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TT Business Intelligence Report Vol. 2, No. 44, 17 April 2003 Business Intelligence, Crime, Corruption and Debt in C&E/SE Europe and the FSU  UPCOMING CONFERENCES "E-FORUM: THE FUTURE OF ELECTRONIC PAYMENTS IN THE CZECH REPUBLIC" This PBJ event will take place on 26 May 2003 at the PricewaterhouseCoopers Business Centre, Prague, Czech Republic. For further information, please contact Iva Santrochova, tel: +420 246 086 546; fax: +420 246 086 543; email: [email protected]; W: www.pbj.cz/events/eforum.htm "INVESTING IN AZERBAIJAN - GATEWAY TO THE NEWLY INDEPENDENT STATES" This event will take place on 7-9 May 2003 at the Hyatt Conference Center in Baku, Azerbaijan. For further information, please visit: www.invest-in-azerbaijan.com, or contact Dorit Sallis, tel: +41 1 249 3133; e-mail: [email protected] BOSNIA AND HERZEGOVINA GOVERNMENT ADOPTS ACTION PLAN FOR IMPROVING SECURITY SITUATION The BiH Council of Ministers (CoM) endorsed yesterday an action plan for the improvement of the security situation in BiH that was drafted by the BiH Ministry of Security. The document envisages increasing the powers of the Security Ministry so that it becomes fully functioning as well as ensuring the exchange of security information among the state institutions. The Ministry will work towards creating conditions for the efficient fight against terrorism, organised crime, human trafficking and white slavery, and other criminal activities. The Ministry of Security will also be expected to prepare legal amendments aimed at harmonising BiH laws with the ones of the EU. The plan also provides for blocking assets and confiscating property of indicted criminals. The CoM also adopted yesterday the working plans of all BiH ministries, which are focused on the process of BiH's integration into the EU as well as the implementation of the OHR's Jobs and Justice programme. (IntelliNews 30.iv.03) PULLING THE PLUG ON CORRUPTION In three bold, clean sweeps, the international community in Bosnia and Herzegovina (BiH) fired the board of directors of the country's Elektroprivreda public electricity utility in Sarajevo, Mostar, and Banja Luka after a series of special audits conducted over the past few weeks uncovered massive corruption and billion-dollar scandals. The conclusion of all three reports was that nationalist political parties--the Bosniak Party of Democratic Action (SDA), the Serbian Democratic Party (SDS), and the Croatian Democratic Union (HDZ) -- have been benefiting from the corrupt practices of the Elektroprivreda utilities at the expense of their own citizens. "It is no surprise that the greatest corruption is found in the largest state-owned companies, such as Elektroprivreda and the post office," the Transparency International representative in Bosnia Emir Djikic said in a telephone interview on 13 March. "It is likewise no surprise that after elections, the winning parties found it more important to have their own people installed in high positions in such companies than to have ministers. The money is in those companies," he said. In the Federation entity of Bosnia, the audit revealed corruption has cost the Elektroprivreda companies in Sarajevo and Mostar a combined total of approximately $30 million. In the Republika Srpska entity, the losses have been more than $90 million. (TOL 17.iv.03) BULGARIA O.T.P. PRESENTS EUR 300mn INVESTMENT PROGRAMME FOR D.S.K. BANK The Hungarian bank OTP promises to invest BGN 600mn (EUR 307mn) in DSK Bank for 5 years in case it wins the privatisation tender for the country's second largest bank in terms of assets. OTP will target an 18% return on its investments. Around a third of the financing will be allocated to the improvement of the bank's infrastructure while the other part will be invested in information technologies and the development of sales channels. Managers of OTP presented yesterday, during a visit to Sofia, the company's vision for the expansion of DSK Bank in the field of retail banking and the introduction of Internet and GSM financial services. They met PM Simeon Saxe-Coburg and chief officials of the Bank Consolidation Company. The delegation rejected press rumours of an unclear ownership structure saying that 78.8% of the shareholders' capital is held by foreign investment funds and banks while its financial performance is monitored by the Hungarian central bank and the stock exchanges in Budapest and Luxembourg. OTP expressed confidence that it would win the privatisation tender due to its high price bid of EUR 311mn for 100% of DSK Bank. The other candidate, Austria's Erste Bank, offered EUR 293mn. Meanwhile, the Bank Consolidation Company informed that it would not select a preferred buyer for the last state bank before 7 May and recalled that the price would be the main but not the only selection criterion. (IntelliNews 30.iv.03) CROATIA COMMERCIAL BANKS REGISTERED A GROSS PROFIT OF $380m IN 2002 Commercial banks in Croatia registered a gross profit of 2.589 billion kunas ($380m) in 2002, with a 20% climb in comparison to their pre-tax profits of 2.149 billion kuna in 2001, according to provisional figures released by the Croatian National Bank on