Yushchenko Blames Tymoshenko For Economic Woes

KIEV, Ukraine -- President Viktor Yushchenko on Friday demanded that his arch rival, Ukraine's prime minister, alter the 2009 budget to withstand the world financial crisis.

The president accused Prime Minister Yulia Tymoshenko, his estranged ally from the 2004 "Orange Revolution", of deliberately drafting a budget with targets he said were impossible to fulfil."I hereby appeal to Yulia Tymoshenko and to the majority in parliament that she has put together. This is your responsibility," Yushchenko said in a televised address."You have knowingly included in the budget inflated indicators and promises that cannot be fulfilled today."Members of parliament backing the prime minister, he said, were "supporting populism which tomorrow will turn into unpaid salaries, pensions, stipends and social benefits"."On behalf of the entire country I demand that the government and parliament put together an honest budget in which expenditure matches the possibilities afforded by our economy."Responding in a statement issued late on Jan. 30, Tymoshenko blasted Yushchenko, calling his words “a mix of lies, panic and hysteria.”“Everyone saw that the president is not that leader which is needed now, when the country is in the midst of a deep world economic crisis facing a test of its strength. I will not cover up the true situation with makeup, but I will also not sow panic,” she said.“If the president cannot find a way to help, he should not interfere,” she said.The budget, passed just before the New Year, provides for negative growth of only 0.4 percent against forecasts by some bodies, including the economy minister, of minus 5 percent as Ukraine is battered by the effects of the crisis.Industrial production in the ex-Soviet state plunged between 20-30 percent in October and December and growth shrank by over 14 percent in November and December month-on-month. The economy grew 2.1 percent in 2008 against 7.6 percent in 2007.The budget also provides for a deficit of 3 percent despite a stipulation by the International Monetary Fund that it be deficit-free. An IMF mission is currently in Kiev to review progress by the government and determine whether to disburse the second tranche of a $16.4 billion credit approved last year.The prime minister has defended her government's budget and vowed to implement it. The tone of both leaders has become increasingly strident, with the prime minister repeatedly calling on Yushchenko to resign.In his remarks, Yushchenko said he backed reservations on the budget attributed this week to Finance Minister Viktor Pynzenyk on a major Internet site. Pynzenyk dissociated himself from the report without making an outright denial.Yushchenko has been at odds with Tymoshenko on virtually all policy issues since she became premier a second time in 2007 and in his remarks repeated allegations that she had clinched a gas supply and pricing deal with Russia detrimental to Ukraine.The prime minister, he said, was deliberately responsible for "the economic situation, the disruption of the budget process, the wrecking of the banking system ... Enough of lies."He vowed to defend Ukrainians against the effects of the crisis and called on the chairman of parliament to take action to ensure that the budget would be suitably amended.Tymoshenko denied Yushchenko’s accusation that citizens could not be paid pensions and salaries due to a major shortfall in budget revenues.“I have a sad news for the president, but optimistic information for the country. Despite the crisis, the state budget in January has been over fulfilled. Budget-funded salaries and pensions will be paid on time and in full,” she said adding that energy tariffs will not be raised on households.

Shuvalov: Tycoons Won't All Get Help

DAVOS, Switzerland -- Russia will not write a blank check to save top businessmen hit by the global economic crisis, and the state expects something in return for helping bail them out, First Deputy Prime Minister Igor Shuvalov said Thursday.Some of Russia's richest men, who borrowed billions of dollars in the boom years during Vladimir Putin's presidency, face difficulties because the value of collateral they put up as security for major loans has plummeted.Russia has spent large amounts helping businessmen such as metals tycoon Oleg Deripaska, once Russia's richest man, refinance foreign debt.But Shuvalov said businessmen should not expect the state to help them with everything and they would have to make compromises."We must have understanding. ... We see that many enterprises that we work with, and their shareholders, have started to feel that the state will save them no matter what," he told reporters at the World Economic Forum in the Swiss ski resort of Davos."Against this background, they have begun to think ... that the state will help them no matter, help them to refinance their foreign debts and give them special programs to buy their production. We have nothing like this in our plans."Russia has spent about $11 billion through state corporation VEB to refinance companies' foreign debts and had received requests for much more financial help, Shuvalov said.He gave no details, but VEB chairman Vladimir Dmitriyev told reporters that Russian companies had made bids for about $90 billion to help them restructure their foreign debts.Russian corporations must pay back $115.7 billion in foreign debt and interest this year, according to government estimates.Putin told investors in Davos on Wednesday that excessive state intervention in the economy would be a mistaken reaction to the crisis.He also said businessmen would have to take responsibility for their decisions, although the state would continue to support national champions."Just because the enterprise is important and has several tens of thousands of workers, we do not simply intend to give out resources and wait for them to come for more later," said Shuvalov, an influential figure in Putin's government."The shareholders and heads of these enterprises must for themselves look at their own personal responsibility," he said.Deripaska last year used his 25 percent stake in Norilsk Nickel, the world's leading producer of nickel and palladium, as collateral for a $4.5 billion loan from VEB.Norilsk's largest shareholder, Vladimir Potanin, and Deripaska, who controls aluminum giant United Company RusAl, have proposed pooling their metals assets with other miners to create an entity that would be part-owned by the Kremlin and wipe out their debts.

