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TT Business Intelligence Report
Vol. 3, No. 62, 15 January 2004
Business Intelligence, Crime, Corruption and Debt in C&E/SE Europe and the FSU



UPCOMING CONFERENCES

EASTEURO LINK'S "FACE TO FACE WITH THE GOVERNMENTS OF CENTRAL & SOUTHEAST EUROPE"

This event will take place on 29-30 January 2004 at the Sheraton Sofia Hotel Balkan, Sofia, Bulgaria. For further information, please contact Biba Jovanovic, tel: +44 (0)20 7689 1618; email: [email protected]; W: www.finance.easteurolink.co.uk

FOULDS INGHAM'S "ANTI MONEY LAUNDERING AND OPERATIONAL RISK MANAGEMENT 2004"

This event will take place on 3-4 February 2004 at the The Royal Hotel Luxembourg, Luxembourg. For further information, please contact Susan Nelson, tel: +44 (0)20 8238 5905; fax: +44 (0)20 8238 5901; email: [email protected]; W: http://luxembourg.moneylaundering2004.com


BELARUS

GAZPROM SUSPENDS GAS SUPPLIES TO BELARUS

Russia's Gazprom ceased gas supplies to Belarus on 1 January in the wake of the failure last year to reach an agreement with Minsk on the creation of a joint company to run Beltranshaz, Belarus's gas-transport network, "Kommersant-Daily" reported on 9 January. The two sides disagree over the value of Beltranshaz, with Minsk putting the figure at $5 billion and Gazprom at $600 million. According to "Kommersant-Daily," Belarus will receive 2 billion cubic meters of gas supplied by Itera and Transnafta at the price of $46.68 for 1,000 cubic meters in January. Belarus needs 20.5 billion cubic meters of gas in 2004; Gazprom is reportedly prepared to supply 10.2 billion cubic meters, but no price has been set because of the disagreement over Beltranshaz. (RFE/RL 12.i.04)


BOSNIA AND HERZEGOVINA

NATO CONTINUES HUNT FOR FORMER BOSNIAN SERB LEADER

An unspecified number of SFOR peacekeepers searched a house in Krivace, near Pale, in the early hours of 13 January in a continuing operation aimed at finding and arresting indicted war criminal and former Bosnian Serb leader Radovan Karadzic. A NATO spokesman said the decision to examine the abandoned house was made on the basis of materials recently obtained during a search of Karadzic's home in Pale. In Bijeljina, an unspecified number of posters appeared overnight with a picture of Karadzic and the caption: "Why is defending one's own people a war crime?" In Banja Luka on 12 January, Bosnian Serb parliamentary speaker Dragan Kalinic said that unnamed representatives of the international community have made it clear that arresting Karadzic and former General Ratko Mladic is a priority, adding that the Republika Srpska authorities have been warned of possible sanctions if they do not cooperate. Kalinic argued that NATO's search operation probably is not completely legal, adding that he feels "contempt" for the search, which took place during the Serbian Orthodox Christmas season. Kalinic represents Pale in the parliament and is a leader of the Serbian Democratic Party(SDS), which was founded by Karadzic. (RFE/RL 13.i.04)

FORMER BOSNIAN DIPLOMAT SENTENCED FOR HUMAN TRAFFICKING

On 6 January, Bosnia's State Court sentenced Dzenana Karacic, who is a former first secretary of the Bosnian Embassy in Ankara, to 30 months in prison for her role in organizing the illegal migration of Turkish citizens into Western Europe via Bosnia between December 2002 and April 2003, dpa reported. Her son Mirza Ustovic Karacic received a 28-month sentence in the same case. State Prosecutor Medzida Kreso said the exact number of Turkish citizens involved is unclear. (RFE/RL 07.i.04)


BULGARIA

MELROSE RESOURCES INCREASES RESOURCES BY A THIRD WITH GALATA GAS FIELD DEVELOPMENT

UK-based Melrose Resources has increased its total proved reserves by a third due to the completion of two production wells in off-shore Bulgaria, according to a report in the Financial Times on Monday. The wells, located on the Galata gas field development in the Black Sea, are expected to boost production from 2,500 barrels per day up to 10,000 bpd. Melrose, which has a 100% working interest in the field, estimates that the wells have added $15m in net asset value. Melrose will embark on a drilling programme this year in its three core areas in Bulgaria, the US and Egypt, where it made a significant gas discovery last year. Shares of the company have risen from a low of 52p last February to close at 144p on Friday, the Financial Times underlined. (NewsBase 14.i.04)


