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TT Business Intelligence Report Vol. 1, No. 29, 3 September 2002 Business Intelligence, Crime, Corruption and Debt in C&E Europe and the former Soviet Union  UPCOMING CONFERENCES LVA's "3rd INTERNATIONAL BUSINESS SUMMIT OF THE COMMONWEALTH OF INDEPENDENT STATES: DOING BUSINESS IN THE CIS - IMPLICATIONS OF WTO ACCESSION" This event will take place on 1-3 October 2002 at the Evian Congress Centre, Evian, France. For further information, tel: +44 (0)20 8795 2970, fax: +44 (0)20 8795 2977, email: [email protected], W: www.lva.co.uk THE ADAM SMITH INSTITUTE'S "RUSSIA'S ACCESSION TO THE WTO" To take place on 16-17 October 2002 at the Moscow Marriot Grand Hotel, Moscow, Russia. For further information, tel: +44 (0)20 7490 3774, fax: +44 (0)20 7505 0079, email: [email protected], W: www.asi-conferences.com EUROMONEY'S "REGIONAL FINANCE & INVESTMENT CONFERENCE FOR SOUTHEAST EUROPE" To take place on 29-30 October 2002 at the Hotel Croatia, Dubrovnik, Croatia. For further information, tel: +44 (0)20 7779 8821, email: [email protected], W: www.euromoneyconferences.com CROATIA MOL BEGINS DUE DILIGENCE ON INA Hungary's oil company MOL on Monday began its due diligence process of Croatia's oil company INA, as part of INA's privatisation process. MOL is the second company to begin the process after Russia's company Rosneft completed its detailed analysis of INA's work last week. The due diligence process began on August 19 and is expected to last through the autumn. Each of the five potential partners for the purchase of 25% of INA's shares plus one share has one week to complete the due diligence process. The five potential bidders are Austria's OMV, Russia's company LUKoil and Italy's Edison Gas as well as MOL, and Rosneft. After all of these companies complete the due diligence process, they are expected to submit binding offers. (NewsBase 29.viii.02) CZECH REPUBLIC GOVERNMENT PROPOSES HIGHER TAX ON ANNUAL INCOMES OVER 900,000 CROWNS The government's proposed higher tax to be paid by people with annual incomes of over 900,000 crowns would only remain in force for three years, Premier Vladimir Spidla told Czech Radio on Friday. "The proposal is for three years, and it is a reaction to the situation caused by the floods," Spidla said. Next week, the government will discuss introduction of a fifth income-tax band with a 37% tax rate for incomes exceeding 900,000 crowns. The highest tax rate currently is 32%. "We do not want to take advantage of this situation in any way, or react to it in any other way than just rationally, as the situation requires," Spidla said. The government also proposes to increase the excise duty on cigarettes, alcohol and liquid gas. (NewsBase 03.ix.02) POLICE COMBINE SRBA INVESTIGATIONS Czech police have decided to combine the investigations on former Foreign Ministry Secretary Karel Srba, CTK reported on 26 August, citing Srba's lawyer Miroslav Kriznecky. Srba, who is under detention, is being investigated on suspicion of having commissioned the murder of journalist Sabina Slonkova, as well as on suspicion of corruption. Kriznecky also told CTK that Srba suffers from depression and will be moved from the Plzen na Borech prison where he is currently held to a psychiatric prison hospital in Brno. Kriznecky said that after one month of detention, two weeks of which the lawyer said was in complete isolation, Srba has exhibited suicidal tendencies and suffers from claustrophobia. (RFE/RL 30.viii.02) SPIDLA SAYS CZECHS 'PASSED TEST' DURING FLOODS Addressing an emergency session of the Senate on 25 August, Prime Minister Vladimir Spidla said the Czechs "passed the test" of the recent floods, demonstrating that the Czech Republic is a welfare social state prepared to support its citizens while at the same time respecting democratic principles, CTK reported. Spidla said the floods are probably the worst natural disaster in the country's history. Ten of the country's 14 regions were affected, he said. The Senate on the same day approved a government request for an extension till the end of October in the deadline for submitting the 2003 draft budget. The one-month delay will allow the cabinet to assess flood damage. The upper house also approved an amendment to the law on the Housing Fund, following up on a 23 August vote in the lower house and allowing lending for new homes to people whose houses were destroyed by the flood. (RFE/RL 28.viii.02) ESTONIA GOVERNMENT MAY SUE KPMG ESTONIA The government may sue the auditing firm KPMG Estonia for malfeasance if the current police investigation of massive embezzlement at the government-funded Kultuurkapital (Foundation for Promoting Culture) uncovers incompetent auditing practices or fraud by the firm, the local media reported on Wednesday. The finance ministry believes that the auditors did not check the 1999 and 2000 accounts thoroughly, probably failing to ask questions at the banks holding the foundation's funds. The finance ministry is preparing stricter financial regulations for public institutions