VTB Could Issue Shares for Bailout

VTB, Russia's second-largest bank, may issue preference shares later this year as part of a 200 billion ruble ($5.9 billion) state recapitalization, VTB chief executive Andrei Kostin said Thursday. Russia is discussing ways to recapitalize major banks, which have been badly hit by an economic crisis that has hammered the country's stock, bond and currency markets. "There is no final decision yet on the size of the capitalization. We think that 200 billion rubles would be the right decision," Kostin said at the World Economic Forum in Davos. "The capitalization is linked to an additional share issue, which takes about half a year in Russia, so we think the decision should be taken now," he said. "There are different options including the issue of preference shares." Kostin said he hoped that VTB could break even for 2008 under international accounting but that it was too early to forecast 2009 results. He said nonperforming loans totaled about 3.8 percent but that VTB was using forecasts for bad loans for 10 percent for planning purposes. "The worst scenario is up to 10 percent," he said. "The reason for the crisis in the Russian banking sector is quite different to in the West. In Russia, a major problem is the inability of companies to return debts." VTB has to pay about $7 billion in foreign debt this year and will seek to refinance some of it, he said. "We will negotiate for refinancing, but we think we will have enough liquidity for this year," Kostin said. "Frankly speaking, this year it will be very difficult for Russian companies to find funding abroad, with the exception of major companies who have a state guarantee or some of the oil companies," he said. The majority of the ruble's devaluation is now done, but it is unlikely to strengthen again for at least a year, he said, adding that he expected further capital flight from Russia this year but that things would improve in 2010. The gradual devaluation of the ruble would help the economy in the meantime, he said. "The majority of the devaluation has been done, and it will help a lot the Russian economy, particularly exporters," Kostin said. "There is no evidence why the ruble should be stronger over the next 12 months or even 24 months, but over the long term there is a chance it will come back to previous levels." Mechel, Magnitogorsk Iron & Steel and other Russian metals companies have borrowed about $10 billion from VTB, Kostin said. "The state, as I know, is interested in consolidation because even from the point of view of assistance from the state, it is easier to give help to a few large holdings than separate companies," Kostin said. Kostin declined to discuss different ideas being discussed by Russian officials about building one of the world's biggest metals companies on the base of RusAl, Norilsk and other miners.

Russia Halts Pork from U.S.

Russia is halting pork shipments from nine U.S. pork facilities, including plants owned by Smithfield Foods and Cargill, the U.S. Department of Agriculture said Thursday on its web site. Among the plants affected were the Smithfield facility in North Carolina, a Farmland Foods unit in Missouri and a Farmland Distribution unit in Nebraska, the USDA said. Russia, the fourth-largest buyer of U.S. pork last year, also canceled shipments from Cargill facilities in Illinois and Iowa.

Lebedev Slams Putin's Anti-Crisis Strategy

Alexander Lebedev, the Russian millionaire who bought London's Evening Standard newspaper last week, said on Thursday that Prime Minister Vladimir Putin's strategy for economic recovery is based on cronyism and is fueling corruption. "We have two Putins," Lebedev said. "There are lots of words, but the system doesn't work." Russia's economy remains addicted to exports of raw materials, while bailout loans are failing to reach the real economy, including Lebedev's agriculture, airline and building companies, he said. Putin's government has approved more than $200 billion in emergency measures, including $50 billion to help companies repay foreign debt. "You give a kickback of 10 percent, and you get a loan from the state," Lebedev said. "It's easy." Lebedev, who made his fortune in banking, was ranked Russia's 39th richest man last year, with a fortune of $3.1 billion. He said he joined the rush of investors who have applied for a combined $90 billion of refinancing loans from VEB "as a matter of principle, to see if all of us are equal here." VEB's rejection of Lebedev's application for $100 million, the minimum available, for his National Reserve Corp. shows that Putin's critics are discriminated against. Nobody in VEB's press service could be reached immediately for comment. VEB chief Vladimir Dmitriyev was with Putin at the World Economic Forum in Davos, Switzerland, on Thursday. Putin heads VEB's supervisory board. "Appropriate measures are undertaken by the Russian government, Central Bank and Finance Ministry to sort out those bad assets and to introduce a very efficient system to handle" the crisis, Dmitriyev said Wednesday. First Deputy Prime Minister Igor Shuvalov said in Davos that owners of Russian enterprises should not expect the government to come to their rescue and should "use their own resources" for debt repayment. "They've been helping out people like Deripaska, and that's exactly what Putin was opposing a few years ago," Lebedev said Thursday. "He said every oligarch has to be equally distanced from the state." Oleg Deripaska's United Company RusAl, the world's biggest aluminum producer, has received $4.5 billion of the $11 billion that VEB has so far dispensed for refinancing foreign debt. The loan is backed by a 25 percent stake in Norilsk Nickel. Managers at state companies and banks do not know how to work in crisis conditions after a decade of economic growth, Lebedev said. Rampant corruption has led to "hundreds of billions" of dollars in state funds being "wasted and pocketed," while the government has built few new roads, hospitals or schools. "It's the right time to start looking into the state sector, instead of saying this is the most reliable and trustworthy institution in this country," Lebedev said.