CROATIA

CROATIA'S NATIONALIST GOVERNMENT MAKES CONCESSIONS TO SERBS

One month after general elections, the Croatian parliament on 23 December approved the new conservative government formed by the nationalist Croatian Democratic Union (HDZ). The party, which was founded by late Croatian President Franjo Tudjman, returns to power after nearly four years in opposition. HDZ leader Ivo Sanader will head a minority government. The HDZ won 66 seats in the 152-member parliament but has managed to secure the support of 88 deputies. That support came at a price, however. To win over three representatives of the Independent Democratic Serb Party (SDSS), Sanader had to promise to return all Serbian property to its owners by the end of this year--property that is currently occupied by Croatian refugees. Sanader also recently pledged to heal the lingering wounds from the 1990s "homeland war" by cooperating with ethnic Serbs. Representatives of Croatia's ethnic Italian minority also agreed to back Sanader after he pledged to implement a 1996 agreement between Zagreb and Rome that, among other things, establishes dual-language rights in some parts of Croatia. The HDZ won the backing of the Croatian Party of Pensioners (HSU), as well as "silent support" from the Croatian Peasants Party (HSS). During that decade, the HDZ's image was badly tarnished by corruption, nepotism, and the role it played in the bloodshed that followed the breakup of Yugoslavia. As a result, the party was crushed by a center-left coalition in the 2000 elections, held shortly after Tudjman's death. But Sanader has repeatedly claimed that the HDZ has broken with its nationalist past. (TOL 06.i.04)


CZECH REPUBLIC

GOVERNMENT TO SELL ITS STAKES IN SEVEROCESKE DOLY AND SEROCESKA UHELNA

The government will decide on the sale of state shares in brown-coal mining companies Severoceske doly (SD) and Severoceska uhelna (SU) by the end of January or at the latest in early February, Trade and Industry Minister Milan Urban said on TV Nova's Sedmicka (Seven) discussion programme. Urban would not say how much money the government wants to obtain in the deal. He only said that the state wants to acquire as much as possible. There will still be talks with the bidders, so data on the price would weaken the cabinet's position, according to Urban. Shadow trade and industry minister Martin Riman criticised the privatisation process quite a lot. He ascribed the fact that there has been a bid worth as much as nearly 7 billion crowns for a stake in SD to the stances of the opposition, economists and unions. The inter-ministerial commission evaluated the bids in December and made a list for the government. In case of SD, the J&T group reportedly won. According to unofficial information, Appian Group has offered 4.78 billion crowns for the mines, Penta bid 5.36 billion crowns and J&T 6.83 billion crowns. Then, Czech-Slovak group Penta decided to raise the price to roughly 7 billion crowns. The government does not have to obey the commission's decision. The sole bidder which remained in the tender for the stake in SU is the management, represented by Sokolovska tezebni. The commission said its bid was satisfactory and recommended the company as the winner. The company reportedly offered some 2 billion crowns for SU. (NewsBase 13.i.04)

CTU ISSUES REDUCED INTERCONNECTION TARIFFS

The Czech Telecommunications Office (CTU) yesterday issued a new pricing regulation reducing interconnection fees in public telecom networks by an average of 20 percent. Maximum tariffs apply to interconnections of fixed networks and interconnections from mobile networks to fixed networks. The highest tariff for interconnection from mobile to fixed networks stayed at the current CZK 3.66/minute. The new CTU prices do not correspond to Czech Telecom's calculations; the leading telecom carrier is reportedly set to ask the CTU for an explanation and does not rule out taking legal steps. (PBJ 09.i.04)

CZECH CABINET HEDGES OVER EU LABOR POLICY

Cabinet ministers decided on 7 January to postpone a decision on possible retaliatory measures against foreign workers from EU countries that deny complete access for Czech nationals to their own labor markets after enlargement in May, CTK reported. Labor and Social Affairs Minister Zdenek Skromach, who submitted a proposal outlining such steps, told journalists after the cabinet meeting that Prague "might" decide to do impose "transition periods" on the free movement of labor if developments on the Czech labor market warrant such steps. "We want to protect our internal labor market, but we do not want to use this defense as revenge or sanctions," Skromach said. At the same cabinet session, the government approved a package of measures aimed at curbing unemployment and encouraging small and medium-sized businesses. A spokeswoman for the Labor and Social Affairs Ministry said unemployment rose to 9.9 percent at the end of 2003 and is expected to continue climbing. (RFE/RL 08.i.04)