its web site. Profits were made by 42 banks, while four banks reported losses in their business activities last year. In 2001, 43 banks reported gross profits. The two leading banks, both owned by Italian banking groups, Zagrebacka Banka with 736 million kuna and Privredna Banka Zagreb PBZ with 689 million kuna, accounted for 55% of all the banks' pre-tax profits in Croatia last year. They are followed by three banks owned by Austrian banking groups, Splitska, Raiffeisenbank Austria and Hypo Alpe-Adria-Bank. These five banks made up 74% of total pre-tax profits, and those banks also hold nearly two thirds of the total assets of the Croatian banking sector. Assets of all the 46 commercial banks in Croatia rose by 17.5% to 174.4 billion kunas at the end of 2002, and more than 90% of those assets were held by banks owned by foreign groups. The bank at the top of the list according to the volume of assets and profits was Zagrebacka Banka, owned by UniCredito, holding 46.2 billion kunas of assets. It made the biggest pre-tax profit of 736.7 million kunas. In 2002, it was followed by PBZ, owned by Italy's IntesaBci, with 30.7 billion kunas of assets and a 689.8-million kuna gross profit. The first Croatian state-owned commercial bank to be found on this list is Hrvatska Postanska Banka, the Croatian Postal Bank, which occupied eighth place with assets worth above 5.5 billion kunas and the gross profit of 67.5 million kunas. Of a total of 46 commercial banks in Croatia, 23 are owned by foreigners, 21 are domestic privately owned financial institutions, and two are state-owned, HPB and Croatia Banka. (NewsBase 29.iv.03) NEGOTIATIONS ON SALE OF 25% OF I.N.A. RESUME Negotiations on the sale of 25% +1 share of INA oil and gas company resumed yesterday. The economy ministry has already started preliminary negotiations with Austria'S OMV, and should hold similar talks with the Hungary's MOL today, and Russia's Rosneft tomorrow. Talks on further details of each offer should be held from 12 May until 17 May. According to economy minister Ljubo Jurcic, the privatisation of 25% of INA should be finalised by the end of June. The privatisation process was initiated in April of last year, and the previous deadline for the closing of the process was the end of March. However the process was further extended by two months, and there is already some speculation that the process would not be finalised by the beginning of the autumn. At the beginning of March, the cabinet founded a council for INA's privatisation that should select the best offer based on strategic development plans for INA, as well as financial conditions. Though the details of each offer were kept confidential, speculation puts bids from USD 200mn to USD 400mn. (IntelliNews 29.iv.03) CZECH REPUBLIC FINANCE MINISTRY MODIFIES G.D.P. PROGNOSIS The Finance Ministry yesterday modified with no explanation the 2003 GDP growth prognosis. Instead of the previous estimate of 3.3%, the new figure predicting a 2.3% growth is one of the lowest among EU candidate countries. The cabinet's new estimate is closer to expectations of international financial institutions and Czech analysts. The OECD last week lowered the GDP growth estimate for the Czech Republic from 3.3% to 3.0%. (PBJ 30.iv.03) ZIVNOSTENSKA BANKA POSTS ALMOST 20% Y/Y PROFIT DROP IN Q1 The mid-sized Zivnostenska Banka reported a net profit of CZK 105.4mn in Q1, dropping by 18.3% y/y. The results are unconsolidated, under Czech Accounting Standards, and are not fully comparable y/y due to a change in the accounting method. Total assets of the bank stood at CZK 51.2bn, slightly increasing y/y. Client deposits reached CZK 37.4bn, also staying almost unchanged y/y. The loans provided soared by 13% y/y to CZK 234.bn. The bank was acquired in January this year by the Italian UniCredito, which now holds a stake of over 85%. (IntelliNews 30.iv.03) ESTONIA BALTIC PRESIDENTS UNDERSCORE NEED FOR GREATER COOPERATION Presidents Arnold Ruutel (Estonia), Vaira Vike-Freiberga (Latvia), and Rolandas Paksas (Lithuania) affirmed at their annual meeting held in Tartu, Estonia, on 24 April that their countries can achieve more by continuing cooperation after they become members of the EU and NATO, BNS reported. Ruutel said that while the construction of the Via Balticahighway is proceeding successfully, the development of the stretch transiting Poland is experiencing a bottleneck and the issue should be raised at the next meeting of the Baltic and Polish presidents. Paksas invited Latvia and Estonia to be partners in the construction of a new nuclear-power plant at Ignalina, but received responses that more study is needed before a decision can be made. The presidents agreed on the need to work together to achieve the ratification of their NATO-accession treaties by current NATO members. They also agreed to cooperate in strengthening security along their eastern borders and in combating international terrorism and crime. (RFE/RL 30.iv.03) HUNGARY MOL EXECS, CROATIAN OFFICIALS DISCUSS I.N.A BID Executives of Hungary's oil and gas company Mol Rt and officials of the Croatian economics ministry met for a closed-door meeting in Zagreb on Tuesday to discuss Mol's bid for a 