and government grantees, since the current oversight procedure appears to have failed. Two weeks ago, Kultuurkapital Managing Director Avo Viiol confessed that he embezzled up to 8 million kroons ($533,000) from the foundation. Viiol was arrested and Culture Minister Signe Kivi resigned. (NewsBase 02.ix.02) HUNGARY MECS LISTS GOVERNMENT MEMBERS WITH STATE SECURITY PAST Imre Mécs, head of the parliamentary committee investigating the possible state security past of current and former gov't members, on Friday afternoon announced that according to available documents, the following ten politicians were found to have been involved in the pre-1990 secret services: László Bogár, Imre Boros, Szabolcs Fazakas, Béla Kádár, János Martonyi, Péter Medgyessy, László Nógradi, Ferenc Rabár, Erno Raffay and László Sárossy. Mécs said the committee would invite all ten politicians to clarify the affair during its session next week. (BBJ 02.ix.02) HUNGARIAN TV (MTV) PAID $3.2 MILLION TO 42 ADVISORS Hungarian Television (MTV) executive Imre Ragats on Wednesday said the station has paid 800 million forints ($3.2 million) to 42 advisers in recent years but has "no idea what kind of advice MTV received," Nepszabadsag reported. Outlining the findings of an internal probe, Ragats said that right-wing journalist Istvan Lovas was paid 13.6 million forints and Andras Wermer, an unofficial adviser to former Prime Minister Viktor Orban, 6.5 million forints. Ragats said he has terminated the advisers' contracts. Regarding recent personnel changes, which the right-wing opposition calls "purges," Ragats said he sacked no one and that 44 staff members have left on their accord over the past 45 days. Others who left upon mutual agreement received severance pay totalling 210 million forints, he said. (NewsBase 02.ix.02) KAZAKHSTAN RSF QUESTIONS REPORT ON SUSPICIOUS DEATH OF OPPOSITION JOURNALIST'S DAUGHTER Reporters Without Borders (RSF) and the Damocles Network question the official version in its 29 August release of a previously unpublished report on the suspicious death on 21 June of Leyla Baysetova, 25, the daughter of Kazakh opposition journalist Lira Baysetova. As for the police and judiciary explanations provided so far, RSF and the Damocles Network deem them too "riddled with discrepancies." On 16 June, while detained for illegal possession of drugs, the young woman was hospitalized in a coma; she died five days later. Officials claim that she committed suicide while suffering withdrawal symptoms. RSF and the Damocles Network sent a fact-finding mission to Almaty. Just before her daughter's untimely death, Lira Baysetova, the former editor in chief of the opposition paper "Respublika 2000," had published an interview in the daily "SolDat" with Geneva's former public prosecutor, Bernard Bertossa, who confirmed the existence of Swiss bank accounts of several senior Kazakh officials, including President Nazarbaev. She claims to have been the victim, on several occasions, of intimidation, including physical attacks and telephone threats, due to her investigation into corruption in Kazakhstan. RSF and the Damocles Network, in accordance with the wishes of the civil party, have proposed the assistance of independent experts in forensic medicine and toxicology to obtain a second expert opinion after the exhumation of the body. (RFE/RL 30.viii.02) EBRD TO FINANCE RECONSTRUCTION OF KAZAKH AIRPORT The EBRD has granted Kazakhstan a $25 million loan to finance the upgrading to international standards of the airport at Kazakhstan's "oil capital," Atyrau, ITAR-TASS reported on 28 August. The work will be undertaken by a company from the Netherlands and should be completed by late 2003. (RFE/RL 29.viii.02) CORRUPTION WATCHDOG RATINGS FOR TRANSCAUCASUS AND CENTRAL ASIAN COUNTRIES Transparency International issued its Corruption Perceptions Index 2002 for 102 countries on 28 August. The following are rankings within Transcaucasus and Central Asia, from best to worst: Uzbekistan (68th); Georgia (85th); Kazakhstan (88th); and Azerbaijan (95th). Armenia was not indexed due to a lack of sufficient data, according to the authors. (RFE/RL 29.viii.02) LITHUANIA YUKOS PLANS FOR OPERATING MAZEIKIAI OIL Lord David Owen, a former British foreign minister and health minister now the head of Yukos International, arrived in Vilnius for talks with the government on the company's plans for operating Mazeikiai Oil, if the sale of shares and operator's rights from US-based Williams International is approved, the local media reported. Owen first met with President Valdas Adamkus, and was to begin talks with the government. He told reporters that "We expect to form new quality relations. Yukos would never have entered Lithuania unless it could see a possibility for successful operations here." Owen stressed that he understands the bitterness and fear of Lithuanian politicians and people regarding Russian capital dominating in the Lithuanian oil sector, but said, "Times when the economy depended on politics are already in the past. And we would be fools if