Johnson's Russia List
23 April 2003
A CDI Project

  1. Reuters: Russia says Korean standoff a step from disaster.
  2. Wall Street Journal: Gerald Seib, American Playbook Relies On Patching
Russian Ties.
  3. Moscow News: Sergei Karaganov, Crisis Lessons.
  4. Suspect detained in deputy's murder case. (re Yushenkov)
  5. Moscow Times: Andrei Piontkovsky, A Fearful Silence.
  6. The Times (UK): Robin Shepherd, Big question over proven reserves.
  7. Wall Street Journal: To Maximize Shareholder Value.
  8. The Electronic Telegraph (UK): Malcolm Moore, Riches were made in 'the 
wild days'
  9. Financial Times (UK): Andrew Jack, Move gives Russian major critical
  10. The Times (UK): Carl Mortished, Can Yukos leap the Siberian gap?
  11. Yukos and Sibneft Merger To Cause Many Scandals.
TO RELAX. Central Electoral Commission chairman speaks in Yekaterinburg.
  13. Moskovsky Komsomolets: YABLOKO'S TOP THREE. Yabloko's the top three
display its potential to the full advantage.(interview with Vladmir Lukin)
  14. ITAR-TASS: Russia Communists celebrate 133rd birthday day of Lenin.
  15. Rossiyskaya Gazeta: Public Support for Social Democratic Concepts and 
Slogans, Parties Contrasted.
  16. New York Times: Richard Lourie, St. Petersburg's Regilded Age.
  17. Moscow Times: Valeria Korchagina, Grand Plan to Cut Taxes on the
  18. Reuters: Russia to cut VAT, up energy taxes in 2004-5-govt.
  19. Luba Schwartzman: TV1 Review.]


Russia says Korean standoff a step from disaster

MOSCOW, April 23 (Reuters) - Russia's top North Korea expert said on
Wednesday the Korean peninsula remained on the brink of disaster as talks
between Washington and Pyongyang on resolving a nuclear arms standoff
opened in China.

"It is probable that as early as tomorrow events may take a disastrous
course," Itar-Tass news agency quoted Deputy Foreign Minister Alexander
Losyukov as saying in Tokyo after meeting Japanese officials.

Losyukov, Russia's key expert on North Korea, was quoted as saying he
regretted that the row over Pyongyang's nuclear ambitions had been "pushed
to the limit."

Losyukov met reclusive North Korean leader Kim Jong-il for several hours of
talks in January after the United States accused Pyongyang of secretly
pressing ahead with its nuclear programme.

U.S. and North Korean negotiators began talks in Beijing earlier on
Wednesday aimed at trying to end the row.

Losyukov has welcomed the talks and said Russia, which has good relations
with both North and South Korea and shares a tiny border with the North,
could join the negotiation process at a later stage, if invited.

The Korean peninsula remains the Cold War's last flashpoint and reclusive
North Korea, which talks regularly about war being imminent, fears it could
be the next target after the quick U.S. military campaign in Iraq.

Wall Street Journal
April 23, 2003
American Playbook Relies On Patching Russian Ties

At the height of fighting in Iraq, when U.S. troops were knocking on the
door of Baghdad, National Security Adviser Condoleezza Rice quietly left
Washington for a day. Her destination: Russia and the office of President
Vladimir Putin.

There, she had a kind of tough-love chat with the Russian leader. She spoke
of the "strategic choice" Russia has made to work with the U.S. in the
post-Cold War world, and how they might cooperate to rebuild Iraq,
according to officials familiar with the conversation.

But she also warned that the U.S. found antiwar agitation less acceptable
when American soldiers' lives were on the line in battle than it did before
the hostilities began. (Left unstated was the fear of some U.S. officials
that renegade Russian officers might have continued to provide intelligence
to Iraq as the fighting unfolded.)

More important than what was said was the fact that Ms. Rice made the visit
in the first place. While the leaders of fellow war foes France and Germany
were left to stew alone, Mr. Putin got personal attention. Much is made of
whether the rift with France and Germany can be put behind. But as the Rice
visit suggests, in the new global diplomatic alignment in which the biggest
threats are small states and movements, the state of the U.S.-Russian
relationship is more important.

Why? Start with reviving Iraq. The key question is when Iraq will regain
access to its own oil and oil revenues, a question that will be decided
when the United Nations Security Council lifts economic sanctions. Russia
has the power to make that process longer and more difficult -- or shorter
and less contentious.

If Russia and the U.S. agree on a path to end sanctions, the die will be
cast. France, which wants a piece of the action in Iraq but won't want to
risk Security Council isolation to get it, would fall into line. China,
with little directly at stake, isn't likely to make a fuss.

The opening scenes in this drama aren't especially promising; Tuesday,
Russia reiterated that it wants U.N. weapons inspectors sent back to Iraq,
which could complicate the process of declaring the country free of weapons
of mass destruction, which in turn would delay the lifting of sanctions.
But the opening scene is less important than how quickly the U.N. gets to
the final act.

Beyond Iraq, the U.S. needs sustained Russian cooperation in the fight
against terrorism. Mr. Putin took a hugely important step by acquiescing in
the movement of American troops and planes into former Soviet republics in
central Asia, making the fight against al Qaeda and the Taliban in
Afghanistan much easier and U.S. clout in the region broader. Meanwhile,
the U.S. is trying to help Mr. Putin with his own problem -- Islamic
militants trying to drive the Russians out of Chechnya. The U.S. has
identified the Pankisi Gorge, on Russia's border with Georgia, as a haven
for these terrorists, and is working with the Georgian government to oust

On North Korea, Washington needs Moscow's help. Nobody seems capable of
telling the North Korean government what to do, but Russia , in combination
with China, can make life for the North Koreans so uncomfortable that they
will see the wisdom of backing down from its nuclear-weapons ambitions.

The list of areas where the U.S. and Russia need each other goes so far --
you can even add the imperiled space station -- that one senior Bush aide
says the relationship with Russia is the single broadest one the U.S. now has.

The Iraqi war has imperiled that relationship, largely because it came
after Mr. Putin has had to swallow so much American expansion in recent
years. He has accepted not just U.S. troops in Central Asia, but the
expansion of the North Atlantic Treaty Organization to Russia's borders and
a U.S.-installed government in nearby Afghanistan.

After all that, acquiescing in Iraq was simply more than Mr. Putin could
take without permanently alienating popular and elite opinion at home.
"Russia is in the middle of a major strategic shift, from the interests and
perspectives of the Soviet Union in foreign policy to the interests of
Russia ," says a senior Bush aide. "Iraq comes at a time when I don't think
that transition was complete."

The task for Mr. Bush now is to ease the Russian relationship back toward
where it was. In Mr. Putin, there is a leader who has made a choice to move
with the U.S. In Ms. Rice, the president has a national-security adviser
who knows Russia well, to the point that she can chat in Russian with Mr.
Putin and his top aides. Because Mr. Putin has had to swallow so much, odds
are he will get the benefit of the doubt for a while more. To the
administration, Mr. Putin still appears to represent more the new Europe it
likes, rather than the old and backward-looking Europe it finds so


Moscow News
April 23-29, 2003
Crisis Lessons
By Sergei Karaganov

The Iraq crisis is not over yet. It will still produce unexpected twists
and turns, and unpleasant surprises for many sides involved. But when all
is said and done, it has ended with a victory of military force and
behind-the-scenes diplomacy of the United States, as well as of Great
Britain and their allies. Unproductive debate over why the apparently well
organized Iraqi resistance collapsed so soon or the pointless discussion of
why we dislike America for what it has done in Iraq could go on and on. 
But it would be better to appraise the new situation that this country will
have to act in, and look at how Russian diplomacy has thus far performed in
the circumstances.

September 11 did not create a new reality, but simply opened people's eyes
to the reality that was there all along but had not been recognized.
Neither did the Iraq crisis create a new reality, but now it will be more
difficult to ignore what was ignored before.

First, the era of national-liberation revolutions and movements and social
experiments in the 1940s-1990s produced a vast number of states that showed
their inability, at least at the given historical stage, to ensure normal
development on the territories they occupied or a worthy life for the
majority of the people living there. Zero or negative development, mass
corruption, and ineffectual despotic regimes, exacerbated by demographic
and religious problems, are a growing threat not only to these states
themselves and their populations, but also to the rest of mankind. These
regions are a source of instability, diseases, and terrorism. They
constitute the gravest danger in the proliferation of weapons of mass
destruction, drug trafficking, and other global problems. This region
encompasses a greater part of Africa, Central Asia, and the Near East,
possibly including some of the FSU states. Russia balances on the rim of
this region.

Second, the United States resolved to enforce order and modernization, the
way it sees fit, in a substantial portion of this region - the Near and
Middle East and Central Asia, strengthening its positions there in the
process. Africa is less important, so it has been left alone for the time

Third, despite its dubious legitimacy and hamfisted propaganda campaign,
the first such attempt to enforce order, from Washington's perspective, has
been a success. Now similar efforts will be repeated - not necessarily
involving the use of force. After the success in Iraq, the threat of force
should be enough in most cases.

