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* Due Diligence * Business Intelligence * TT Total Intelligence * * TT Meerkat 500 * Disappearance Response * Debt Recovery * * Asset Retrieval * Technology Services *  TT Business Intelligence Report - CE/SEE & FSU Vol. 3, No. 71 Business Intelligence, Crime, Corruption in C&E/SE Europe and the FSU UPCOMING CONFERENCES ADVANTIX'S "RAISING FUNDS ON THE LONDON STOCK EXCHANGE ON AIM" This event will take place on 2 June 2004 at the London Stock Exchange, London, UK. For further information, please contact Arthur Poliakov, tel: +44 (0)20 8429 0920; fax: +44 (0)20 8429 0912; email: [email protected]; W: www.advantix.co.uk/target-invest ADVANTIX'S "ALTERNATIVE FUNDRAISING OPPORTUNITIES FOR GROWING RUSSIAN AND CIS COMPANIES" This event will take place on 3-4 June 2004 at The Grosvenor House Hotel, London, UK. For further information, please contact Arthur Poliakov, tel: +44 (0)20 8429 0920; fax: +44 (0)20 8429 0912; email: [email protected]; W: www.advantix.co.uk/target-invest EUROPEAN FINANCE CONVENTION FOUNDATION'S "BANKING AND FINANCE IN CENTRAL, EASTERN & SE EUROPE, RUSSIA, AND THE CIS 2004 AND BEYOND" This event will take place on 6-7 July 2004 at the Conrad Hotel Brussels, Belgium. For further information, please contact Claudio Cassuto, tel: +44 (0)20 7381 9291; fax: +44 870 1340 064; email: [email protected]; W: www.euroconvention.com BELARUS BELARUS SIGNS NEW SHORT-TERM GAS-SUPPLY CONTRACT WITH RUSSIA'S SIBUR Russia's Sibur on 15 May was contracted to supply Belarus with 350 million cubic meters of natural gas at a price of some $47 per 1,000 cubic meters, Belapan reported. Meanwhile, Gazprom head Aleksei Miller told journalists the same day that the lack of a long-term contract between Belarus and Gazprom might develop into a major crisis because Russian gas traders that have been supplying the country with gas on the basis of short-term contracts will soon fulfill their contracts. Miller added that these traders -- Sibur, Itera, and Transnafta -- delivered 7.9 billion cubic meters of gas to Belarus by 13 May, whereas their annual limit is 8.3 billion cubic meters. Miller also stressed that Gazprom can sell Belarus gas at Russian domestic prices only on condition that there is "real integration" between the two countries. Gazprom has refused to supply gas to Belarus since the beginning of the year, demanding a higher price for deliveries and favorable terms in the potential purchase of a controlling stake in Belarus's gas-pipeline operator Beltranshaz. (RFE/RL 18.v.04) BOSNIA AND HERZEGOVINA SACKED BOSNIAN SERB POLICE COMMANDER REFUSES TO STEP DOWN Republika Srpska police chief Radomir Njegus told the parliament in Banja Luka on 18 May that he fired special police commander Dragan Lukac and suspended at least seven of his men on 14 May but that Lukac refuses to go, Reuters reported. "We have to find a solution very soon, otherwise we might face far-reaching consequences," Njegus added. He sacked Lukac because of "poor planning" in connection with an incident in April in Visegrad in which an innocent man, Novica Lukic, died as a result of an unsuccessful attempt by police to arrest two of his relatives, whom the Hague-based war crimes tribunal has indicted. The Republika Srpska is under strong international pressure to arrest indictees and send them to The Hague. (RFE/RL 19.v.04) BULGARIA TRANSKOM BULMARKET CARGO HAULER TO BE FIRST PRIVATE RAIL OPERATOR Bulgaria's first private railway company has been licensed, bringing to fruition three years of efforts to break the state monopoly on the market. On May 11, Deputy Prime Minister Nikolay Vassilev handed a indefinite licence to Russe-based Transkom Bulmarket for cargo haulage along the 100-kilometre railway section from Russe to Kaspichan. The private haulier will compete with the state company, which will continue its operations on the railway line. The price of the licence was 5,000 euros. The company will also pay an annual railway infrastructure fee. The amount of the fee was not immediately known. The licence will be renewed every five years, provided that the company meets the set requirements. Last year, the Transport Ministry sent letters to over one hundred Bulgarian and foreign companies, which expressed willingness to be licensed for passenger and cargo haulage. Shortage of wagons, contract violations and high prices are the major problems that the monopolist's big clients currently face. (NewsBase 13.v.04) CROATIA FORMER MACEDONIAN INTERIOR MINISTER REPORTEDLY FLEES TO CROATIA Former Interior Minister Ljube Boskovski, who faces arrest in Macedonia in connection with the killing of six Pakistanis and one Indian in March 2002, is hiding in Croatia, Macedonian media reported. Justice Minister Ixhet Mehmeti told RFE/RL on 8 May that at present, Croatia has not yet officially responded as to whether Boskovski is in that country. Mehmeti said as soon as Zagreb officially confirms that Boskovski is in Croatia, the Justice Ministry will demand his extradition. Boskovski also holds Croatian citizenship. In an interview with the Croatian HTV television, Boskovski dismissed the allegations that the killing was a setup, saying that there were audio recordings of a conversation between the Pakistanis and an Albanian member of Al-Qaeda on a planned attack on the U.S. Embassy in Skopje, "Dnevnik" reported. Boskovski's successor, Hari Kostov, said the original recording was not found in the Interior Ministry, but added that transcripts of the recording that were handed over to the U.S., British, and German embassies were found. (RFE/RL 10.v.04) CZECH REPUBLIC CABINET TO CONSIDER SALE OF STATE-OWNED