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*** Due Diligence *** Business Intelligence *** Asset Retrieval *** *** Debt Recovery *** Disappearance Response *** *** TT Meerkat 500 ***  TT Business Intelligence Report Vol. 2, No. 60, 27 November 2003 Business Intelligence, Crime, Corruption and Debt in C&E/SE Europe and the FSU UPCOMING CONFERENCES LVA'S "12th INTERNATIONAL TRANSPORT FORUM OF THE C.I.S. & BALTIC STATES" This event will take place on 8-14 December 2003 in London and Liverpool, United Kingdom. For further information, please contact Tessa Abrahams, tel: +44 (0)20 8795 2970; fax: +44 (0)20 8795 2977; email: [email protected]; W: www.lva.co.uk THE ENERGY EXCHANGE'S "REFINING AND PETROCHEMICALS IN RUSSIA AND THE CIS COUNTRIES" This event will take place on 9-11 December 2003 at the Hotel Adlon, Berlin, Germany. For further information, please contact Steve Church, tel: +44 (0)1242 529 090; fax: +44 (0)1242 529 060; email: [email protected]; W: www.theenergyexchange.co.uk EUROMONEY'S "COMPETING IN A NEW EUROPE: THE 9th EUROMONEY CENTRAL & EASTERN EUROPEAN FORUM" This event will take place on 13-14 January 2004 at the Hotel Inter-Continental, Vienna, Austria. For further information, please contact Jane Colwill, tel: +44 (0)20 7779 8968; fax: +44 (0)20 7779 8795; email: [email protected]; W: www.euromoneyconferences.com BELARUS BELARUSIAN PRESIDENT ORDERS 10 PERCENT ECONOMIC GROWTH President Alyaksandr Lukashenka instructed his government on 21 November to ensure annual economic growth of 10 percent in 2004 and 2005, Belapan reported. "Some might find this excessive, but I'll say that the officials who fail to ensure the achievement of the targets set at the Second All-Belarusian Popular Congress will have to resign," he said. That Soviet-style congress, held in May 2001, approved a government-drafted program for Belarus's socioeconomic development in 2001-05 that served as the economic plank of Lukashenka's re-election platform later that year. The program provided for a 40 percent increase in the country's GDP between 2000 and 2005, and a 25 percent increase in GDP compared with 1990. Lukashenka pledged that the average monthly pay in 2005 will total $250. (RFE/RL 24.xi.03) BOSNIA AND HERZEGOVINA BOSNIA WINS GREEN LIGHT FOR NEXT STEP TO EU Bosnian authorities began breaking out the champagne on 18 November when the European Commission (EC) accepted the country's Feasibility Study, assessing its readiness for a Stabilization and Association Agreement (SAA), the next step toward European integration. According to the Feasibility Study, Bosnia has made important progress since the end of the war in 1995 --particularly in regard to establishing democratic procedures, improving the rule of law, and stabilizing the macroeconomic situation-- but still suffers from significant weaknesses. Addressing the European Parliament in Strasbourg last week, EU Commissioner for External Affairs Chris Patten described the EC's attitude toward Bosnia's SAA prospects as "yes, but.". Bosnia now has until 30 June 2004 to implement the EC's recommendations and to make significant progress in 16 priority areas before the green light will be given to open SAA negotiations. It's a deadline that local authorities say they can meet, despite doubts expressed by the international community in Bosnia. The prime minister of Bosnia and Herzegovina, Adnan Terzic, said on 19 November that the EC report was "better than we had hoped for," adding that the EC's recommendations had already been put into motion, and that Bosnian authorities will have no problem meeting the June 2004 deadline. Terzic attributed the positive result of the Feasibility Study to the "great success of Bosnian authorities" and also to the work of the international community in Bosnia. (TOL 24.xi.03) U.S. CAUTIOUSLY BACKS EU MISSION IN BOSNIA Speaking in Brussels on 18 November, U.S. Secretary of State Colin Powell said the United States supports an EU takeover of the international peacekeeping mission in Bosnia from NATO but that it remains a "question of timing." The EU -- especially France -- is anxious to take over the mission in 2004. The EU is currently in charge of international police efforts in Bosnia. Several U.S. officials previously said that it is too early to discuss NATO's exit from the Balkans, where many Muslims and ethnic Albanians trust the United States but not the EU. Many in Washington also have doubts about the EU's ability to manage the security situation in Bosnia and about the EU's ultimate goal in building up a military bloc without the participation of the United States. (RFE/RL 19.xi.03) BULGARIA BULGARIAN, ROMANIAN PREMIERS AGREE ON JOINT EU-ACCESSION EFFORT Visiting Romanian Prime Minister Adrian Nastase and his Bulgarian counterpart Saxecoburggotski agreed during an "informal meeting" at the former monarch's palace of Vranya, near Sofia, on 16 November that their countries will make a joint effort to conclude accession talks with the EU before October 2004 and to sign the accession accord in the first quarter of 2005, bnn and international news agencies reported. Bulgaria has thus far closed 26 out of 31 chapters in the negotiations with the EU, while