Fourth, the United States could get stuck, but it could also go overboard
and start acting far more unceremoniously, including with regard to
Russia's direct interests.

Fifth, the Security Council is no longer in a position to operate on the
basis of its 1945 mandate. As far as the organization itself is concerned,
for all its usefulness, it is losing effectiveness while it has grown
almost four-fold - mainly thanks to the aforementioned states.

Now about how we have performed. I will say it outright: We have not done
very well; but then, thank God, there has been no debacle.

Firstly, our intelligence services misled us - or we deluded ourselves -
about the Iraqis' ability and readiness to resist the attack.

Secondly, our policy did not seem to be coordinated enough. Sometimes we
clearly improvised and sometimes acted at cross purposes.

Thirdly, we lacked a coherent strategic objective. Did we want to preserve
international legitimacy or save the UN Security Council or make friends
with the Europeans and play them off against the United States or remain on
good terms with the Americans? All of these objectives are justifiable if
they are based on an underlying strategic line. There was no such line,
however. This is not so much the problem of a particular crisis as of the
entire foreign policy.

Fourthly, we simply refused, shortsightedly, to look after our economic
interests in Iraq. This is not about trading in principles, but about the
kind of image that we project as a state - one of the 19th century, playing
the geopolitical, vainglorious games of the kind kings used to play, or one
of the 21st century, concerned with upholding its special interests. Less
important, including economic, interests can be sacrificed to more
important interests. Yet I for one did not see any prioritization while the
government agencies - above all the Economic Development Ministry, which,
as is known, was entrusted with defending Russian economic interests in
Iraq - simply ignored their duties.

Fifthly, one of our policy objectives has been false. It is
counterproductive - even for tactical purposes at the UN - to try playing
against its most powerful member. The ship is just barely afloat. It must
be saved as a matter of urgency, but the crew is indulging in exercises on
what is already history. The ship should be repaired and modernized, and
this should be done with those who will stay on board and sail on. Unless
the UN is reformed without delay, it will follow the path of NATO, or worse
still, of the OSCE.

Even so, despite all miscalculations, we have scraped through this time -
largely thanks to personal Putin-Bush diplomacy and the dispatch of Yevgeny
Primakov to urge Saddam to step down and save the nation.

We have scraped through, however, not thanks to any consistent action, but
to a series of haphazard moves that proved successful. In an increasingly
challenging and hazardous world that we have entered, this approach will
sooner or later doom us to failure and definitely to serious opportunity

National-liberation movements and social experiments in the 1940s-1990s
produced a vast number of states that showed their inability, at least at
the given historical stage, to ensure normal development on the territories
they occupied or a worthy life for the majority of the people living there.


April 23, 2003
Suspect detained in deputy's murder case
By Irina Petrakova  

A 20-year-old has been detained in Moscow on suspicion of murdering State
Duma deputy Sergei Yushenkov. Investigators believe that Artyom Stefanov
could have murdered the deputy for personal reasons and are citing
vengeance as a possible motive. Back in 1997 Stefanovís father spent 6
months in custody, after the deputy complained about him to the Prosecutor
Generalís Office. However, there is no direct evidence of Stefanovís guilt
and he is likely to be discharged shortly, Gazeta.Ru sources say. 

The 20-year-old was arrested in Moscow in the early hours of Wednesday.
According to Gazeta.Ru sources in the law enforcement agencies, Artyom
Stefanov was detained at around 0300 in Moscowís northwestern suburb of
Strogino in an apartment he shares with his parents. 

Artyom Stefanovís appearance bears a certain resemblance to a composite
drawing of Yushenkovís assassin, made on the basis of eyewitness accounts.
A young man with short black hair, aged between 16 and 20, allegedly
committed the murder. 

Prosecutors believe that the murder could have been committed for personal
reasons and are not ruling out that the murderer may have been seeking
revenge. It transpired that in 1997 Alexander Stefanov harshly criticized
Sergei Yushenkov and even wrote a letter to the Prosecutor Generalís
Office, informing the prosecutor of the deputyís alleged ties with the
Chechen mafia. The deputy also wrote a letter to the Prosecutor Generalís
Office, in which he claimed that he had been receiving threats, whereupon
Stefanov was arrested and spent 6 months in detention. 

NTV television interviewed the young manís parents, who said their
apartment had been searched without a prosecutorís warrant and resolutely
refuted their sonís possible implication in the attack on the deputy.
Alexander Stefanov said that men armed with assault rifles broke into their
apartment in the middle of the night and took his son Artyom away. 

Gazeta.Ru sources in the law enforcement agencies assume that Stefanov will
most likely be released soon, since investigators have no direct evidence
of his guilt, and he came under suspicion along with a number of others who
have had or could have had conflicts with the murdered deputy. 

A day earlier, the late deputyís son Alexei Yushenkov told Ekho Moskvy
radio station that on Tuesday morning an acquaintance of his, Anna Gebel,
and two more people were detained on suspicion of being involved in his
fatherís murder. ''They came to Anna's flat to search it although Anna did
not know my father personally, just like she did not know Vladimir Golovlev
[another Liberal Russia member and State Duma deputy murdered in August
last year]. She was only acquainted with his aide.'' 

Aleksey Yushenkov said that those people had come with a sniffer dog
trained to find drugs. ''They found drugs, took them and then took Gebel
and those who were in the flat with her to the prosecutor's office for
questioning. During the questioning Gebel felt unwell and asked for some
water. She was given a bottle of water that turned out to have narcotic
substances in it. Gebel demanded that the ambulance be called but her
request was denied.'' 

Later in the day Anna Gebel was released and the Prosecutor Generalís
Office refuted reports of the first arrests made within the framework of
the probe into Yushenkovís murder. 

On Tuesday the Interior Ministry said a composite drawing of the suspected
murderer had been made and sent out to all police stations. Investigators
have also established the serial number of the Izh pistol, used by
Yushenkovís murderer. The offender left the pistol in the courtyard of the
residential block where the deputy lived. 

Sergei Yushenkovís colleagues in the State Duma, as well as the members of
the opposition Liberal Russia, co-founded by Yushenkov, are convinced that
the attack on the deputy was politically motivated. Liberal Russia
activists assume that one possible motive for the murder could have been
his work on an independent work group investigating apartment bombings in
1999, blamed on Chechen terrorists. Liberal Russia member Alyona Morozova,
who together with Yushenkov took part in the commissionís work, and the
well-known tycoon Boris Berezovsky, said as much earlier this week. 

Moscowís top prosecutor Mikhail Avdyukov has not ruled out commercial
motives for Yushenkovís murder, or that the murder could have been
committed by ''an unbalanced person''.  


Moscow Times
April 23, 2003
A Fearful Silence
By Andrei Piontkovsky 

Fear is tightening its grip on the capital. People still talk in whispers
on street corners and in their homes, but they're already afraid to ask
questions, even the most obvious. Even of themselves. Here are a few of the
questions that no one's asking.

According to evidence compiled by human rights organizations in Chechnya,
more than 1,000 Russian citizens have been kidnapped by federal forces
during so-called sweep operations. The victims have either vanished without
a trace, or their corpses, disfigured by torture, have been sold to relatives.

The authorities aren't terribly fond of human rights activists, of course,
and they refute these claims. A few days ago, the chief prosecutor of the
Chechen republic said that the estimate of "more than 1,000" was
inaccurate. In fact, he said, the number of Russian citizens kidnapped by
Russian soldiers during sweep operations came to no more than a few hundred.

A few hundred. This is mass terror carried out by the very people who are
supposed to be conducting a counter-terrorism operation. 

The authorities' official recognition of this fact does them honor. But it
does no honor to our society, which prefers to turn a blind eye to the

President Vladimir Putin made an amazing statement in his address to the
Chechen people on the eve of last month's referendum. The president
expressed his wish that Chechens would no longer live in fear of a knock on
the door in the night, that sweep operations would cease, and that
civilians would no longer be robbed at army checkpoints.

But Putin isn't Mother Theresa or the United Nations high commissioner for
human rights. He is the commander in chief of the very soldiers who knock
on the door in the night, who kidnap people during sweep operations and rob
them at checkpoints.

So, is the commander in chief unwilling or unable to call off the death
squads operating within his government? It's hard to say which answer is
more terrifying.

If professionally trained people are given a license to kill with impunity
on the territory of one region of the Russian Federation, what makes you
think that they'll stop there?

Once the beast has tasted blood, nothing can stop it. There's no point
acting upset that Russian law enforcement can't solve political murders.
The police are perfectly capable of solving these crimes, but they don't
have much incentive to try.

In the case of journalist Dmitry Kholodov, law enforcement did the
impossible. They tracked down an entire death squad and brought them to
justice. But the killers, after openly mocking the memory of their victim
throughout the trial, walked away scot-free, accompanied by the obliging
dwarf from Channel One television who led the campaign for their acquittal.

At some point this dwarf kissed the president's poodle's ass on prime time,
and became his favorite journalist. The president's that is, not the
poodle's. Ever since he has been a permanent fixture on TV talk shows meant
to teach us about the principles of statehood and the importance of
striking mercilessly against "enemies of the people."