we stuck with old principles." (NewsBase 30.viii.02) POLAND WILL PKN ORLEN BE ALLOWED AN 80% STAKE IN THE OIL SECTOR? On Friday Treasury Minister Wieslaw Kaczmarek presented the Prime Minister with data on three possible scenarios concerning the future of the Gdańsk Refinery (RG). “As soon as he is familiar with the details we will have a final discussion on the subject, maybe next week. Until that time I am not going to speculate which scenario should be accepted,” Kaczmarek told Gazeta Wyborcza. The government does not exclude the fact that PKN Orlen might be allowed to purchase the Gdańsk Refinery. The Płock-based concern would then control 80% of the national fuel market. “The new restructuring and privatization program of the fuel sector may allow for the existence of one distribution and refining center,” said Deputy Treasury Minister Ireneusz Sitarski. (WBJ 02.ix.02) CABINET APPROVES "SAFE POLAND" PROGRAMME TO CRACK DOWN ON CRIME & CORRUPTION The Cabinet has approved the "Safe Poland" programme which is aimed at cracking down on crime and corruption and proposes a number of new laws to ensure greater transparency in business dealings, improve the efficiency of combating economic crime and enhance security for the general public. The local media particularly noted that one of the proposed measures makes it impossible for criminal suspects to protect illegally acquired property by signing it over to relatives. "Today the situation is disconcerting. Many criminals hold the law in open mockery, sometimes treating prison sentences as a calculated risk and very often a risk that pays off well," Prime Minister Leszek Miller said in explaining the reasons for adopting the programme. (NewsBase 02.ix.02) RUSSIA FOREIGN DEBT PAYMENTS The government plans to pay $4.5 billion to foreign governments and $2.9 billion to international finance organizations next year, the Finance Ministry said. Specifically, Russia is expected to pay $1.9 billion to the International Monetary Fund and a combined $800 million to the World Bank and the European Bank for Reconstruction and Development. The government also plans to pay $3 billion, or 4 percent, of principal debt on inherited Soviet debt to the Paris Club of creditors next year. (The Moscow Times 02.ix.02) IRAN NUCLEAR PROJECT Some 600 Russian specialists began work Sunday on a key phase of the $800 million project to build a nuclear reactor in Iran, a deal that has drawn strong U.S. criticism. "We have reached the stage of assembling our reactor and the turbine," said Viktor Kozlov, managing director of Atomstroiexport, Itar-Tass reported. Kozlov said that as construction of the nuclear plant in Iran enters its final stage, "the number of Russian specialists will rise and will reach 2,000 people by year's end," he said. The Kremlin has floated preliminary plans to help Iran build another five nuclear reactors over the next 10 years. (The Moscow Times 02.ix.02) MOSCOW DUMA DEPUTY SHOT DEAD IN PROBABLE CONTRACT KILLING Vladimir Golovlev, a member of the Russian State Duma, was shot dead in Moscow on 21 August, "RFE/RL Newsline" reported. "Golovlev, who was elected to the Duma as a member of the Union of Rightist Forces (SPS), left that party in early 2001 and later became a co-chairman of Liberal Russia. "The murder of one of the five co-chairmen of Liberal Russia is undoubtedly of a political nature," fellow Liberal Russia co-Chairman and Duma Deputy Sergei Yushenkov was quoted as saying by regions.ru. According to NTV, unknown assailants attacked Golovlev, 45, about three months ago, but the attack was foiled by Golovlev's dog. Last fall, the Prosecutor-General's Office asked the Duma to lift Golovlev's immunity from prosecution in order to investigate his activities when he headed the Chelyabinsk Oblast State Property Committee in 1991-92. The Duma partially granted the request by authorizing prosecutors to proceed with an investigation. According to dpa, Golovlev is the seventh member of the Duma to be murdered since 1994. The other six all died during the presidency of Boris Yeltsin. According to "The Moscow Times" of 22 August, Golovlev was walking his dog at around 8 a.m. in a park near Pyatnitskoye Shosse in the Mitino district when an unknown assailant or assailants opened fire on him. He was shot twice in the head and died instantly, and minutes later his body was found by a passer-by, a police spokesman said. The attack had all the markings of a contract hit carried out by a professional killer, said city prosecutor Mikhail Avdyukov: "There were two bodyguards with him who said that they did not see anything," Avdyukov told reporters. Members of his party, however, denied that he had any bodyguards. (RFE/RL 30.viii.02) AGENCY OFFICIALS ACCUSED OF GIVING IRAQ 'MILLIONS' IN BRIBES The British daily "The Guardian" reported on 20 August that Russian officials from Emercom, the Russian government ministry which distributes emergency aid and which signed a $270 million deal with Iraq under the UN oil-for-food program in July, have been accused of giving