GEORGIA

A PRESIDENT WITHOUT A PALACE

The prime piece of real estate in Georgia's capital could soon be vacant. The Krtsanisi palace, which sits on a hill above Tbilisi, is a luxurious, marble-clad residence fit for presidents. But just days after winning an overwhelming victory in the presidential election, Mikhail Saakashvili has promised to set up shop not in the grandeur of the Krtsanisi palace, as his predecessor did, but in the headquarters of the traffic police. The aim, he says, is to cut costs for this once rich, now very poor country. Some work will need to be done to upgrade his new offices, but he said the cost would be offset by making other ministers take part in this symbolic austerity drive. Ministers' official dachas -- or weekend cottages -- will be sold and their staffs reduced. Saakashvili himself will do without a dacha. "At the maximum I need a two-room apartment, one office, and a few rooms for my staff," he said. It was a suitably striking move by a man who has earned a reputation as a master populist since he first entered big-time politics in his 30s. It was also a return to a theme that made his name --as justice minister he accused ministers of corruption and waved photos of their dachas in parliament -- and fueled his parliamentary campaign in November. It could also entrench support for a man who, on 4 January, won a level of support usually seen only in autocratic regimes. While international observers noted some violations, they said that Saakashvili had won well over 90 percent support in a vote that was largely free of fraud. Final figures have not yet been published. (TOL 06.i.04)


HUNGARY

FT 400 BLN MOTORWAY TENDERS IN

Seventeen companies, among them several international, have lined up for a two-round tender to build eight motorway sections with a combined length of 166 kilometers, state-run motorway developer National Motorway Rt (NA) said. The tender was launched last December and contenders will have to meet a number of criteria to go through to the second round. NA will announce another tender in a few weeks for the construction of a bridge on the Danube extending the M0 Motorway in the north of Budapest. The aggregate value of the nine projects is Ft 400 billion. (BBJ 14.i.04)

LOCAL PARMALAT MAY BE SOLD IN WAKE OF ITALIAN PARENT'S BANKRUPTCY

The local subsidiary of Italy’s dairy giant Parmalat SA will suffer from the parent company’s troubles, according to industry insiders. The executive, who spoke on condition of anonymity, said Parmalat Hungaria Rt’s CEO will visit the Italian headquarters in a few days for talks that will draft the local strategy. Managers of the local Parmalat said last week they are not allowed to talk to the press without the authorization of the parent company. Citing dairy producers, newswire MTI-Econews reported last Tuesday that Parmalat Rt owes an average one-and-a-half months’ payments to milk suppliers. The parent company, Italy’s largest food company, filed for bankruptcy protection last month after it admitted that a $4.9 billion account it claimed on its books did not exist. Founder, co-owner, president and CEO Calisto Tanzi, who has been arrested, admitted to prosecutors that he siphoned off €500 million from Parmalat to other family-controlled companies. Last Tuesday, Swedish-owned packager Tetra Pak Hungaria Rt said it will continue to supply Parmalat’s Hungarian subsidiary. Tetra Pak’s communications director, Eva Baka, said deliveries of packaging materials to the firm have not been interrupted. Ranked sixth among local dairy producers, Parmalat has a 5%–6% Hungarian market share. According to industry insiders, if Parmalat were sold, its processed dairy products line would be the main attraction for buyers, as there is little scope for growth on the milk market. Dairy companies buy 1.2 billion liters of milk yearly in Hungary for domestically sold milk and dairy products, according to 2003 figures of the council. The market leader, Friesland Hungaria Kft, buys nearly 400 million liters and maintains a market share of around 25%. Sole Hungaria Rt is second with 300 million liters and a market share of around 18%, while the company until recently named MiZo-Baranyatej Rt (now Uj-MiZo Rt) purchases a yearly 200 million liters and maintains a 13% stake of the market. (BBJ 12.i.04)


