firm is interest in acquisitions in the whole CEE region." Roman would not say how much the company is willing to invest abroad. "CEZ is one of the least indebted and most profitable energy firms... Room for foreign acquisitions is very big. It goes beyond the privatizations where CEZ is involved today," he said. CEZ is currently eyeing power distributors in Poland, where two smaller energy distributors have been privatized so far. The Polish government is considering integrating the larger energy distributors and coal mines with the generators prior privatization. CEZ is now involved in privatizations in Slovakia and Bulgaria. It has been shortlisted, with four firms, in the privatization of Bulgaria's seven power distributors. The Bulgarian privatization agency recently postponed the deadline for binding bids by one month to June 25. In Slovakia, CEZ is interested in the power producer Slovenske Elektrarne (SE). It was expected to have been the favorite, as originally it was the only bidder willing to take on SE’s nuclear power division, but more bidders have since expressed interest in the entire company. CEZ is 67.6% owned by the Czech state. The government decided last year to merge CEZ with the country's eight regional power distributors. The deal was approved by the Anti-Monopoly Office (UOHS) provided CEZ sell off two distributors in which it held a minority stake and one in which it held a majority. (Interfax 09.iv.04) GEORGIA GEORGIAN MILITARY OFFICER PROFESSES LOYALTY TO ADJAR LEADER Major General Roman Dumbadze, whom Defense Minister Gela Bezhuashvili dismissed on 3 April from the post of commander of the 25th Armored-Mechanized Brigade based in Batumi, said on 19 April that he will take orders only from Adjar Supreme Council Chairman Aslan Abashidze to whom, Dumbadze said, the brigade is subordinate, Caucasus Press reported. Dumbadze added that he would defend Adjaria in the event of an armed attack by forces loyal to the central Georgian government. Caucasus Press on 20 April quoted Bezhuashvili as condemning Dumbadze's statement as "high treason," adding that it may have been made under pressure or in response to blackmail. Also on 20 April, 17 of the 53 officers of the 25th brigade arrived in Tbilisi, where they told journalists their fellow officers were prevented by "technical reasons" from leaving Batumi with them, according to the website of the independent Georgian television station Rustavi-2. (RFE/RL 20.iv.04) GEORGIAN BREWERY HEAD OFFERS TO SUBSIDIZE GOVERNMENT SALARIES Beer magnate Gogi Topadze, who heads the Industry Will Save Georgia party, proposed on 14 April that Georgia's Union of Major Taxpayers establish a special fund that would pay government ministers' and judges' salaries, ITAR-TASS and Caucasus Press reported. He said the creation of such a fund would demonstrate to the Georgian leadership that it has the support of the country's business community. U.S. philanthropist George Soros and the UN agreed in January to create such a fund in a bid to eradicate corruption by ensuring that such officials are paid an adequate salary. But Topadze told the newspaper "24 saati" that he disapproves of a foreigner subsidizing the Georgian government. In related news, the Union of Major Taxpayers elected Badri Patarkatsishvili as its new chairman on 14 April, Georgian media reported. Patarkatsishvili replaces former Georgian Minister of State Niko Lekishvili, who was re-elected to parliament as an independent candidate in the 2 November ballot. (RFE/RL 15.iv.04) HUNGARY NEWLY ENTERING BUDGET AIRLINES TO LINK BUDAPEST WITH VENICE, BERLIN Two more names have joined the ranks of low-budget airlines serving, or planning to serve, the Hungarian market. AlpiEagles of Italy has been offering low-cost flights between Venice and Budapest as of April 8. One-way tariffs of the company start from E19, excluding taxes and charges. The company offers daily flights, with the exception of Saturday, on a route previously served only by Malev Hungarian Airlines Rt. The company is based in Venice. Its destination network includes Milan, Naples, Palermo, Rome, Venice, Verona, Barcelona, Athens and other popular Greek destinations. As of May 1, Air Berlin of Germany will enter the market, with daily flights to Budapest from Berlin, Munich and Düsseldorf. Flights between Hamburg and Budapest will be available on Tuesdays, Thursdays and Saturdays, according to the company’s press release. Prices start from E29 one way, including all taxes and charges. Recently, easyJet announced daily flights from Budapest to Berlin and London. Another company having talks with Budapest Airport is Ryanair, which aims to fly to Balaton West Airport, near Sarmellek. Volareweb.com of Italy is also planning to launch flights to Hungary. Norwegian Air Shuttle AS will start low-cost flights from Oslo to Budapest this spring or summer, according to the company’s website. Zurich-based budget airline Helvetic is considering flying to Budapest after fall 2004. Czech airline Travel Service, which operates charter flights, recently announced that it will start a budget airline, named Smart Wings, from May, and will start low-cost flights from Budapest in 2005. Meanwhile, Wizz Air Ltd., registered in London with subsidiaries in Hungary and Poland, plans to fly to ten popular European destinations from Budapest. Low-cost airlines already serving the Hungarian market include Snowflake of Sweden, SkyEurope of Slovakia and Germanwings of Germany. (BBJ 