Sergei Yushenkov, like Dmitry Kholodov before him, asked questions that
irritated the ruling elite and its rapidly multiplying armed brigades,
which seem now to be totally out of control.

Yushenkov's murder sends a clear signal. After his death, there will be far
fewer people willing to ask questions -- about the 1999 apartment block
bombings or the "Nord Ost" tragedy, for example. And the impact will be
felt for a long time to come, until an event like the 20th party congress
of United Russia, when the party will condemn the violations of capitalist
legality that occurred in the first decade of the 21st century.

"Why were you silent back then?"

"That's how things were in those days. An oligarchy hemmed in on all
economic fronts. Anglo-American aggression in Iraq. NATO creeping toward
our borders. And there was so much we didn't know back then."

Andrei Piontkovsky, an independent political analyst, contributed this
comment to The Moscow Times.


The Times (UK)
April 23, 2003
Big question over proven reserves
By Robin Shepherd

How much oil does Russia have? Industry analysts, Opec, and the Pentagon -
desperate to diversify oil streams away from the politically volatile
Middle East -would dearly like to know.

Unfortunately, the predominance of Soviet-era statistics makes it
impossible to be sure.

The most commonly quoted figure is 48 billion barrels putting it well
behind Saudi Arabia, with proven reserves of 262 billion, and Iraq, with
112 billion. But analysts say that the figure must be outdated since the
combined reserves of the major Russian oil companies exceeds it. 

Analysts at Yukos, the oil group that yesterday confirmed its merger plans,
have suggested that the true figure could be about 100 billion barrels with
some estimates reaching 150 billion.

The key problem is that Russia's landmass is so vast that much of it
remains to be explored. The frozen wastelands of Siberia are one problem.
The offshore zones of Russia's huge Arctic sea zones are an even bigger

"It is one of the great unknowns. I don't think we're going to have a good
picture for years until the old Soviet estimates have been revamped," said
Nicholas Redman, analyst at the Economist Intelligence Unit in London.

"The technical problems in finding it and extracting it are huge. The big
problem is how do you develop the arctic, the offshore zones," he added.

Once the oil has been found, the next biggest problem for the Russian oil
industry is exporting it to the the West.

Russia currently exports between 3.5 and 4 million barrels of oil and
refined products a day, the second largest exporter after Saudi Arabia. But
the big domestic and international oil companies in Russia have long been
hampered by government opposition to private pipeline projects. Ministers
fear that they would undermine the monopoly enjoyed by Transneft which
controls Russia's trunk pipelines.

But last week there were hopeful signs of change. The Government appeared
to end its opposition to a project to turn the Arctic city of Murmansk into
a vast oil port.

"For the first time this would allow them to load onto supertankers giving
exporters good access to Western markets," said Mr Redman. "This is key
because the big constraint in the Russian oil industry is export capacity."


Wall Street Journal
April 23, 2003
To Maximize Shareholder Value

Yukos's merger with Sibneft doesn't just create a new oil supermajor. It
also gives Russia a new national champion. Indeed, the deal may have been
done to keep oil assets out of foreign hands.

Oil companies have spearheaded Russia's drive to improve corporate
governance. And investors have rewarded them for adopting international
accounting standards and cutting costs. Yukos shares, for instance, have
risen fourfold in two years. Sibneft has done even better, rising
sevenfold. But by opening themselves up, Russian oil producers have made
themselves vulnerable to foreign takeover. Witness Britain's BP taking a
50% stake in TNK earlier this year.

With market capitalizations of about $25 billion (‚ā¨23 billion) and $10
billion respectively, Yukos and especially Sibneft were potential targets
for international supermajors. But the combined company is probably too big
to swallow. It is easy to see how this suits Mikhail Khodorkovsky. The
Yukos chief executive will, with allies, most likely retain control of the
merged group. Less obvious is why Sibneft's core shareholders were happy to
sell down to a blocking minority.

Granted, there is something for them in the deal. They are selling a 20%
stake for $3 billion in cash. But factor in the remaining 70% stake they
hold, which they are swapping for stock in the combined group, and assume
minorities are offered the same share-swap ratio. On this basis, the core
shareholders are exiting on a multiple of about 6.5 times last year's
earnings before interest, taxes, depreciation and amortization, or Ebitda.

That is better than the multiple of just over five times that BP paid TNK.
But, then, TNK didn't cede control. And there should be more synergies from
a merger of Yukos and Sibneft (although the two companies have said little
about these so far). If such savings exist, they would depress the Ebitda
multiple further.

Sibneft may have its reasons for agreeing to a cozy domestic merger -- or
may have been forced to do so by the Russian government. Either way, it
shows that while Russian firms have made some strides in improving
corporate governance, they still have something to learn about maximizing


The Electronic Telegraph (UK)
April 23, 2003
Riches were made in 'the wild days'
By Malcolm Moore†

Mikhail Borisovich Khodorkovsky is the biggest success story in Russia's
recent history.

Born the only son of two factory workers in Moscow, the 39-year-old
Khodorkovsky built himself, seemingly overnight, into Russia's richest man.
His 36pc share in oil giant Yukos values him at about £5 billion, making
him the richest man under 40 in Europe.

He is extremely well-connected politically, lives near President Putin and
counts his top aide as a friend and former employee.

A short, thickset man, he made the first kernel of his fortune when he was
a deputy leader of Komsomol - the youth communist party - where he
exploited a weakness in the Soviet monetary system to exchange non-cash
factory subsidies for hard currency.

In a couple of years, he had accumulated the million dollars he needed to
found Bank Menatep in 1989. When Russia began to start auctioning off
state-owned companies to kick-start the faltering economy, Khodorkovsky got
his break. Even though Bank Menatep organised the Yukos sale, it was
Khodorkovsky who ended up with a controlling stake in the company.

Some have suggested that he pulled strings to exclude foreign investors
from looking at the company and that he reminded some of the perils of
investing in Russia. "In those days Russian law did not recognise the
concept of conflict of interest," he argues.

Under his leadership, Yukos has grown to become Russia's largest oil
producer and has even, despite some incidents back in the "wild days",
pioneered a spotless standard of corporate governance.

Between 1999 and 2001, the group's share price rose from 20 cents to more
than $10. The group has an American finance director, and
PricewaterhouseCoopers does the books.

As for the man himself, oddly for a former communist, his current idols
include none other than Lady Thatcher.


Financial Times (UK)
April 23, 2003
Move gives Russian major critical mass 
By Andrew Jack 
When BP announced its $7bn joint venture with the Russian oil group TNK in
February, it caused ripples not only among its western competitors, but
also among the country's leading local operators.

TNK was among the three large Russian oil groups that had taken strides to
improve performance and management and which had become relatively open to
foreign partners. The landmark BP deal with TNK left only Sibneft and Yukos
in play.

It was an open secret that Sibneft was for sale if the price was right.
Some industry insiders said that discussions with both Shell and France's
Total about the acquisition of a stake of up to 50 per cent advanced apace
after the BP deal.

Sibneft's share price jumped sharply as rumours spread of possible
transactions. The price of Surgutneftegaz rose even more on the back of a
possible hostile bid.

But such news also led Mikhail Khodorkovsky, the head and principal
shareholder of Yukos, to approach Sibneft. A merger would provide some
synergies, but also offer a critical mass to help turn the company into a
more weighty domestic and international operation. It would also make good
the bitter taste left after previous merger plans collapsed in 1998.

In less than a month, he was able to put together an offer, proposing the
outright purchase of Sibneft with a substantial cash down-payment and
shares in the combined group.

In what became negotiations between two purely Russian entities -
principally between Mr Khodorkovsky and Roman Abramovich, the dominant
Sibneft shareholder - few outsiders were involved. Sibneft brought in
Citigroup to help advise on valuations only last week.

For Mr Abramovich, the low-profile governor of Russia's Far Eastern
Chukotka region said to be closely linked to the circle of former President
Boris Yeltsin, the deal presented him with a chance to crystallise the
profits he had made from Sibneft in the past few years. An equity stake in
the combined YukosSibneft offered potentially far greater upside than in a
western oil major.

It also provided him with cash in the build-up to parliamentary and
presidential elections in the next few months, when many businesses are
likely to come under pressure to contribute substantially to campaigns.

One challenge will be how far the group can diversify, notably out of
Russia. Analysts suggested yesterday that a future joint venture, asset
swap or minority stake taken by a western oil group was still possible.

Another is how easily the team of Mr Khodorkovsky - likely to control just
over 50 per cent of the combined group - will get on with that of Mr
Abramovich, who is set to hold a minority blocking stake of just over 25
per cent.

Certainly the body language at yesterday's curt press conference to
announce the deal was cold, with Mr Khodorkovsky and Eugene Shvidler,
Sibneft's chief executive and chairman of YukosSibneft, only shaking hands
for the briefest of moments, as Mr Abramovich looked on in silence.