Romania has completed negotiations on only 20 chapters. This prompted concerns in Sofia that Bulgaria's EU membership might be delayed, after the European Commission said in its report earlier this month that the two countries should sign the accession agreement together. The premiers said that they want the commission to provide the two countries by December with a "road map" for concluding the negotiations. (RFE/RL 18.xi.03) CROATIA NATIONALISTS' NARROW WIN "This is a great day of victory -- not only for the Croatian Democratic Union, but for the whole country as well," announced Ivo Sanader, addressing his fellow party members after hearing the first unofficial election results -- which granted his nationalist party at least 64 seats in Croatia's 160-seat Parliament. But the declared "victory" is narrow. The only thing that's certain is that the next government in Zagreb will be a coalition. HDZ's main rival, the center-left bloc leader Social Democratic Party (SDP), could still claim about 68 seats if smaller parties rejoin their coalition. In the most closely contested election since Croatia has gained independence in 1991, the intrigue of the moment is whether the 10-seat Croatian Peasants' Party (HSS) will remain SDP's main ally. "Although the HSS's president Zlatko Tomcic still keeps his cards close to his chest, his party will most likely turn its back to SDP and join HDZ," said Damir Grubisa, political analyst from the Institute for International Relations. HDZ knows it can count on the Croatian Party of Rights (HSP) and its eight seats, as well as on Croatian Social Liberal Party's (HSLS) two seats. Then eight seats in Croatia's Parliament are reserved for the national minorities' representatives, and up to 12 seats can go to representatives of the Croatian diaspora. In the end, it will all depend on simple arithmetic. Croatia's outgoing prime minister -- SDP's leader Ivica Racan -- is convinced that the coalition government would not be stable without his party. "It is not over yet," he warns. (TOL 24.xi.03) CZECH REPUBLIC CZECH REPUBLIC FAILS TO MAKE HYUNDAI SHORT-LIST The Czech Republic did not make it onto the short-list of countries being considered for the construction of a new production facility of the Korean automobile manufacturer Hyundai, which would have brought an investment of CZK 1.5 bln. The manufacturer's management officially announced this to the CzechInvest agency yesterday. According to the agency, Hyundai demanded such concessions and incentives that the investment would not have been profitable for the Czech Republic. According to analysts, lower wages and taxes in Slovakia and Poland also influenced the Korean decision. The Hyundai concern is still deciding between these two countries. CzechInvest wants to continue preparing the industrial zone Triangle near Zatec for the needs of a large foreign investor. (PBJ 26.xi.03) CSA MOVES TO LAUNCH LOW-COST SUBSIDIARY The supervisory board of Czech Airlines (CSA) last week decided to launch negotiations for acquiring complete control of the biggest charter airline in the country, Travel Servis, with the aim of turning it into a low-cost airline serving Western and Eastern Europe. If successful, CSA would be the first of the scheduled airlines in the region to even contemplate a low-cost subsidiary. CSA currently envisages the existing charter operations of Travel Servis continuing alongside the new low-cost business. CSA had brushed off any suggestion that it would go the low-cost route, but it now admits that it cannot continue cutting scheduled fares in response to the cheaper competition. "The negotiations may be finalized very quickly," said Michal Pozar, manager in the marketing and sales division of CSA. Part of the urgency is caused by the need to know whether or not Travel Servis will figure in the airline's future strategy. The acquisition is part of a bigger development plan to transform CSA into a pan-regional airline that will serve destinations in the European Union and Eastern Europe, company spokeswoman Marcela Pickova said. CSA president Jaroslav Tvrdik last week was given 10 more weeks to finalize the airline's overall strategy, which will include the development of Travel Servis and purchase of new aircraft worth billions of crowns, Pickova said. CSA financial and marketing specialists have already written a business plan for the launch of the no-frills airline, the source said, and the company has appointed a team of consultants from KPMG to advise on the purchase of Travel Servis. The low-cost airline should be launched no later than March 2004, the source added. The company wants to introduce a new brand name, Pozar said, and it willoffer "a different level of quality at a lower cost." He cited the example of CSA's SkyTeam alliance partner Delta Air Lines, which has a low-cost subsidiary, Song. The alliance also includes Air France, Korean Air, Delta Air Lines, Alitalia and AeroMexico. (PBJ 24.xi.03) GEORGIA GEORGIA PLEDGES EARLY ELECTIONS Georgia's interim leader Nino Burdzhanadze, in her first speech to the nation Monday, pledged to hold elections within 45 days, restored the old parliament and said she would repeal the state of