25% plus one share stake in the Croatian national oil company INA. Speaking after the meeting, the leader of Mol's delegation, business development manager Zoltán Áldott said the three bidders agreed with the government of Croatia that none of them will disclose information about the talks. At the next round some time between May 12 and 17, the bidders will lay out their detailed offers. Croatian Minister for the Economy Ljubo Jurcic earlier said a final decision will be made in June. (BBJ 30.iv.03) KAZAKHSTAN BRIBERY SCANDAL OLD HAT IN ALMATY The U.S. government's indictment of an American counselor to Kazakhstan's President Nursultan Nazarbayev on charges of funneling $60 million in oil payments into his boss' secret Swiss bank accounts is sending shudders throughout the global oil industry. But in Kazakhstan, it is being met by a big "So what?" The investigation, says Scott Horton, a Columbia University law professor who advises oil companies on Central Asia, appears to be the biggest ever undertaken under the 28-year-old Foreign Corrupt Practices Act, which forbids U.S. citizens and companies from paying bribes to obtain contracts. "It is also one of he most significant criminal investigations of any sort to target the oil industry," he added. The act had been mostly used to prosecute bribes in arms deals, and experts say the main function of the prosecutions are to show companies what is acceptable under the act and what is not -- a line that is expected to be redrawn when the case ends. The investigation, which began in Belgium -- ironically at the request of Kazakhstan's government, which was seeking to tarnish a Nazarbayev rival -- and spread into Switzerland, is still under way in Federal District Court in Manhattan, a spokesman said in a telephone interview. According to the indictment, between 1995 and 2000, New York businessman James Giffen, 62, received $138 million in bonuses and commissions from some of the world's largest oil companies, of which he is alleged to have passed on $60 million to the president and $17 million to Nurlan Balgimbayev, a former prime minister and head of state oil company Kazakhoil. In addition, Giffen is alleged to have paid $30,000 for two mink coats (one for Nazarbayev's wife and one for one of his three daughters); $80,000 for a Donzi speedboat, which was given to Balgimbayev to give to the president, and two snowmobiles that Giffen gave to the president himself. (The Moscow Times 30.iv.03) KAZAKHSTAN AND CHINA DISCUSS BILATERAL COOPERATION ISSUES PM Tasmagambetov and Chinese Foreign Affairs Minister Chosen Lee have met to discuss bilateral cooperation issues, PM press service informed. The new Chinese government is paying special attention to the development and strengthening of cooperation with Kazakhstan, Lee emphasised during the meeting. The sides touched upon the construction of an oil pipeline from Western Kazakhstan to China, privileged tariffs for railway transportation, higher exports of Kazakh steel to the Chinese market, and customs problems. Foreign trade turnover between the countries stood at USD 1.3mn in 2002, including Kazakh imports of USD 305,000, mainly in equipment, textile, consumer goods and chemicals, and USD 1.02mn of exports, mainly steel, scrap metal and copper. (IntelliNews 29.iv.03) LITHUANIA GAZPROM ASKED TO IMPROVE OFFER FOR LIETUVOS DUJOS GAS UTILITY The commission in charge of the privatisation of Lithuanian gas utility Lietuvos dujos has asked Russia's Gazprom, which is the only bidder in a tender for a 34%-share package, to adjust and improve the offer it made on April 11. The commission sent the request on Monday, according to Saulius Specius, a commission member and aide to the Lithuanian prime minister. Specius did specify the contents of the letter. The 10-day deadline for the commission to make a decision regarding the offer expired on April 28. Nerijus Eidukevicius, a deputy economics minister who chairs the tender commission, told reporters a deal was in sight. But unofficial sources said Lithuania needed time to refer the matter to parliament. Specius, for his part, said other aspects of the sale had been agreed upon entirely. For example, Gazprom agreed to supply 70% of the gas it exports to Lithuania via Lietuvos dujos, but not including supplies to the Kaunas heat and power plant or Achema fertiliser plant, if the government stops regulating gas prices for major consumers. Unofficial reports say Gazprom is offering 80 million lits for the shares, way below Lithuania's asking price, which is 116 million lits. A consortium of Germany's Ruhrgas and E.ON Energie paid 116 million lits for another 34% of Lietuvos dujos in 2002. Gazprom was supposed to have made its final offer for the latest 34%-block by February 28 this year. But at the beginning of March, the Lithuanian government extended the deadline until April 11. The Lithuanian government currently owns 58.36% of shares in Lietuvos Dujos, and Ruhrgas and E.ON Energie 35.49%. (NewsBase 29.iv.03) POLAND U.S. STEEL ACCUSES ARCELOR OF DECEIT IN P.H.S. PRIVATISATION U.S. Steel claims that its European competitor Arcelor received confidential information on Polish steel concern PHS while conducting its due