MINORITY STAKE IN OKC COAL MINE The Cabinet could discuss the sale of the state-owned stake in the largest Czech black-coal mine OKD again in June, Finance Ministry spokesman Marek Zeman said on May 18. In March the Cabinet approved the sale of the minority stake to its majority owner, Karbon Invest, for 2.25 billion crowns, but the anti-monopoly office considered the price too low, described it as state aid, and stopped the sale in late April. Karbon Invest then raised its bid to 3.4 billion crowns, and the government must approve or reject the new price now. Karbon Invest is the majority owner of OKD which employs 17,000 people. If the cabinet accepts the new price, the sale will be examined by the European Commission to which the power to grant exceptions from the ban on state aid has been shifted. (NewsBase 20.v.04) FINANCE MINISTRY, KRALOVOPOLSKA RIA FAIL TO SIGN CONTRACT FOR 100% STAKE IN KRALOVOPOLSKA The Finance Ministry and Kralovopolska Ria (Ria) failed to sign a contract on the sale of a 100% stake in engineering firm Kralovopolska when Ria refused to accept the privatization conditions attached by Cabinet, Finance Ministry spokesman Marek Zeman told Interfax Friday. The Finance Ministry will propose that Cabinet cancel its decision says Zeman. The Czech Cabinet will discuss the proposal and decide on the issue next Wednesday, he says. Kralovopolska Ria rep Ladislav Chodak confirmed to the CTK news agency that Ria objected to some provisions in the contracts, particularly since the last opportunity Ria reps had to evaluate the state of the company was in September 2003. Chodak gives as an example a requirement that staff be maintained at the original 700 employees. That cannot be met, he says, because Kralovopolska has since sold one of its largest production facilities. The state also wants a say in the sale of land owned by the engineering firm, which would restrict the plans of potential buyers, says Chodak. Kralovopolska Ria was to buy the nearly 100% state-owned stake in Kralovopolska for CZK 36.5 mln. The sale was opposed by the privatization adviser, Commerzbank, which recommended the stake be sold to another bidder, Brass, which offered about CZK 500,000 less than Ria. Kralovopolska expects a profit for last year, on revenues of CZK 430 mln. Between 1997 and 2000, Kralovopolska Ria was a subsidiary of Kralovopolska. For sale is 67% of Kralovopolska owned by the Czech bailout agency Ceska konsolidacni agentura (CKA), 32.7% held by the state-owned company Kras, and 0.2% held by the National Property Fund (FNM). (Interfax 14.v.04) ANTI-MONOPOLY OFFICE BLOCKS SALE OF STATE'S STAKE IN OKD TO KARBON INVEST The Czech Anti-Monopoly Office (UOHS) has blocked the sale of the state's 46% stake in the black coal mining firm Ostravsko-karvinske doly (OKD) to the Karbon Invest (KI) concern, the UOHS press department announced late Wednesday. According to the UOHS, KI's CZK 2.25 bn offer is inadequate, fails to correspond to market conditions and constitutes public support, which is prohibited under the CR's Europe Agreement with the EU. Initially, KI offered CZK 1.2 bn for the stake, which is controlled by the National Property Fund (FNM). It later it raised its offer to CZK 2.25 bn. Finance Ministry spokesman Marek Zeman told Interfax Thursday that the Finance Ministry and the FNM are currently analyzing the UOHS's decision and should issue a stance on the matter by the end of next week. KI has not commented on the issue yet either, and according to its spokesman Jiri Hrabovsky, it will also continue to examine the ruling. In November 2003, the government granted three-month exclusivity to KI, which already holds OKD's majority stake. Interest in OKD was also expressed by the Czech/Slovak financial group Penta, which offered CZK 3.1 bn for the state's stake in March, just ahead of the government's final decision on the sale. With 17,000 employees OKD is one of the largest employers in the North Moravian region. Last year, OKD showed a profit of CZK 220 mln and extracted 11 mln tonnes of coal. The KI group also comprises the trading firm Metalimex and the mining concern Ceskomoravske doly (CMD). The state plans to transfer the majority of proceeds from the sale of OKD to the State Fund for Transport Infrastructure. (Interfax 07.v.04) ESTONIA VADIM POLISCHUK FOUND GUILTY OF ORDERING ASSASSINATION OF TALLINN DEPUTY MAYOR One of the most controversial criminal cases in the last decade came to an end on May 6, as Vadim Polischuk, owner of Tallinn's Central Market, was found guilty of ordering the assassination of businessman and Tallinn Deputy Mayor Mait Metsamaa, the weekly Baltic Times reported on May 7. Polischuk, 55, was sentenced to just nine years in jail. Andrei Dudochkin, 30, who was contracted by the market employees on Polischik's request to kill Metsamaa for $1,000, received the same sentence, while Valery Kuznetsov, 38, head of the security service at Central Market, and security employee Sergei Normanov, 29, were sentenced to eight years in prison for planning the murder and contracting the killer. All four men are ethnic Russians. Metsamaa was shot five times in the head and the chest and died on October 12th,1999, in the doorway of his apartment house in central Tallinn. At the time police said the death involved a conflict over the privatisation of the Central Market. The case highlights the problem of a mainly ethnic-Russian mafia presence in the day to day economic life of Estonia. (NewsBase 10.v.04) GEORGIA SAAKASHVILI TAKES BACK ADZHARIA Adzharian leader Aslan Abashidze resigned early last Thursday and flew to Moscow in a power handover that gave victory to Georgian President Mikheil