emergency declared by longtime President Eduard Shevardnadze before he was swept from power. Burdzhanadze, a key opposition figure swept into power by huge street protests against the ousted president, appealed to Georgia's people to cooperate with her government and reaffirmed her country's pro-Western stance. She also said she would repeal the state of emergency Shevardnadze had declared two days earlier, saying there was no need for it. Interior Minister Koba Narchemashvili, who is in charge of police forces and who sided with Shevardnadze in calling the state of emergency, resigned Monday. Life in Tbilisi appeared to be returning to normal on Monday after a night of street parties, and only a few dozen stragglers remained outside parliament, the epicenter of the protests. Traffic flowed freely along Tbilisi's main Rustaveli Avenue for the first time in days, with the bustle of a normal working week getting under way. Shevardnadze resigned Sunday after a decade of mounting discontent and three weeks of protests over Nov. 2 parliamentary elections his critics said exemplified the corruption that has plagued the former Soviet republic during his reign. After weeks of refusing to step down, in the end he said he was leaving office to avoid a bloodbath in a region steeped in violence. But by that time, some servicemen had joined the protesters and it was doubtful police and soldiers would have obeyed orders to use force. Opposition leader Mikheil Saakashvili, head of the National Movement and the loudest voice in the anti-Shevardnadze protests, praised the outgoing president for "a courageous act" in stepping down. (The Moscow Times 25.xi.03) HUNGARY MOL ANNOUNCES A MANDATORY BID TO BUY SHARES OF SLOVANFT Hungarian oil giant MOL has announced a mandatory bid to buy shares of refiner Slovnaft with the bid applying to three issues of Slovnaft shares that MOL is offering to buy at a single price of 1,379 crowns. The takeover bid will expire in 60 days from the day of its announcement, November 25th. It will be financed from its own, or eventually from existing loan resources of the company. The Financial Market Office (UFT) approved MOL's new draft bid to buy Slovnaft shares on October 27th. Earlier this year the UFT turned down the draft public takeover bid, since MOL did not include the transaction with 202,000 Slovnaft shares from March 20th in the calculation of the average share price, bidding merely 1,200 crowns per share to the minority shareholders. MOL appealed against this verdict. However, the UFT Council confirmed the Financial Market Office's original decision. MOL was obliged to announce a public takeover bid on Slovnaft shares since its share in all voting rights related to the company exceeded 66%. It controlled 70% in Slovnaft at the end of September. It is estimated that buying all remaining shares could cost MOL $248 million. (NewsBase 27.xi.03) SCALA EXPECTS MORE INTERNATIONAL SALES FROM EPICOR MERGER The local subsidiary of business software firm Scala Business Solutions NV is likely to benefit from synergies and access to new markets if the planned global takeover by U.S.-based Epicor goes ahead, its managing director told the BBJ last week. Scala's customer base is predominantly European, while Epicor's customers are mostly in North America, Australia and the U.K., according to a joint press release. The resulting company will have approximately 52% of its revenue base in North America, the release said. Scala Hungary had revenues of $2.97 million in 2002, and is profitable, according to Kiss. After SAP, Scala is the most commonly used international provider of ERP solutions in Hungary, she said. Andreas Kemi, CEO of Scala NV, said the fusion of the two companies will bring better services to clients. He added that the new company will become a global leader in the sale of ERP solutions to small and medium-sized enterprises, with over 20,000 customers and approximately $250 million projected annual revenues. The new company expects to grow in emerging markets and key markets where Scala traditionally performs well, such as the Scandinavian countries, Russia, Central and Eastern Europe and China, said the joint press release. The combined company will support and develop iScala products, it added. The anticipated aggregate transaction value is approximately $87 million, paid in a combination of cash and Epicor common stock. Epicor is seeking to acquire 100% of Scala Business Solutions. Scala's supervisory board and management board said they expect to recommend that shareholders approve the public offer. (BBJ 24.xi.03) OPPOSITION PARTY SLAMS DISMISSAL OF CENTRAL STATISTICS OFFICE PRESIDENT Janos Ader -- who heads the parliamentary group of the main opposition party, FIDESZ -- on 21 November criticized the government's decision to dismiss the president of the Central Statistics Office (KSH), Tamas Mellar, Hungarian dailies reported. Ader said the cabinet expected Mellar "to be servile and understanding of the government's positions," "Magyar Nemzet" reported. Ader quoted Mellar as telling the daily that, when the KSH published GDP figures for the second quarter of 2003, the cabinet asked "why the figure is so poor." Government