19.iv.04) KOREAN BANK TO USE HUNGARY AS EU SPRINGBOARD The Korea Development Bank, owned by the South Korean state, will make its Hungarian subsidiary a strategic base for expansion into the EU. This is to be backed up by a capital injection of $20 million. The decision was announced last week in a press release by KDB Bank (Hungary) Rt following its annual shareholders’ meeting on April 15. The release also said the cash boost will help further strengthen the local bank’s financial status and its credit exposure capacity. Addressing the meeting in Budapest, Lee Yun Woo, deputy governor of the parent bank, said 2003 was a year of steady growth regarding both corporate and consumer financing. Total assets increased by 26.2% to Ft 57 billion (E230 million) over 2002, and pre-tax profit was up 54.5%, to Ft 1.086 billion, he said. Also at the meeting, the local bank approved its financial report for 2003, and decided to reclassify profit after tax as retained earnings instead of paying a dividend. (BBJ 19.iv.04) PM HOPEFUL BELKA CALLS FOR FREEZE ON MOL-PKN ORLEN MERGER Marek Belka, the candidate for prime minister in Poland who enjoys the backing of the country's president, called on the country's outgoing officials to go slow on a merger between Orlen and MOL. Belka's comments followed a front-page article in the daily Gazeta Wyborcza, which claimed that treasury minister Zbigniew Kaniewski was seeking to rush a merger ahead of the government's dissolution on May 2 in order to cement the position of current management at the firm. "This is not a good time for such a decision, in current circumstances when we hear sensational statements every day," Belka said during a meeting with reporters Tuesday. "Later, it wouldn't matter whether the decision was right or wrong but the question will be why the decision was made at that time. I think that these decisions should wait," Belka said. (Interfax 13.iv.04) KAZAKHSTAN FORMER KAZAKH EMERGENCY SITUATIONS AGENCY HEAD URGES PRESIDENTIAL IMPEACHMENT Zamanbek Nurqadilov urged Kazakh parliamentarians to impeach President Nursultan Nazarbaev in an appeal published on 16 April in "Respublika-Assandi Times." In his appeal, Nurqadilov charged that Nazarbaev violated the constitution with his public support for the Otan Party and possibly disclosed state secrets to James Giffen, a former consultant currently on trial in the United States for allegedly making illegal payoffs from U.S. oil companies to high-placed Kazakh officials. Nurqadilov was dismissed in early March after he publicly accused President Nazarbaev of corruption, and called on him to resign. (RFE/RL 19.iv.04) LITHUANIA ACTING PRESIDENT ARTURAS PAULAUSKAS SETS DATE FOR GENERAL ELECTION Acting President Arturas Paulauskas has signed a decree setting September 19 as the date for the next parliamentary elections, the ELTA news agency reported. Prime Minister Algirdas Brazauskas told reporters that he did not support a proposal to amend the constitution to set the second Sunday of October as the date for parliamentary elections. Brazauskas suggested that the elections should normally be held in March so that the newly elected parliament would have enough time to prepare the annual budget for the following year. He said that a government formed in November after parliamentary elections in October would in practice have to work its first year with the budget formed by the previous government. (NewsBase 15.iv.04) POLAND POLPHARMA PLANS RUSSIAN NIZH PHARM PURCHASE Polpharma, the largest domestic drugs producer, owned by Jerzy Starak, plans to expand its operations into foreign markets, which, the firm believes, should increase its annual sales to roughly $500 million by 2007. "We hope that we would be able to take over the Russian Nizh Pharm [a private company currently up for sale]," revealed Jacek Glinka, Polpharma's president. According to the Law and Justice party (PiS), Polpharma would also like to take control of Polish Pharmaceutical Holding (PHF). However, regarding the matter, Glinka stated, "We declared our initial interest in the company, but we have never made any binding declarations. Anyway this would require due diligence of the companies comprising PGF. We are interested in acting as a sector investor, rather than a financial one." (WBJ 21.iv.04) POLAND TO KEEP TROOPS IN IRAQ DESPITE SPAIN'S PULLOUT Polish government spokesman Marcin Kaszuba told PAP on 19 April that Poland respects the sovereign decision of the Spanish authorities to withdraw its troops from the Polish-led multinational division in Iraq. Kaszuba was commenting on new Spanish Prime Minister Jose Luis Rodriguez Zapatero's announcement on 18 April that Madrid will pull out its 1,300 troops as soon as possible. Kaszuba stressed that Polish soldiers in Iraq will continue performing their tasks but added that Warsaw is not going to increase its contingent in Iraq to compensate for the Spanish withdrawal. "At the military level we are holding all the necessary talks so that this process takes place as safely as possible and without affecting the state of security in our zone," Polish Radio quoted President Aleksander Kwasniewski as saying the same day. "We are working on the appropriate mode of replacing the Spanish soldiers in their tasks." (RFE/RL 20.iv.04) MICROSOFT LIKELY TO FEEL SMACK OF EU ANTITRUST RULING The European Commission's recent antitrust ruling against Microsoft will likely directly affect the operations of Microsoft Polska hot on the heels of