diligence and consequently decided not to place a privatization offer for PHS. Furthermore, the Americans claim that the European giant will be in a privileged position thanks to the analyses and will have easier access to the market. Since the beginning of the privatization process, representatives of the Polish steel sector have predicted that Arcelor was keener on seizing the domestic market than expanding its activities in Poland. "It might use the privatization process for other purposes, as the company received detailed information about the market, clients, prices and costs. It plans to enter Poland by using the geographical proximity of its plants to the market. We were afraid of that," said deputy president of U.S. Steel, John H. Goodish. Arcelor would not comment on the reports. (WBJ 30.iv.03) E.B.R.D., ABN AMRO, RZB GROUP TO PROVIDE FUNDS FOR PURCHASE OF ASTER CITY Funds advised or controlled by ARGUS Capital, Emerging Markets Partnership and Hicks, Muse, Tate & Furst will receive $52.5 million from the European Bank for Reconstruction and Development, Holland's ABN AMRO and Austria's RZB Group to buy Polish cable TV provider Aster City, the EBRD said on Tuesday 29. The new owners of Aster City agreed to buy Aster City from Elektrim Telekomunikacja ET, a holding held by Polish telecom-to-power group Elektrim and France's Vivendi Universal, for $110 million in late November 2002. "The senior debt facilities of the Polish zloty-equivalent of $52.5 million comprise a $50 million equivalent long-term acquisition loan and $2.5 million equivalent revolving working capital facility," the EBRD said. The EBRD's contribution is $22.5 million, ABN AMRO's is $15 million and Raiffeisen Zentralbank Osterreich's is $10 million and its Polish unit Raiffeisen Bank Polska's is $5 million. The $110 million transaction is the largest leveraged buy-out yet in Poland by private equity investors, EBRD telecommunications director Izzet Guney said. The private-equity group has pledged to support Aster City's management in expanding operations, improving services and cutting prices. Aster City is the third-largest cable TV provider in Poland, leading the way in the lucrative Warsaw market but lso holding a strong position in Krakow and Zielona Gora. The company has a subscriber base of 355k with 280k in Warsaw. Like all Polish cable TV providers, such as Polish market leader UPC Polska, the company is increasing its efforts to provide broadband internet access. (NewsBase 30.iv.03) ROMANIA GOVERNMENT TO SELECT BANKS TO HANDLE EUROBOND ISSUE BY END MAY-03 Romania's government will announce the western banks to be in charge of handling the country's Eurobond issue. The new euro bonds mature in seven years. The Finance Minister hopes the raising to be completed by end of May or in early June. "We hope the money to fuel the state treasury by early June to allow us to finance the budget deficit in a non-inflationary way," Romania's Finance Minister Mihai Tanasescu said. The eight western banks competing to handle Romania's Eurobond issue are ABN AMRO, Deutsche Bank, JP Morgan, Merrill Lynch, Commerzbank, Schroeder Salomon Smith Barney, UBS Warburg and ING Bank. Romania successfully launched last April a 700 million Eurobond issue in the international market. The issue was welcomed by foreign investors and it was awarded by Euroweek magazine as the best sovereign borrow made by a country in transition. (NewsBase 30.iv.03) RUSSIA PUTIN AGAIN CRITICIZES THE U.S.-LED COALITION OVER IRAQ President Vladimir Putin and British Prime Minister Tony Blair held a two-hour meeting on 29 April at the presidential residence outside of Moscow, Russian and international media reported. While the meeting was widely seen as an attempt to mend fences, Putin continued to be critical of U.S.-U.K. policy toward Iraq and the world at large. During a joint press conference, Putin iterated that sanctions against Iraq should not be lifted "until clarity is achieved over whether weapons of mass destruction exist" there, "The Guardian" reported on 30 April. "Where is Saddam," he added. "Where are those arsenals of weapons of mass destruction, if indeed they ever existed?" Putin also said he will oppose a status quo in which global-security decisions are made "by just one member of the international community." Like their Western counterparts, Russian media stressed the tension at the Putin-Blair meeting. The two leaders "did not manage to agree on a single key issue -- neither on Iraq's postwar settlement nor Iraq's debts to Russia nor the issue of...