Iraqi officials millions of dollars in bribes. The deal involves Iraq supplying Russia with $12 million in oil. The oil-for-food program permits Iraq to sell crude oil at below market prices. According to "The Guardian," a spokeswoman for Emercom strongly denied the allegation, saying that it had been awarded the $270 million contract because of "its humanitarian work in the area." The bribery accusation became known two days before Russia announced that it intended to sign an economic and trade cooperation agreement with Iraq worth an estimated $40 billion. According to a Western diplomat who spoke to "The Guardian" on conditions of anonymity: "The Emercom deal, approved by the UN on 11 July, is twice the size of any other under the oil-for-food program in the last three months. It was noticeably large." (RFE/RL 30.viii.02) RUSSIA NOW A LITTLE LESS CORRUPT The annual ranking of countries according to levels of corruption issued by Berlin-based Transparency International showed a slight improvement for Russia, "The Moscow Times" and other Russian news agencies reported on 29 August. Russia ranked 79th of 102 countries, up from 82nd last year. Russia was tied with Tanzania, India, Zimbabwe, Cote d'Ivoire, and Honduras. Russia was rated less corrupt than most CIS countries, with the notable exceptions of Ukraine and Belarus. (RFE/RL 29.viii.02) RUSSIAN SOLDIERS REPORTEDLY SOLD THE KASPIISK LANDMINE Seven Russian soldiers based in Buinaksk allegedly sold the landmine that was exploded during a Victory Day parade on 9 May in Kaspiisk, killing 42 and wounding more than 130, dpa reported on 29 August. According to Deputy Prosecutor-General Vladimir Kolesnikov, the device was stolen from a depot belonging to the 136th Motorized Infantry Division and sold. Charges have been filed against the seven unidentified soldiers. (RFE/RL 29.viii.02) FSB ARRESTS MAN WHO THREATENED TO BLOW UP ITS HEADQUARTERS The antiterrorism squad of the Federal Security Service (FSB) arrested Vladimir Shirokov on 22 August in Moscow for allegedly threatening to detonate a car bomb in front of the FSB's Lubyanka headquarters, Russian and Western news agencies reported. Shirokov, who was armed with something that appeared to be a Kalashnikov assault rifle, allegedly demanded to be allowed to meet with President Putin in order to tell the president "how to save Russia." FSB officials claimed that Shirokov was drunk and said that his small truck was filled with bags of cement rather than explosives. Operatives were able to distract and disarm him, and no one was injured in the incident. He is being held in the FSB prison at Lefortovo and an investigation into charges of terrorism has been launched. (RFE/RL 28.viii.02) INTERIOR MINISTRY SETS PRIORITIES ON ECONOMIC CRIME Speaking in Khabarovsk, First Deputy Interior Minister Rashid Nurgaliev said the Interior Ministry (MVD) is focusing on three areas in its battle against economic crime, RIA-Novosti reported on 26 August. The priorities are crimes linked with marine resources, forestry, and gold and diamond mining, Nurgaliev said. Speaking to MVD officers of the Far East Federal District, Nurgaliev said that illegal fishing in the Russian Far East is worth an estimated $3 billion per year. Moreover, it generates collateral spheres for organized crime such as shipbuilding and sales, the illegal sale of fishing quotas, and conflicts over shares in fishing companies. He also said that organized crime controls up to 40 percent of Russia's timber exports and a considerable portion of the mining and sale of gold and diamonds. (RFE/RL 26.viii.02) UKRAINE 'UKRAINE WITHOUT KUCHMA' TO HOLD PROTEST ON 16 SEPTEMBER The Ukraine Without Kuchma movement is planning to hold a mass protest rally on Independence Square in Kyiv on 16 September, the second anniversary of the disappearance of journalist Heorhiy Gongadze, UNIAN reported on 20 August. "[Ukraine needs] a revolution to purify and revive society, to change the system of social, economic, and political relations," the movement said in a statement. Ukraine Without Kuchma's main demands include ousting President Leonid Kuchma, making Ukraine a parliamentary republic, and punishing those guilty for the disappearance and/or death of well-known Ukrainian journalists and political activists. (RFE/RL 21.viii.02) INFORMATION PROVIDERS NEWSBASE NewsBase is a leading provider of business and economic news and intelligence from Russia, Central Europe and the FSU. Daily bulletins and industry specific weekly reports backed by an archive containing over 10 million words combine to provide a comprehensive service to a global blue chip client base. Contact: Jon Laurijssen T: +44 (0)131 478 8537 F: +44 (0)131 478 7001 E: [email protected] W: www.newsbase.com, www.newsbaseworldmonitoring.com NEW WORLD PUBLISHING New World Publishing is a primary source of business-related information for Central Europe, through its publications the Prague, Budapest and Warsaw 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. 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