spokesman Zoltan Gal said, however, that Mellar is being dismissed because the KSH faces major challenges in the upcoming EU accession. In 1998 the FIDESZ-led government appointed Mellar to his post for a six-year term. He has been chairman of the UN Statistics Committee since March 2002, and last year Eurostat asked him to upgrade the European statistics system. The opposition FIDESZ and the Democratic Forum charge that Mellar's dismissal is another attack by the government on independent state institutions. (RFE/RL 24.xi.03) KAZAKHSTAN KAZAKH GOVERNMENT LODGES COMPLAINT WITH CIS ECONOMIC COURT AGAINST RUSSIA The Kazakh government has lodged a complaint with the CIS Economic Court against Russia over the closure of the Baikonur off-shore tax haven. According to Kazakh officials, the Russian-Kazakh agreement on Baikonur's status entitles the city administration to grant tax breaks. However, in October 2001, the Russian government banned the Baikonur city administration from granting tax reliefs on the grounds that the offshore area had been actively used by oil companies to dodge taxes. According to the Russian Tax Ministry, the Russian budget lost R13.8 billion to Baikonur offshore activities in 2001. Should the court rule against Russia, the practice of granting tax breaks in the offshore area may resume. (NewsBase 19.xi.03) LITHUANIA LITHUANIAN COMMISSION INSISTS THAT PRESIDENT ANSWERS QUESTIONS PUBLICLY The Lithuanian parliamentary commission investigating the scandal around President Rolandas Paksas insists that he answer its questions in public. The commission has received Paksas's latest appeal to send its questions to him in writing, chairman Aloyzas Sakalas told the body on Monday. They responded with a message saying that Paksas's "public statement at a commission meeting would promote trust in the presidency," he said. The legislation on ad hoc parliamentary commissions empowers them "to invite state officials to their meetings and hear their statements or explanations, but does not provide for sending questions in writing," Sakalas said. It also refers to an article in Lithuania's constitution saying that "everybody will be equal before the law, a court of justice and state officials." The message says the commission will wrap up its work soon and so invites Paksas to attend a meeting on November 26 or 27 to answer questions publicly. If he wishes, the meeting can be held in his headquarters. The commission has also decided to ask the Prosecutor General's Office to carry out investigations following up on statements made by presidential advisers, Sakalas said. In particular, presidential health service adviser Vitalija Vinickene and former national security adviser Remigijus Acas have told the commission that "a creeping coup or conspiracy are underway in Latvia," he said. "The commission must respond to such statements, which is why it has asked the Prosecutor General's Office to find out who is masterminding these conspiracies or coups, and decide whether an investigation is needed," Sakalas said. The parliamentary commission's meetings are broadcast live on television and radio. (Interfax 25.xi.03) POLAND PROKOM'S SPIN TO ACQUIRE TELMAX In early December, Katowice-based Spin, an IT sector company controlled by Prokom, plans to acquire between 25-30% of publicly traded Telmax. According to unofficial information, the value of the transaction should amount to around zl. 8-10 million. "Spin will take over a new share issue, and all the details have already been settled," said a source close to Telmax shareholders. Although Spin will become a majority shareholder in Telmax, with an option to further increase its stake, a merger is not planned yet. Through the investment, Prokom will be fighting its energy sector competitor, Centrum Informatyzacji Energetyki, which in turn is controlled by Computerland, Prokom's largest rival. The companies will be competing to win contracts to implement new billing systems for energy distribution companies, deals which are worth between zl. 200-300 million, while further system maintenance is estimated at zl. 100 million annually. According to market analysts, the value of the IT market for the energy sector stood at between zl. 400-600 million in 2002, while the sectors future annual growth has been put at 20%. (WBJ 26.xi.03) ORLEN EYEING CZECH AND ROMANIAN PRIVATIZATIONS On Monday, the Czech government announced plans to sell a 68% stake in its oil concern Unipetrol for at least EUR 361 million. Meanwhile, Romanian officials have presented the final list of eight potential bidders to take over its refinery business, Petrom. The Romanians expect around $1 billion for their oil business. PKN Orlen is taking part in both bids, with the hope of further building its market share. "The company, or companies that take over the concern, will be free to do whatever they like with the assets. It is possible, therefore, that some of the subsidiaries will be separated from Unipetrol," said Pavel Kuta, deputy president of the Czech privatization fund. The deadline for submitting offers is January 12, and Orlen signed an agreement last week with the Czech company Agrofert Holding to make a