The Times (UK)
April 23, 2003
Can Yukos leap the Siberian gap?
By Carl Mortished

The great Siberian oil rush is over almost as it begins. After yesterday's
sale of Sibneft to Yukos and last month's deal between BP and TNK, there
are few mammoths left roaming the tundra. Those that remain, such as Lukoil
and Surgutneftegaz, are owned by managers unlikely to cede control to a
foreign oil company. 

Mikhail Khodorkovsky, the chief executive of Yukos, acted fast, capturing
the largest and most tempting prospect at a reasonable price before it fell
to Shell or TotalFinaElf. Russia now boasts an oil company of world scale
but not yet of world value and that discrepancy will remain a constant
irritation to the Yukos chief until he finds a way out of Siberia.

It is an irony that cannot be lost on Khodorkovsky. A position in Russia is
so keenly prized by Western oil majors that BP was prepared to sup with the
devil, so to speak, doing a deal with TNK, a company with which it had
previously fought tooth and nail in the courts. For Yukos shareholders,
however (including its billionaire chief executive), Russia represents a
discount, a political risk.

Sibneft's reserves are valued in yesterday's transaction at just over $ 2
per barrel while the stock market puts a value of more than $ 5 on each of
BP's barrels.

Closing the gap will be difficult for Yukos. The takeover of Sibneft will
force Western institutions to sit up and take notice of a business that
pumps more oil than Chevron Texaco, but it also draws attention to
oddities. Yesterday's deal is essentially a buyout of the interests of
Roman Abramovich, Sibneft's chairman, and a number of other unnamed
investors who control more than 90 per cent of Sibneft.

The core shareholders are getting $ 3.16 per share in cash for the 20 per
cent stake sold yesterday, while their remaining stock will be swapped for
shares, worth about $ 2.70 yesterday. Minority investors will receive a
"fair offer", rubber-stamped by an investment bank.

Russian law does not require that Yukos offer equal treatment to the
minority shareholders but it is strange that Yukos yesterday overlooked an
opportunity to make such a commitment. The bigger challenge for Yukos is
abroad. Diluting the "Russia discount" means a meaningful stake in a
foreign oilfield. From a standing start, Yukos has a mountain to climb. It
is precisely the lack of big opportunities elsewhere that makes Russia so
attractive to the Western majors, so Yukos will have to buy its way into
foreign oil provinces. With its shares depressed, that could prove expensive.

Unless Yukos uses its own assets as currency...Having closed the door to
Russia, Khodorkovsky could open it a chink by offering ExxonMobil, Shell or
TotalFinaElf partnerships or asset swaps. With little prospect of buying a
Russian oil company, the Western majors are left competing for Russian oil
licences and without the comfort of a contract regime that guarantees tax

However, a piece of Siberian tundra swapped for offshore acreage in West
Africa or even a stretch of desert in Iraq could do the trick. It would
give Exxon and Shell the comfort of a Russian partner with political clout,
and it would give Yukos an exit route from Siberia and a seat at top table.


April 22, 2003
Yukos and Sibneft Merger To Cause Many Scandals 
The new company will become one of the largest oil companies in the world

Until recently, Russian oligarchs have been competing with each other, 
fighting over property. If they have occasionally joined their efforts to do 
something together, such actions were presumably aimed against someone else. 
And when such great oil companies as Yukos and Sibneft merge, one can say 
that the consequences will be very serious. 

The union between Yukos' CEO, Mikhail Khodorkovsky, and Sibneft's major 
shareholder, Roman Abramovich (also the governor of the Chukotka region), is 
likely to affect many figures in Russia's political and economic life. 

Everything is more or less clear when it comes to the international 
significance of the merger. As the New York Times wrote, the merger of Yukos 
and Sibneft would form one of the world's largest oil companies, which would 
be capable of extracting up to 2.16 million barrels of crude daily. This 
number is comparable to the daily crude extraction of Canada, and it exceeds 
the daily amount of the U.S. Chevron Texaco Corp.

According to experts' estimates, the market value of the new company might be 
evaluated at somewhere around $34 billion. One way or another, it will be the 
most valuable and most powerful Russian company from the point of view of 
company management.

It is worth mentioning here that this is a very unusual thing to happen 
during a pre-election year in Russia. Furthermore, Khodorkovsky is going to 
fund such parties as Yabloko, SPS (the Union of Right Forces) and the 
Communist Party, while providing considerable financial support to the United 
Russia party. In other words, there is every reason for Russian political and 
economic life to undergo profound changes. As usually happens in Russia, this 
might result in victims, taking into consideration that it is Mikhail 
Khodorkovsky who is to play the main role in the duet. 

In the short term, it is hard to predict how the situation is going to 
develop. However, it is possible to say who is going to fall afoul of such a 
grand undertaking. The merger of two Russian oil giants will be a disaster 
for Leonid Polezhayev, the Omsk governor. 

After Polezhayev took the office of governor, he started cooperating with the 
oligarch Abramovich. The latter was a hugely powerful man at that period of 
time. Abramovich's company Sibneft had no problems at all, although many 
other companies and organization did not feel comfortable in the Omsk region. 
Sibneft's management got everything it wanted; they just had to wish for it.

Relations between the governor and local businessmen worsened a great deal. 
However, Abramovich helped Polezhayev to win battle after battle. It goes 
without saying that this eventually resulted in many enemies with whom the 
governor had to deal. 

Yukos had its plans for the Omsk region as well. Khodorkovsky did not conceal 
the fact that his company was rather interested in establishing control over 
the Omsk refinery. Yet, they showed Khodorkovsky the door.

This happened in the 1990s. Mikhail Khodorkovsky was not the man that he is 
now, so he just departed ? although he promised to come back. Nowadays, Yukos 
is returning to the Omsk region in the form of YukosSibneft, and Khodorkovsky 
is the master: Abramovich has decided to stay aloof from the business, and 
Khodorkovsky will rule the new giant company. Polezhayev has been deprived of 
his protection, and there is no way that he can get any form of support 

The Russian people have a saying: "Do not have a hundred rubles; have a 
hundred friends." This is a wise saying indeed: When trouble comes, only 
friends can help.

But the Omsk governor does not have any friends, and there is no support 
Anatoly Chubais, the head of RAO UES of Russia, used to help Krasnoyarsk 
Regional Gov. Alexander Lebed, having intervened in the economic war in the 
region. Polezhayev will not have such support, for he took very serious 
measures against the energy industry this spring. The Omsk regional 
administration refused to clear multi-million-ruble debts to the energy 
company, initiating trial after trial. Criminal proceedings were started 
against the regional company Omskenergo  on the governor's instigation. In 
addition, Omskenergo's director, Alexander Antropenko, was ousted from United 
Russia. To crown it all off, Polezhayev wrote several letters to Moscow 
threatening Chubais. However, the governor became rather quiet during 
Chubais' recent visit to the region. Polezhayev had a conversation with 
Chubais and disavowed all his claims publicly. 

Polezhayev hoped for support from the Russian State Construction Committee in 
the field of the housing- and communal-system reform. The committee liked 
Polezhayev's suggestions, and they were highly appraised by high-ranking 
officials, by Leonid Drachevsky, the presidential envoy in the Siberian 
administrative district, for instance. However, Chubais has recently 
announced that the reform of the housing and communal system would be run by 
a consortium that unites RAO UES of Russia, Gazprom and other Russian large 
companies. The State Construction Committee does not wish to deal with the 
Omsk regional experience in the housing field, which basically comes to banal 

The city of Omsk used to be famous for its powerful defense enterprises. 
Almost nothing has been left of them, because of the governor's zealous 
activity. It was Gov. Polezhayev who insisted on the scandalous bankruptcy of 
the Omsk machine-building factory, one of the two Russian tank producers. It 
was the governor who drove defense enterprises to devastation, desiring to 
establish total personal control over them. One may say that he has achieved 
his goal: There are only three defense-industry enterprises left in the Omsk 
region, which used to be an important strategic region for Russia. For 
example, the Polyot enterprise does not produce anything, brings no profits, 
and its employees do not get paid for months. The only enterprise that runs 
is Relero, which manufactures defense equipment. 

Will any defense enterprise support the governor? It's not likely. However, 
Polezhayev does not have any other way out but to talk to local businessmen 
and managers of defense enterprises.

So far, he has been trying to get ahold of Moscow's ephemeral support. The 
situation sometimes even becomes ridiculous. At the end of April, the 
governor is to open an exhibition of drawings made by the children of Omsk. 
Drawings will be exhibited in the State Duma. 

Of course, no one is going to give him any money for the pre-election 
campaign ? that's a fact. Most likely, offended Omsk businessmen will gloat 
over Polezhayev's misfortune, and young and aggressive top managers of the 
new oil giant will ruin his career completely.

