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TT Business Intelligence Report Vol. 1, No. 30, 19 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 INTERNATIONAL PROFESSIONAL CONFERENCES' "MONEY LAUNDERING IN CENTRAL ANDEASTERN EUROPE" To take place on 6-7 November 2002 at Andel's Hotel, Prague, CzechRepublic. For further information, tel: +44 (0)20 7529 8906, fax: +44(0)7387 4647, email: [email protected], W: www.ipc-conferences.co.uk/prague CROATIA CROATIA FREE TO JOIN CENTRAL EUROPEAN FREE TRADE AGREEMENT (CEFTA) Following the resolution of details covering agricultural trade in abilateral free trade agreement between Croatia and Romania, the way isnow clear for Croatia to join the Central European Free Trade AgreementCEFTA, Croatia's Deputy Economy Minister, Miroslav Bozic, said at theCEFTA prime ministerial summit in Bratislava, Slovakia on Saturday."Agricultural trade between Croatia and Romania is modest and thenegotiations proved to be very difficult, but the most important issueis that a successful agreement has been finally been reached," saidBozic. Addressing the summit, Croatia's Deputy Prime Minister SlavkoLinic said: "Croatia sees the significance and role of the CEFTA as aregional trade organisation in the further strengthening andencouragement of trade among the countries of central and east Europe,as well as in the deepening and expansion of co-operation to othereconomic sectors." He added that membership of CEFTA was important inpreparing for EU membership and hoped that the agreement could beformally signed by ministers in Zagreb later in the year. Slovak PrimeMinister Mikulas Dzurinda, who chaired the summit said that membershipin the CEFTA gave each member a chance to develop their economy andimprove foreign trade. CEFTA members are the Czech Republic, Hungary,Poland, Slovenia, Slovakia, Bulgaria and Romania. (NewsBase 17.ix.02) CZECH REPUBLIC HAVEL MEETS BUSH IN WHITE HOUSE President Vaclav Havel, who began a one-week official visit of the USAyesterday, met President George Bush in the White House. Havel told Bushthat the Czech Republic is prepared to participate in an internationalmilitary campaign against the Iraqi regime if Baghdad does not complywith UNO Security Council resolutions. Both Presidents agreed on supportof the expansion of NATO to include seven new member countries,including the Baltic states. (PBJ 19.ix.02) FORMER CESKA SPORITELNA BOARD DIRECTORS TO BE INVESTIGATED OVER PROPERTYDEALS Police have started proceedings against former board directors of theCzech Savings bank, Ceska sporitelna, alleging violating their duty asdirectors concerning property dealings while they were in office,according to reports on Czech media. According to Czech Radio, the caseis believed to involve Brno businessman Miroslav Kachlik, who was givena loan of 315 million crowns by CS in 1996, although internal documentsat the bank made it clear that he would have problems repaying the loan.A report on Czech Television said that the case involved former CSdirector general and board chairman Jaroslav Klapal and Josef Kotrba,Klapal's deputy and fellow board member. Kotrba is the husband ofEducation Minister Petra Buzkova. On the television report police wouldnot comment on the names. (NewsBase 18.ix.02) HUNGARY MOL EYES U.S. STOCK EXCHANGE Hungary's gas and oil company MOL Rt is considering floating its shareson a U.S. stock exchange CFO Michel-Marc Delcommune announced yesterday.MOL is currently listed on BSE and SEAQ. Delcommune said the move wouldmake trading more convenient for American stockholders, but analysts sayMOL's regional expansion plans may have also played a role. While MOLcould easily meet U.S. exchange regulations now, the move will be put onhold until the problems of MOL's natural gas unit are solved, accordingto Delcommune. (BBJ 19.ix.02) DEUTSCHE TELECOM NOT PLANNING TO SELL MATAV The future of Matav, the most influential Hungarian telecommunicationsprovider, is under threat by the increasingly bleak future of cablecommunications as well as financial and HR problems at the company'sGerman parent. Deutsche Telecom (DT) does not plan to sell either Matavor its subsidiary Westel, according to Elek Straub, CEO of Matav. DT isstruggling with debts of around E65bn which have substantially erodedits reputation. Matav's current market value is around E4.5-5bn,according to Straub. Of the total amount, the Westel mobile provider isworth around $2-3bn. Westel's reorganisation would only be possible ifDT purchased the company from Matav at its market value, since both arejoint stock companies. Straub has stated that such a transaction wouldincur very high taxes for DT, which makes its purchase of Westelunlikely. Straub also maintained that the new executive board at DT hasnot ordered the Matav management to begin staff layoffs. (NewsBase 18.ix.02) POLICE TO QUESTION STAFF OF OPPOSITION DAILY The Budapest