[lifting UN] sanctions," gazeta.ru wrote on 29 April. (RFE/RL 30.iv.03) THE SURGUT STOCK PRICE BUBBLE POPS Surgutneftegaz nose-dived nearly 15 percent Tuesday to 45 cents following an announcement by management that it would alter its shareholder structure to protect a crucial 42 percent stake from attack by corporate raiders. Surgut has climbed more than 70 percent over the past month on the back of a massive surge of buying that analysts say has been driven by cash-rich rival oil barons moving in to prepare for a potential attack on management's ownership control of the company, and defensive buying by management as a result. A Surgut spokeswoman confirmed on Tuesday reports that the company had called an extraordinary general meeting for June 6 to change the subsidiary that holds 42 percent of the company in treasury shares from a joint stock company to a limited liability company -- a move analysts slammed for making the company's structure even more murky than it already is. Surgut management's use of those treasury shares to wield voting control over the company -- a policy that could be challenged in court -- has been key for management maintaining ownership control. Before the recent rally, management was seen to directly own just 19 percent of the company's stock. Thirty percent is freely traded. By turning the subsidiary, NK Surgutneftegaz, into a limited liability company, management would not be required to disclose whether it had sold the shares to a third party -- making it harder to track them down in the event of a legal attack. (The Moscow Times 30.iv.03) SIX CIS COUNTRIES FORMALIZE COLLECTIVE-SECURITY BLOC The leaders of Russia and five other former Soviet republics, meeting in Dushanbe on 28 April, signed the final documents creating the Organization of the Treaty on Collective Security (ODKB), Interfax reported. The other members are Belarus, Armenia, Tajikistan, Kazakhstan, and Kyrgyzstan. The bloc will have its own budget, secretariat, military staff, and rapid-deployment force. Its main military base will be at the Kant airfield in Kyrgyzstan, not far from a recently established U.S. military installation. "Such proximity is unlikely to inspire Moscow and its allies," reported "Nezavisimaya gazeta." "According to certain information, the Kyrgyz comrades were asked at yesterday's meeting how long they plan to accommodate the NATO guests." The paper reported that Belarusian President Alyaksander Lukashenka delivered a speech implying that the ODKB needs to contain NATO. Russian President Vladimir Putin "clarified this issue" in his address, the paper wrote, by countering, "One of the main missions is to combat terrorism, to combat the narcotics threat." (RFE/RL 29.iv.03) PHILIP MORRIS ST. PETERSBURG PLANT GETS $240M Philip Morris International will invest $240 million in its factory near St. Petersburg to boost output to 70 billion cigarettes per year from 40 billion by 2005. "Philip Morris International is doing well in Russia. Sales grew by 30 percent in 2002, and that growth is continuing," Mark Duerst, Philip Morris Management Services BV's managing director for Russia, said at a news conference. "We need to significantly increase our production base in Russia to satisfy consumer demand for our product." This 70-percent rise in annual production capacity would make the company's fully owned Leningrad region-based subsidiary, Philip Morris Izhora, the country's top cigarette producer, Guy Goeffers, the parent company's head of Russian business development, told reporters Tuesday. Philip Morris Izhora produces Marlboro, Parliament, Virginia Slims, L&M, Chesterfield and Bond Street brands. Philip Morris International has a second factory in the country, Philip Morris Kuban, based in the southern city of Krasnodar, which produced 33 billion cigarettes last year. The two plants account for 22.4 percent of the domestic tobacco market, up 4 percent on the year in 2002. Philip Morris Izhora will also increase its workforce to 1,400 from 1,000, Goeffers said. The company, whose top cigarette brand is Marlboro, the No. 1 brand worldwide, is the international tobacco unit of Altria Group Inc. (The Moscow Times 30.iv.03) MARATHON CLOSE TO ACQUISITION U.S.-based Marathon Oil Corporation announced in a 22 April press release that it has sealed an agreement to acquire the Khanty Mansiisk Oil Corporation (KMOC) for $275 million in cash and assumed debt. Royal Dutch/Shell, which holds a 45 percent stake in U.S.-registered KMOC, has until 6 May to make a matching offer for the shares it does not own or approve the acquisition, RusEnergy reported on 23 April. Bank of America Securities analyst Tyler Dann told "The Houston Chronicle" on 23 April that the move is a "brave step into Russia" for Marathon, which is "not blessed with the best-performing assets, so they are trying to expand their presence into more attractive areas." Marathon's offer translates into $0.95 for each barrel of KMOC's reserves, which compares favorably to the $1.15 per barrel that British Petroleum (BP) paid in its recent deal with Tyumen Oil Company, "Kommersant" reported on 24 April. Maksim Shub, spokesman for Shell's Russian operations, told the newspaper that the company has not yet made a final decision on the Marathon offer. (RFE/RL 29.iv.03) RECORD-BREAKING RTS KEEPS RISING The benchmark Russian Trading System (RTS) stock index notched a 6.85 percent gain for the week of 21-25 April to break a six-year record and close at 430.39, the RTS news service (rts.ru) reported on 26 April. Oil companies led the charging bull market, with the 22 April announcement of a Yukos-Sibneft merger adding fuel to the fire. Oil major Surgutneftegaz, currently the focus of speculation over a possible hostile takeover attempt, and utility Mosenergo were top performers, rising 9 percent and 12 percent, respectively, on 