Timofey Iznorkin
Especially for PRAVDA.Ru


Nezavisimaya Gazeta
April 23. 2003 
Central Electoral Commission chairman speaks in Yekaterinburg
Author: Vladimir Terletsky
[from WPS Monitoring Agency,]

     Central Electoral Commission (CEC) chairman Alexander Veshnyakov 
held a district seminar meeting in Yekaterinburg yesterday, titled 
"Elections in Russia: cooperation between electoral commissions, state 
bodies, and civil society in ensuring the electoral rights of 
     Veshnyakov noted yet again that the official starting of the Duma 
election campaign is September 1, while the presidential campaign will 
start on December 10. Since the parliamentary and presidential 
campaigns will overlap, Veshnyakov says there will be no time for 
regional authorities to relax.
     According to Veshnyakov, 51 political parties have now submitted 
the required documents for legal registration in compliance with the 
new federal law; only 37 of them have sufficient regional branches to 
qualify them for participation in elections at all levels.
     The CEC is fully determined to prevent any violations of the law 
by candidates during the campaign, as evidenced by its initiative to 
make further amendments to the Criminal Code. Veshnyakov said: 
"Penalties are essential, since candidates frequently exceed the 
lawful campaign spending limits by a significant amount." Those 
amendments will be submitted to the Duma in May.
     Veshnyakov also spoke about the conflict over the Saratov 
region's upcoming gubernatorial election. He said that it ought to 
take place within the time-frame set in law. Governor Eduard Rossel's 
term in office expires in September. A new election should be held in 
the same month. The Unity and Fatherland factions in the Saratov 
regional legislature have been blocking the passage of a new Electoral 
Code; Veshnyakov described their actions as outright sabotage.
     According to Veshnyakov, legislators who disrupt parliamentary 
sessions should face severe penalties. Veshnyakov emphasized: "It is 
up to the governor to take action on these matters."
     The CEC recently recommended that Vladimir Mostovshchikov should 
become a member of the Sverdlovsk regional electoral commission; he is 
now its chairman. This indicates that even as it goes about forming 
its management hierarchy in the regions, the CEC is prepared to make 
concessions to regional leaders on even such sensitive issues as 
delegating its representatives to regional electoral commissions.
(Translated by Gregory Malutin)


Moskovsky Komsomolets
April 23, 2003
Yabloko's the top three must display its potential to the full advantage
Author: Marina Ozerova
[from WPS Monitoring Agency,]

     Yabloko is currently rumored to be facing serious problems. For 
instance, it's been said that Vladimir Petrovich Lukin, a deputy Duma 
speaker, will no longer be among the top three names on Yabloko's 
electoral list. In this interview, Lukin comments on the upcoming 
elections and the party's overall affairs.
     Question: What do you think will be the differences of the 
upcoming elections from the previous election campaigns?
     Vladimir Lukin: Frankly, I don't have encouraging ideas. The so-
called administrative factor, which is a synonym to a powerful and 
barefaced pressure, has been increasing right in front of our eyes. 
This factor is functioning on all levels, from top to bottom, and this 
complexity even seems to bring democracy, because sometimes the 
federal administrative resource is conflicting with the targets of the 
local administrative resource and the general effect proves to have 
unambiguous nature.
     I expect the role of the financial factor, the permanent pressure 
of the criminal structures to increase further on, especially in 
single-mandate electoral districts...
     Question: Is it Yabloko's intention to form an electoral 
coalition with any of the political forces?
     Vladimir Lukin: It is, undoubtedly, possible to ally with various 
forces, but it is much better to gather ourselves up and take what we 
want to. We need to stir up Yabloko's electorate, which includes 
peculiar people, intelligentsia, which is not always good, since when 
an individual reflects, he is also reflecting on whether or not should 
he participate in the elections. Sometimes, an individual decides to 
refrain from taking the vote.
     I have one thing to say to these people: if you won't go to the 
elections, you'll help the manipulations immensely, because the bigger 
the attendance is, the less opportunities remain for garbling.
     Question: Will you run in the elections in a single-mandate 
electoral district or on the party list?
     Vladimir Lukin: In both versions. The chief problem n this 
respect is whether a person has resources to fight on two fronts. I've 
decided to run in the elections on the party list and a single-mandate 
electoral district in the Moscow region. Everybody with the exception 
of Yavlinsky decided to nominate in single-mandate electoral 
districts. Even if one doesn't win in a single-mandate district, by 
taking an active election campaign one may assist raising the 
popularity rating of one's party.
     Question: The rumor is circulating that your name may disappear 
from the top three of Yabloko's party list. Is that true?
     Vladimir Lukin: This event has no drama and tragedy. I cannot 
call you the top three names on the party list and nobody can. The 
decision on the top three of candidates will be adopted at the 
congress due to take place this autumn. Yabloko is a democratic party, 
no matter what they say, and we have never before had unanimous 
ballot, especially in the private issues. The discussions are underway 
now, but nothing more.
     In my view, one's place on the party list is not a problem. If 
the party gets through, one gets into the Duma from the 1st to 15th 
places inclusive. The only difference is that the top three must show 
our potential to full advantage. For instance, in the previous 
elections, I had proposed including Sergei Stepashin among Yabloko's 
top three candidates. If we now find two more persons who agree to 
join us and the party's popularity rating will certainly rise of that, 
I'll gladly retard to any other place. At the current stage, however, 
I see no such candidates...
(Translated by Andrei Ryabochkin)


Russia Communists celebrate 133rd birthday day of Lenin.
April 22, 2003

April 22 marks the birthday of Vladimir Lenin (1870-1924), founder of the 
Bolshevik party and the Soviet state.

Born Vladimir Ilyich Ulyanov into a family of a school inspector and a former 
Tsarist lady in waiting, Lenin lived 54 years. A man of immense intellect, he 
fathered the 1917 Bolshevik Revolution and the all-against-all Civil War that 
left the vast Russian empire in shambles. 

Lenin led the Soviet state during its first six years.

MOSCOW- Russian Communist Party leader Gennady Zyuganov, his followers, and 
the left-leaning Agrarian Faction in the Russian parliament's lower house 
laid wreaths at the Red Square mausoleum where the embalmed body of Lenin 

ST. PETERSBURG- Communists in St. Petersburg (formerly Leningrad), Russia's 
second city, which in the Soviet era was named after Lenin, celebrated the 
birthday of Lenin modestly. "Firstly, the 133rd anniversary is not a round 
date; secondly, it is difficult to get permission to organize public 
functions, because Petersburg is actively preparing for its 300th 
anniversary," said Gennady Turetsky, a chief organizer of the street 
commemorative activities of the St Petersburg branch of the Russian Communist 
Party. Ceremonies in the city will be limited to laying flowers at a monument 
to Lenin near the Smolny Palace, a former headquarters of the Bolshevik 
Revolution, and a brief meeting that is likely to convene some 50 people.

KEMEROVO-War and labour veterans of the Siberian coal-mining Kuzvbass region 
have raised 80,000 roubles for the preservation of the Lenin mausoleum in 
Moscow. Residents of the Yurginsky region and Novokuznetsk have been the most 
active in efforts to raise financial support for the Lenin mummy. They said 
the body of Lenin must be kept on display for ever in the interest of the 
history of the state that managed numerous economic and social achievements 
at the beginning of the last century. The coal-mining region kept its 
monuments to Lenin after the fall of communism, and the streets named after 
him were not re-named.

BARNAUL- Celebrations of Lenin's birthday in the Siberian city of Barnaul 
have proved the most massive in Russia's post-Soviet years. Some 500 citizens 
gathered around a monument to Lenin in the city centre and laid flower 
garlands. The capital of the Altai region was decked out in red communist 
posters on Tuesday. Usually some 40-50 local communists gather for the event 
in Barnaul, where three Lenin monuments tower in city squares and near a 
former building of the regional Communist party committee.

MAIKOP- Communists of Adygeya, an ethnic autonomous territory in Russia's 
southern Krasnodar region, laid flowers at a Lenin monument that was erected 
in 1959. The former Yekaterinodar was in Soviet times renamed Krasnodar ("Red 
Gift"). There are more than 50 monuments and busts of Lenin in Adygeya, an 
official of the regional monument inspection office said. All are intact.

In the village of Gorodskoy, where Soviet power was first established in the 
Krasnodar region, children join the Communist-allied Pioneer organization in 
a ceremony by the Lenin monument every year.

SAMARA- In a poll in Samara, a city in the Volga region, only one out of 100 
interviewed school students knew who Lenin was. Most of the polled school 
children called him a writer or Russia's president.