the country's accession to the European Union. Yet whatever the negative effects on the company's bottom line throughout the EU, market watchers claim that in Poland they will be mitigated by the country's dearth of broadband penetration. Last month, the EC issued its decision against the world's largest software company, stating that it had violated the EU treaty's competition rules by abusing its near monopolistic position on the personal computer operating market. Despite the zl.2.38 fine, the EC is demanding that Microsoft offer a version of its Windows Operating System to manufacturers and end users without its seemingly ubiquitous Windows Media Player. "Following accession, the provisions of the EU treaty will be directly applicable in Poland," said Monika Tomczak-Gorlikowska, attorney at Miller Canfield Poland. She explained that in some sections of EU law, new entrants are afforded a transitional period. But that doesn't apply to competition issues, she points out. Microsoft, as expected, is appealing against the ruling. The market, however, expects that Microsoft will be required to follow part of the antitrust remedy - especially the unbundling of its Media Player. And this is where Microsoft in Poland could have a smoother landing than in Western Europe, due to Poland's lack of broadband penetration. Tomczak-Gorlikowska explains the other aspects of the ruling beyond just the Media Player, which could be equally significant not just in Poland, but also throughout the EU. The Commission has ordered Microsoft to reveal to competitors the "interfaces" necessary for their products to be able to communicate with the Windows operating systems. That's been one of the many bones of contention competitors have had with the software giant. PC users have hardly had any choice but to use all Microsoft products with the ubiquitous operating systems, boxing out competitors' technologies whether or not they are in demand from users. The Washington-based firm faced similarly harsh scrutiny in the USA, where the antitrust authorities targeted Internet browsers rather than the EU's bother of media and server software. And much as was the case in the USA, the company is not taking this sitting down. Asked what the EC ruling's effect might be on Poland, Inga Paus, Microsoft's Munich-based spokeswoman, asserted that the company is appealing and that that process could delay the effects, whatever they may be. The company has publicly complained that the record EU fine was too steep for its stated infractions and accused the EU of trying to regulate something that was already regulated in the USA. The fine alone, however, would hardly put a dent in the company's roughly $50 billion cash pile. And in the USA, Microsoft settled the antitrust case with the government in 2001, despite the fact that a U.S. appeals court is at present reviewing whether the deal was sufficient to reinvigorate software-market competition. At the same time, the deal drew the ire of many key members of the American business community, who were still reeling from the EU decision to thwart General Electric, another U.S. business icon, when it attempted to buy Honeywell International. The EU response was cold if anything. Speaking at a competition law conference last week, EU Competition Commissioner Mario Monti said the remedies proposed "were the minimum necessary to allow effective competition." (WBJ 19.iv.04) SLD'S LAST PARTNER CONSIDERS ABANDONING SHIP The Labor Union (UP) is beginning to reassess its coalition with the Democratic Left Alliance (SLD). This has been forced upon the UP by numerous polls which show that its alliance with the SLD could mean that it will not secure enough votes to return deputies to Parliament. At the UP's national congress next week, party members will select a new leader, as the current leader, Marek Pol, plans to step down. The SLD has already made an offer to the UP to withdraw from coalition and therefore lower the threshold which has to be achieved in order to return deputies to the Sejm from 8% to 5%. Tomasz Nalecz on the other hand, has invited all UP members abandon the party and to join the new Polish Social Democracy (SDPL). "The Labor Union can try and be independent, but it currently needs shock therapy to wake up the members to the actual political reality," said Ryszard Bugaj, UP founder and its first leader, who added that it is unlikely that the coalition with SLD will be broken before the European elections. (WBJ 13.iv.04) ROMANIA GOVERNMENT MAY LAUNCH THE CEC SAVINGS BANK PRIVATIZATION IN 2005 Romania's government may launch the CEC savings bank privatisation in March 2005. The CEC sell-off schedule is expected to be finalised by the end of April, with consultant selection to be launched in May 2004. The CEC savings bank is the last commercial bank in which the state is the sole stakeholder. CEC has a share capital of Leu 642bn and ranks third in the local banking sectors, the assets are valued at over Leu 40tn. (NewsBase 16.iv.04) RUSSIA S&P SLASHES YUKOS, WARNS OF INSOLVENCY Standard & Poor's slashed Yukos' debt rating an unprecedented five notches Tuesday over mounting concerns that the embattled oil giant could be headed for bankruptcy and nationalization. The dramatic downgrade -- the biggest ever of a Russian firm by the debt rater, outstripping even those that followed the 1998 sovereign default and ruble devaluation -- was prompted by last week's beefed-up, $3.5 billion back-tax claim against the company