KAZAKHSTAN

KAZAKHSTAN HOPES FOR SUCCESSFUL JOINT PROJECT WITH LUKOIL IN CASPIAN

Kazakh Prime Minister Danial Akhmetov, Lukoil President Vagit Alekperov and management from KazMunaiGaz discussed cooperation to develop the Caspian's hydrocarbon resources, ahead of a visit to Kazakhstan by Russian President Vladimir Putin. A statement on this was issued by the Kazakh government's press service. During the meeting the sides discussed "a number of issues connected with preparations for the signing of an agreement between KazMunaiGaz and Lukoil for the joint development of the Tyub-Karagan and Atashskaya fields, during the official visit by Vladimir Putin," the press releases said. Akhmetov said the agreement is "one of the first significant Kazakh-Russian oil projects in the Caspian, from which both countries expect to receive an effective result." Lukoil and KazMunaiGaz signed an agreement in June 2003 on the principles for cooperation on the Dostyk project, which includes the Tyub-Karagan and Atashskaya fields. The cost of the project is estimated at $3 billion. Investment in geological exploration will amount to about $150 million - $170 million and the Russian side takes on the risks in full. If commercial reserves are discovered, the sides will split exploration and commercial development costs equally. The Tyub-Karagan and Atashskaya fields are located in the central section of the Kazakh sector of the Caspian Sea. Tyub-Karagan covers an area of 1,168 square meters and is located 40 km northwest of the Kazakh port of Bautino. Atashskaya covers an area of about 8,400 square meters. The northeast and southeast sections of this section border dry land. The press release said that Lukoil is the second largest private oil company in the world in terms of its proven hydrocarbon reserves. The company accounts for about 1.3% of total world oil reserves and about 2% of total world production. The company plays a key role in the Russian energy sector, accounting to over 20% of Russian oil production and 18% of refining. (Interfax 09.i.04)


LITHUANIA

LITHUANIAN PRESIDENT VOWS NOT TO RESIGN

Rolandas Paksas told a press conference on 12 January that he will not resign under any circumstances, "Lietuvos zinios" reported the next day. "My stance is unambiguous and final," Paksas said. "I will not [resign] for many reasons. The main reason is that I do not feel guilty. Any kind of resignation would stress my guilt." The Constitutional Court recently ruled that Paksas violated the constitution when he granted Lithuanian citizenship to Russian national Yurii Borisov, who contributed to Paksas's election campaign. A special commission of parliament is currently examining the possibility of impeaching Paksas. Meanwhile, Paksas said on 12 January he was unaware of the whereabouts of former Ambassador to Latvia Petras Vaitiekunas, whom the president had tapped to serve as his foreign-policy adviser. Vaitienkunas announced last week that "I do not want to and cannot work as a politician in the president's office," and said he was taking leave but would be willing to return early if asked by the Foreign Ministry to serve on the foreign policy group, Baltic News Service reported on 9 January. LNK television on 12 January quoted unidentified sources as saying Vaitienkunas's decision came as the result of the Constitutional Court's ruling against the president. (RFE/RL 13.i.04)


POLAND

ALEKSANDER LESZ STEPS DOWN AS PRESIDENT OF SOFTBANK

On March 1, Krzysztof Korba, who is currently running Unisys Polska will replace Aleksander Lesz as the president of Softbank. "I can confirm that on February 29 I will definitively resign as company president. My decision has been known to the president of the supervisory board [Ryszard Krauze, president of Prokom] for months," said Lesz yesterday. However, Parkiet wrote that Korba has not confirmed that he will take over Softbank. However, he knows the company very well, as he used to work for ICL Poland, which was a strategic investor in stock-listed Softbank. For a few months he had been participating in drafting its new strategy, which will place it in Prokom's capital group, with Softbank being responsible for supplying IT to the financial sector. (WBJ 14.i.04)

POLAND TALKS TO GERMANY AND FRANCE ABOUT COMPROMISE OVER EU CONSTITUTION

After many months of fierce disputes Poland, Germany and France appear to be willing to put away the hatchet and try to reach a compromise concerning the EU Constitution. Last week Foreign Minister Wlodzimierz Cimoszewicz discussed this issue in Paris and today he will fly to Berlin where foreign ministers of the three countries will gather on Friday. According to Rzeczpospolita, a key issue for reaching a compromise would be accepting a new formula of voting in the EU Council by the three. One of the most serious versions envisages that Germany and France will agree for weighing votes, while Poland and Spain will take better account of demographic reality thus granting Germany and France a few votes more than at present. However, another option is increasing from three-fifth to two-thirds of EU inhabitants the criterion of taking decisions in the Council, which would make it easier for Poland and Spain to veto decisions. (WBJ 14.i.04)