Public Support for Social Democratic Concepts and Slogans, Parties

Rossiyskaya Gazeta
15 April 2003
Article by Anna Zakatnova: "The Weak Ones Die Off, the Quick Ones 
Leave. A Social Democrat for Every Party" 

     As a party, the social-democrats have 
practically no chances at the elections. Evidently, it is for this reason 
that all of the political parties are going all out, "treating 
themselves" to those slogans and conceptions that have traditionally 
belonged to social-democratic political associations. So there are 
social-democrats in Russia, only with a particular national feature: 
There are center-right social-democrats, there are center-left ones, and 
there are ones that are completely in the center. 
    The official contenders to the status of social-democrats are three: 
the Unified Socialist Party of Aleksey Podberezkin, the United 
Social-Democratic Party of Mikhail Gorbachev and Konstantin Titov, and 
also Gennadiy Seleznev's Party of Russia's Rebirth. Furthermore, survey 
data invariably show that at best, 1 percent of voters are prepared to 
vote for the new social-democrats. At the parliamentary elections of past 
years, the results have turned out to be significantly worse: 0.13 
percent in 1995 and 0.08 percent in 1999. The main problem of 
contemporary Russian social-democracy consists in the fact that they are 
not particularly needed by anyone. Sociological survey data clearly show 
that there is not yet an electoral base in the country for the 
social-democratic idea - there is no middle class. 
    Thus, survey research of the All-Russian Center for the Study of 
Public Opinion indicate that over the past three years, the opportunity 
for choosing produce, clothing, footwear, and other day-to-day goods are 
changing for the better for an absolute majority of Russians. The choice 
of produce, for example, improved over the year 2000 for 51 percent of 
Russians; over 2001, it changed for 61 percent; and over 2002, for 70 
percent. But then, the situation on the labor market, that is, the 
opportunity to make a good living, has changed little: In 2000, some 18 
percent of those surveyed noted a changed for the better, and 25 percent 
noted a change for the worse; in 2001, the respective figures were 21 and 
32 percent; and in 2002, they were 26 and 36 percent of those surveyed. 
True, a more detailed study of the survey data show that "in 2002, for 
the first time in recent years, the demand for a highly qualified 
workforce on a country-wide scale exceeded its supply." 
    There is also one more cause for optimism. When the All-Russian 
Center for the Study of Public Opinion conducted research on the 
lifestyle expectations of Russians, a rather curious tendency of the 
so-called Putin period came to light. The number of people oriented on 
living no worse than the majority rose from 46 percent in January 2000 to 
55 percent at the present time. But at the same time, the number of those 
who would like to live in accordance with Western standards or better 
decreased from 14 percent to 11 percent. As sociologists believe, the 
"Putin" period is characterized by an averaging out, an evening of 
Russians' lifestyle expectations: There has been a stabilization in the 
number of Russians striving to "live better" than the majority in their 
city or rayon, and an increase in the number who are focused on "living 
no worse." The weakest are dying out, the quickest are leaving, and the 
rest are gathering into small groups. Thus, in Russia a middle class is 
slowly growing. But very slowly. 
    Not that the social-democrats themselves do not realize their 
difficulty with the electorate perfectly well. Thus, at the congress of 
the Unified Socialist Party of Russia, which took place last Saturday, 
Aleksey Podberezkin, famous for his optimistic views on the prospects for 
social-democracy in Russia (which was certainly one of the reasons for 
his break with the CPRF), honestly informed his comrades in arms about 
the party's problems: "In these conditions, we have three variants for 
action: to support Unity unconditionally; to act independently, realizing 
that we will not get the 5 percent; or to form a "leftist bloc" with 10 
to 12 left-wing and patriotic parties." In the end, Podberezkin declared 
the priority to be the formation of a kind of left-wing coalition, which 
could be joined, in addition to the Unified Socialist Party, by the Party 
of Russia's Rebirth, the Social-Democratic Party, and a number of others. 
And on that same day, Gennadiy Zyuganov, speaking at the 35th Moscow 
party organization conference to hear reports and to elect new officials, 
called upon all the left-wing forces to come out at the upcoming 
elections as a united front: "We are obligated on the patriotic flank to 
unite everyone, and together, in concert, to come out at the elections; 
there are all the necessary capabilities for this." Within the CPRF, in 
general, talk of the social-democrats is greeted with a condescending 
smile, as if to say, Why create complications, if we have 30 percent of 
the electorate as it is? Which, however has not at all prevented the 
Communists, for several years now, from sprouting their own kind of 
social-democratic wing in the People's Patriotic Union, and also from 
becoming nervous on the subject of the appearance of a coalition of small 
left-wing parties (including the Eurasians) surrounding Gennadiy 
Seleznev's Party of Russia's Revival. And this is entirely 
understandable; according to the data of Mark Urnov, about 15 percent of 
the Red electorate is in favor of private property in land, and about 30 
percent demand that unemployment benefits be minimal and not corrupt 
people. So the successor to the Russian Social-Democratic Workers Party 
needs to conform to the demands of the political climate. 
   But on the whole, a modern understanding of the social-democratic 
concepts at one level or another is present in the party programs of all 
the political associations represented in the Duma. First and foremost, 
this is a question of a fixation on succession, a repudiation of the 
revolutionary path in favor of the evolutionary, but then, without fail, 
social protection guarantees, and finally, patriotism and support of the 
state ideology of a "gathering of the lands." All of these postulates in 
one form or another are absolutely held by all the leaders of the 
parliamentary race - the Yabloko people, the United Russia people, the 
Communists, the rightists. Moreover, one of the points of the party 
program sounds almost verbatim, regardless of the colors of the party 
banner: "Raising the level of the minimum wage to the level of the 
subsistence minimum." This provision could be categorized as a cost of 
pre-election promises, if not for the fact that similar proposals are 
systematically repeated from one year to the next in the Duma during 
discussion of the budget. 
    Meanwhile, even a minimal increase in federal budget expenditures is 
possible only in the event that the party actively cooperates with the 
Government. And that means that modern social-democracy operates already
completely differently: The social-democrats are no longer leftists, even 
if they are in opposition to the ruling regime, and modern party members 
are prepared to cooperate with it and come to an agreement, supporting 
public stability at least partially. And in this sense, the Russian 
social-democrats, first of all, are rightists, or at least centrists, and 
second of all, are not viable as independent parties, because political 
associations cannot exist solely on slogans of cooperation with the 
President and the Government. Then they begin to look too much like a 
part of the state apparat and to savor of the CPSU. In a word, there are 
social-democrats in Russian politics, but they are kept a deep secret. 


New York Times
April 20, 2003
St. Petersburg's Regilded Age
RICHARD LOURIE is the author of Sakharov: A Biography (Brandeis 
University Press/University Press of New England).
BUILT on rivers and canals, St. Petersburg's sorbet-colored palaces and 
golden cupolas shimmer in reflection as if it were two cities, one of stone, 
one of water. In fact, ever since its founding three centuries ago by Peter 
the Great the city has always had a certain doubleness about it - a city that 
was to be progressive, European, "a window on the West," was also a city 
built by edict and forced labor, a "city built on bones." And that city has 
had two distinct incarnations: grandiose capital of the immense Russian 
empire and, after the Revolution, second city of the Soviet Union, neglected, 
forlorn (picture Washington stripped of political power).

In 2003, St. Petersburg is celebrating its 300th anniversary and experiencing 
rebirth, a third incarnation whose contours are only just emerging. A year's 
worth of festivities are planned - fireworks, flotillas, balls, ballets, 
concerts, operas and museum exhibitions. The forest green and frost white 
Winter Palace adjacent to the Hermitage and, just outside the city, the 
Versailles-like summer residence Peterhof to the west and the Czar's Village 
(Tsarskoye Selo) to the south in Pushkin have all been restored to pristine 
prerevolutionary splendor by the city's superb conservators and curators.

And czarist splendor is of a sort apart, inducing vertigo and euphoria. 
Perhaps it's a result of Russian love for largess and excess, or of the 
simple fact that the czars were among the richest men who ever lived. Lavish 
was always the watchword for the czars, exemplified by the magnificent Amber 
Room in the Catharine Palace, to reopen during the anniversary celebration.

There are two hot topics in St. Petersburg right now: Will the city be ready 
for the principal festivities this spring? And what is the city becoming in 
the topsy-turvy, post-Soviet, postmodern world?

I put the first and easier question to my friend Alla, a native. "Just look 
at that!" she says, pointing at a jagged pothole that could wrench a car out 
of alignment. Except that this pothole wasn't on the street but the sidewalk, 
and not just on any sidewalk, but on Nevsky Prospekt, the city's Fifth 
Avenue, where the whole of St. Petersburg shops and promenades. She raises 
her eyes upward, but they encounter nothing but scaffolding. "Potholes below, 
scaffolding above," she says with despair, then adds with a fierce pride: 
"And all that culture in between."

Pulkovo Airport is still a wilderness of wallboard and dangling wires in a 
building that looks like a Soviet Metro station. Just emerging from a 
particularly hard winter, streets, sidewalks and parks seemed too rutted in 
March to be ready by late May. 

It's not as if the 300th anniversary of the city's founding were a Soviet 
secret that had only just been declassified. Every Russian schoolchild knows 
that the city dates from the laying of the first stone of the Peter and Paul 
Fortress on May 27, 1703. How much more notice do you need?

In Peter's time, heads would have been sent rolling. If the czar wanted a 
city built on vaporous marshland because from there he could project power 
westward, that city was built posthaste along with a navy to defend it. Six 
foot 7 (seven feet in today's inches), Peter dashed about the city urging 
everyone on, no one laboring harder than he. 

The power of his imperial will reverberates in the city to this day. The city 
has had several names - Petersburg, Petrograd, Leningrad (with the fall of 
communism the city reverted to its original name) - but the people who live 
there just call it "Peter," both in familiarity and in acknowledgement that 
they dwell inside his vision. 