and a court-ordered freeze of all its property. Downgrades of a company's credit rating normally trigger reviews of loans, and analysts said the massive re-rating of its long-term debt -- to "CCC" from "BB-" -- will make it much harder for the company to secure new financing and could even jeopardize the $2.6 billion in international syndicated loans already on its books. Yukos spokesman Alexander Shadrin, however, said the company's loan agreements had yet to come under threat. S&P said the huge back-tax bill plus the asset freeze could pave the way for bankruptcy proceedings, noting that mounting political pressure "might weaken Yukos' position in the tax case." Yukos was hit unexpectedly last week with a $3.5 billion bill for unpaid taxes in 2000, slightly higher than a previous claim that the company had been negotiating with tax authorities for months. A court immediately banned Yukos from selling or transferring any of its assets, including shares and stakes in its key production subsidiaries, pending the outcome of the tax case. S&P credit analyst Elena Anankina said the move was the first time the government had attacked the company itself in the nine-month legal assault against its core shareholders. Yukos founders Mikhail Khodorkovsky and Platon Lebedev have been held in pretrial detention for months on charges of forming an "organized group" for the purpose of defrauding the state and evading taxes. It is not clear whether Yukos has the funds to pay the tax claim if it loses its appeal, Anankina said. Yukos says all of its activities in 2000 were legal. Anankina said that after spending $3 billion last year for 20 percent of Sibneft and then paying out massive dividends, "most of Yukos' cash is gone." S&P also downgraded Sibneft to B from B+ citing increasing uncertainties over its demerger with Yukos in the wake of the court ruling. Some analysts estimate that Yukos has just $500 million in cash, suggesting that it would have to sell assets such as oil field licenses to meet the tax claim. In a telephone interview Friday, chief financial officer Bruce Misamore declined to say exactly how much the company had. She said the government could either force the company into insolvency, or allow some asset sales to pay the tax bill. She warned, however, that despite government efforts to soothe investor fears over the case, it was still impossible to tell which route it would take. Yukos' shares closed down more than 5 percent on the RTS on Tuesday. Finance Minister Alexei Kudrin told investors at the Russian Economic Forum in London on Monday that confiscation of property could not be ruled out, but that the company should be allowed to sell off assets first if the courts ruled against it in the tax case. Analysts, however, said signs are growing that the state is moving more aggressively to force a change of ownership at the nation's largest crude exporter. Al Breach, chief strategist at Brunswick UBS, said the downgrade could lead to a liquidity crunch that could in turn lead to bankruptcy. He said investors had been prepared to turn a blind eye to enforced ownership change at the company as long as it only involved Yukos' core shareholder group. If bankruptcy proceedings were initiated, however, investors would flee out of Russia again, he said. The Federal Tax Service has said it is conducting probes into possible violations in later years, but no charges have been filed. (The Moscow Times 21.iv.04) PM PROPOSES UPDATING PRIVATIZATION PROCEDURE IN RUSSIA The current rules for privatizing state property in Russia must be updated, Prime Minister Mikhail Fradkov told the Cabinet. The Cabinet is discussing the results of privatization in 2003 and privatization plans for 2004 on Wednesday. "At first sight, this issue seems rather routine, as it is discussed each year. But the long established privatization procedure is not making privatization or decision-making in this area, any more effective," Fradkov said. He added that the current situation in the management of state property must be thoroughly analyzed. Fradkov said that insufficient implementation of privatization plans, discussions over the extension of lists of property to be privatized, a clash of bureaucratic interests and the formal quantitative approach to privatization are the main problems. (Interfax 21.iv.04) SENIOR STATE OFFICIALS GET HEFTY PAY RAISES President Vladimir Putin has handed hefty pay raises to federal employees - and himself - as part of an ongoing government overhaul aimed at boosting efficiency and curbing corruption. Putin raised the monthly salary of the prime minister by almost fivefold to $4,000, while the salaries of the deputy prime minister and federal ministers grew to $3,000 and of deputy ministers to $1,500, according to a copy of the April 10 decree obtained by The Moscow Times on Friday. In addition, some 35,000 lower-ranking federal workers will get pay hikes of $100 to $500. Putin doubled his own salary to $5,100, making it almost the equivalent of that of the Spanish prime minister. The salary increases are biggest that civil servants have received in post-Soviet Russia and should leave them satisfied, analysts said. "These figures reflect the expectations of the bureaucrats, as our research based on conversations with some of them shows," said Vladimir Rymsky, an analyst at the Indem think tank who tracks government corruption. The raises affect 10 percent of the 350,000 civil servants employed in federal