NEW TAX SCHEME PROPOSITION REJECTED BY INDUSTRY EXPERTS

Just a day after the government presented its new tax scheme which is to be implemented during the upcoming years, it has been strongly criticized by industry experts. "We first need a real tax strategy, and than a codification of the legal framework. Until now we have not been dealing with a strategy but rather with tactical operations," said Wojciech Blaszczyk, a lawyer and the spokesperson for the Polish Confederation of Private Employers (PKPP). According to Rafal Antczak, an expert from the Center for Social and Economic Research (CASE), the new tax scheme is merely propaganda trying to prove that it is impossible to introduce a flat rate tax. "The document is purely theoretical and cannot be realistically incorporated into the economy," he said. Experts also question the basic assumption of the strategy which calls for the complete separation of personal income and income obtained from running small businesses. (WBJ 08.i.04)


ROMANIA

PRIVATISATION OF PETROM OIL COMPANY AND DISTRIGAZ SUD AND NORD GAS RETAILERS POSTPONED

The deadlines for privatising national oil company Petrom and the two natural gas retailers, Distrigaz Sud and Distrigaz Nord, have been postponed by three months to the end of June, economy minister Dan Ioan Popescu said late last week. Preliminary letters of interest are still expected for Distrigaz Sud and Distrigaz Nord by January 14. Petrom's privatisation reached the stage of completing the final draft of the privatisation contract based on which the bidders will compete. The same end-June deadline was also indicated by Popescu as likely for the privatisation of the first two electricity distributors, Electrica Banat and Electrica Dobrogea, initially planned to be sold by the end of last year. The delay was grounded by Popescu on certain technical problems, such as the property regime of the land in the case of Petrom and of pipeline network in the case of Distrigaz. Only half of the land used by Petrom has a clear legal status, Popescu explained. Similarly, some 30% of the pipelines used by Distrigaz are owned by private individuals or companies. Similar problems were indicated for Electrica. (NewsBase 13.i.04)


RUSSIA

SHAKHNOVSKY TAX, FRAUD TRIAL OPENS

The first in the likely series of trials of former Yukos top officials opened Wednesday in Moscow's Meshchansky District Court, against the former head of the company's Yukos-Moskva subsidiary, Vasily Shakhnovsky. Shakhnovsky pleaded not guilty to charges of tax evasion and documents fraud. The case is the first to come to trial in the massive legal offensive centered on Mikhail Khodorkovsky, who has been in jail since Oct. 25. The attack on Khodorkovsky and his senior associates at the company is widely believed to be aimed at taming the former CEO's political ambitions. Apart from going after Khodorkovsky and his close allies, Yukos itself fell under scrutiny. Among the most recent moves against the oil major was the Tax Ministry claim that the company failed to pay $3.4 billion in taxes in 2003. On Wednesday, the separate civil charges brought by tax authorities against Shakhnovsky and the demand for unpaid taxes and penalties totaling $1.85 million were officially dropped. The decision was made after Shakhnovsky paid the sum sought in taxes and penalties in full last November. The criminal charges of fraud, however, remained. An official at the Prosecutor General's Office said Wednesday that the case against Shakhnovsky continues, Interfax reported. "The proof of his guilt will be studied by the court according to legal procedures," the official said. Shakhnovsky's lawyers also asked for other charges against him to be dropped, but judges denied the request. After entering a plea of not guilty, Shakhnovsky told the court he had no plans to testify. "I am not obliged to prove my innocence," he said, Interfax reported. The hearing was adjourned until Friday, when prosecution witnesses are due to give evidence. Shakhnovsky was charged just days before Khodorkovsky's arrest on fraud and tax evasion charges. Another key Yukos shareholder, Platon Lebedev, has been in pretrial detention since July 2 on similar charges. Moscow City Court is expected to rule on an appeal by Khodorkovsky against the extension of his pretrial detention on Dec. 30. (The Moscow Times 15.i.04)

FITCH FORECASTS RISE IN RUSSIAN OIL COMPANY DEBTS

Fitch Ratings said Tuesday that debt levels at Russian oil companies are likely to increase over the next 24 months as a result of significant capital expenditure, but this could be mitigated by the translation of new investment into increased cash flow generation. In a Special Report, entitled 'Key Rating Issues for Integrated Russian Oil Companies in 2004', Fitch said rising debt levels are not necessarily negative, provided that debt-financed capital expenditure translates into improved cash flows. However, Fitch still views any material increase in financial leverage with a degree of caution. "Russian oil companies are likely to fund investment with new bonds over the next 12-24 months which could initially weaken their credit profiles," said Jeffrey Woodruff, Director in Fitch Corporate Group and the report's author. Russian oil companies have also become increasingly reliant on refined product exports, and any substantial erosion of presently high margins due to increased export tariffs could have a negative impact on ratings. The report notes the successful resolution of the Yukos affair, and the implementation of plans to restructure UES and/or Gazprom would be of more significance to the ratings. (Interfax 14.i.04)