Saakashvili in his battle to rein in the rebellious region but signaled Russia's loss of a key Georgian ally. With a deadline looming for him to step down, Abashidze met with Russian Security Council chief Igor Ivanov the night before. Ivanov had flown in to the Adzharian capital, Batumi, that night. About three hours later, Saakashvili announced on television that Abashidze had resigned and left the country. Saakashvili's spokesman, Guga Sukhanishvili, denied that Tbilisi had sent special forces toward Batumi. Sukhanishvili, speaking by telephone from Batumi, also said Georgian television had aired live broadcasts of the situation around Abashidze's residence and no shooting was heard in the footage. Georgian Foreign Minister Salome Zarubishvili said the resolution of the conflict with Adzharia has toppled the last hurdle preventing Georgia from becoming a democratic European country. "Adzharia remained the only undemocratic and corrupt enclave belonging to the past epoch," he said at the start of a visit to Moscow last week, Interfax reported. A Russian Foreign Ministry spokesman said the ministry had no comment about the matter. Abashidze's departure has put a big dent on Russia's influence in Georgia, said Konstantin Zatulin, a State Duma deputy and director of the CIS Institute. Zatulin warned that Saakashvili would try to stir up hostility over a Russian base in Adzharia. Russia has two bases in Georgia left over from Soviet times. Russia has said it could withdraw its troops from Georgia in about a decade; Georgia insists on three years. The countries plan to start negotiating the issue next month. In addition to political benefits, Georgia will gain a hefty chunk of cash by reclaiming control of Adzharia. The Batumi port, located on the Black Sea, is by far the biggest enterprise in Georgia, handling 60 percent of all Caspian Sea oil going through Georgia to international markets. Taxes and customs duties collected at the port had been pocketed by Abashidze's government. Port officials said that oil shipments were going smoothly, casting doubt on earlier claims that the port had been mined by Abashidze supporters. Saakashvili and his bodyguards waded through a crowd of about 10,000 cheering people to dip his hands in the Black Sea on Thursday. Saakashvili's victory could lead him to apply strong pressure on two other restive regions in Georgia, South Ossetia and Abkhazia, Zatulin said. The two republics have been largely autonomous for the past decade. (The St. Petersburg Times 11.v.04) HUNGARY HP, GRAPHISOFT REAFFIRM SYNERGIES HP Hungary Kft and Graphisoft Rt yesterday signed a strategic agreement on deepening their long term partnership. As an independent software vendor of HP, Graphisoft will use HP desktop computers and professional workstations to test its software and will create a testing room where interested parties can trial the latest software products on HP hardware. HP PC Systems division leader Imre Molnar said HP would make an effort to develop its products so that they can best exploit the advantages offered by the software distributed by Graphisoft. (BBJ 19.v.04) DECISION FOR MOL AND PKN FUEL MERGER WILL FOLLOW VOTE OF CONFIDENCE Poland could make the political decision to go ahead with a merger of its national fuel company PKN Orlen and its Hungarian peer MOL within two weeks, assuming the current caretaker government secures a parliamentary vote of confidence, new treasury minister Jacek Socha said Tuesday. Speaking to MPs during a Treasury Commission hearing, Socha promised that no move would be made before the new caretaker cabinet takes on an air of permanence with a parliamentary vote of confidence and the cabinet lays out its guidelines for energy sector security. The first such vote for the new cabinet, led by former finance minister Marek Belka, is scheduled for late Friday, May 14. The policy question could be resolved within two weeks."I don't intend to make a decision on Orlen until the government secures a vote of confidence from parliament," Socha said. Socha added that the currently prevailing analysis does not lay out benefits which Orlen would see from the merger nor the possibilities for increasing Poland's energy safety. The Treasury also believes that should sides move forward with a merger, shares of both companies should be listed on the counterpart's stock markets in order to generate truer valuations. In late April Orlen and MOL said that they would extend their ongoing talks regarding possible cooperation beyond an original April 30 deadline. The companies have said that that their comprehensive analyses have clearly shown a strong business argument for potential cooperation. MOL and PKN signed a memorandum of understanding initiating exclusive negotiations to evaluate the potential merits of closer cooperation between the two companies in November 2003. Both the Polish and Hungarian states hold stakes in their respective fuel leaders. The Polish government controls 27.6% of Orlen through two stakes. (Interfax 17.v.04) SAMSUNG TIPPED TO TRANSFER MOBILE PRODUCTION TO HUNGARY Hungary may be in the running for Samsung's mobile phone production. So ran a news article in business daily Vilaggazdasag last Thursday, citing a report by South Korean newspaper Maeil Business. Samsung is reportedly considering moving mobile phone production from its plant in Spain to either Hungary or Slovakia, the report said. The international maker of mobile phones, TV and video equipment, computers, monitors and semiconductors reportedly plans to shut down its plant in Spain because of high wage costs. The plant turns out one million mobile phones a year. Samsung's Hungarian