25 April alone. Gains have been so impressive that the Federal Securities Commission (FKTsB) has initiated an investigation to ensure that all of the exuberance has a rational basis, "Kommersant" reported on 22 April. Meanwhile, the RTS announced on 22 April that the exchange has introduced a new method for recording on-market and off-market trades, "Vedomosti" reported on 23 April. The issue has been the focus of a protracted squabble with regulators, who went so far as to threaten the RTS with the revocation of its license earlier this year. FKTsB First Deputy Chairman Vladimir Milovidov told "Vedomosti" that he will have to examine the exchange's new methodology before drawing any firm conclusions. (RFE/RL 29.iv.03) TEMPLETON BUYS INTO RETAILER PEREKRIOSTOK Retail chain Perekriostok announced in a 23 April press release the sale of a 7.7 stake in the company to Templeton Strategic Emerging Markets Fund. According to the press release, the parties estimated the company's value at $240 million, suggesting that the stake cost Templeton $18.5 million. Perekriostok board Chairman Lev Khasis told "Kommersant" on 24 April that the deal is part of a larger plan: "It's important because we're planning an IPO [initial public offering]. "Troika Dialog analyst Andrei Ivanov told "Vedomosti" on 24 April, "An investor with a name like Templeton will increase the retailer's chances of conducting an IPO in the next year and a half." Templeton Managing Director Mark Mobius expressed his satisfaction with the arrangement, explaining that "the deal is an advantageous investment into one of the most dynamically developing Russian retail chains," "Vremya novostei" reported on 24 April. Templeton manages a $252 billion portfolio, including $280 million invested in Russia. Perekriostok, part of Alfa-Group's holdings, owns 46 stores in Moscow and St. Petersburg. According to "Vedomosti," the company's 2002 revenues were $333 million. (RFE/RL 29.iv.03) RUSSIA, IRAN, INDIA TO DOUBLE FREIGHT VOLUME ALONG NORTH-SOUTH CORRIDOR Deputy Transport Minister Chingiz Izmailov said on 28 April that Russia, Iran, and India expect to ship up to 8 million tons of container cargo annually along the new, North-South international transport corridor by 2005, RIA-Novosti reported. That would be twice the volume recorded last year. Izmailov was on his way to Tehran for the second meeting of the corridor's coordinating council. The corridor route will eventually run from the Persian Gulf and the Indian Ocean via Iran, the Caspian Sea, and Russia to northern and eastern Europe. It will cut by two-thirds the distance these cargoes must travel via the Suez Canal route, and cargo owners will save more than $400 per container, Izmailov said. As part of the corridor project, Russia will soon begin construction of a $140 million, 51-kilometer railroad line linking the North Caspian port of Olya with the Volga Railroad. In addition to budgetary funds, Moscow will seek private investment and a 60 million euro ($66 million) loan from the European Bank for Reconstruction and Development for the project. (RFE/RL 29.iv.03) E.B.R.D. EXPRESSES INTEREST IN RUSSIAN-UKRAINIAN-GERMAN GAS CONSORTIUM According to the EBRD's first VP Noreen Doyle, the EBRD wants to invest in the new Russian-Ukrainian-German gas consortium. This would be done either by providing loans, or entering the consortium's charter capital. The EBRD has not yet determined the amount of funds it is willing to contribute. The consortium, which might also include France and Italy, is created to provide uninterrupted gas supplies from Russia to Western Europe through Ukrainian territory. PM Kasyanov hopes all technical issues will be resolved in 2003, allowing the start of the real work of the consortium. (IntelliNews 28.iv.03) ECONOMIC UNION OF FOUR CIS STATES TO BE DRAFTED BY SEPTEMBER Prime Minister Mikhail Kasyanov reconfirmed on 25 April that Russia, Belarus, Ukraine, and Kazakhstan will form a "joint economic space," "Vremya-MN" reported on 26 April. Kasyanov, speaking at a Moscow meeting of the heads of government of the CIS states, said that a basic framework for the union will be ready by September and that the other CIS countries can join if they meet certain conditions. But Russia still has a couple of issues to iron out with Ukraine. Kyiv has not yet transferred the hard-currency bonds it has promised as repayment of its debt to Gazprom, and little has been done to implement last year's agreement to create a natural-gas consortium. In addition, Russia's trade with Kazakhstan declined in 2002. Kazakh Prime Minister Imanghali Tasmaghambetov attributed the drop to the vagaries of market conditions, but he asked Moscow to reexamine its stiff excise taxes on tobacco and vodka. "Vremya-MN" commented that an economic union would deliver more positive than negative results, especially an expansion of market opportunities for its members and, therefore, healthier growth. (RFE/RL 28.iv.03) YUKOS AND SIBNEFT OFFICIALLY ANNOUNCE LARGEST MERGER IN RUSSIA'S HISTORY At a press conference that has just ended, Yukos CEO Mikhail Khodorkovskiy and Sibneft CEO Yevgeniy Shvidler officially announced the planned merger of the two companies. The