FOR TREPASHKIN, BOMB TRAIL LEADS TO JAIL

Former intelligence officer Mikhail Trepashkin said he had evidence supporting a hair-raising theory that the Federal Security Service participated in the deadly 1999 apartment house bombings. He also suspected there was an FSB link in the Dubrovka theater siege. Trepashkin, a practicing lawyer, planned to lay out some of the evidence in the Moscow City Court, which on Monday sentenced two men to life in prison on charges of helping carry out the bombings. But on Oct. 22, a week before the trial started, he was stopped by police outside Moscow and arrested on changes of illegal arms possession. Police claimed to have found a gun in his car; Trepashkin says the gun was planted after he was stopped. Three weeks later, on Dec. 15, he was transferred to the Matrosskaya Tishina prison and put on trial on charges of divulging state secrets and illegally possessing ammunition -- a separate case that prosecutors opened in 2002 but only recently finished investigating. If convicted of the charges of divulging state secrets and illegally possessing ammunition, Trepashkin faces up to 10 years in prison, said his lawyer in that case, Valery Glushenkov. The charges are based on a search of Trepashkin's apartment, in which investigators claimed to have found 30 classified copies of FSB documents that Trepashkin kept from his time at the agency and 22 cartridges, Glushenkov said. Prosecutors say Trepashkin showed the documents to FSB officer Viktor Shebalin when asked for advice, thus revealing state secrets about the ways FSB operates, according to Glushenkov. Trepashkin said he did show some of the documents to Shebalin, but they were not classified. The rest of the documents in question and the cartridges were planted, he said. Misfortune has followed many members of the Duma commission looking into the bombings. Yushenkov was killed near the entrance to his apartment building in April, and Shchekochikhin died in a hospital later that year after apparently suffering food poisoning. After Trepashkin's arrest, another member, Otto Latsis, editor of the liberal Russky Kuryer newspaper, was beaten unconsciousness. Kovalyov and Rybakov failed to win re-election to the Duma in last month's elections. Several other people have suspected that there was a connection between the bombings and the FSB. One of them is former FSB Lieutenant Colonel Alexander Litvinenko, who fled to Britain and was granted asylum. Last year, a Moscow court convicted him in absentia on charges of abuse of office and stealing explosives and sentenced him to 3 1/2 years in prison. (The Moscow Times 13.i.04)

CENTRAL BANK UNABLE TO CONTROL DOLLAR

As its plunge continued on international currency markets, the dollar reached a new low of 28.87 rubles in domestic trading Monday, with analysts predicting the fall would continue at least until mid-year. After ending 2002 at 31.8 rubles to the dollar, the continuing fall means that the U.S. currency has lost almost 10 percent of its value in a year, according to Troika Dialog calculations. Last Friday the dollar dropped below the psychologically important 29 ruble barrier. Expectations that U.S. interest rates will remain at 45-year lows have contributed to the ruble's appreciation. Other factors are a burgeoning oil price and resulting high export revenues, meaning high demand for rubles as exporters repatriate their earnings. Chris Weafer, chief strategist at Alfa Bank said that the Central Bank's policy had become one of containment as the dollar dropped against the ruble over 2003 - though today it is in no position to control the dollar's fall. Now all the Central Bank can do is "go to bed praying for a lower oil price," Weafer said. (St. Petersburg Times 13.i.04)

PM PROMISES DECISION ON LIBERALIZING GAZPROM SHARE MARKET

Prime Minister Mikhail Kasyanov expects a decision shortly on liberalizing the Gazprom share market. "I will be taking all the necessary steps to speed up the process," he said in an interview with Vedomosti published on Monday. Kasyanov said he is not sure whether it is necessary to reform the gas sector or form a market for natural gas. "To begin with, we should develop a methodology for defining gas pipeline transportation tariffs. After that we should clearly decide how prices for domestic gas consumers will be set. When that work is completed, it will become clear what should be done next -should we form a market for natural gas, on which the price will be determined by supply and demand, or not," Kasyanov said. If general extraction volumes are maintained at approximately the present level, all the resources required have been prospected and surveyed, and it is only a question of developing them, he said. Gazprom can cope with this well, he added. Therefore the question is whether one big producer, which can guarantee 90% of extraction, should be given the chance to form a quasi- market price by forming a gas market, he said. (Interfax 12.i.04)