joint bid for Unipetrol. Both transactions are to be finalized in the spring. (WBJ 25.xi.03) ROMANIA EU OFFICIAL HINTS THAT ROMANIA MIGHT FAIL TO CONCLUDE NEGOTIATIONS IN 2004 The chief EU negotiator with Romania, Enrico Grilo Pasquarelli, said in Bucharest on 21 November that it is not "very important" for Romania to succeed in finalizing the accession negotiations by the end of 2004, Mediafax reported. What is important, Pasquarelli said, is for Bucharest to be able to meet the 2007 target of integration into the EU. He said Romania has a lot of work to do before being in a position to conclude accession negotiations. He also said the accession treaty should be signed in 2005, at the latest, and should be ratified in 2006 by all 25 EU members. Pasquarelli spoke at the end of a joint EU-Romania Association Committee session held in Bucharest. He also said the EU will grant Romania the status of a functioning market economy when the reform process is ended. (RFE/RL 24.xi.03) RUSSIA NO YUKOS OUT-OF-COURT SETTLEMENT Prosecutors said Wednesday that there was no chance that jailed oil baron Mikhail Khodorkovsky could settle his case out of his court, signaling their determination to bring him to trial. "There is no question of an out of-court settlement," Prosecutor General's Office spokeswoman Natalya Vishnyakova told foreign journalists Wednesday. Even though the prosecutors' investigation into Khodorkovsky is now completed, she said she could not rule out the possibility that other arrests could be made in connection with a larger investigation into Yukos, which, she said, "is proceeding at full steam." A court has approved Khodorkovsky's detention until Dec. 30, though prosecutors can request an extension. The comments came as the Organization for Economic Cooperation and Development issued a stern warning that the Yukos affair was on track to batter investor confidence and economic growth. Analysts say the attack on Khodorkovsky and other core shareholders in Yukos is a politically motivated onslaught prompted by the businessman's moves that threaten President Vladimir Putin's power base. Khodorkovsky's lawyers have been presented with a 33 page indictment and 227 volumes of evidence substantiating the seven counts against him. Each volume is 300 to 500 pages. Prosecutors will not demand a closed trial, Vishnyakova said, adding, though, that it was up to the court to decide. She said she was unable to confirm or deny speculation that Yukos could be hit with up to $10 billion worth of tax fraud charges. The market slumped on rumors last week that the Tax Ministry would announce Yukos had evaded $10 billion in taxes, a move that could have led to its bankruptcy. But the OECD predicted more doom and gloom over the Yukos affair in its semiannual report published Wednesday. It said economic growth could slow down next year because the arrest of Khodorkovsky and the subsequent arrest of the large Yukos stake had sparked investor fears about property rights. It estimated growth could slow to 5 percent in 2004, compared to an expected 6.3 percent this year. In the strongest criticism yet of the Yukos affair by an international financial institute, the OECD lashed out at "the deployment of the prosecutors, police and security services in a legal and political campaign directed against top executives of Yukos" that "has renewed concerns about the security of property rights and threatens to have a lasting impact on business confidence." (The Moscow Times 27.xi.03) PUTIN CREATES ANTICORRUPTION COUNCIL President Putin signed a decree on 24 November on creating within his administration a Council for Combating Corruption comprising the prime minister, the speakers of both chambers of parliament, the heads of the Constitutional, Supreme, and Arbitration courts, and other officials, Russian media reported. According to the decree, the main goal of the council, which will be a consultative body, is to help the president determine state priorities in fighting corruption. The council will include a commission for fighting corruption and a commission for resolving conflicts of interests. The first commission will deal with eradicating corruption at the federal, regional, and local organs of government, while the second "will regulate conflicts of interests in situations that can damage the interests of the Russian Federation, its constituent subjects, organizations and [individual] citizens." The council must present to the president an annual report on corruption in Russia. (RFE/RL 25.xi.03) SEVERSTAL BIDS $215M FOR ROUGE Russian steelmaker Severstal agreed to pay about $215 million for Rouge Industries Inc., the Michigan-based steel company announced Friday. Rouge, which had previously signed a letter of intent with Severstal, said the companies signed a purchase agreement for substantially all of Rouge's assets. The U.S. steelmaker has amassed $558 million in debt and lost money in 17 of the past 18 quarters. However, the U.S. Bankruptcy Court in Wilmington, Delaware has yet to approve the deal, and other companies could submit competing bids. If the sale goes through, it would be the Russian company's first investment in the U.S. steel industry. Severstal