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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. 66, 11 March 2004 Business Intelligence, Crime, Corruption and Debt in C&E/SE Europe and the former Soviet Union UPCOMING CONFERENCES SACHS-BLOOMBERG "8TH ANNUAL CONFERENCE INVESTING IN RUSSIA & CIS" This event will take place on 18 March 2004 at the Plaza Hotel, New York City, USA. For further information, please contact Pernilla Hellsten, tel: +44 (0)20 7405 5544; fax: +44 (0)20 7405 4411; email: [email protected] ; W: www.sachsforum.com THE EUROPEAN FINANCE CONVENTION'S "2nd e-FINANCE CONGRESS FOR CENTRAL, EASTERN & SOUTH EASTERN EUROPE" This event will take place on 29-30 March 2004 at the Hotel Lev, Ljubljana, Slovenia. For further information, please contact Claudio Cassuto, tel: +44 (0)20 7381 9291; fax: +44 (0)870 134 0064; email: [email protected]; W: www.euroconvention.com THE EBRD's 2004 BUSINESS FORUM "COMING OF AGE: OPPORTUNITIES OF AN EVOLVING REGION" This event will take place on 18-19 April 2004 at the Hilton London Metropole (HLM), London, UK. For further information, please contact Georgie Walker, tel: +44 (0)20 7338 6625; email: [email protected]; W: www.ebrd.com/am BELARUS BELTRANSGAZ CHIEF LEAVES FOR MOSCOW TO SIGN GAS CONTRACT Beltransgaz General Director Pyotr Petukh traveled to Moscow on Tuesday to sign a contract with Gazprom for supplies to the republic of 10.2 billion cubic meters of gas in 2003, a source in the company told Interfax. Gazprom has not supplied gas to Belarus since January 1, 2004. After the gas crisis in February 18-19, Belarus said that it is ready to sign a single contract with Gazprom for gas supplies and transit at the increased tariff of $50 per 1,000 cubic meters and a transit rate of $1.02 per 1,000 cubic meters per 100 km. The Belarussian government officially decided to hold talks with the Russian government on the provision of a state credit to the republic in 2004. The Belarussian government approved a draft credit agreement for the receipt of a Russian state credit of $200 million to ensure payment for gas supplies from Gazprom. Belarussian experts said that the increase in the cost of 1,000 cubic meters of gas from Gazprom to $50 will lead to an additional strain of $200 million - $250 million on the budget compared with 2003, when Gazprom supplied 10.2 bcm of gas at the same price as for the fifth price zone in Russia. Speaking about the current situation with gas supplies to Belarus, the source said "there are no restrictions, daily the republic receives 62 million cubic meters of gas, which is sufficient for the republic's economy to function normally." (Interfax 09.iii.04) BOSNIA AND HERZEGOVINA EU INSISTS ON RUNNING BOSNIAN MISSION Unnamed diplomats in Brussels told the "Financial Times" of 9 March that the EU and United States "are engaged in a fresh trans-Atlantic dispute over who should have control of a new military mission in Bosnia once the [EU] takes over from NATO this year." One unnamed "senior European diplomat" argued that the EU "cannot end up drying the dishes while the [United States] runs the show. We cannot be a junior partner to NATO. We need overall responsibility for the mission." Washington wants to reduce its role in the Balkans while maintaining a security presence at its Tuzla base and elsewhere to reassure Muslims and Albanians who do not trust the EU to be willing or able to protect them. The United States also seeks a continuing political role in the EU military missions, specifically those parts involving counterterrorism and apprehending indicted war criminals. An unnamed U.S. official told the London-based daily that the terrorist attacks of "11 September changed our perception of the Balkans" in favor of maintaining a security presence in the region. (RFE/RL 09.iii.04) TRYING TO MEND DEFENSES Nearly nine years after the end of the Bosnian wars, the divided country will finally get a defense minister at state level. On 1 March Prime Minister Adnan Terzic announced the appointment of a Bosnian Serb, Dragomir Dumic, to fill the post. An earlier Serbian candidate was withdrawn after allegations surfaced linking him to war crimes. But even though the three ethnically based ruling parties--the Serbian Democratic Party (SDS), Bosniak (Muslim) Party of Democratic Action (SDA), and the Croatian Democratic Union (HDZ)--can agree on Dumic, the international community is not rushing to embrace him. Dumic is a lawyer and former judge from Bijeljina, in the eastern part of Republika Srpska. He was a member of the Democratic Party of Republika Srpska from 1995 but changed his political colors 18 months ago by joining the ruling SDS. HDZ member Marina Pendes and SDA member Enes Becirbasic were named deputy ministers. Dumic's nomination still must be confirmed by the parliament, and, more importantly, he will be vetted by the Office of the High Representative, the international body overseeing the implementation of the 1995 Dayton Peace Agreement. The speedy appointment of a defense minister is a high priority for Bosnia, because the country's goal of entering NATO's Partnership for Peace program at the alliance's June summit in Istanbul depends upon its having a unified defense structure in place. (TOL 08.iii.04) BULGARIA BULGARIAN SOCIALISTS MOVE NO-CONFIDENCE VOTE The opposition Socialist Party (BSP) on 4 March officially initiated a vote of no confidence in the government, mediapool.bg reported. BSP Chairman Sergey Stanishev said his party decided to move the vote because of the government's alleged "social irresponsibility," which he said violates the constitution, which describes the country as a "social state." He added that certain constitutional passages pertain to the government's responsibilities regarding labor, health care, and education. Stanishev accused the government of "genocide and discrimination" regarding its treatment of the disabled. He also alleged that approximately 1.5 million of the country's 8 million citizens are left without health care because of problems in the state health-insurance system. Deputy Prime Minister Plamen Panayotov