The celebration interests local residents less as an event than as part of 
the puzzle of their emerging identity. What will the anniversary's success, 
or failure, say about the city's future and its liberation from the past? If 
the infrastructure isn't spruced up by late May, it won't be for lack of 
funds. Some suspect epic corruption, a constant in Russia no matter who's in 

The private sector seems better prepared but not without bugs of its own. 
Though not yet honeycombed with creative commerce like Moscow, St. Petersburg 
has recently acquired a good number of charming restaurants, bars, clubs and 
cafes (including a home-grown knockoff of Starbucks, the Perfect Cup). But 
the service can vary wildly; Radisson room service offered to make me any 
sort of soup I wanted and within 20 minutes delivered a chicken soup that was 
both refined and homey; the Barometer, an atmospheric little restaurant, 
delivered excellent appetizers and succulent chicken ? la Kiev, unfortunately 
both at the same time. 

It's really moot whether the city will be ready for its actual birthday on 
May 27 because all the hotels are already reserved for high-level official 
delegations for the anniversary week. City closed, private party. The always 
helpful and reliable Russian National Group, 130 West 42nd Street, (212) 
575-3431,, says rooms will again be available beginning 
June 5. 

In any case, the party lasts all year and the city's rebirth is more 
important and more interesting than its birthday. Poised to recreate itself, 
St. Petersburg has several advantages. The city is a work of art. Moscow may 
have the signature attractions (the Kremlin, St. Basil's), but St. Petersburg 
has block after block of beauty, the buildings elegantly stamped out like old 
Manhattan tin ceilings. Forest green, raspberry, goldenrod yellow, an 
aquarelle city floating on water and air, St. Petersburg has always been 
loved by artists. The most famous poem about it, Pushkin's "Bronze Horseman," 
opens like a valentine: "I love you, creation of Peter, your look of elegance 
severe ."

But Russians also found the city spooky, spectral, surreal. It had not grown 
up organically, was not rooted in anything but one man's will and 
imagination, and so could be swept away by floods, by the wrath of the city's 
poor and exploited. Even Peter jokingly prophesied that his city would last 
no more than 300 years.

And it never seems less substantial, in an eerie, lovely way, than during the 
White Nights of June, when twilight lasts till dawn. A happy restlessness 
overtakes St. Petersburg - parties spring up by the river at 2 a.m. and 
people read on park benches in the milky light, which spreads through the 
streets like an illuminated mist.

Perhaps because the present is so new and thin, the past feels close at hand. 
History is short in St. Petersburg and Russian memory long. The personages of 
the past are referred to with offhanded familiarity by the locals ("Poor 
Peter, he didn't have it so easy either, what with his wife carrying on and 
all that") and especially by the legion of cultural workers, zealous and 
underpaid, who staff some 200 museums in the city that run the gamut from 
bread, submarines and hygiene to the great collections of the Hermitage. 

The death at 37 of Pushkin, the country's Mozart of literature, still elicits 
fury, sorrow and outrage in the guide who shows me the book-lined room where 
Pushkin's life ebbed away after his duel in 1837. A tour leader defends 
Rasputin's drinking habits in the basement of the Yusupov Palace where the 
"holy man" who could somehow cure the czarevitch's hemophilia was murdered; 
it took poison, bullets and drowning. A slightly unnerving life-size Rasputin 
sits at a table having tea while his murderer, Prince Yusupov, waits for the 
poison to take effect.

St. Petersburg seems to require that suicides and assassinations be brought 
off with fantastical panache. The poet Sergei Yesenin, who was married to the 
American dancer Isadora Duncan, committed suicide in the Angleterre Hotel, 
first writing an eight-line rhymed poem in blood: "Goodbye, my friend, 
goodbye In this life to die is nothing new ." Now, that hotel and the 
adjacent Astoria (where Hitler hoped to celebrate conquering Russia) have 
been restored to the beauty they enjoyed when they were founded in the early 
20th century, on the eve of disaster, and one can only hope their makeovers 
are better timed than their original openings. 

No architecture in St. Petersburg is more tragic than that of the Church of 
the Savior on the Spilled Blood. Czar Alexander II liberated the serfs two 
years before Lincoln freed the slaves and like him was assassinated, by a 
bomb-throwing revolutionary organization. On the very spot where he was 
attacked and bled, his grief-stricken son built the church, modeled on St. 
Basil's in Red Square, an enormous cloud of many-colored domes that startles 
every times it heaves into view on Griboyedov Canal, as if it were about to 
rise into the air. In the shade of the church a small flea market sells 
icons, busts of the czars and Lenin and Stalin. Schoolboys run past all of it 
oblivious, intent only on reaching a nearby Internet cafe. 

Enemies of the czarist regime - including Peter's own son, whom he suspected 
of treason and had tortured to death - were imprisoned in the Fortress of 
Peter and Paul strategically placed on Zayachy Island where the first stone 
of the city was laid. Built to stop foreign foes, it was used only against 
domestic enemies, including Lenin's brother, who was hanged for sedition. Now 
the prison is a museum, but the cells are still so dark and oppressive that 
few visitors linger; the punishment cell is almost unapproachable, 
radioactive with suffering. 

Lenin had his revenge soon enough. All teak and brass, the Aurora, the 
warship that fired the signal for the storming of the Winter Palace in 1917, 
is still on the river; both seem part of some imperial board game.

The revolution was relatively bloodless there, but the rest of the Soviet era 
was tough on St. Petersburg, renamed Leningrad in 1924. Stalin's Great Terror 
started there. The Kirov of the Kirov Ballet wasn't some monocled maestro but 
the tough boss of the Leningrad Communist Party assassinated in 1934, an 
event Stalin used as a pretext for purges. Kirov's apartment is now a museum 
and the Kirov Theater has resumed its old name of Mariinsky, proof enough 
that Communism is over and done with. (Though how long does it take to rename 
a theater and close a museum, the skeptics might ask?) 

During World War II, Leningrad was besieged by the Nazi army for 900 days. At 
14 Nevsky Prospekt, a plaque from the time remains: "Citizens! During 
shelling this side of the street is the most dangerous." The Prospekt's 
bridge over the Fontanka has its own plaque pointing out with Petersburgian 
precision the traces of one of the 148,478 shells that hit the city from 1941 
to 1944. 

The Soviet past still feels close here, in the public monuments, grand and 
brutal, the lackadaisical rhythms of workers relaying pavement by the 
Hermitage, the old woman standing on Nevsky Prospekt displaying her wares on 
a crate (three lemons and four cloves of garlic), and, finally, in the soft 
voice of a friend admitting that speaking in public with a foreigner still 
elicits an old, familiar fear: "These are different times! It's a different 
country! I keep telling myself!"

Not so different, says Irina Frige, director of Memorial, an independent 
grass-roots human rights organization dating from the Gorbachev era that 
chronicles injustices past and present. For her, nothing essential has 
changed, the same people are still in charge. The 90's splurge of capitalism 
was just one of Russia's intermittent thaws; the next freeze-up's due soon. 

In a former czarist palace, the Nikolaevsky, now a fitness club for the 
elite, I hear a rosier view from a founding father of Sting Ray, a company 
that protects V.I.P.'s. His head shaved to a gleam, his neck muscular, he 
sees no reason St. Petersburg won't, with enough investment, outdazzle Paris 
for high life and high-end shopping, fashion shoots and film festivals. He 
prefers London to Paris in any case and peppers his conversation with English 
phrases, as is now de rigueur. This is St. Petersburg, after all, with "all 
that culture in between."

It is a great walking city, though sometimes the snaking canals and many 
bridges play tricks on you, and the palace you just passed is suddenly up 
ahead. Every step shifts perspective. One moment the city looks dilapidated 
and ill kempt, then suddenly it's as dashingly aristocratic as sable and 
tiaras. The same is true of glimpses of its future, which may yet be glorious 
or banal, the city becoming little more than a site for malls and condos. A 
rebirth is not necessarily a renaissance - for that the angels of history 
must grace a time and place with genius. 


Moscow Times
April 23, 2003
Grand Plan to Cut Taxes on the Cabinet Table
By Valeria Korchagina 
Staff Writer 

The government on Wednesday is to consider the Finance Ministry's tax
reform plan, which outlines a way to meet Prime Minister Mikhail Kasyanov's
demand that the tax burden on the economy be slashed by 2 percent of gross
domestic product next year.

The 30-page report, submitted to the Cabinet last week, calls for the state
to lower -- and simplify -- both the value added tax and the unified social
tax, although the ministry itself admits that implementing the changes may
be painful.

Lowering VAT from 20 percent to 18 percent would shrink state budget
revenues next year by 100 billion rubles ($3.2 million), or 0.7 percent of

Streamlining VAT refunds for the construction industry, a complicated
process long seen as an impediment to investment, would decrease tax
revenues by 0.4 percent of GDP. 

Another reduction, of 0.4 percent of GDP, would come from scrapping the
sales tax, approved by the government and sent on to the State Duma this
spring. Together with the scaling back of a number of more obscure taxes
amounting to 0.5 percent of GDP, a total of 2 percent of GDP would be
channeled away from state coffers. 