is one of Russia's top three steel producers. Rouge previously asked the court to grant Severstal the right to bid first for Rouge's assets. That proposal was met with objections from U.S. Steel, which said Rouge did not disclose that it received a purchase offer from the Pittsburgh-based steel maker. U.S. Steel, Rouge's second-largest unsecured creditor, said it remained interested in purchasing Rouge to protect its interest in a 50-percent joint venture making electrogalvanized automotive steel. A division of the Justice Department also objected to the proposal, saying that Severstal could just walk away without a definitive sales agreement. The Severstal acquisition is also contingent on the ratification of a labor agreement with the United Automobile workers of America, Rouge said in the statement. (The St. Petersburg Times 24.xi.03) MOSCOW DORMITORY FIRE DEATH TOLL GROWS TO 32 The death toll of a fire that broke out in a dormitory at the Moscow Patrice Lumumba People's Friendship University in the early hours of Monday has reached 32. Acting PR chief of the Moscow interior department Kirill Mazurin told Interfax that 28 bodies were found in the building, three in the street and one person died on the way to the hospital. The total number of people given medical attention was 139. The fire broke out at 2:20 a.m. in room 203 and was extinguished by 5:39 a.m. According to Mazurin, 521 people were on the list of official dormitory residents, 272 of them were in the wing that caught fire, 20 of them were from China, 10 from Vietnam, 10 from Ecuador, 9 from Ethiopia, 6 from Tahiti, 10 from Afghanistan, 6 from Tajikistan, 10 from Angola and 1 or 2 from such countries as Cote d'Ivoire, Morocco, Kazakhstan, the Dominican Republic, Lebanon, Peru and Malaysia. (Interfax 24.xi.03) A LOBBY LOSING ITS POWER Since Vladimir Putin became president in 2000, the agricultural lobby has weakened considerably. In the current Duma, elected in December 1999, the Agrarian and Communist Parties command less than a third of the votes, and they were soon marginalized by a union of pro-Putin factions. In the new government, the Ministry of Agriculture was isolated and the policy initiative for many questions related to agriculture was transferred to other ministries. Moreover, the divisions between opponents to the agricultural lobby began to disappear. The increasing cooperation of their opponents meant that, in government and parliament, the agricultural lobby could no longer find a veto majority. As a result, a liberal land code was introduced in 2002 and negotiations over Russia's entry into the WTO--which means a reform to agricultural subsidies--gained speed. Two further factors have weakened the lobby. First, the devaluation of the ruble after the financial crisis of 1998 has made Russian agricultural products cheaper than imports. As a result new agro-holdings emerged, concentrating their energy on developing new mbusiness opportunities. Second, the fading influence of the lobby and of their strategic partner, the Communist Party, has led to an internal crisis. Gennady Kulik, for example, a founding member of the Agrarian Party and agriculture minister from 1998 to 1999, switched to the Fatherland Party in the 1999 elections--and since April 2002, he has headed the Duma's agricultural committee as a member of the pro-Putin bloc. This May, after an internal power struggle, the current minister of agriculture, Aleksei Gordeev, and another senior party figure, Nikolai Kharitonov, were removed from the party's leadership after seven years in office. Party leaders favoring a break with the Communists seem to be the victors of this power struggle. These factors could mean that the Agrarian Party will cease to be a significant political force. It is quite possible that, after the Duma elections on 7 December, the Agrarian Party will have no representatives in the Duma. Nor is it clear whether, if the party does make it into parliament, its faction will cooperate with or oppose the pro-Putin bloc. However, regional administrations continue to play a major role in managing the farm sector. While Putin may find it possible to pass agricultural reforms into law with greater ease, the future of reforms in Russia depends to a large degree on the government's ability to force rural regions to implement these reforms. (TOL 21.xi.03) DUMA CUTS PENALTIES FOR ECONOMIC CRIME A raft of changes to the Criminal Code have passed a second reading in the State Duma, reducing penalties for a range of crimes, from tax evasion to illegal drug use. But the changes are unlikely to affect how long the country's best-known remand prisoner, former Yukos CEO Mikhail Khodorkovsky, would serve if found guilty on seven counts of fraud and corporate and personal tax evasion. About 100 amendments moved a step closer to becoming law Tuesday, a process that will be complete after their approval by the Duma in a third reading, the Federation Council and the president. The amendments reduce penalties for some forms of tax evasion, including a cut in the maximum sentence for personal tax evasion from five years to three years. The maximum fine also would be cut by one-sixth, to 500,000 