characterized the motion as the Socialists' latest attempt to obstruct the country's accession to the EU and NATO. The no-confidence vote stands little chance of succeeding, as the conservative opposition parties have announced that they will vote for the governing coalition of the National Movement Simeon II and the Movement for Rights and Freedoms. (RFE/RL 05.iii.04) CROATIA POLITICAL CONTROVERSY IN CROATIA OVER NEW WAR CRIMES INDICTMENTS Croatian Prime Minister Ivo Sanader said in Zagreb on 9 March that he considers unacceptable some unspecified references to the 1991-95 conflict included in the latest indictments of Croats by the Hague-based war crimes tribunal, RFE/RL's South Slavic and Albanian Languages Service reported. The tribunal recently charged former Croatian Generals Ivan Cermak and Mladen Markac with crimes against humanity and violating the laws and customs of war in connection with their roles in the August 1995 campaign against Serbian rebels that ended the war in Croatia's Krajina region. The Sanader government repeatedly says that it cooperates with the tribunal. On 9 March, leaders of the Croatian Peasant Party (HSS) called for a special session of the parliament to discuss references in the indictments to the two generals' allegedly having participated in a "criminal conspiracy" along with the late President Franjo Tudjman during the conflict. For his part, former General Cermak called for calm, saying that the place to discuss the content of the indictments is in court and not in political circles. (RFE/RL 10.iii.04) CZECH REPUBLIC SALE OF KEY CZECH MINING COMPANY COLLAPSES Seven months after it began, the sale of the largest Czech mining company has collapsed. The government’s decision to halt the privatization of Severoceske doly marks the end of the latest major tender to raise questions about the transparency of government decision-making. It also probably marks the end of an attempt to protect the Czech mining industry from competitive pressures ahead of EU membership. The government had sought to sell the company in an attempt to both plug gaps in the government’s budget revenues--particularly important with the country set to join the EU on 1 May--and to try and secure the company’s future after the country joins the EU. The government had been hoping to sell the company for 7.5 billion koruna ($280 million), equivalent to 6.5 percent of the budget deficit expected this year. Severoceske doly is prospering at present. 2003 was its best year for a decade, with its net profit rising 34 percent thanks to larger sales to CEZ, the country’s dominant electricity generator. However, CEZ expects exports to go down, as sales in 2003 were extraordinary: it managed in the summer to capitalize on electricity outages across Europe. Longer term, the government feared that EU enlargement could lead to a consolidation of the mining industry across Europe, which could sharpen already acute social problems in North Bohemia, where Severoceske doly operates. Unemployment in the district of Most is running at 23 percent, double the national average of 10.8 percent. Speculation that concern for an important section of the Social Democrat electorate was a key reason for the privatization became stronger after the terms of the privatization were announced and ruled out energy companies--coal, electricity, gas, or oil companies--from neighboring countries. This immediately prompted speculation that the government had engineered the privatization to favor a U.S. company, Appian, owner of another major Czech mining company, Mostecka uhelna. Victory in the tender would have given Appian control of over half the Czech mining industry. Severoceske doly alone produces roughly 40 percent of the country’s brown coal. The government has denied these allegations. However, Trade and Industry Minister Milan Urban is on the record as suggesting that Mostecka uhelna and Severoceske doly should merge. Speaking to journalists, Urban said that "sales are expected to fall, and if there are two companies mining in the same basin, they will be less efficient.” The government also stipulated that the buyer maintain current staff levels, agree to meet mining quotas, and pay money into the regional development fund. (TOL 08.iii.04) ROYAL DUTCH/SHELL JOINS FORCES WITH KAZMUNAIGAZ FOR A 63% STAKE IN UNIPETROL With three players left in the race for a 62.99% stake in Unipetrol, one of them, Royal Dutch/Shell, has joined forces with Kazakhstan's KazMunaiGaz, which fell out of the race earlier despite offering the highest price, the Polish daily Gazeta Wyborcza reported on March 1. KazMunaiGaz had offered 16 billion crowns for the stake, as compared with 10 billion crowns offered by Poland's largest oil company, PKN Orlen. However, some analysts view the return of the Kazakhstani Company as favourable for Orlen's chances, the daily wrote. KazMunaiGaz's offer was originally rejected due to fears that a Russian company would eventually take over the Czech oil firm. Now those same fears could act against the combined bid. Since the third bid, placed by Hungary's MOL, has been viewed as the poorest one from the beginning, Orlen's chances are seen to be improving. (04.iii.04) PRESIDENT VACLAV KLAUS ATTACKS THE EU Czech President Vaclav Klaus has again attacked the European Union, this time in an interview in the daily Mlada fronta dnes on Saturday, February 28th. "I am not a supporter of the idea that the EU in its present form is the victory of freedom and democracy in Europe. I am stating this resolutely and unconditionally," Klaus says. He said that the Czech government's position on current integration in the EU was unbelievable and undignified. Klaus said that EU entry will result in a loss of sovereignty. He voiced the fear that the problem of Sudeten Germans could be re-opened in the EU with all the ensuing problems for the Czech side. Reacting to the president's viewpoint, Foreign Minister Cyril Svoboda told the daily: "European integration is a joint construction and not the fight of one against the other. I think that the president mainly says this for the domestic