subsidiary has not yet been informed of the plans regarding the move, Vilaggazdag reported. (BBJ 17.v.04) KAZAKHSTAN KAZAKH, CHINESE COMPANIES INK PIPELINE DEAL Officials from Kazakhstan and China signed an agreement on 17 May to construct an oil pipeline from western Kazakhstan to China, Kazakh TV reported the same day. The signing came during an official visit by Kazakh President Nursultan Nazarbaev to China. Uzakbai Karabalin, the head of state oil company KazMunaiGaz, and Chen Geng, president of China National Petroleum Corporation, signed the agreement to build the Atasu-Alashankou pipeline. Construction on the $688 million, 988-kilometer pipeline will begin in August, "Izvestiya" reported. The newspaper quoted Karabalin as saying, "The signing took place after lengthy, difficult negotiations." In the course of his visit, Nazarbaev met with Chinese Chairman Hu Jintao and Zhang Deguang, the executive secretary of the Shanghai Cooperation Organization, Kazinform reported. Cooperation agreements on oil and gas, trade, agriculture, and transportation were signed at the ministerial level. (RFE/RL 18.v.04) POLAND STATE BOWS TO EU PRESSURE AND ANNOUNCES GAS MARKET LIBERALIZATION Following several years of dispute between the state and the European Commission over the transitory period that would protect the domestic gas market until 2006 , the government yesterday announced it will liberalize the market on July 1, thus opening it up to foreign competition. Until now, the government had tried to convince the EU that Polish Oil and Gas (PGNiG), a sector monopoly, was not yet ready to face foreign competition. However, the experience of other EU member states shows that in countries where liberalization was introduced earlier, prices are now at the lowest levels. The liberalization of the market will apply to all EU gas firms, meaning that as of July 1, all domestic companies will be able to individually choose their own particular gas supplier. The government has also agreed to fully open the market in 2007 to give private individuals the same right to pick and choose suppliers. (WBJ 19.v.04) PLANS TO CREATE NATIONAL NITROGEN COMPANY ABANDONED Nafta Polska (NP) has decided to abandon the concept of creating a national nitrogen corporation, as it would probably sink due to the debts of the plants in Tarnow and Kedzierzyn. The original idea was to create the new company around the ZA Pulawy nitrogen plant. "Tarnow and Kedzierzyn were pressing on maintaining their identities, which would in turn make it very difficult to merge the firms under the auspices of Pulawy," said a representative of NP. He added that NP has definitely finished with the idea and is now conducting negotiations with potential investors for Tarnow and Kedzierzyn. These would be good catches for PKN Orlen, but only if Orlen did not have to maintain their plastic manufacturing divisions. NP would also like to force new investors to take the burden of paying off the debts. (WBJ 18.v.04) RUSSIAN OIL MAJOR LUKOIL SEEKS POLISH PARTNERS IN BRINGING CRUDE TO EUROPE Russian oil major Lukoil is offering Polish oil pipeline operator PERN and Polish fuel terminal Naftoport major deals to help the Russians transit oil to Western Europe, Lukoil Polska executive director Nikolai Ivchikov told reporters Wednesday (May 12). Lukoil has also approached Polish Baltic Sea drilling company Petrobaltic with an offer to carry oil from the Baltic shelf to the Gdansk sea port on Lukoil tankers. "We presented our proposal to the Treasury [which owns both PERN and Naftoport] to sign a direct contract for transit of oil to Western Europe. We are interested in providing our crude oil to the open market, transmitting it in cooperation with PERN and Naftoport," Ivchikov said. "We also made an offer to Petrobaltic to carry its crude from the Baltic shelf to Gdansk on our top class tankers and Petrobaltic has expressed its interest. We additionally plan to invite Petrobaltic to drilling operations," Ivchikov said. The cooperation in drilling could start as soon as in June. The ownership of the potential partners for Lukoil is subject to change in the nearest future. Petrobaltic has been assigned by Polish planners to the nation's #2 refining group Group, while Naftoport is schedule to become part of a to-be-established integrated logistics operator ZOL. PERN has estimated that the amount of oil transported abroad through its network will increase to 10 mln tons in 2004, after nearly doubling to 7 mln tons in 2003. PERN continues investing to increase its oil transport capacity. (Interfax 17.v.04) SLD BEGINS "ENTERTAINING" EU ELECTION CAMPAIGN The Democratic Left Alliance-Labor Union (SLD-UP) coalition and Polish Social Democracy (SDPL) have begun their election campaign to the European Parliament. The SLD-UP opened their campaign with "election picnics" in Wlodawa and Gubin. The coalition's idea for the campaign is to keep ideology to a minimum and entertainment to the maximum. During one of the election meetings, Sejm Speaker Jozef Oleksy said that the government and the European Union have to create a common plan to development of the Eastern part of Poland. Meanwhile, the SDPL inaugurated its campaign in the Warsaw National Library with its election slogan of "Let's make use of the European chance." SDPL candidates intend to primarily focus on fighting unemployment and corruption. However, the chances of the left in the election do not appear that good, with opinion polls showing that they will be lucky if they can cross the 5% threshold and return any deputies at all. (WBJ 10.v.04) ROMANIA STATE-RUN BANCA COMERCIALA ROMANA AND CEC SAVINGS BANK TO BE PRIVATISED Romania