rubles ($17,000). The current figure of 600,000 rubles is based on 1,000 times the minimum monthly wage, which was raised from 400 rubles to 600 rubles on Oct. 1. Another amendment cuts the maximum jail term for corporate tax evasion from seven years to six years. But while Duma legal experts think the changes could apply in the case of Khodorkovsky, they doubt whether they would have any effect on any jail time he might serve. As Khodorkovsky has been charged with evading both corporate and individual taxes, sentences for some crimes could be shorter if he is convicted after these amendments become law. Those amendments that provide for milder punishments would also be retroactive, according to Alexei Kovalyov of the Duma's legal committee. He said by telephone Wednesday that he expected the amendments, first submitted to parliament this spring, to easily pass through the Federation Council and be signed into law by President Vladimir Putin by year's end. (The Moscow Times 20.xi.03) INTERIOR MINISTRY PROBES SIBNEFT, ROSNEFT The Interior Ministry's Main Economic Crime Directorate has begun to analyze documents submitted by the Audit Chamber, which has urged the ministry to open criminal tax-evasion investigations of oil giants Sibneft and Rosneft, "Vremya novostei" and other Russian media reported on 17 November. The Audit Chamber found that Sibneft used offshore companies to avoid paying about 10 billion rubles ($300 million) in taxes in 2001-02. State-owned Rosneft allegedly evaded paying about 1 billion rubles in taxes during the same period. Strana.ru commented on 17 November that the target of the probes is Sibneft head Yevgenii Shvindler, who is expected to become chairman of the board of YukosSibneft after the merger of those two companies. The website speculated that the investigation will derail Shvindler's selection and undermine Yukos's efforts to continue "business as usual." A second target of the investigations is Rosneft head Sergei Bogdanchikov, who has been considered one of the initiators of the state's investigations of Yukos but who now seems to have run afoul of the law enforcement agencies, strana.ru wrote. (RFE/RL 18.xi.03) RUSSIAN MINISTRY INTRODUCES NEW TAX CALCULATION METHOD FOR OIL COMPANIES The Russian Ministry of Economic Development has come up with a new tax calculation method, designed to boost the federal budget revenue from taxes on oil companies by $1.5-3 billion a year. The ministry's model taxes the extraction of minerals dependant on the properties of a deposit. The tax rate will take account of the depth of drilling, the quality of oil and other characteristics. The resulting coefficient may range from 0.7 to 1.3 of the rate, calculated in accordance with the current methodology. Graduated tax for deposits with varying quality is designed to maintain production in "difficult" wells and raise the tax on "new" deposits by as much as 30%. (NewsBase 17.xi.03) SERBIA AND MONTENEGRO US STEEL SERBIA AGREES ON 35% WAGE INCREASE TO PUT AN END TO 38-DAY STRIKE Management and representative trade unions at US Steel Serbia, formerly Sartid, have agreed on a 35% wage increase and a new three-year individual collective agreement, putting an end to 38 days of work stoppage. Management also agreed to provide a social welfare programme for some 400 workers of four Sartid's units that were not included in last year's privatisation deal under which US Steel Corporation acquired the Serbian bankrupt steel maker. According to US Steel Serbia Vice President and Managing Director Thomas Kelly, the agreement "marks the beginning of a new era in the Serbian steel sector and a promising future for co-operative relations between US Steel Serbia and its employees." Around 8.7k workers of the Smederevo-based steelworks went on strike in mid-October to protest low wages. (NewsBase 26.xi.03) PARTIES PREPARE FOR SERBIAN ELECTIONS The three leading Serbian parties not linked to the regime of former Yugoslav President Slobodan Milosevic -- the Democratic Party (DS), Democratic Party of Serbia (DSS), and G-17 Plus political party -- will each field its own slate of candidates in the 28 December parliamentary elections. Several smaller parties, however, are interested in forming coalitions in the hope of meeting the 5 percent electoral threshold. Vuk Draskovic's Serbian Renewal Movement (SPO) and Velimir Ilic's New Serbia (NS) thus agreed on 19 November to form an electoral coalition, as did the Sandzak Democratic Party (SDP) and League of Vojvodina Hungarians (SVM). In related news, the Otpor (Resistance) student movement that played a major role in Milosevic's ouster in October 2000 officially registered as a political party. (RFE/RL 20.xi.03) SLOVAKIA SLOVAK PRESIDENT VETOES FLAT TAX President Rudolf Schuster on 25 November vetoed a bill to introduce a flat 19 percent income and corporate tax from the beginning of next year, TASR reported. Schuster said the bill violates the principle of fair taxation by unfairly benefiting those with monthly incomes of 25,000 crowns ($719) and over, as well as businesses. Schuster said just 11 percent of taxpayers would benefit from the change, which might result in reduced domestic demand and