ministries, agencies, services and the presidential administration, Yugoslav Kuzminov, rector of the Higher School of Economics, told Vedomosti. It was unclear when other civil servants might expect pay raises. Deputy Prime Minister Alexander Zhukov said Friday that the extra money for the raises will come from the salaries of federal employees laid off in the government revamp, Interfax reported. He said the raises will help fight corruption while giving the government a better chance of retaining qualified professionals by closing the gap between the salaries of civil servants and those in the private sector. Observers welcomed the measure but warned that it will not root out corruption on its own. "It is a definitely positive start from a very bad initial position," said Al Breach, chief economist at Brunswick UBS. Breach said that for a crackdown on corruption to work, the raises need to be bundled with other measures - such as giving more independence to the private sector and making legislation less subjective. "And on top of that, there is a cultural aspect. It needs to become bad for people to steal," he said. Just Friday, the Interior Ministry's economic crimes division caught a senior ministry official accepting a $5,000 bribe, Russian media reported. A construction company allegedly gave Labor and Social Development Ministry official Anatoly Golubenko the money to win contracts, the reports said. (The St. Petersburg Times 20.iv.04) ABRAMOVICH STRIKES OIL IN CHUKOTKA While Roman Abramovich's Sibneft is mainly the focus of market attention for whether it will demerge from Yukos, in faraway Chukotka the big news Thursday is that the firm has struck oil. While the estimated 2.2 million tons of oil may not make Chukotkans rich -- or Abramovich significantly richer -- the company hopes the find will bring the region Abramovich governs one step closer to self-sufficiency. Closer to Alaska than Moscow and cut off from the rest of Russia for the better part of the year, Chukotka's survival depends on supplies, including fuel, to be shipped in during the warmer summer months when navigation is possible in its icy waters. By Sibneft's own admission, the Verkhne-Telekaiskoye field is not large enough to warrant building a pipeline from it, "but you could put up a mini-refinery and supply all of Chukotka with fuel," Sibneft spokesman John Mann said. While the entire field's output, were it to be sold at world market prices, could bring in as much as $500 million -- enough for Abramovich to buy another couple Chelseas -- the likelihood of that happening is remote. Under his Chukotka self-sufficiency strategy, Governor Abramovich is pulling in many of the assets of oil magnate Abramovich to the vast region, where his term ends in late 2005. He has said he will not run for reelection. To date, Sibneft has thrown 2 billion rubles ($70 million) at oil exploration in Chukotka. Work is under way on bringing a gas pipeline from Sibneft's Zapadno-Ozyornoye field to Anadyr, Chukotka's capital. The gas it brings will be used to fuel a new power station that will replace coal-powered facilities currently in use. Abramovich's holding company, Millhouse Capital, is active in other areas of the Chukotkan economy as well. Millhouse's Planeta Group built Anadyr's first supermarket in 2002, while its meat products company, Omsk Bacon, is in the process of setting up a pig and chicken farm there. By Sibneft standards, the Verkhne-Telekaiskoye field is a guppy, as one of its largest fields, Sugmut in the Yamal-Nenetsk region, holds over 300 times more oil. But experts say the new field may be the tip of an iceberg, and despite claims that it is his intention to get Chukotka on its feet, Abramovich may have secured his governorship there to exploit its drilling potential. At a new site, initial oil reserve estimates are usually very conservative, Smith said, and the Verkhne-Telekaiskoye field could prove to be two or three times larger than the 2.2 million tons Sibneft assigned it Thursday. Sibneft has already drilled two other wells, but this is the first in Chukotka to yield oil. The company is continuing exploration activities in the region, where it holds licenses for three onshore sites and three offshore sites in the adjacent Bering Sea. (The Moscow Times 16.iv.04) VYUGIN RAPS CENTRAL BANK’S RUBLE POLICY The Central Bank's "protectionist" ruble policy is causing the stock market to overheat and is threatening to create an asset bubble, the nation"s top financial regulator warned Thursday. The Central Bank is reacting wrongly to the U.S. Federal Reserve's decision to "pump the world economy full of cheap dollars," Oleg Vyugin told Vedomosti. Instead of intervening in the currency market to keep the ruble from strengthening against the greenback, the Central Bank should let market decide what the currency is worth, said Vyugin, who ran monetary policy at the bank before moving to head the new Federal Financial Markets Service last month. A massive inflow of weakening dollars from record oil and gas exports is encouraging Russians to convert their savings into rubles, much of which is being invested in equities - either directly or via bank deposits, he said. President Vladimir Putin on Friday told Central Bank Chairman Sergei Ignatyev to keep the ruble from strengthening too much, and Ignatyev later said that real effective ruble appreciation against a dollar-euro basket of currencies would be limited to just 7 percent this year. To do that, however, the