police anti-organized-crime unit is preparing to questionthe editor in chief and a journalist of the "Magyar Nemzet" on suspicionof violating data-protection legislation, "Magyar Hirlap" reported on 11September. On 18 June, "Magyar Nemzet" published documents relating toPrime Minister Peter Medgyessy's past in the communist-era secretservices. "Magyar Hirlap" commented that the police stance is impossibleto understand, as it contradicts an earlier ruling passed by BudapestProsecutor's Office with respect to another case involving "MagyarNemzet." In that case it was established that journalists cannot becharged with violating data-protection legislation. "Magyar Hirlap" alsoobjected to the police action as the prime minister is a public figureand all citizens have a right to know about his past. (RFE/RL 13.ix.02) POLAND INDUSTRIAL OUTPUT FALLS 1.1% IN AUGUST, BUT RECOVERY TREND REMAINSPOSITIVE According to data presented yesterday by the Central Statistical Office(GUS), industrial output fell in August reflecting the unevenness of theeconomic recovery from the worst slowdown in a decade. Industrialoutput, without adjustment for seasonal factors, fell by 1.1% in Augustcompared with a year earlier, against the general expectation of nosignificant change, and following a revised 5.7% gain in July. Analystssaid that, taking into account the shorter working month, the industrialoutput figures represented a modest year-on-year gain. But weakproduction activity continued to support the case for further cuts ininterest rates, which at eight percent are nearly seven percentagepoints above retail inflation, which hit 1.2% in August. "If you stripout the effect of fewer working days, output is still increasing. But wehad strong exports in July, and my suspicion is that they fell a littlein August," said Gavin Gray, an economist at HSBC in London. TheMonetary Policy Council (RPP) will meet on September 24-25, anduncertainty over the fiscal outlook may stand in the way of anotherinterest rate cut. "I think one could say that from the output sidethere are no impediments to further cuts," said Gray. (WBJ 19.ix.02) ELEKTRIM FILED FOR BANKRUPTCY IN WARSAW COURT Following its default on bond payments due last week, Elektrim filed forbankruptcy in a Warsaw court on Friday in a move that could see Poland'sbiggest business failure to date, the local media reported. However,many analysts believe that the move may have been made by managers in anattempt to force bondholders to re-negotiate the bond repayment deal.Elektrim believes that there is still time for talks with bondholders,although Elektrim's chairman Maciej Radziwill said he was not optimisticabout the outcome of such talks. The company would preferre-negotiations rather than carry out a fire sale at a time when pricesare depressed. Elektrim needs to sell assets to satisfy bondholders whocarried out a debt-for-equity deal after the former-communist tradingcompany accrued large debts from its attempt to reform itself as aleading telecommunications and multi-media company. At the height of thetechnology boom the company had the largest stock capitalisation on theWarsaw Stock Exchange, and is still listed on both the Warsaw and Londonexchanges. Elektrim's most valuable holdings are stakes in the Pak powerplant and Elektrim Telekomunikacja, which, with Vivendi Universal, ownshalf of Polska Telefonia Cyfrowa, Poland's leading mobile phoneoperator. Following its own problems, Vivendi is also looking to disposeof its stake in Elektrim Telekomunikacja. (NewsBase 17.ix.02) LUKOIL, YUKOS MAKE PLANS FOR POLAND Vagit Alekperov, chairman of oil giant LUKoil, met on 4 September inWarsaw with Polish Prime Minister Leszek Miller to discuss his company'splans to buy Poland's largest oil refinery, Rafineria Gdanska,"Kommersant-Daily" and other Russian news agencies reported on 5September. Although no details of the talks were released, LUKoil'sintentions have many opponents in Poland. The local firm PKN/Orlen hasasked the government not to approve LUKoil's bid and instead torestructure the entire Polish oil sector. PKN/Orlen is, however, alsoengaged in partnership negotiations with the Russian firms Yukos andSurgutneftegaz, according to "Kommersant-Daily" on 30 August. Meanwhile,Yukos took control of Lithuania's national oil company, Mazeikiai Oil(Mazeikiu Nafta), following a government decision not to buy a 26.85percent stake formerly held by the U.S. company Williams International.The move gives Yukos a 53.7 percent stake in Mazeikiai Oil. (RFE/RL 12.ix.02) RUSSIA $6 MILLION RANSOM FOR LUKOIL EXEC LUKoil has received a $6 million ransom demand from a person claiming torepresent the abductors of its chief financial officer, the Kommersantbusiness daily reported Tuesday. The executive, Sergei Kukura, 48, wasseized by masked men Thursday while his car was stopped at a railroadcrossing outside Moscow. The gunmen bound