higher unemployment. The bill was approved by parliament in October. Parliament can override the presidential veto with an absolute majority in the 150ong parliament. (RFE/RL 26.xi.03) NATIONAL PROPERTY FUND LAUNCHES TENDER TO SELL 90% OF PAROPLYNOVY CYKLUS The National Property Fund (FNM) launched a tender to sell 90% of gas/steam energy producer Paroplynovy Cyklus, a.s., Bratislava (PPC) on Monday, with an announcement in the Slovak daily Hospodarske Noviny and the international press, inviting investors to enrol in the tender between December 8th and 11th, 2003. The FNM is offering for sale 5,400 PPC shares with a face value of 100,000 crowns. Potential buyers must have a share capital of over 3 billion crowns according to an audited financial statement as of December 31st, 2002. They are obliged to pay a participation fee of 100,000 crowns Simultaneously, each potential buyer must take a vow of silence in writing. After joining the tender, participants will obtain information dossiers on PPC. A potential investor can make a bid in tender individually, or together with other entities. PPC was inscribed in the corporate register in August 1996 with production of heat and electricity as its core business. Its share capital of 600 million crowns is divided in 6,000 shares. The FNM controls 90% in PPC, while the remaining 10% in held by power producer Slovenske Elektrarne (SE). In February of this year the Slovak cabinet approved the sale of SE's 10% stake in PPC to the FNM. The purchase price of the 600 shares with a nominal value of 100,000 was to be 60 million crowns. The FNM would thus acquire 100% in PPC and could sell PPC as a whole to a strategic investor. Articles of association of PPC approved by shareholders enable a 10% shareholder to block important decisions made at a shareholders meeting. Despite this, the shares have not been transferred from the SE to the FNM so far, since Slovenske Elektrarne refused to sell its 10% stake in PPC to the FNM for anything other than the market price. However, Economy Minister Pavol Rusko did not exclude the sale of 100% of PPC in a single package. He admitted that the current offer for sale might be additionally changed depending on agreement with the FNM. (NewsBase 26.xi.03) SLOVAK OPPOSITION PARTIES ANNOUNCE MERGER Two political formations that split from the Movement for a Democratic Slovakia (HZDS) announced on 24 November that their merger is nearing completion, TASR reported. The two formations are the People's Union and the Movement for Democracy (HZD). Seven out of eight regional conferences of the People's Union have approved the merger. The new party will be called People's Union-Movement for Democracy (LU-HZD). The HZD, which is led by former parliamentary speaker Ivan Gasparovic, split from the HZDS ahead of the 2002 general elections but failed to win any seats in parliament. Eleven deputies representing the HZDS set up the People's Union in March. People's Union Deputy Chairwoman Olga Keltosova told TASR that the merger congress might take place in January.Following the People's Union split, the HZDS changed its name to People's Party-Movement for Democracy. (RFE/RL 25.xi.03) UKRAINE PARLIAMENT PASSES AMENDMENTS TO STATE 2003 BUDGET REGARDING MINIMUM WAGE Ukraine's parliament has passed amendments to the state 2003 budget regarding minimum wage. According to the amendments, minimum monthly wage will reach UAH205 ($39) from December 1, 2003; increase to UAH237 ($44.7) from November 1, 2004, and to UAH263 ($49.6) from January 1, 2005. (NewsBase 27.xi.03) UKRAINE NOT TO PRIVATIZE NO. 1 STEEL PRODUCER Ukraine's parliament ruled that Krivorozhstal, the country's biggest steel mill, cannot be privatized. The mill, which controls a fifth of Ukraine's steel market, is on a revised list of enterprises that cannot be privatized. As many as 288 of the 435 deputies present voted in favor of the motion. The mill, from the Dnipropetrovsk region, increased production of finished roll 3.9% year-on-year to 5.213 million tonnes and crude steel 3.1% to 5.882 million tonnes in the first ten months of 2003. Krivorozhstal, a fully-integrated steel mill, is capable of producing more than 6 million tonnes of roll, about 7 million tonnes of crude steel and more than 7.8 million tonnes of pig iron annually. (Interfax 20.xi.03) INFORMATION PROVIDERS - For either a free trial, or for further information on the services of our Information Providers, please contact: NEWSBASE NewsBase is a leading provider of business and economic news and intelligence from Russia, Central Europe and the FSU. Daily bulletins and industry specific weekly reports backed by an archive containing over 10 million words combine to provide a comprehensive service to a global blue chip client base. Contact: Jon Laurijssen T: +44 (0)131 478 8537 F: +44 (0)131 478 7001 E: [email protected] W: www.newsbase.com, www.newsbaseworldmonitoring.com INTERFAX Interfax News Agency is part of Interfax Information Services Group. Interfax is a provider of accurate and reliable general news as well as financial and industry specific news and data from the emerging markets of Europe and Asia. 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