bank has to print more rubles and buy up dollars on the market has created even more liquidity, Vyugin said. Deputy Prime Minister Alexander Zhukov warned Wednesday that a surging money supply is threatening the economy. The broad estimate of money supply, or M2, rose 51 percent last year, he told a banking conference. Ignatyev has suggested that since inflation is within the government's target band, the Central Bank will pay more attention to reining in the ruble's appreciation. A stronger ruble hurts manufacturers because it raises their costs, making their goods less competitive. Ignatyev is also mooting the idea of imposing capital controls to limit short-term liquidity, known as "hot money." A new law that comes into force in June will allow the Central Bank, if it wishes, to freeze up to 20 percent of incoming foreign exchange - even corporate loans - and freeze it in a non-interest-bearing account for up to a year. Many economists say that although this is the only tool the Central Bank has to slow inflows, it only intends to use as a threat. Vyugin was not available for clarification Thursday. The Central Bank would not immediately comment. Vyugin was not alone in criticizing his former employer. Macroeconomic instability "is inevitable" when central banks insist on keeping exchange rates at the levels they want, Renaissance Capital wrote in a note to clients. "In the medium term - we believe that Putin will find that the laws of economics prove substantially more difficult to bend than the laws of Russia," wrote Roland Nash, the investment bank's chief strategist. (The St. Petersburg Times 16.iv.04) RUSSIAN FOREIGN MINISTER CRITICIZES EU RESOLUTION ON CHECHNYA Lavrov told journalists in Dublin on 14 April that he believes the resolution the EU submitted last week to the UN Human Rights Commission criticizing the actions of federal troops in Chechnya does not accurately reflect the situation there, ITAR-TASS reported. Lavrov pointed out that Chechen resistance is petering out as "ever more people come to understand the terrorists are fighting a losing battle." Human Rights Watch acting Director Rachel Denber has urged the UN commission to adopt the EU resolution in order to help "break the ongoing cycle of abuse and impunity" by Russian troops who, according to a statement summarized by Interfax on 13 April, routinely abduct, abuse, torture, rape, and execute Chechen civilians. (RFE/RL 15.iv.04) MOSCOW WANTS PROTOCOL FOR NEW EU STATES TO BE SIGNED ON APRIL 27 Moscow hopes that an additional protocol, which makes Russia-EU agreements valid for new member countries of the European Union, will be signed together with a joint statement that Russia is no longer concerned about the EU enlargement. Russia hopes this will take place at a ministerial conference of the Russia-EU Permanent Partnership Council in Luxembourg on April 27, Deputy Foreign Minister Vladimir Chizhov said at a Monday press conference in Moscow. "The statement made by Vincent Picket, deputy head of the European Commission’s Moscow office, claiming that the documents will be signed on April 27 was a bit premature. The negotiations are not over yet. But April 27 is also our target," Chizhov said. Asked whether all Russian concerns will be lifted before May 1, Chizhov said, "It is a thankless task to forecast an outcome for the negotiations. So I will abstain from making a forecast as to whether we will be successful or not." (Interfax 12.iv.04) KREMLIN WARY OF NATO BOSS’S SWEET TALK On his first visit to Moscow as NATO secretary general, Jaap de Hoop Scheffer sought Thursday to persuade Russians and their leaders that he wanted to work with, and not against Russia, in the wake of the Western alliance's expansion two weeks ago into former Soviet space. It promised to be a tough line to sell, given the flurry of ruffled feathers over NATO planes on Russia's Baltic borders since the Western alliance welcomed opened new members Lithuania, Latvia, Estonia, Slovakia, Slovenia, Bulgaria and Romania in an official ceremony in Washington on March 29 that boosted its ranks to 26 countries. Putin, for one, was unconvinced that the expansion would not simply direct energies away from emerging security problems. Putin said he hoped the expansion would ultimately strengthen international security, but for that to happen, it was necessary to increase the level of trust between NATO and Russia. Defense Minister Ivanov warned in televised comments that the expansion has forced Russia to reorient its force deployments to match NATO's, placing "powerful war infrastructure in Europe." Foreign Ministry spokesman Alexander Yakovenko on Thursday reiterated concerns over NATO members' reluctance to ratify an amended version of the Conventional Forces in Europe treaty, which limits the "gray zone" of an arms buildup. NATO has linked ratification of the treaty to Moscow's fulfilling its 1999 pledge to pull its troops out of former Soviet republics Georgia and Moldova, withdrawals that have been strongly resisted by the Russian military and continue to be the subject of bilateral negotiations. De Hoop Scheffer tried to reassure Moscow that all of NATO's new member countries would enter and ratify the amended treaty "as soon as it is possible." Meanwhile NATO has planned small "lily pad" bases in Romania and Bulgaria. But despite the political establishment's knee-jerk outcry, such bases "have absolutely nothing to do with Russia," said security specialist, Carnegie Moscow