public before the elections to the European parliament." Half a million Sudeten Germans were expelled from their homes in Czechoslovakia after the end of the Second World War and were not compensated for their losses. (NewsBase 02.iii.04) GEORGIA GEORGIAN PRESIDENT WARNS OF PLANS TO THWART OIL PIPELINE CONSTRUCTION President Saakashvili told journalists in Baku on 4 March that he anticipates an attempt within the next few months by foreign political forces to block or change the route of the Baku-Tbilisi-Ceyhan oil export pipeline, which is currently under construction, in order to delay its completion by up to two years, RFE/RL's Azerbaijani Service reported. The first oil is currently scheduled to reach Ceyhan during the second quarter of 2005. On 5 March, Saakashvili inspected the Sangachal terminal south of Baku, where oil from the Azeri, Chirag, and Guneshli oil fields enters the export pipeline, Turan reported. On 6 March, Azerbaijani Transport Minister Zia Mamedov told journalists that Azerbaijan and Georgia will reduce oil-transit tariffs for Kazakh and Turkmen oil exported via their countries, Caucasus Press reported. (RFE/RL 08.iii.04) HUNGARY FHB, FOTEX TO JOIN BUX BASKET The shares of mortgage bank FHB Rt and Fotex Rt will be included in the Stock Exchange's BUX index, while Antenna Rt, Rába Rt and Synergon Rt will be dropped from April 1, the Budapest Stock Exchange (BSE) announced yesterday. Although Danubius Rt and PannonPlast Rt did not meet the eligibility criteria either, they remain part of the basket because they failed to make the mark for the first time. Shares must fail to meet the requirements twice before being removed. The BSE will set the new weights for the shares in the basket on March 24. (BBJ 10.iii.04) FUND MANAGERS PROPOSE TAX BREAKS ON INVESTMENT FUNDS The Association of Fund Management Companies in Hungary (Bamosz) put forward proposals to the Finance Ministry last week, arguing for investment funds to enjoy the same tax breaks currently available to long-term unit trust and pension fund investments. Bamosz argued that this would stimulate long-term saving, thus spurring on the national economy and ultimately easing pressure on financing the budget deficit. Investment funds previously enjoyed tax breaks, but a change to the law in 2003 saw those benefits revoked. Gyula Fatér, CEO of Budapest Fund Management Rt and chairman of Bamosz’s regulation committee, said the revoking of the tax break negatively affected the nation’s savings. Fatér said that ideally, the proposals would be part of the Finance Ministry’s recommendations for changes to next year’s tax law. Hungarian fund managers are practically unanimous in their support for the proposals, said Zoltán Nagy, deputy general manager of Europool Fund Management Rt, which manages Ft 10 billion (€39 million) in assets and acts as an advisor to San Paolo IMI’s €30 million, Luxembourg-registered EMEA Fund. András Csoma, head of sales and client relations at Raiffeisen Fund Management Rt, which currently has Ft 30 billion in assets under management, said the market is well developed in terms of supply of products. He said his fund prefers to concentrate on the opportunity to build long-term client relationships that such a change to the law might bring. On a more somber note, Nagy noted that many investors were disappointed by poor returns in 2003. Investors withdrew some Ft 300 billion from investment funds in 2003, while total assets handled by Bamosz members fell by Ft 20 billion–Ft 25 billion. Csoma opined that many retail clients are not aware that their bond or money market investments will not provide real rates of return over the long term. Investors are still focusing on short-term gains, in some cases even focusing on quarterly performance, he said. Csoma said that a law change would encourage capital market investment, a goal shared by the ministry and by local fund managers. Fatér, too, said the Bamosz proposals reflect the government’s own strategy to stimulate long-term investment. He said the government wants to support long-term household savings to boost GDP growth and assist the long-term financing of the budget deficit. He asserted that increased long-term household savings would take the pressure off by reducing the dependency on foreign portfolio investment to shore up the deficit. Nagy agreed that, if accepted, the proposals would have a positive impact over the long term for the fund industry, and the whole economy. (BBJ 08.iii.04) HUNGARY TO RETALIATE OVER EU LABOR RESTRICTIONS Government spokesman Zoltan Gal told journalists following a cabinet meeting on 3 March that the government "will use the principle of reciprocity" and impose labor restrictions on citizens from current EU member states that have chosen to limit Hungarian access to their labor markets after EU enlargement on 1 May, AFP reported. "This means we will impose exactly the same restrictions on current EU states in the next seven years following [our] accession as those countries impose on Hungarian citizens," Gal said. He also said Hungarian leaders will continue to seek the easing or lifting of restrictions already announced through bilateral talks with the leaders of the current EU members. The Hungarian government has repeatedly charged that such restrictions infringe on the EU's basic principle of free movement of labor. (RFE/RL 04.iii.04) KAZAKHSTAN KAZAKH COMMUNIST PARTY SPLITS Thirteen members of the Central Committee of the Communist Party of Kazakhstan (KPK) have split off to form a new party they plan to call the Communist Party of the Republic of Kazakhstan (KPRK), Interfax-Kazakhstan reported on 1 March. "We worked long and hard to preserve the unity of the party, but the methods that KPK leader Serikbolsyn Abdildin uses did not allow us to find a consensus," former KPK Central Committee Second Secretary Vladislav Kosarev announced at a 1 March press conference. According to Kosarev, he and his supporters decided to strike out on their own in December, after Abdildin insisted on making Tolen Tokhtasyn, formerly a leader in the opposition Democratic Choice