MT INDEX POINTS OUT RESURGENT CONFIDENCE

After taking a plunge in the wake of Yukos founder Mikhail Khodorkovsky's arrest last October, The Moscow Times Confidence Index for December is up more than 100 percent. While the rating increased from 12 to 27 out of a possible 50, ratings for the top three woes -- corruption, political instability and the shaky legal system -- remained virtually unchanged. Yevgeny Abov, deputy general director of Prof-Media, which also participated in the survey, said he was not surprised by the upturn. So far, there were "no such signs" of further aggressive moves against business along the lines of the Yukos clampdown, he said. The MT Confidence Index, published on the first Monday of each month, collects its data from a pool of 440 executives across 22 industries. The index weights management opinion according to the size of the company and the position of the respondent. Executives' confidence in their own companies remained firm at 30 points. (The Moscow Times 11.i.04)

A PRESIDENT WITHOUT RIVALS

It is possible to be too successful a politician, Russia’s President Vladimir Putin is discovering. His ratings are unassailable. A ROMIR Monitoring poll in the last days of 2003 showed that many Russians think Putin has more work to do -- 46 percent believe he has not succeeded in bringing order to Russia -- but with 82 percent saying they trust him to some degree, Putin is clearly the man most people believe will boost Russia’s fortunes. Most Russians have never doubted that Putin will be re-elected on 14 March. And after the overwhelming victory of the pro-Putin United Russia Party in the parliamentary elections on 7 December, their conviction turned into a certainty. Indeed, Putin’s victory now seems so assured that the president’s staff is reportedly more concerned that turnout will be lower than the 50 percent needed for the election to be legitimate. The danger is substantial: just 55 percent of the electorate voted in December’s Duma elections. So the Kremlin may be relieved to see that since the campaign for the presidency officially began on 11 December, 10 challengers to the president have emerged. (TOL 06.i.04)

RUSSIA, UKRAINE SIGN AGREEMENT ON USE OF KERCH STRAIT AND SEA OF AZOV

Ukrainian President Leonid Kuchma and Russian President Vladimir Putin signed an agreement on the use of waters of the Kerch Strait and the Sea of Azov in the Crimean city of Kerch on 24 December, Interfax reported. The agreement defines the Sea of Azov as the internal waters of both Ukraine and Russia, and it provides for the free navigation of Ukrainian and Russian military and civilian vessels in the area, while third-flag vessels need the consent of both Ukraine and Russia to operate within those waters. The document also provides for delimitation of the state border on the bottom and the surface of the sea. The unclear status of the Azov and the Kerch Strait prompted a high-profile dispute between Kyiv and Moscow in October-November. (RFE/RL 30.xii.03)


SERBIA AND MONTENEGRO

FIC PLEDGES TO MAKE SEVERAL MAJOR INVESTMENTS IN 2004

The Foreign Investors Council (FIC) invested a total of E900m in Serbia over the past year and a half and plans to make several major investments this year as well, said FIC Secretary General Christoph Greussing. Greussing failed to disclose the nature of planned investments, but stressed that FIC members are set to maintain a leadership position in investing in Serbia. The 76-member FIC could be joined by other international corporations, he added. FIC, founded in July 2002, aims to propose reform steps to help beef up investments and business in Serbia-Montenegro, encourage foreign direct investment and improve communication between foreign investors and the authorities in Serbia-Montenegro. (NewBase 12.i.04)

KEY SERBIAN PARTY STILL UNDECIDED ON COALITION ROLE

Leaders of the Democratic Party met for seven hours in Belgrade on 11 January but failed to agree as to whether they will join a coalition government of all parliamentary parties not linked to the rule of former Yugoslav President Slobodan Milosevic, or support a minority government. The leaders agreed to make a final decision "in a week's time" and named Serbia and Montenegro's Defense Minister Boris Tadic and outgoing Serbian Prime Minister Zoran Zivkovic to represent the Democrats in coalition talks. In related news, Serbia and Montenegro's Foreign Minister Goran Svilanovic said there is a broad consensus in Serbia regarding foreign policy, which will not change as a result of the 28 December Serbian elections. He stressed that any new Serbian government will have to deal with the issues of cooperation with the Hague-based war crimes tribunal, Kosova, and relations with Montenegro. (RFE/RL 12.i.04)