Center director Andrew Kuchins. Vyacheslav Nikonov, a foreign policy expert who heads the Fond Politika think tank, had a gloomier view, pointing to Russia's relationship with NATO as an empty formality. "The clear message [of expansion] is: 'You are not one of us.' It excludes Russia from Europe and does not make Europe any safer." Putin was expected to establish the same friendly rapport with de Hoop Scheffer as he enjoyed with his predecessor as NATO secretary general, Britain's Lord Robertson. As de Hoop Scheffer launched his low-key charm offensive at a Spaso House reception in his honor Wednesday evening, some guests mistook the mild-mannered Dutchman for U.S. Ambassador Alexander Vershbow's translator. Scheffer, for his part, came hoping to clinch Putin's promise to attend a NATO summit in Istanbul, Turkey in June for a meeting of the NATO-Russia Council. That as-yet unaccepted invitation, however, is a bargaining chip Putin was seen as eager to hold onto. As part of his campaign to boost NATO's image among ordinary Russians, de Hoop Scheffer gave an interview Thursday morning to Ekho Moskvy, where he tried to deflect talk of NATO's eastward expansion being a zero-sum game. Instead, he told listeners, expansion signaled new members' support of NATO's mission to defend "democracy, the rule of law and human rights," not their fear of Russia. But a phone-in poll run by the radio station, showed that 71 percent of the more than 5,000 callers said they considered the Western alliance as aggressive, not friendly, toward Russia. (The St. Petersburg Times 09.iv.04) SERBIA AND MONTENEGRO THREE SERIOUS CONTENDERS FOR PRESIDENCY Three serious contenders -- including two members of the so-called democratic bloc and a radical populist-- entered Serbia's presidential race last week, as the Serbian government coalition extended its control to the federal level by entering the reshuffled government of Serbia and Montenegro. The Serbian presidential election, set for 13 June, couldn't really kick off until the government coalition, in power since early March, announced the name of its candidate. After a week of speculation in the media, the coalition decided on 15 April to name current Economy Minister Dragan Marsicanin as the man with the best chance to beat the radicals' candidate, Tomislav Nikolic. Marsicanin, vice president of Serbian Prime Minister Vojislav Kostunica's Democratic Party of Serbia (DSS), has twice served as chief of parliament since the fall of Slobodan Milosevic in 2000. The 54-year-old Belgrade-born jurist was one of the founders of the DSS and is thought of as Kostunica's closest associate. His candidacy was backed by the DSS as well as its coalition partners, the G17-plus of neo-liberal economist Miroljub Labus and the Serbian Renewal Movement-New Serbia (SPO-NS) headed by Vuk Draskovic, veteran opposition leader to Slobodan Milosevic in the 1990s. Although he said the government coalition was "convinced" that Marsicanin would win, Kostunica said he could not exclude the possibility of a "cohabitation of the kind that has existed in France" in the past, with a president and a government representing different political points of view. (TOL 19.iv.04) SLOVAKIA A COMPROMISED DARKHORSE BEATS MECIAR Vladimir Meciar will not lead Slovakia into the European Union next month as the country's president. As usual, Meciar loyalists turned out in droves in the 17 April presidential elections, but it was not enough to defeat his old comrade-in-arms Ivan Gasparovic. To the great relief of many in Slovakia (as well as NATO and EU officials), Gasparovic won a resounding victory in a race cast as a lesser evil versus a greater one. Gasparovic surprised even himself by receiving 59.9 percent of the vote -- almost 20 percent more than Meciar, who came in at 40.9 percent. Gasparovic won in all eight administrative units of Slovakia, with his main support in urban areas. Meciar won in his traditionally loyal areas of central and northern Slovakia. Although still a force to be reckoned with, Meciar proved for the fourth time in a row--two presidential and two parliamentary elections -- that he cannot expand his power base. At 43 percent, turnout was lower than in the first round (47 percent), yet higher than expected by analysts before the election. Many people, however, made a last-minute decision to vote. "People's fear of Meciar led a significant part of the electorate to the ballot box -- with clenched teeth they voted for Gasparovic," political analyst Lubos Kubin told the daily Narodna obroda on 19 April. A lawyer and university teacher, the 62-year-old Gasparovic joined Meciar's Movement for a Democratic Slovakia (HZDS) in 1992 and quickly rose to the upper echelons of power, serving as parliament chairman from 1994 to 1998, when Slovakia fell deep into international isolation. Repeatedly criticized by the international community for violations of parliamentary and minority rights, misuse of the secret service, and rampant corruption, the country was left behind in the EU and NATO integration processes. Only in 2002 did Gasparovic finally break with Meciar, claiming (after he was left off the party's list of election candidates) that he was disgruntled with the level of democracy within the HZDS. The party Gasparovic founded to compete in the parliamentary elections that year failed to gain any seats. (TOL 19.iv.04) ECONOMY MINISTRY TO CONSIDER BUYING CEZ ENERGY UTILITY SHARES Slovakia's Economy Ministry is prepared to seriously