of Kazakhstan (DVK) movement, a member of the KPK Central Committee. Kazinform reported on 1 March that the dissident communists could take with them 25,000 of the KPK's 56,000 members. (RFE/RL 02.iii.04) LITHUANIA FIRST DAY OF PRESIDENT ROLANDES PAKSAS’ IMPEACHMENT HEARINGS LAST 13 MINUTES The first day of the parliamentary impeachment hearings that will determine the fate of President Rolandas Paksas lasted only 13 minutes, daily Lietuvos rytas reported on March 9. Supreme Court Chairman Vytautas Greicius, who is presiding over the impeachment, accepted a proposal by Liberal-Centrist deputy Raimundas Sukys to suspend the hearings until the Constitutional Court rules on the admissibility of charges that Paksas violated the constitution. The president's lawyers also supported the adjournment. The Constitutional Court is scheduled to begin its hearings on the issue on March 16. Parliament has discussed a proposal to change the rules of the impeachment process to accept the court's ruling without further investigation. However, others are arguing that the role of the parliament in the impeachment would be diminished and the changes to the rules could be challenged by the Constitutional Court. The continuing crisis over the presidency may continue until after EU accession on May 1, which many Lithuanians consider would be a major national embarrassment and potentially harmful to the country's image as a place to invest. (NewsBase 11.iii.04) POLAND PUBLIC FINANCES COMMISSION APPROVES THE SENATE’S VAT BILL AMENDMENTS The Sejm Public Finances Commission yesterday gave the thumbs up to the bulk of the Senate's amendments to the VAT bill, a stance echoed by the government, although the latter did reject an amendment concerning an increase in VAT on Internet services. This means that government will now have to negotiate with the European Commission on whether such an amendment can be forced through into law. The most controversial issue to arise, however, concerned the introduction of guarantee deposits. At present, companies trading with EU member states have to wait 180 days for a tax return, but the new amendment would allow companies to speed the process up by paying a deposit of zl.250,000 . This though is proving to be something of a hot potato, with opposition parties claiming that the amendment would punish domestic enterprises and favor the richest companies. (WBJ 10.iii.04) EUREKO AND TREASURY TO LOCK HORNS OVER CONTROL OF PZU The State Treasury has announced it has devised a plan to settle its dispute with Dutch Eureko over the control of PZU, the largest domestic insurer. Treasury Minister Zbigniew Kaniewski asserted that a document concerning this issue has already been sent to the Dutch investor, although Eureko spokeswoman Lorrie Morgan refuted the claim, stating, "We have not received a single document concerning the amicable solution to the dispute." Both parties will, however, meet on March 29, but it is likely to be a difficult meeting. Eureko demands keeping the original privatization agreement, according to which PZU should be publicly sold and thus giving the Dutch investor the right to increase its current 20% stake in the insurance firm by an additional 21%. At present, the Ministry rejects such a proposal. (WBJ 10.iii.04) POLAND NAMES FOUR POTENTIAL ADVISERS ON SELL-OFF OF BANKING GIANT PKO BP Poland has named four potential privatization advisory groups in the sell-off of state banking giant PKO BP, the country's State Treasury announced Monday (February 23). The four groups are led by international giants: Citigroup Global Markets, Credit Suisse First Boston, HSBC and Deutsche Bank Securities. Citigroup Global Markets teamed up with the Bank Handlowy brokerage house, Credit Suisse First Boston joined Bank Gospodarki Zywnosciowej (BGZ), DB will be supported by several Polish consultancies and HSBC will run in cooperation with its Polish unit HSBC Securities Polska. Much worry has existed that the landmark privatization, a cornerstone of Poland's budget for 2004, will be delayed into 2005 after a recent leaked report and Treasury comments suggested the complexity of the deal may not allow for a prompt sale. Other reports, however, also suggest political will could be lacking to carry out such a headline privatization among Poland's unpopular minority government as popular support for privatization has lagged. This overarching desultory mood has even led PKO BP officials, eager to see an injection of capital, to suggest they could carry out the privatization on behalf of the government. That could be all the more important as the bank's president told a recent press conference that a sales decision in 2005, an election year, could be difficult indeed. Poland has already tried and failed to pick an adviser for the sale. In the last tender, Citigroup Global Markets Polska with its local Bank Handlowy brokerage house, HSBC Investment Services, and the Polish brokerage house Penetrator in concert with investment advisors TDI were the bidding parties, but all bids were rejected. PKO BP's sell-off is supposed to take place via the public sale of a roughly 30% stake, aimed at chosen financial investors on the Warsaw bourse. PKO BP is Poland's retailing leader and the biggest bank in the country. The bank lifted its net profit to a record PLN 1.23 bln in 2003. The bumper profit rested on a relatively good interest income performance considering the fall of official rates, a good net provision result, an improved credit portfolio, and lower asset costs. (Interfax 01.iii.04) ROMANIA HIGH-RANKING ROMANIAN OFFICIAL DETAINED ON SUSPICION OF CORRUPTION Retired Brigadier General Lazar Iliescu was detained on 5 March under the suspicion he solicited and accepted bribes and was involved in illegal deals, Romanian television reported. After his retirement from the Romanian Army in 2002, Iliescu became deputy director of the Defense Ministry's internal auditing directorate. He will be under investigation by the National Anticorruption Prosecution (PNA) for a period of 29 days. According to the PNA, some of Iliescu's alleged offenses date back to 