SLOVAKIA

SLOVAK ROMA PROTEST PLANNED 'SPECIAL POLICE FORCE'

Activist Alexander Patkolo told CTK on 12 January that the Romany community considers the Interior Ministry's plan to set up special police forces to deal with members of that community to be an "undemocratic step backward". Patkolo said that only fascist authorities during World War II and communist authorities used to keep special police records on the Roma. He said that instead of focusing on petty crime in Romany settlements, police should concentrate on attacks and discrimination against the Roma and their leaders. An Interior Ministry spokesman countered that there are no grounds for Roma to fear possible abuse by the special forces. "We want to improve communication between police and Roma, especially in Romany settlements. [Under the plan,] a police expert would deal with minor disputes and offenses in such settlements and prevent illegal acts among members of the community," the spokesman said. The special police forces are to start working in 2007, and Romany nongovernmental organizations are expected to participate in the implementation of the plans for combating petty crime. (RFE/RL 13.i.04)

PRESIDENTIAL ELECTIONS IN SLOVAKIA TO BE HELD ON 3 APRIL

Speaker of Parliament Pavol Hrusovsky announced that presidential elections in Slovakia will be held on April 3rd, and if no candidate gains over 50% of the vote, a run-off between the two candidates with the highest votes will take place on April 17th. All nominations for the presidential post must be sent to the speaker of parliament within 21 days after the announcement, or by January 30th, Sme reported. Incumbent President Rudolf Schuster's term in office ends on June 15th, 2004. Public opinion polls list Foreign Affairs Minister and Slovak Democratic and Christian Union (SDKU) candidate Eduard Kukan as the hottest candidate for the presidential post. The group of candidates who have officially announced their candidacy include head of the non-parliamentary Movement for Democracy (HZD) Ivan Gasparovic, former Slovak Ambassador to the United States Martin Butora, Bratislava regional government chairman Lubo Roman, Christian-Democratic Movement candidate Frantisek Miklosko, one-time state secretary of the Foreign Affairs Ministry Jozef Sestak and chairman of the non-parliamentary Leftist Block Jozef Kalman. Neither leader of the opposition People's Party - Movement for Democratic Slovakia (LS-HZDS) Vladimir Meciar, nor President Rudolf Schuster have officially confirmed their candidacy yet. In the 1999 presidential elections Schuster beat Meciar in the run-off election. The Slovak president is elected by general suffrage for a five-year term. In the second round the winner is the candidate gaining over half of the valid votes from participating voters. (NewsBase 12.i.04)


UKRAINE

UKRAINIAN OPPOSITION PROPOSES REFERENDUM ON PRESIDENTIAL-ELECTION PROCESS

Three parliamentary opposition groups -- Our Ukraine, the Socialist Party, and the Yuliya Tymoshenko Bloc -- have proposed a nationwide referendum to resolve the ongoing dispute in Ukraine over direct versus indirect election of the president, Interfax reported on 12 October, quoting Our Ukraine leader Viktor Yushchenko. On 23 December, lawmakers from the pro-government majority and the Communist Party preliminarily approved a constitutional-reform bill calling for the election of president in 2006 by the Verkhovna Rada. The proposal to hold the referendum was voiced during a 12 January meeting of parliamentary-caucus leaders devoted to the current parliamentary controversy over a related constitutional-reform bill. According to Yushchenko, under the Ukrainian Constitution, any curbs on the rights of voters may be introduced only via referendums. (RFE/RL 13.i.04)

NEGOTIATIONS ON QUOTAS FOR UKRAINIAN PIPE SHIPMENTS TO RUSSIA YIELDS NO RESULTS

Negotiations on quotas for Ukrainian pipe shipments to Russia have yielded no results. Under the current agreement, Ukrainian pipe supplies to Russia are restricted by an annual quota, which is specified in a separate annual protocol. The restrictions set in the current protocol expire on January 1, 2004, while the agreement's validity expires next May. Russia is insisting on extending the current annual quota of 620,000 tonnes, including 320,000 tonnes of large diameter pipes, for the next three years, while Ukrainian pipemakers want the quota to be raised to 790,000 tonnes as of next year. Experts believe a compromise will eventually be worked out soon. If not, Russia may impose duties of between 20% and 40% on Ukrainian pipes. Russia's Pipe Industry Development Fund estimates Russian producers' losses from Ukrainian pipe supplies at R23b in 9M 2003. (NewsBase 07.i.04)


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