deal would be completed by the year-end, if approved by shareholders of the companies and Russia's regulatory authorities. The new unified entity would become Russia's largest, and the world's 4th largest oil company with a market capitalization of about USD 35bn. Yukos is considering making additional payments to buy out Sibneft's shares from its shareholders. Yukos's CEO Khodorkovskiy would become the CEO of the new company, while Sibneft's CEO Shvidler would become BoD Chairman of the unified entity. Most of the BoD members would be independent directors. The new company would have crude oil reserves of 19.7bn barrels, according to the audit held in 2001. Proven reserves make up 18.4bn barrels of oil and 5.9tn cub. m. of gas. Taking into account the assets of oil major Slavneft, acquired in December by Sibneft, daily oil output would make up 2.3mn barrels. In 2002, Yukos and Sibneft produced a total of 103.2mn tons of oil. Oil export is expected to reach about 70mn tons this year. Yukos and Sibneft control 6 refineries in Russia, and also a refinery complex in Lithuania and Belarus. The companies also have large stakes in Moscow and Yaroslavl refineries, and own a chain of 2500 gasoline stations. The managers of the companies announced that the new entity would have a moderate debt level and would embark on large-scale investment projects. Commenting on the merger, the Duma's banking committee chairman Zubov said the company would now be able to compete with other leading oil producers in the world, which is a positive signal of Russia's strong economic development. Both companies post solid output growth figures and are bound to become of the key sector players in the world. (IntelliNews 22.iv.03) DUMA DEPUTY SLAIN IN MOSCOW Sergei Yushenkov, the 52-year-old co-chairman of the Liberal Russia party and a member of the Russian Duma, was shot and killed near the entrance to his home in northwestern Moscow as he got out of his automobile in the early evening of 17 April. The killer fired three rounds from a Makarov pistol with a silencer attached. The pistol was found at the scene of the crime. Yushenkov died before reaching hospital. AP reported on 18 April that Yushenkov's colleagues in the Duma suggested the killing was politically motivated. Chief Moscow Prosecutor Mikhail Avdyukhov said it was most likely connected to his "activities as a lawmaker." A member of the Duma's Security Committee, Yushenkov had received death threats in the past, reportedly in connection with his opposition to the war in Chechnya. Yushenkov was the ninth member of the State Duma to have been slain since 1994. Police have not apprehended any of the murderers in those cases. According to "The Moscow Times" of 18 April, "Investigators also were trying to determine whether the killing could have been connected to the killing of another Liberal Russia co-chairman last year. Vladimir Golovlev, also an independent Duma deputy, was gunned down in Moscow in August, and his killing remains unsolved." (RFE/RL 19.iv.03) SERBIA AND MONTENEGRO ASSASSINATION OF P.M. ZORAN DJINDJIC - 45 PEOPLE CHARGED The Serbian Interior Ministry has charged 45 people in connection with the assassination of Prime Minister Zoran Djindjic and the criminal act of terrorism and associating to commit hostile activities. The charged include members of the now disbanded Special Operations Unit (JSO), but also Serbian Radical Party leader Vojislav Seselj, former military intelligence head Aco Tomic, and Rade Bulatovic, the security advisor to former Yugoslav President Vojislav Kostunica, who have been charged on suspicion of associating to commit hostile activities. Seselj, who surrendered to The Hague Tribunal in February, is also suspected of inciting the murder. In a separate case, the Interior Ministry has charged former Yugoslav President Slobodan Milosevic, former state security service head Radomir Markovic, JSO commander Milorad Lukovic, and JSO members Branko Bercek, Leonid Milivojevic and Nenad Ilic with organising an assassination attempt on Serbian Renewal Movement (SPO) leader Vuk Draskovic in Budva on June 15, 2000. Former Yugoslav Army chief of staff General Nebojsa Pavkovic has also been charged with aiding the assassins. (NewsBase 30.iv.03) CENTRAL BANK GOVERNOR DINKIC URGES SERBIAN INDEPENDENCE In an extension to his controversial statement the day before, the governor of the Serbian central bank Mladjan Dinkic announced that any further efforts towards harmonisation of Serbia and Montenegro's markets were just a waste of time. He stressed that Serbia had to establish an independent state, in order to defend better its interest. Dinkic added that the EU would most probably have nothing against Serbia's independence, provided that all political forces embraced the idea. He gave as an example small countries Slovenia and Macedonia, whose independence was not objected to by the EU. The major arguments of Dinkic were that Serbia contributed for almost 95% of the overall GDP of the union, which, according to him, made some of the claims of Montenegro inappropriate. In particular, Dinkic referred to the requests of Montenegro to nominate a representative at the World Bank and the fact that it has the authority to appoint half of Serbia and Montenegro's diplomatic representatives. Furthermore, Dinkic said that if Serbia had started independently talks on a Stabilisation and Association Agreement with the EU, it would have signed it already. As might be expected, the position of Dinkic provoked harsh criticism from Montenegrin politicians. Miodrag Vukovic, an official with the ruling Democratic Party of Socialists (DPS), accused Dinkic of "economic nationalism". He added that under the assumed commitments before international institutions, Serbia and Montenegro would have to remain a single state for at least the next three years.