Kukura's driver and bodyguardand gave them injections that caused both to lose consciousness.Kommersant reported that an anonymous caller to a special LUKoil hotline had assured the company Monday that Kukura was alive and well butwould be released only after the payment -- half in dollars, half inrubles -- had been made. However, the newspaper said the reported callcould have been a ruse, and the caller had offered no evidence that heindeed had Kukura. On Friday, LUKoil President Vagit Alekperov offered areward of 30 million rubles ($948,000) for information leading toKukura's release. Many business executives have been targeted bycriminal groups in the past, but rarely one of Kukura's stature. As oneof LUKoil's founders and its chief financial officer, he has broadcontrol over the company's business dealings. Some media have speculatedthat the incident may have been caused by an internal management disputeat LUKoil. However, there have been no public statements to that effectby the prosecutor's office. (The Moscow Times 18.ix.02) EU TO BACK VISA-FREE KALININGRAD TRAIN The European Union's executive body will propose concessions Wednesdayto end a dispute with Moscow over visas for Kaliningrad residents,according to a confidential EU paper. The European Commission recommendsthat the EU member states consider allowing Kaliningrad residents totravel to mainland Russia in special trains without a visa, according toa draft proposal seen by Reuters on Tuesday. The commission rejectsRussian demands that the visa-free regime apply also to passengers oflong-distance coaches. Other transit passengers would have to apply forspecial transit passes, or "facilitated transit documents," atLithuanian consulates, instead of regular travel visas. Those passes"could take the form of a securized booklet," which would be availablefor a small fee or even for free. Until the end of 2004, the passeswould be issued against internal passports. (The Moscow Times 18.ix.02) RUSSIA TO REPAY $55.5BN IN FOREIGN DEBTS TO PARIS CLUB According to the Russian Accounting Chamber, Russia will repay $55.5billion in foreign debts to the Paris Club member countries between 2002and 2020. Of this amount, $54.9b will be former Soviet debts. As ofJanuary 1, 2002, the debt to the Paris Club totalled $42.56b, including$6.26b in Russian debt and $36.3b in former Soviet debt. Between 1996and 2001, debt payments to the Paris Club creditors stood at $19.077b,including $8.781b in principal debt and $10.296b in accrued interest. Ofthe total amount of payments over the said period, $9.944b was formerSoviet debt, accounting for 52.13% of total debt payments. (NewsBase 18.ix.02) MOSCOW MAYOR CONFIRMS WISH TO RESTORE DZERZHINSKII STATUE Yurii Luzhkov told journalists on 15 September that his proposal torestore the downtown Moscow monument to the founder of the Soviet secretpolice, Felix Dzerzhinskii, was a "well thought-out and considered"statement, Russian news agencies reported on 17 September. In callingfor the restoration of the monument on Lubyanka Square in front of theheadquarters of the Federal Security Service (FSB), Luzhkov describedDzerzhinskii in almost angelic terms, pravda.ru commented. Luzhkov'sstatement was widely perceived as a strange turnabout for a man who waswithin the leadership of the Moscow City Council when it decided on 22August 1999 to dismantle the statue, an event that Luzhkov describes inhis memoirs. In addition, Luzhkov energetically resisted Communist Partyproposals in 1999 to restore the statue. Arsenii Raginskii, chairman ofthe human rights organization Memorial, told polit.ru on 17 Septemberthat Luzhkov's change of heart can be explained by his desire to fawn onPresident Putin and the other chekists who have come to power in recentyears. (RFE/RL 17.ix.02) STANDARD & POOR'S ON TRANSPARENCY OF 42 LEADING RUSSIAN COMPANIES The STANDARD & POOR'S rating agency has published the results of itssurvey of the transparency of 42 leading Russian companies. On the listare 18 companies that are now included on the S&P/IFCI index fordeveloping markets' stocks. Some 40 companies on the list account for98% of the total capitalisation of the Russian stock market. The listalso include GOLDEN TELECOM and the Magnitogorsk steel plant. As aresult of the survey, the MOBILE TELESYSTEMS (MTS) and WIMM-BILL-DANNcompanies were declared the most transparent companies in Russia interms of the disclosure of their finances and economic policies.