1996-98, when he was serving as chief of the Defense Ministry's internal financial-control department, while other alleged crimes were committed between 2002-03 in his new civilian position. Mediafax reported that Iliescu solicited and received some 5-10 percent of the value of contracts he approved. (RFE/RL 08.iii.04) RUSSIA YABLOKO FILES DUMA ELECTION LAWSUITS The liberal Yabloko party filed a series of lawsuits demanding the cancellation of results in December's State Duma elections in 170 out of 225 single-mandate districts, party spokesman Sergei Loktionov told Interfax on Wednesday. Yabloko failed to gain the 5 percent of the vote required for parties to get into the Duma and had only three of its deputies elected from their districts. Loktionov said that the 78 lawsuits are based on the data compiled from comparing 14,065 voting protocols received from observers with the ones received from local election commissions. He said that copies of the protocols would be submitted to court together with the lawsuits. The largest number of discrepancies between official protocols and those submitted by observers -- 215 -- came from the Perm region, he said. Yabloko also plans to file suit with the Supreme Court, protesting violations during the elections and vote count that led to the violations of citizens' constitutional right to free elections, Loktionov said. (The Moscow Times 11.iii.04) RUSSIA CREATING SINGLE FINANCIAL MARKET REGULATOR The new Russian government is to discuss the formation of a single structure that will regulate financial markets. A presidential decree on the system and structure of federal executive bodies says that a federal service for financial markets will be set up and receive the control and supervision functions of the Federal Securities Commission. The service will also receive the financial market control and supervision functions of the Labor Ministry and Anti-Monopoly Ministry, control over the Finance Ministry's audit activities and control over exchange activities. The government will also set up a federal finance and budget supervision service, to which Finance Ministry control and supervision functions over budget and finance will be transferred. (Interfax 10.iii.04) RYBKIN DROPS BID FOR THE PRESIDENCY Presidential candidate Ivan Rybkin, who mysteriously disappeared for four days last month, said Friday that he was pulling out of the election after facing what he called enormous pressure from the Kremlin. "I'm withdrawing my candidacy. I will not participate in this farce," Rybkin, a fierce critic of President Vladimir Putin, said at a news conference in Moscow. "In Russia it is very difficult to work as an opposition candidate," he said, Interfax reported. Rybkin said that when he decided to take part in the election he knew he would face pressure to quit, but he said he had not "expected such lawlessness." He did not elaborate. Rybkin spoke after a court rejected a complaint he had filed against the Central Elections Commission for forbidding him from taking part in televised campaign debates via a video link from London. Rybkin, citing safety concerns, went to London after his disappearance last month. He surfaced after four days in Kiev, where he initially said that he had gone for a short vacation. But after flying to London -- and meeting with his political patron, Boris Berezovsky -- he said he had been drugged and forced to participate in a compromising video. Rybkin returned to Moscow late Thursday to announce his withdrawal. At the news conference, Rybkin said he would not call on any of the other presidential candidates to withdraw and urged his supporters to shun the March 14 election. "I prefer a boycott," he said. Candidates had until Monday to withdraw from the election, which Putin is expected to win easily. (The Moscow Times 10.iii.04) GOVERNMENT PLANS TO SUBMIT AMENDMENTS TO THE LAW ON INSURING BANK ACCOUNTS In the spring of 2004, the Russian government plans to submit amendments to the law On Insuring Bank Accounts to the State Duma. Under the document, the maximum amount which the state will reimburse to account holders of bankrupt commercial banks in full will be lowered to R20,000 from R100,000 at present. In addition, the ministry of economic development and the finance ministry drafted amendments, under which state guarantees will not apply to household deposits, made at SBERBANK after December 27, 2003. The law, which was passed at the end of 2003, extended the term of SBERBANK guarantees until January 1, 2007. Experts warn that, in all likelihood, those amendments would not be approved by parliament. (NewsBase 10.iii.04) INVESTORS SUING SURGUT OVER STOCK OWNERSHIP Minority shareholders in Surgutneftegaz have staged a revolt with a legal suit that could wrest control of the oil major from its current management and result in 62 percent of the company's stock being canceled. The lawsuit, filed at the Khanty-Mansiisk autonomous district arbitration court on Thursday, is based on the law on joint stock companies, which requires companies to cancel any treasury stock that hasn't been sold within a year, said William Browder, CEO of Hermitage Capital Management. Hermitage is leading the consortium of Surgut's minority investors that joined forces against the current management. The group also includes Firebird Management LLC, Prosperity Capital Management and the Russian Investor Protection Association. The minority investors also charge that management is failing to effectively manage its cash and securities, believed to be worth some $5.5 billion. According to Surgut's own financial statements from 2002 to 2004, Browder said, interest earned on the company's average cash balance remained at 1.4 percent, while Yukos oil major earnings were 9 percent and 8.1 percent. Browder conceded that no quick results can be expected in the suit given the likelihood of appeals. Analysts welcomed the minority investors' move. "If not pushed, Surgut will do very little. ... But whether the case is going to be won, I don't know. I hope so," said James Fenkner, head of Research at Troika Dialog investment