plans to complete the privatisation of two state-run banks, Banca Comerciala Romana (BCR) and CEC savings bank. By September, the government is to choose the consultant for the CEC sell-off while the official announcement is expected to be released by next March. The first stage of the long awaited privatisation of BCR is expected to be completed by end of May when the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) are expected to settle the payment for a 25% stake in the bank. Last November, the Romanian government, EBRD and IFC representatives signed the sale contract of a 25% stake in BCR, paving the way for the bank's full privatisation as required by the western lenders. The EBRD and the IFC will pay up to $222m for 25% plus two shares in BCR. The sell-off strategy was discussed with IMF and World Bank representatives. The IMF and World Bank have already drafted a restructuring plan for BCR. (NewsBase 12.v.04) RUSSIA RusAL ENDS DISPUTE, BUYS 100% OF KrAZ Russian Aluminum ended a drawn-out power struggle for the country's largest aluminum factory Monday by buying up businessman Anatoly Bykov's 4 percent stake in the plant. RusAl now owns 100 percent of the Krasnoyarsk aluminum plant, or KrAZ. The company confirmed reports of a deal with Bykov, but did not say how much it had paid. It is unclear what role a lawsuit by Bykov against RusAl played in the sale. In 2002, a Swiss court ordered RusAl to pay $107 million to Bykov's company Aldeco for breach of contracts. RusAl balked at the ruling. Analysts said that any deal between RusAl and Bykov is likely to have included a resolution of the lawsuit. With the Swiss court's ruling hanging over the company and Bykov's stake in KrAZ seen as a liability to future stability, RusAl sought a settlement, Smolyaninov said. Past statements by RusAl have indicated that the company is planning to open up to the market. RusAl "is planning a placement on international capital markets to attract a wide spectrum of investors in the medium term," RusAl said on its web site. RusAl, part of oligarch Oleg Deripaska's Basic Element, muscled in on KrAZ while Bykov was in prison between 1999 and 2000 on charges of conspiracy to murder. RusAl acquired 66 percent of the massive factory -- the world's second-largest -- and diluted Bykov's 28 percent stake to 4 percent with a share emission. Bykov was not available for comment Tuesday. However, his shares were sold "at market value," a representative of Bykov-affiliated firms Solomonia Co. and Agoma Enterprises, both based in Cyprus, told Vedomosti. Bykov, once chairman of KrAZ, has at times said both Deripaska and former Krasnoyarsk Governor Alexander Lebed were behind a long string of accusations -- from money laundering to murder -- made against him since 1999. Bykov was convicted on charges of conspiracy to murder Vilor Struganov, the infamous crime boss, also known as Pasha Tsvetomuzyka. Bykov was released on parole in 2002. (The Moscow Times 19.v.04) SARATOV GOVERNOR NOW FACING CRIMINAL CHARGES The Saratov Oblast prosecutor's office filed criminal charges against Saratov Oblast Governor Dmitrii Ayatskov on 17 May, Russian news agencies reported. Ayatskov is suspected of exceeding the authority of his office and abuse of office. He gave testimony at the prosecutor's office prior to the filing of charges. Ayatskov announced that he will go on vacation in order to avoid being accused of trying to influence the investigations. Ayatskov allegedly authorized the payment of 70 million rubles ($2.4 million) from the oblast budget in 1998 to cover customs duties that a local company, Agroton, was unable to pay in order to take possession of some imported harvesters. The company had been hit by the fall in the ruble during the financial crisis that year. According to the oblast prosecutor, Anatolii Bondar, other decisions by Ayatskov, such as the granting of trade privileges to a firm owned by his brother, are the focus of a criminal investigation. (RFE/RL 18.v.04) BASAYEV SAYS HE ORDERED ASSASSINATION Chechen warlord Shamil Basayev on Monday claimed responsibility for the assassination of Chechnya President Akhmad Kadyrov and for the first time threatened to carry out an attack on President Vladimir Putin. Kadyrov's death in a bomb blast during Victory Day celebrations in Grozny was the execution of a Shariah court ruling that sentenced Kadyrov to death as a traitor for abandoning the rebels and allying with the Kremlin in 1999, Basayev said. Basayev, taking on a mocking tone at the end of the statement, said rebels are plotting an attack against Putin. "We are interested in who will be appointed the prime minister of Russia - Katya or Masha - should we, by the mercy of Allah, successfully conduct special operation Moska-2," he said, apparently referring to Putin's two daughters and the recent appointment of Ramzan Kadyrov, the son of the slain leader, as first deputy Chechen prime minister. The Federal Security Service declined to say whether the statement would prompt any increased security measures. The threat against Putin is "something new," said Svyatoslav Kaspe, chief analyst at the Russian Public Policy Center. But he dismissed it as a political stunt that won't materialize, likening it to "slinging banana skins." Alexei Makarkin, an analyst at the Center for Political Technologies, agreed, saying the threat was little more than a sign of "euphoria from the success" of Kadyrov's killing in the rebel camp. The FSB is checking Basayev's claim in the killing but said it is also looking at other possible culprits, Interfax reported. Besides the rebels, Kadyrov had plenty of enemies and rivals. Several Chechen officials have