(IntelliNews 30.iv.03) SLOVAKIA MEINL BANK RECEIVES APPROVAL IN SALE OF STAKE IN BANKA SLOVAKIA The National Bank of Slovakia gave the next approval in the sale of a majority stake in Banka Slovakia to financial group Meinl Bank, according to NBS spokesman Jan Onda. In line with the central bank's decision, the shares can be acquired directly by Austrian Meinl Bank Aktiengesellschaft. In its first decision, the NBS agreed that BASL Beteililgungverwaltungs GmbH, a member of Meinl group, would buy the stake. The National Property Fund FNM spokeswoman Tatjana Lesajova said that the fund itself requested this change from the investor. Meinl Bank group will buy 60.1% in Banka Slovakia for the preliminary price of 360 million crowns. It will pay the first 30% of the price on the day of signing the purchase contract, while the remaining portion should be deposited in a special account before the transaction's closing date. The definitive price of the stake will be set on the basis of an audit of the bank's results up to December 31, 2002. In addition to FNM's stake, Meinl Bank has also shown interest in shares in the bank from the portfolio of insurer Slovenska Poistovna, Slovenska Sporitelna bank and Banska Bystrica city council. These entities together control 39.6% in Banka Slovakia. Six entities enrolled in the third tender, including Meinl Bank, Slavia Capital in a syndicate with European American Investment Bank; J&T Finance Group; Czech J&T Banka (a member of J&T group); Postova Banka; and a US investment group, allegedly Winged Keel Group. FNM extended the third round of the tender, accepting an additional four bids for Banka Slovakia from Eco-Invest Ruzomberok, Fora-Bank headquartered in Russia, Slavia Capital in a consortium with Doprastav and Gutmann Prague. However, the central bank only allowed Meinl Bank access to Banka Slovakia's data room. (NewsBase 30.iv.03) UKRAINE GAZPROM, NAFTOHAZ AGREE ON DEBT AMID CONSORTIUM TALKS Naftohaz Ukraina CEO Yurii Boiko announced on 21 April that his company will transfer $1.4 billion in Eurobonds to Gazprom by 1 July as payment for Ukraine's gas debt, Interfax reported the same day. Gazprom will also pay $180 million in annual transit fees in the form of gas shipments. With the debt issue resolved, talks proceeded on 23 April in Kyiv between Russian, Ukrainian, and German representatives on the future of an international gas consortium the three countries agreed to form in June 2002, AP reported the same day. The consortium, which could be expanded to include France, Italy, and Turkmenistan, is intended to revamp Ukraine's aging pipeline system in order to maintain a steady supply of gas to Europe. Ukrainian Deputy Prime Minister Vitaliy Haiduk announced on 23 April that further study of key issues is required and Ukraine and Russia have decided to postpone a discussion of the consortium's business plan until June, "Vremya novostei" reported the next day. Sources in the German consulate told the newspaper that "substantive talks" will take place at a future meeting between heads of state. Viktor Nebozhenko, former director of the analytical department in Ukraine's presidential administration, told "Kommersant" on 23 April that the current talks focus on "trivial" technical issues, while the real issues are political. Nebozhenko noted that the consortium's creators "thought they were creating a structure that would become an instrument for solving geopolitical problems; instead, the consortium became captive to those problems after Germany, France, Italy, and Turkmenistan expressed a desire to join Russia and Ukraine." (RFE/RL 29.iv.03) INFORMATION PROVIDERS - For further information on our InformationProviders, 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 NEW WORLD PUBLISHING New World Publishing is a primary source of business-related information for Central Europe, through its publications the Prague, Budapest and Warsaw Business Journals. Contact: Mark Child T: +420 2 4608 6524 F: +420 2 4608 6501 E: [email protected] W: www.ceebiz.com, www.pbj.cz, www.wbj.pl, www.bbj.hu THE MOSCOW TIMES The Moscow Times offers readers an independent and precise view of the political, economic and business life of Russia. Contact: Andrew Boag T: +7 095 232 3200 F: +7 095 232 1761 E: [email protected] W: www.themoscowtimes.com INTERNET SECURITIES, INC. (IntelliNews articles) Internet Securities, established in 1994, is the pioneering provider of electronically delivered emerging markets business information. 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