bank. Fenkner noted that the suit could become a telling episode on whether the country is heading in the right direction regarding transparency. Paul Collison, oil and gas analyst with Brunswick UBS, was skeptical over the prospects of minority shareholders succeeding in their quest. "People have tried to force [Surgut CEO Vladimir] Bogdanov to change practices before. And I don't see the change in the environment to alter the probability of success," he said. Officials at Surgutneftegaz headquarters in Surgut said the company was not commenting on the suit. (The Moscow Times 05.iii.04) TAX MINISTRY: SIBNEFT OWES $420M MORE Sibneft, Russia's fifth-biggest oil producer faces an additional claim for $420 million in back taxes from the Tax Ministry, on top of a $1 billion claim received earlier this week. Sibneft received a ministry letter Thursday that its main production unit, Noyabrsk, underpaid taxes for 2000 and 2001, Sibneft spokesman John Mann said. The unit's taxes for those years were cleared by the Audit Chamber, the parliament's watchdog, Mann said. The tax review raises concerns that investigations of Yukos, Russia's largest oil company by market value, may lead to probes of other companies. The ministry's $1 billion tax on Tuesday claim drove the stock 7.6 percent lower for the next two days. Earlier this year, the Tax Ministry kicked off a campaign to crack down on the widespread use of tax-minimization schemes by slapping Yukos with a claim worth some $3 billion. The move ratcheted up the pressure on a company already reeling from a wide-ranging fraud and tax-evasion probe that landed Yukos founder Mikhail Khodorkovsky and his partner Platon Lebedev in jail. That battle has been seen as key to establishing greater state control over big business, in particular big oil. Analysts said the Tax Ministry's claim against Sibneft is further indication that the government is determined to rein in the oil barons. President Vladimir Putin on Monday nominated a former chief of the now defunct Tax Police, Mikhail Fradkov, as his choice for prime minister. Fradkov, according to some analysts, specialized in assembling dossiers on the tax schemes used by big business and was key to building the government's case against Khodorkovsky and Lebedev. Outgoing PM Mikhail Kasyanov was considered too close to tycoons like Sibneft owner Roman Abramovich and Khodorkovsky for the Kremlin's liking. Both Abramovich and Kasyanov are considered part of the "Family" clan of tycoons and bureaucrats that rose to power under Boris Yeltsin. Sibneft, however, insisted the Tax Ministry's claim had nothing to do with Abramovich's political standing. Mann declined to say when Sibneft had been notified by the ministry about the $1 billion claim, which was for the year 2001, and he stressed that it was not "a tax bill," but rather an "opinion" that Sibneft could contest. Political or not, analysts said the move increases the risks for oil majors like Sibneft who have aggressively made use of loopholes to minimize taxes. When it comes to tax-minimization schemes, Sibneft is the best in the business. In 2001, the year in question, its effective tax rate was just 9 percent - well below the statutory rate of 24 percent. In a probe that ended last year, the Audit Chamber charged that the company had lowered its tax payments to the federal budget by 10 billion rubles in 2001 and 2002, but it also conceded that the schemes were legal at the time. Yukos also made full use of these schemes, keeping its effective tax rate down to 13 percent in 2002. Moves by the Tax Ministry to go after companies for exploiting legal loopholes are provoking fears the investment climate is becoming increasingly unstable. (The St. Petersburg Times 05.iii.04) FRADKOV TO PROPOSE NEW CABINET STRUCTURE TO PUTIN SHORTLY Mikhail Fradkov, the newly approved prime minister, will submit his proposal on the structure of the new Cabinet to President Vladimir Putin shortly. The Duma gave its consent to his appointment earlier on Friday. Fradkov told reporters on Friday he would go from the Duma to the government house to continue consultations. "I will go to my office and invite my aides, who are helping me plan the Cabinet structure, its final version, in order to have it ready for the president in the next few days," Fradkov said. He would not say when decrees on ministerial appointments and the new structure will be issued as this, he said, depends on the president and how quickly everything is coordinated. He said that on Friday he will move to the office of the prime minister, which has been vacant for a week and a half. He said he was generally satisfied with the Duma vote on his nomination. Asked how he intended to mark his appointment Fradkov said "by shock work." He said he would celebrate with his family in the evening. Fradkov said he had learned many curious things about himself from the media in the past few days. "I was moved from the shadows to the light," he joked. (Interfax 05.iii.04) NO VENUES FOR SERGEI GLAZYEV ON CAMPAIGN TRAIL Presidential candidate Sergei Glazyev couldn't meet with voters as planned during a campaign stop in Nizhny Novgorod on Saturday after local authorities tore up his contract for the scheduled venue and cut off its electricity. But this is nothing new, said Glazyev, a leader of the nationalist-populist Rodina bloc in the State Duma. Just two days earlier, during a stop in Yekaterinburg, authorities evacuated the building where he was holding a news conference due to what they called a bomb threat. Visibly embarrassed, Glazyev explained to a crowd of about 200, mostly young people standing on the windy street that authorities had just torn up his contract to rent the hall and switched off the electricity to prevent him from using it. He did not elaborate on who exactly had torn up the contract, but said he had spoken with Nizhny Novgorod Governor Gennady Khodyrev and been told there must have been "a misunderstanding." Behind him, the doors of the building were shut tight, and as he spoke three police cars pulled up. Telephone calls to Nizhny Novgorod officials went