said the killing was an inside job. In his statement, Basayev indicated that former Chechen President Aslan Maskhadov had approved the plan to assassinate Kadyrov - which he called "Operation Revenge." Maskhadov, who is widely considered a moderate in the rebel camp, denied last week that he had been involved and said he suspected the attack was staged by Russian security services "to liquidate a marionette government" unable to resolve the Chechen conflict. Basayev's announcement would dismay Maskhadov but Basayev was apparently trying to legitimize the killing by using the name of the popularly elected rebel president, Makarkin said. Basayev has claimed responsibility for a number of attacks in Chechnya and elsewhere in Russia. Most recently, he said he had masterminded two deadly suicide attacks in December - one on a train in the Stavropol region, which killed 46 people, and the other outside the National Hotel in Moscow, which killed six. (The St. Petersburg Times 18.v.04) KREMLIN OFFICIAL REPORTEDLY NEGOTIATING SIBERIAN MERGER Deputy presidential-administration head Vladislav Surkov is conducting negotiations for the unification of Taimyr and Evenk autonomous okrugs with Krasnoyarsk Krai in 2004-05, an unidentified source in the presidential administration told "Vedomosti" on 18 May. The previous day, Leonid Drachevskii, presidential envoy to the Siberian Federal District, told reporters that the unification of those regions is only "a matter of time." He said that "it is not important whether it will be in a year or two years." Meanwhile, Evenk Governor Boris Zolotarev has not given up his opposition to the effort. His region would lose direct federal subsidies -- it received around 800 million rubles ($28 million) in subsidies this year. Anton Siluanov, director of the department for interbudgetary relations at the Finance Ministry, told the daily that the ministry has already suggested that the government introduce amendments to the Budget Code that would guarantee the same level of federal financial support for a period of up to three years to regions that merge. (RFE/RL 18.v.04) PUTIN SAYS RUSSIA WANTS 'FREE-TRADE ZONE' WITH UKRAINE President Putin said after talks with Ukraine Prime Minister Viktor Yanukovych in the Kremlin on 15 May that Russia is ready to create a "full-fledged free-trade zone" between the two countries, RIA-Novosti and polit.ru reported the same day. Putin admitted that Russia may initially suffer economic losses, but said they could be compensated for by increasing the volume of bilateral trade. Putin also said that he will meet with the presidents of Kazakhstan, Ukraine, and Belarus in the Crimea in the "nearest future" to finalize an accord on the Single Economic Space. Meanwhile, Prime Minister Fradkov announced on 15 May after meeting with Yanukovych that in two or three weeks Moscow and Kyiv will sign a protocol abolishing taxes and duties within the free-trade zone. (RFE/RL 17.v.04) BIG BANK LOSES ITS LICENSE One of the largest contributors to President Vladimir Putin's reelection campaign, Sodbiznesbank, was stripped of its banking license Thursday amid accusations of money laundering connected to a murder investigation. In the first license recall of its kind, the Central Bank acted on evidence from the Tatarstan prosecutor's office claiming the Moscow-based bank processed ransom money in the May 2003 kidnapping of two KamAZ employees. The two, deputy general director Viktor Faber and chief economist Natalia Starodubtseva, were found dead in September. The authorities also accused Sodbiznesbank of destroying paperwork regarding some credit transfers in 2002 and failing to notify the Financial Monitoring Committee, a government money-laundering watchdog, of about 500 transfers made in 2003. Further, Central Bank deputy chairman Andrei Kozlov said that over 80 percent of Sodbiznesbank's capital of 2.3 billion rubles ($80 million) was fictitious. The bank has been put under temporary administration by the Central Bank. The authorities used the 2002 law on money laundering and terrorism financing which imposes stricter supervision over transactions. The bank's chairman, Roman Petrov, was quoted by Interfax as saying that the violations occurred under previous management and the chairmanship of businessman Igor Zakharov. A spokesman for the Interior Ministry said late Thursday that it had opened a criminal case against the bank, but would not say if the case involved its management under Petrov. Sodbiznesbank is among Russia's top 50 in terms of capital and 88th by assets, according to Profil magazine. Its deposits grew more than 10-fold in the 16 months to April 1 to 2.225 billion rubles, Kozlov said. This amounts to 0.12 percent of the country's total bank deposits. Sodbiznesbank's records show its ownership split equally between six Moscow-based shell companies. The Central Bank was unable Thursday to confirm who the bank's beneficiary owners were. The beneficiaries question piqued interest among banking analysts who scoured the web for information, said Maxim Kondratenko, an analyst at Trust Investment Bank. According to a private website for bank analysts, Igor Zakharov sold Sodbiznesbank to Alexander Slesarev in early 2001. Slesarev, who owned Moscow City Hall-connected CreditTrust bank (also known as Kredittrast), reportedly sold Sodbiznesbank earlier this year. The management promised to announce the new owners after the May holidays but has so far not done so, according to one banking analyst. A receptionist at Sodbiznesbank said Thursday the bank had closed at noon and there was no one to talk to the press. Subsequent calls were answered but the bank's spokesman