(NewsBase 17.ix.02) FORMER OIL EXECUTIVE ACCUSED OF EMBEZZLEMENT One of Nizhnevartovsk's most famous residents and a member of the TyumenOblast legislature, Viktor Palii, has been charged with appropriatingmoney from Nizhnevartovskneftegaz during his nine-year tenure as thecompany's general director, "Vedomosti" reported on 16 September.According to the daily, Palii allegedly intentionally raised the priceof contracts for the construction of a sanatorium in the Crimea and thentransferred the money to his personal bank account in Monaco. As thecompany's director, Palii was more influential in the Siberian city thanthe elected mayor, the daily reported. Palii told the paper that thecase against him was ordered up by his "enemies" and that he isinnocent. (RFE/RL 17.ix.02) RUSSIAN ORGANIZED CRIME REPORTEDLY IN GERMANY Members of the Bavarian office for the Protection of the Constitutionrecently told the German newspaper "Die Welt" that Russian crimesyndicates operating in Germany had close links to the Russianintelligence services and to "high-ranking officials from politics andindustry in Russia," as well as to German industrialists. According tothe story published on the "Die Welt" website on 29 August(http//:www.welt.de), in the past, German law enforcement officialssuspected that only former intelligence agents were involved withRussian organized crime groups. Today they have evidence that activeduty officers are involved. According to unnamed officials from Bavaria,"Often extremely flexible, interlinking businesses serving primarilymoney-laundering purposes have been established, commissioned by Russianintelligence services and criminal organizations." The money earnedflowed mostly into real estate, restaurants, and hotels. Trying toreconstruct the sophisticated financial transactions, the investigatorsgroaned: "Through the purposeful establishment of global links of firmsand accounts, the flow of funds frequently can hardly be reconstructed."According to German security services, Russian organized crime iscooperating with intelligence agents in the areas of human trafficking,money laundering and illegal immigration. (RFE/RL 13.ix.02) MOSCOW CUSTOMS CHIEF MURDERED Shamil Altyshov, director of the Domodedovo customs terminal in Moscow,was shot dead near his home on 13 September by unidentified gunmen,Russian news agencies reported. Altyshov was struck five times in thechest and back. According to police reports, Altyshov's fully loadedpersonal handgun was found on his body, indicating that he did not havetime to respond to the attack. Investigators are looking into thepossibility that Altyshov was killed by drug traffickers. The Domodedovocustoms terminal is one of Russia's largest. (RFE/RL 13.ix.02) ALL THE PUBLICITY MONEY CAN BUY The Russian Union of Industrialists and Entrepreneurs (RSPP) will launcha multimillion-dollar campaign intended to improve the image of Russianbusiness abroad, "Vedomosti" reported on 12 September. The union'scommittee on foreign affairs, headed by Yukos Chairman MikhailKhodorkovskii, hatched the plan, which will consist of three projects. Anew English-language Internet portal will inform Western investors aboutmarket trends in Russia and especially about "improvements" in theRussian business community. An advertising campaign in prominent Westernmedia will tell the world about progress in "creating a favorableinvestment climate in Russia" and will also explain "the essence of theRSPP's mission." A new English-language magazine about Russian businesswill likewise be geared toward persuading foreigners that the Russianbusiness community is "dynamic, transparent, and favorably disposedtoward investors." (RFE/RL 13.ix.02) UKRAINE POLICE BREAK UP ANTI-KUCHMA RALLY Several thousand riot police armed with shields and rubber truncheonsdestroyed a tent camp and evicted protesters near Ukraine's presidentialoffice before dawn Tuesday, following a march in Kiev by tens ofthousands of people who demanded President Leonid Kuchma's resignation.Following the country's biggest demonstrations since Ukraine'sindependence 11 years ago, supporters of opposition groups fromCommunists to democrats set up 167 tents under a heavy rain late Monday.They vowed to occupy the area around Kuchma's office until he stepsdown. The rallies were timed to mark the second anniversary of thedisappearance of journalist Georgy Gongadze. Kuchma was in Salzburg,Austria, on Monday, where he pressed political leaders to supportUkraine's distant hopes of joining the European Union. (The Moscow Times 18.ix.02) PRESIDENT ACCUSED OF INVOLVEMENT IN MURDER OF JOURNALIST Ukrainian President Leonid Kuchma was accused of involvement in themurder of journalist Heorhiy Gongadze by the parliamentary commissioninvestigating the murder of Gongadze and other journalists on 3September. According to "The Financial Times" of 4 September, thecommission called for law enforcement agencies to bring criminal chargesagainst the president. While Kuchma has been accused of involvement inGongadze's murder for some two years on the basis of secret recordingsmade in his office by a member of his security detail, MykolaMelnychenko, this is the first time that parliament has pursued suchaction. (RFE/RL 13.ix.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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