unanswered Sunday, and the Kremlin press service declined to comment on Glazyev's allegations. But Glazyev, a former Communist economist who is running for president as an independent, is convinced that Putin is doing whatever it takes to make sure that he wins more than 50 percent of the vote on March 14 to avoid a runoff. He told the huddled crowd Saturday that Sergei Kiriyenko, the presidential envoy to the Volga Federal District, which surrounds Nizhny Novgorod, had no doubt asked city officials to throw a wrench into his campaign efforts. Glazyev's popularity has soared after Rodina won a surprising 10 percent of the vote in Duma elections. The bloc was formed, at least in part, by the Kremlin, in an attempt to court left-leaning voters and nationalists. Observers say it beat expectations in the elections due to favorable coverage provided by state television. This time around Glazyev is getting little coverage - but he still believes that his popularity stands at 20 percent to 25 percent. Putin's popularity, meanwhile, is closer to 40 percent, Glazyev said, citing a survey conducted by pollsters working for his campaign. And an informal street poll of Nizhny Novgorod residents seemed to confirm this. Many identified themselves as Communists and said they planned to vote for Glazyev. The Kremlin is worried about this support: While Glazyev has next to no chance of beating Putin in the election, a strong showing would put him in place to challenge a Kremlin-backed candidate in the next vote, in 2008, political analysts said. Glazyev said he is confident that he will do well. (The St. Petersburg Times 02.iii.04) YUKOS BARRED FROM TAKING ACTIONS WITH SIBNEFT SHARES The Moscow Arbitration Court has barred Yukos from alienating or transferring to third persons 2.72 billion ordinary shares of Sibneft (57.5% of the 92% of the shares owned by Yukos in Sibneft), which have a nominal value of 0.0016 rubles each, a court source told Interfax. The decision was made on February 16 as a security measure under the lawsuit filed by Nimegan Trading Ltd. and Gemini Holdings Ltd. They are seeking the invalidation of the decision of the Federal Commission on Securities Markets to register an additional emission of securities by Yukos, which could be partially exchanged for Sibneft shares. The defendants in this suit are the Federal Commission on Securities Markets and Yukos. Gemini Holdings Ltd acquired 117.5 million Yukos securities during the placement of the additional emission. Nimegan Trading Ltd is a Yukos shareholder and had a priority right to acquire additional shares. (Interfax 27.ii.04) PUTIN: FIRING WILL BOOST REFORM President Vladimir Putin on Wednesday put a positive spin on his abrupt decision to fire veteran Prime Minister Mikhail Kasyanov and his government, saying it was designed to accelerate the formation of a Cabinet that could tackle stalled structural reforms. Putin paid a rare visit to the White House, the government's seat, to personally brief Kasyanov and his ministers on why they had been fired 19 days before the presidential election. But he kept them in the dark over who would be the new prime minister. But even as Putin took pains to explain the shakeup as a careful ploy to speed up the formation of an efficient government, he conceded it was only "almost planned." Later, Kasyanov told reporters that his dismissal had taken him by surprise and he had been expecting to have to step down only after the presidential election. Observers say the shock decision appears to be a last-minute move designed to pull in the electorate for the March 14 vote that could be threatened with collapse because of low turnout. But Putin said he had been prompted by a need to speed up consultations with the "parliamentary majority" about the next prime minister. He said that if he had not acted now, he would have lost time in forming a new Cabinet after the election. Under the law, the president has to dissolve the Cabinet after his inauguration, which is scheduled for May, and then wait for his choice of prime minister to be confirmed by parliament, a process that could go on through June. By fast-forwarding the dismissal of the Cabinet by almost three months and forwarding a new line-up for government ahead of the election, Putin, who is considered a shoo-in for a second term, appears to be jumpstarting that process. The new Cabinet he puts together now is likely to gain rubberstamp approval after his inauguration, giving it an added two months of working power, analysts said. If Putin had waited, they said, the Kasyanov government could have been left in limbo for months with no clear mandate to go forward with reforms. By Wednesday evening, Putin was already locked in talks with the parliamentary majority over his choice of prime minister, Interfax reported. State Duma Speaker Boris Gryzlov and his first deputies, Alexander Zhukov and Lyubov Sliska, attended the meeting, as did other senior members of the pro-Kremlin United Russia party, including Georgy Boos, Vyacheslav Volodin and Vladimir Pekhtin. United Russia holds more than 300 of the 450 seats in the Duma. Vladislav Surkov, the deputy head of the presidential administration in charge of relations with the Duma, also attended. The consultations will continue Sunday, Gryzlov said after the talks. Earlier Wednesday, Gryzlov pitched for more leverage for United Russia in the government, which, he said, should be based on "the parliamentary majority." Putin said moving to form a new government ahead of time would help advance key administrative reforms to cut the country's overblown bureaucracy. Analysts agreed. "Although the decision was not expected, it looks logical," said Yevgeny Gavrilenkov, chief economist at Troika Dialog. "A whole year could have been lost on reforms. Putin would have had to wait to May to form the government, then nothing happens in the summer anyway, and then in fall the focus is on the budget." (The St. Petersburg Times 27.ii.04) SERBIA AND MONTENEGRO KOSTUNICA RIDES AGAIN After two months of intense negotiations, the Serbian parliament has approved a new government