was unavailable. Under Slesarev, Sodbiznesbank had donated 1 million rubles ($35,000) to Putin's reelection campaign as of Jan. 28, 2004, according to the Central Elections Commission. This made it one of the largest contributors to Putin's campaign. (The St. Petersburg Times 14.v.04) MILITARY PRESENCE IN CIS COUNTRIES IN RUSSIA'S INTERESTS Russia's objective national security interests require its further military presence in different parts of the Commonwealth of Independent States, primarily in Georgia and Moldova, said Chairman of the State Duma's defense committee Viktor Zavarzin. "The situation is particularly complicated in Transdnestria and Georgia. The agreements adopted in Istanbul in 1999 oblige Russia to remove its bases from Georgia and Moldova. But our objective interests demand our further military presence in order to maintain stability in those regions," Zavarzin told Interfax-Military News Agency. "Recent events, including the Baltic countries' admission to NATO, as well as the conclusion of agreements on NATO forces' rapid access to Ukrainian territory only prove this necessity," he said. "All legal initiatives in this area must be negotiated with the Russian foreign and defense ministries. This is the most important task today," Zavarzin said. He said Russia has military bases in Georgia, Moldova (Transdnestria), Armenia, Kyrgyzstan and Tajikistan. Various forces, both global centers such as the U.S. and NATO, and regional political groupings dependent on them, oppose Russia's military presence in nearly all of these regions," he said. However, Russia has "a large number of diplomatic, economic, military and legal levers to put pressure on these centers and groupings," said Zavarzin. (Interfax 14.v.04) PRO-MOSCOW CHECHEN LEADER KILLED BY BOMB Akhmed-hadji Kadyrov was one of six people killed on 9 May by a bomb blast at a Grozny stadium during celebrations to mark Victory Day, the anniversary of the end in 1945 of World War II. Khussein Isaev, the chairman of Chechnya's interim legislature, also died, as did a Chechen journalist working for Reuters and two of Kadyrov's bodyguards. Colonel General Valerii Baranov, commander of the joint federal forces in Chechnya, was severely injured. The 40 people injured in the explosion included many members of the Chechen leadership, among them Prime Minister Sergei Abramov, whom President Vladimir Putin named later on 9 May to serve as Chechen leader pending new elections. Meeting with Kadyrov's son Ramzan, Putin praised the former mufti, whom he named as interim leader four years ago, as "a real hero" who tried to protect his republic and people and restore peace, Interfax reported. Putin also told Radio Mayak that terrorists and "those we are fighting today" face inevitable retribution. Kadyrov, who was born in 1951 in Kazakhstan and aligned himself with the Chechen resistance during the 1994-96 war, had survived a dozen earlier assassination attempts. (RFE/RL 10.v.04) SERBIA AND MONTENEGRO TARKETT EASTERN EUROPE TO TAKE OVER AT LEAST 50% OF SINTELON'S CAPITAL Tarkett Eastern Europe floor coverings producer, set up in 2002 as a joint venture between Serbian carpet maker Sintelon from Backa Palanka and Tarkett Sommer, said it plans to take over at least 50% of Sintelon's capital. The company, which has invested some 57m euros in the Serbian market so far, also plans to invest 15m euros to launch the construction of a parquet factory in Backa Palanka and open more than 150 jobs. Tarkett Trade Europe operates as part of the Tarkett Group, the world's leading maker of resilient floor coverings which produces over 300 cubic metres of floorings at 28 plants world-wide every year. The company has operations in Slovenia, Croatia, Bosnia-Herzegovina, Serbia-Montenegro, Macedonia, Romania, Bulgaria and Albania, where its sales hit 240m euros in 2003, up from 200m euros in 2002. In 2004, Tarkett Eastern Europe expects the eight markets to bring it 300m euros in revenues. (NewsBase 19.v.04) BUSINESS AND CORRUPTION: STUCK IN SUGAR Authorities announce the first arrests in a potentially huge scheme to defraud the EU, just as Commissioner Patten delivers the latest rebuke over Serbia's intransigence at handing over suspected war criminals. Two people have been arrested in connection with the allegations of illegal sugar exports that have already proved costly to Serbia's struggling economy. Serbian Vice President Miroljub Labus announced on 11 May the arrests of Srdan Ilin, director of the MK Komerc company, and another company official. The two are alleged to have doctored paperwork to hide the true origin of 1,500 tons of sugar exported to the European Union in 2002 under a preferential trade scheme that in effect heavily subsidized exports of domestically refined sugar. Police charge the sugar actually was refined in the EU and imported to Serbia before being illegally shipped back to the EU. Authorities said MK Komerc made 5.76 million dinars (82,000 euros) from the illegal export. The company controls 40 percent of Serbia's sugar imports and exports. Labus' announcement came on the heels of a visit to Belgrade by European External Affairs Commissioner Chris Patten, who told government officials yet again that they must cooperate more closely with the war crimes tribunal for the former Yugoslavia in The Hague. Labus told journalists that Patten had been informed of the charges against MK Komerc, because "the sugar case needs to be cleared up" before Serbia can progress in talks with the EU on textiles and on investments in the textile and sugar industries. Serbian Finance Minister Mladjan Dinkic said the government had asked the EU for documentation