consider selling part of its shares in Czech energy utility CEZ if CEZ makes an offer to buy shares in Slovakia's power utility Slovenske elektrarne (SE). "It's a question of whether CEZ's offer might also be advantageous for Slovakia. If they make such an offer we will seriously think about it," Economy Minister Pavol Rusko said on April 7. CEZ is one of four potential bidders for 66% in SE currently performing due diligence, a process expected to end in mid-May. The Slovakian government approved the sale of 66% in SE in February, offering the company as a whole, with both its conventional and nuclear capacities. If the investors' bids are not lucrative enough for Slovakia, the government will announce a second round offering separately conventional and nuclear sources. The other bidders reportedly are Russia's United Energy Systems (UES), E.ON (D) and Verbund (Aut). Britain's International Power was also allowed to perform due diligence in SE but withdrew from the first round of the tender in March, claiming it was not interested in the acquisition of SE's nuclear capacities. (NewsBase 09.iv.04) SLOVENIA GOODYEAR OFFERS TO BUY REMAINING 20% STAKE IN SAVE TYRES Rubber goods maker Sava has received an offer from Goodyear (US) for a buyout of the remaining 20% stake the Slovenian company holds in the Kranj-based producer of Sava Tyres. It has been agreed that the transfer will be made this June in a deal worth 10 billion tolars (42 million euros), Sava said. The option for the buyout was included in the original contract on strategic partnership signed by Sava and Goodyear in 1997. Sava said it would allocate the purchase money for the development of new strategic investment and to consolidate promising programmes in a bid to ensure profitable growth of its business activities. Sava Tyres, which took over the production of car tyres and related production lines from Sava, was set up by the Kranj-based company and its US partner in December of 1997. When the contract was signed, Sava Tyres took 60% of Goodyear and 40% was held by Sava. Sava halved its stake in 2002. In 1997 Sava and Goodyear also set up Goodyear Engineered Products Europe, to which Sava transferred the overall production of gear belts and air springs. Sava sold its 25% stake in the company to Goodyear in 2001. (NewsBase 15.iv.04) UKRAINE UKRAINIAN PARTY SLAMS AN ELECTION A top opposition party claimed Monday that a mayoral vote seen as a test of democratic processes ahead of Ukraine's fall presidential elections was tarnished by violence and falsifications. Roman Zvarych of the Our Ukraine party said lawmakers monitoring Sunday's vote in the town of Mukachevo were badly beaten by police and gang members at polling stations. Zvarych accused President Leonid Kuchma's chief of staff and the interior minister of organizing clashes during the voting, whose results he said were falsified in favor of a pro-Kuchma candidate. According to the regional election commission, preliminary results showed Ernest Nuser, the candidate from Medvedchuk's Social Democratic Party United, beat Viktor Baloh, an ally of Our Ukraine leader Viktor Yushchenko, by about 5,000 votes. Our Ukraine's regional branch said later Monday that Nuser took the oath of office in a ceremony it said was illegal, Interfax reported. (The Moscow Times 20.iv.04) FIVE UKRAINIANS KIDNAPPED, RELEASED IN IRAQ Unidentified Iraqi militants on 12 April kidnapped eight employees of the Russian company Interenergoservis in Baghdad, including five Ukrainian citizens, Ukrainian news agencies reported on 13 April, quoting the Ukrainian Foreign Ministry. The eight were released on 13 April, international media reported. Lieutenant General Valeriy Frolov, Ukraine's Land Forces deputy commander, told journalists that the captured Ukrainians had no relation whatsoever to the 1,600ong Ukrainian military contingent in Iraq. (RFE/RL 13.iv.04) 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. Contact: Mark Child T: +420 2 4608 6524 F: +420 2 4608 6501 E: [email protected] W: www.ceebiz.com, www.pbj.cz, www.wbj.pl, www.bbj.hu THE MOSCOW TIMES The Moscow Times offers readers an independent and precise view of the political, economic and business life of Russia. Contact: Andrew Boag T: +7 095 232 3200 F: +7 095 232 1761 E: [email protected] W: www.themoscowtimes.com RADIO FREE EUROPE / RADIO LIBERTY Radio Free Europe/Radio Liberty is a private, international communications service to Central, Eastern and Southeastern Europe; the Caucasus; and Central and Southwestern Asia funded by the U.S. Congress through the Broadcasting Board of Governors. Contact: Peter Baumgartner T: +420 (0)2 2112 2039 F: +420 (0)2 2112 2012 E: [email protected] W: www.rferl.org TRANSITIONS ONLINE (TOL) TOL is a nonprofit Internet magazine and media development organization that produces timely, original news and analysis, covering all 28 countries in the post-communist region through its network of local journalists and editors. Contact: Eugen Babau-Iladi T: +420 (0)2 2278 0805 F: +420 (0)2 2278 0804 E: [email protected] W: www.tol.cz ST. PETERSBURG TIMES The St. Petersburg Times offers readers an independent and precise view of the political, economic and business life of Russia. Contact: Tobin Auber T: +7 812 325 6080 F: +7 812 325 6080 E: [email protected] W: www.sptimesrussia.com TEMPLETON THORP T +44 (0)20 7520 9380 F +44 (0)20 7504 8180 E [email protected] W www.templetonthorp.com |
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