under Prime Minister Vojislav Kostunica. Kostunica’s cabinet includes ministers from the three reformist parties that won December's elections: his Democratic Party of Serbia (DSS), the G17 of liberal economist Miroljub Labus, and the coalition Serbian Renewal Movement-New Serbia (SPO-NS), led by Vuk Draskovic and Velimir Ilic. Labus was named deputy premier. The reformists' inability to win a parliamentary majority in the elections, when they won 109 of 250 seats, meant that they initially sought support for a majority government from the outgoing ruling Democratic Party (DS). When those efforts failed, Kostunica was left with two alternatives: he could call for new elections in which the strongest party in the parliament, the populist Serbian Radical Party (SRS), would be expected to gain further ground at the expense of the reformists, or he could ask Slobodan Milosevic’s Socialist Party (SPS) for support. The choice was difficult given that Kostunica entered history as the man who beat Milosevic in the 2000 elections and knocked him from power after more than a decade of struggle, during which Draskovic, but also Labus and Ilic, all led the opposition to the former Yugoslav strongman. But the decision was made easier by the unexpectedly cooperative approach of the new SPS leadership, which said it would stay in opposition but would support the new government “in the interest of the country” to bring the months-long institutional vacuum to an end. Milosevic himself was not informed of the decision, SPS officials said. Since the beginning of the parliamentary electoral campaign in December, party contacts with Milosevic have been cut by the International War Crimes Tribunal for the former Yugoslavia (ICTY) in The Hague, where Milosevic is on trial. "The SPS is not in the government but we will support it as long as it respects the program outlined by Mr. Kostunica," SPS Deputy Leader Ivica Dacic said. (TOL 08.iii.04) SLOVAKIA OPPOSITION PARTIES ATTEMPT TO OUST FINANCE MINISTER Leaders of several Slovak opposition parties agreed early this week that they would band together in an attempt to oust Finance Minister Ivan Miklos. The threat caused the Slovak currency to weaken moderately, mostly due to the response of London banks. Miklos is seen as the moving force behind the liberal economic reforms that have been carried out by the Cabinet of Premier Miklos Dzurinda. The reforms sparked the departure of several Democratic and Christian Union (SDKU) deputies, causing the coalition government to lose its majority in parliament and making Miklos’ chances of retaining his post uncertain. The opposition says Miklos has caused financial damage to the country, a charge Miklos denies. “I consider it a legitimate effort of the opposition,” he told reporters. “If I remember it right, this will be the sixth attempt at my dismissal from the government during my political career. I admit, that out of the hitherto attempts this is the one with he best chance to succeed.” Slovakia is ruled by a coalition government made up of Dzurinda’s SDKU, the Hungarian Coalition Party (SMK), and the New Citizen’s Alliance (ANO). (Interfax 05.iii.04) 90% STAKE IN STEAM-GAS CYCLE ENERGY AND HEAT PRODUCER TO BE PRIVATISED A stake of 90% in Bratislava's Steam-Gas Cycle (PPC) energy and heat producer will be privatised to the PPC Holding company, the privatisation agency (FNM) has decided. PPC Holding, backed by local investment group Penta, will pay 3.8 times the stake's nominal price of 540 million crowns (around 13 million euros). Swiss company Aare Tessin AG fur Elektrizitaet will be the strategic partner of PPC Holding. PPC was established in 1996 and has equity of 600 million crowns divided into 6,000 shares. The remaining 10% is owned by the Economy Ministry through Slovenske elektrarne (SE) power utility. (NewsBase 02.iii.04) UKRAINE UKRAINE WARNS POLAND OVER DISCRIMINATION IN HUTA CZESTOCHOW PRIVATISATION Ukraine has warned Poland over possible complications in bilateral relations if the Donetsk-based Industrial Union of Donbas is discriminated against in the process of the privatisation of the Huta Czestochowa steelworks, Interfax-Ukraine news agency reported. Meeting with Polish Ambassador Mariek Ziolokowski on March 4, Ukrainian Economics and European Integration Minister Mykola Derkach said the situation could affect economic ties and bilateral investment and trade projects. Derkach said Ukraine does not understand why LNM Group (India-UK) was awarded the right to buy into Huta Czestochowa despite the fact that the Industrial Union of Donbas won an appropriate tender. Derkach said Ukraine was not satisfied with the Polish side's explanations. Ukrainian President Leonid Kuchma had instructed Prime Minister Viktor Yanukovych to clarify the situation around Huta Czestochowa's privatisation. (NewsBase 08.iii.04) UKRAINIAN PROSECUTOR-GENERAL DISMISSES CHARGES BY FORMER SPY Prosecutor-General Hennadiy Vasilyev told journalists in Kyiv on 2 March that his office will not open a criminal case in connection with documents recently submitted by a former intelligence officer posted at the Ukrainian Embassy in Berlin, Ukrainian news agencies reported. General Valeriy Kravchenko claimed last month that the Ukrainian Security Service (SBU) has been illegally ordering its operatives abroad to spy on Ukrainian opposition lawmakers and cabinet members. Our Ukraine lawmaker Mykola Tomenko met with Kravchenko in Berlin last week and subsequently passed to the Prosecutor-General's Office the SBU instructions that purportedly corroborate Kravchenko's charges. Vasilyev said there were no grounds to open a probe since the documents provide no evidence that the law was broken. At the same time, Vasilyev warned Tomenko against making the content of Kravchenko's documents public, saying the lawmaker could thus face criminal responsibility for revealing state secrets. (RFE/RL 03.iii.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. 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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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