The Finance Ministry says the total 2003 tax burden takes up some 30.7
percent of the economy. With GDP estimated to hit $400 billion this year, 2
percent tax relief amounts to $8 billion.

To compensate partially for the lost state budget revenues, the Finance
Ministry proposes to levy higher taxes on natural resource excavation,
raise excises on tobacco, change the property tax structure and increase
natural gas export duties.

The unified social tax -- social security contributions paid by employers
on workers' salaries -- is also on the ministry's chopping block, though
not until 2005.

Under the current regressive social tax scale, employers pay 35.6 percent
unified social tax on annual salaries up to 100,000 rubles ($3,215), and 20
percent on any part of salaries that fall within the range of 100,000
rubles and 300,000 rubles ($9,646). The Finance Ministry wants to merge
these two lowest categories and tax all salaries under 300,000 rubles at a
flat rate of 26 percent. This alone, the ministry says, would reduce the
state's hand in the economy by 1.1 percent of GDP.

Employers, in turn, are likely to give the funds they gain from tax relief
directly to workers in the form of higher salaries, the ministry said. In
this way, the tax cuts could help inject money into the economy and boost

If an employee is paid less than $695 per month, equal to $8,340 per year
(the level where new and old taxation scales cross), his or her employer
would pay less in social taxes under the ministry proposals. But for those
paid above this level, employers will find themselves paying more -- up to
an additional 2,400 rubles ($77) per year.

The ministry concedes in the report that slimming down the unified social
tax is a costly way of boosting GDP, since the state budget would lose
revenues equal to 1 percent of GDP and reap a one-time growth of only 0.1
percent of GDP.

Though the proposed tax cuts are expected to boost investment, they will
not solve all the economy's problems, the ministry said.

"A favorable taxation system cannot compensate for ... the Russian
economy's low competitiveness, such as technological backwardness,
macroeconomic problems, the inefficiency of government institutions and an
unattractive investment climate," it said in the report.

Economic players have hailed the VAT and unified social tax reductions, but
along with the benefits, there are disadvantages, the ministry said.

Reducing VAT, for example, will not trigger lower prices for consumers and
it will deprive the state of revenues that are well managed and cheap to

As with unified social tax relief, funds freed from VAT cuts are likely to
go to salary increases, the ministry said, as employers clamber to keep
qualified staff from leaving to work for rivals, and not into sustainable

And putting more money in consumers' pockets will not necessarily help
domestic producers if consumers see domestic goods as inferior and opt to
pay more for imports that they perceive as being of higher quality.

Reductions to the unified social tax will likely help raise official
employment figures, especially in manufacturing, a sector seen as
benefitting most from a lighter tax burden. Yet the tax changes are
unlikely to do much to boost productivity growth relative to salary growth. 

Also, decreasing the unified social tax would starve the welfare and
pension systems and throw an additional obstacle in the way of reforms.

Russia to cut VAT, up energy taxes in 2004-5-govt

MOSCOW, April 23 (Reuters) - Russia will try to boost growth next year by
cutting Value Added Tax and the payroll tax at the same time as increasing
taxation in the energy sector, First Deputy Finance Minister Sergei
Shatalov said on Wednesday. 

"The decision in principle has been taken," Shatalov, the mastermind of
Russia's tax reform, told reporters after presenting his plan to the
government. "My report received general support and the measures were

Under President Vladimir Putin Russia has already carried out sweeping cuts
in taxes, which stifle the economy. The cuts included introduction of a
flat 13 percent income tax, among the lowest in Europe. 

According to the statement prepared for the cabinet meeting and published
on the government site, the main goal for 2004 is
to cut VAT to 18 percent from 20 percent, preserving a 10 percent rate on
some goods. 

As a result, the budget will lose 96.4 billion roubles ($3.1 billion). 

Earlier this year the government decided to cancel a sales tax from 2004.
The tax is levied by the regions with the upper limit set at five percent.
Regional budgets will lose 60.6 billion roubles. 

But the energy sector taxation will be increased to compensate for the
losses. The basic mineral extraction tax rate for the oil sector will be
raised to 357 roubles per tonne from 340 roubles per tonne. Export duty for
gas will be raised to 20 percent from five percent. 

In 2005, the government plans to ease the payroll tax. The tax, which has a
regressive scale, has the highest rate of 35.6 percent. The government
plans to cut the highest rate to 26 percent for salaries of up to 300,000
roubles annual. For the 300,000-600,000 roubles the rate will be 10
percent, for more than 600,000 roubles two percent. 

According to Finance Ministry's calculations, the result will be an
effective cut of the payroll tax by 5.7 percentage points. Budget losses
are seen at 194 billion roubles. 

Nevertheless, the government plans to cut the payroll tax again in 2006. A
further cut in VAT to a flat 16 percent is also planned, taking another 70
billion roubles from the budget. 

"The gradual nature of the VAT and unified social (payroll) tax reductions
show the government behaving in a responsible way in relation to budget
revenue issues, given the unpredictable nature of world commodity prices,"
Aton brokerage wrote in a note to clients. 

"In an economy dependent on natural resources it is wise to observe at
least a year's fiscal performance without windfall gains from high
commodity prices before initiating major tax reductions." 

The Ministry for Economic Development and Trade estimates the proposed tax
reform will add 0.2 percent to gross domestic product in 2004, 0.7 percent
in 2005 and 0.9 percent in 2006. ($=31.10 roubles) 


TV1 Review
Compiled by Luba Schwartzman (
Research Analyst, Center for Defense Information, Moscow office

Tuesday, April 22, 2003
- Indonesian President Megawati Sukarnoputri visited the Sukhoi Design 
Bureau testing field, in the Moscow suburb of Zhukovo.  Test pilot Yevgeny 
Frolov demonstrated the modernized Su-27 to the Indonesian delegation.  
Indonesia may purchase a large batch of Su-27s and Su-30s from Russia.  
Tomorrow Sukarnoputri will participate in a Russian-Indonesian business 
- Russian President Vladimir Putin met with Russian Ambassador to Ukraine 
Viktor Chernomyrdin to discuss a number of issues, including the creation of 
a Russian-Ukrainian-German gas transport consortium and the establishment of 
a single economic space for Russia, Ukraine, Belarus and Kazakhstan.
- President Putin discussed next year's budget with Cabinet ministers.
- President Putin will make his Annual Address to the Federation Council in 
- Central Electoral Commission Chairman Aleksandr Veshnyakov spoke about the 
upcoming elections.  The parliamentary election will be held on December 14; 
campaigns can officially begin on September 1; 37 political parties have 
been registered.  The presidential election will be held on March 14, 2004 
and the election campaigns can begin on December 10.
- Russian Prime Minister Mikhail Kasyanov will visit the Saturn scientific 
production enterprise in Rybinsk, in the Yaroslav Oblast, and chair a 
meeting on the reform of the aviation-engine construction industry.  He will 
also visit the Rybinsk wood-processing plant and meet with Yaroslav Oblast 
Governor Anatoly Lisitsyn.
- Prime Minister Kasyanov refuted reports of increased taxes on import cars.
- At the Second Congress of Horticulturalists, held in St. Petersburg, 
Agriculture Minister Aleksei Gordeev spoke in favor of transferring the 
right to sell grain to Egypt to private companies.  Egypt buys about 6-7 
million tons of grain annually.
- The Accounting Chamber received a State Duma resolution on the inspection 
of budget spending through the "Svoi Dom" housing-construction program.
- Yukos and Sibneft are merging into a single company, which will be one of 
the 10 largest oil empires in the world.
- The Moscow Directorate of the Interior Ministry has distributed a 
composite sketch of the killer of State Duma deputy Sergei Yushenkov.  
Interior Minister Boris Gryzlov noted that progress has been made in the 
investigation of the murder.
- A group of young medics from Chechnya have finished a year-long training 
course in prosthetics and orthopedics.
- In a special service operation, police officers detained three Moscow 
college students, who stole about $700,000 dollars from ATMs through 
creating credit card duplicates.
- Interior Minister Boris Gryzlov met with police commanders in the Sakhalin 
Oblast to discuss the fight against organized crime and poaching.  Gryslov 
also named the man who ordered the assassination of late Border Troops 
General Vitaly Gamov --Vasily Naumov, alias Yakut, the head of a Sakhalin 
criminal organization.  Naumov was killed in a shoot-out on April 17.  Five 
other people have been accused of participating in the crime.  Four have 
been detained and one is on the federal wanted list.
- Officers found responsible for the mass desertion in Veliky Novgorod will 
be prosecuted.  14 soldiers and sergeants left their division in early 
- Akhmed Magomedov, a rebel who has participated in the organization of 
several terrorist acts, has been detained in Makhachkala.
- The Seventh Annual "Art Moscow" fair opened in Russia's capital.
- Lieutenant General Ivan Efremov oversaw the rehearsal of the May 9th 
Parade, which will mark the 58th anniversary of victory in World War II.
- The deputies of the Kamchatka Oblast Council are suing the regional 
electricity company for raising tariffs on electricity.
- An interdepartmental commission has completed work on a government 
resolution on compensations to Chechen residents who lost their homes and 


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