that could help establish which Serbian firms may have violated export regulations, the Serbian government website reported on 14 May. Dinkic said he expected the export preferences for sugar to be restored this summer. (TOL 17.v.04) SLOVAKIA RWE GAS POWER COMPANY SELLS ITS 40.13% STAKE IN NAFTA GBELY German power giant RWE Gas has sold its 40.13% stake in Slovak gas storage company Nafta Gbely to another German company, Ruhrgas, for 2.5 billion crowns, RWE Gas said on May 14. Ruhrgas has thus significantly increased its management powers in the gas storage sector, as a further 56% stake in Nafta belongs to Slovak gas utility SPP. Ruhrgas and Gaz de France together hold 49% of SPP following its privatisation in 2002. The latest transaction was carried out as part of an updating of RWE's foreign activities in the gas business. Despite the sale, RWE remains engaged in Slovakia to a large extent, controlling the 49% stake in east Slovak energy distributor VSE, acquired in its 2003 privatisation. VSE produces over 4.5 TWh of electricity a year and has over 600,000 customers. In 2003, RWE posted an operational profit of 5.5 billion euros, up 23% year-on-year, on total turnover of 43.9 billion. (NewsBase 17.v.04) SLOVAKIA HOPES TO ADOPT EURO AS EARLY AS 2008 Slovakia hopes to adopt the euro in 2008 or 2009, but intends to meet most of the criteria for euro adoption by 2006 or 2007, says Finance Minister Ivan Miklos in Paris on Thursday. Slovakia wants to join the euro zone as soon as possible after meeting the Maastricht material. Miklos, in France to attend a meeting of OECD ministers, took the opportunity to criticize existing euro member countries - including France and Germany - for their failure to comply with the EU's Stability and Growth Pact. In order to adopt the euro, a country's budget deficit must be no more than 3 % of GDP. Slovakia could reach that level by 2006, provided it succeeds in reforming its pension system. The country already meets the public debt criterion, with a debt under 60 % of GDP. (Interfax 14.v.04) UKRAINE SEVERSTAL WARNS KIEV OVER MAJOR SELL-OFF Steel giant Severstal on Thursday turned up the heat on Ukraine ahead of one of the most anticipated privatizations ever in the former Soviet republic, threatening to sue Kiev if it is barred from bidding. Severstal said Ukraine had issued "discriminatory" new rules for the June 9 auction for its biggest steel producer, Kryvorizhstal. Under the new terms announced Wednesday by Ukraine's State Property Fund, participants must prove that they have produced 1 million tons of Ukrainian coke annually since 2001 -- a requirement that would exclude foreign companies, said Vadim Makhov, deputy CEO of Severstal Group. Severstal's comments took Kiev by surprise. "I don't know why Severstal is making these announcements," a Ukrainian property fund spokeswoman said by telephone from Kiev. "Perhaps they didn't understand the conditions." She said the Cherepovets-based company had misunderstood the conditions and that the coke clause was not mandatory for all participants. She said it was just one of four requirements, meeting any one of which would qualify bidders. Ukraine has set a minimum bid of $714 million for 93.1 percent of Kryvorizhstal, one of Ukraine's few profitable metals companies. It reported pre-tax profits of $302 million last year and has a capacity of 6 million tons of rolled steel, 7 million tons of steel and 7.8 million tons of pig iron. Severstal reported sales of $2.8 billion, less than a tenth of its French partner Arcelor, which reported sales of $31 billion. Arcelor declined to comment on the new tender conditions. Makhov said Severstal's lawyers had looked over the coke condition of the tender and found it to be mandatory, and that it could be challenged in court as a breach of a bilateral agreement between the United States and Ukraine on protecting investments. Nonetheless, he said, Severstal and Arcelor will submit their joint bid. If foreigners are indeed excluded from the contest, the clear front-runner would become a homegrown consortium comprised of Ukraine's Interpipe and System Capital Management. Other companies that have declared their intention to bid include TATA Steel of India, which is reportedly prepared to invest $1 billion in Kryvorizhstal if it wins. Officials of U.S. banking giant Citibank, which is representing Severstal and Arcelor in the privatization, met with Ukrainian property fund chief Mikhail Chechetov in Kiev on Wednesday and "did not receive a clear answer" to their questions, Severstal spokeswoman Lada Askias said. Severstal is controlled by Alexei Mordashov, Russia's ninth-richest man with a fortune of $4.5 billion, according to Forbes magazine. (The Moscow Times 14.v.04) UKRAINIAN PARLIAMENT STALLS OVER IRAQ-PULLOUT DISPUTE Parliamentary speaker Volodymyr Lytvyn on 13 May closed the morning session of the Verkhovna Rada, accusing Communist Party deputies of obstructing the debate, the "Ukrayinska pravda" website reported. As was the case the previous day, the Communist Party caucus demanded a vote on their motion to put the issue of the withdrawal of Ukraine's military contingent from Iraq on the agenda. "Are we going to start each morning session with this issue?" Lytvyn asked. The legislature rejected the motion, which received 59 votes of support from the Communist Party, 40 from Our Ukraine, 20 from the Socialist Party, 17 from the Yuliya Tymoshenko Bloc, and one from the pro-government Regions of Ukraine caucus. After some Communist and Socialist deputies demanded a repeat vote and blocked the rostrum, Lytvyn terminated the debate. 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