As Ruble Nears Barrier, Central Bank Vows Defense

The ruble tumbled to the brink of breaching Russia’s target trading band, as the Central Bank pledged to defend its six-day-old target after the biggest monthly depreciation in more than a decade. The ruble slid as much as 1.4 percent to 35.6 per dollar, just 1.1 percent away from breaking through Russia’s 36 per dollar limit, before paring declines. Chairman Sergei Ignatyev said Friday. The Central Bank will intervene in the market, limit the amount of refinancing offered to banks and companies and adjust interest rates to keep the ruble from breaking the new trading band. “The market is testing whether the authorities see this band as something permanent or something that will move,” said Lars Rassmussen, an emerging markets analysts at Danske Bank, which ranks itself among the five biggest traders of the ruble through Finnish subsidiary Sampo Bank. “Our view is that they’ll move it because it’s not worth wasting the reserves for a band that is obviously not wide enough.” The Central Bank expanded its trading range for the ruble 20 times since mid-November before policy makers switched last week to let “market” forces help determine the exchange rate. The Central Bank drained more than a third of its foreign-currency reserves, the world’s third-largest, since August to stem the ruble’s 34 percent slide against the dollar. Investors are betting against the ruble as a 69 percent slump in oil prices in the past six months weakens the economy, triggering Russia’s worst financial crisis since 1998. Some $290 billion left the country since August, according to BNP Paribas. The currency has depreciated 20 percent since the start of this year, the worst month since 1998. The government expects the ruble to decline to 36 per dollar after the Central Bank widened the trading band last week, First Deputy Prime Minister Igor Shuvalov told the State Duma on Friday. The Central Bank reinstated curbs on speculators Friday, with a 5 billion ruble restriction ($141 million) on so-called currency swaps, after imposing no limit Thursday. The agreements allow traders to bet on an exchange rate without having to sell currency upfront, and the Central Bank has been limiting them since Oct. 20 to reduce speculative pressure on the ruble. This means banks “don’t have the capacity to increase their ruble shorting,” said Alexei Moisseyev, head of fixed-income research at Moscow investment bank Renaissance Capital. “It’s about trying to regulate speculators.” Moisseyev estimated the Central Bank will defend the ruble’s trading band for a month “for credibility” before widening the targets. The Central Bank may seek to limit bets against the ruble by reducing the amount of money offered in unsecured loan auctions, which were introduced last year to help bolster liquidity in the banking sector. Investors short a currency when they want to bet that it is going to depreciate. The ruble is likely to fall below the Central Bank’s target level “in a couple of trading days,” said Lars Rasmussen at Danske Bank.

Thousands protest in Russian east

Several thousand people have held a rally in Russia's Far East, demanding the government resign over the country's growing economic problems.
The protesters in Vladivostok blamed Prime Minister Vladimir Putin's cabinet for mismanaging the economy and suppressing political dissent.
The rally - which passed off peacefully - was the first in a series of protests expected in Russia on Saturday.
Other recent protests across Russia have been broken up by the authorities.
Such protests were unthinkable just a few months ago as the economy boomed with record high oil prices and as the Kremlin tightened its grip over almost all aspects of society, the BBC's Richard Galpin in Moscow says.
But now with the economy in deep trouble, there is real fear amongst ordinary people about what the future will hold, he says.
He adds that unemployment is rising rapidly, as are the prices of basic food and utilities.
'Crisis'
The anti-government demonstration in Vladivostok was called by the Communist Party.

"The crisis is in the heads of the authorities, not in the economy!" chanted protesters.
The demonstration was joined by a local group angered by higher tariffs imposed on cars imported to the city.
The region has thrived on the car import business and the government's decision has led to job losses, correspondents say.
Demonstrators are also expected to take to the streets in the capital Moscow and other towns and cities later on Saturday.
In a separate demonstration in Vladivostock, thousands of supporters of the ruling United Russia held a rally in support of the government.

Stolen Roses and Crimes of Passion

Valentine's Day is coming up, and International Women's Day, a national holiday in Russia, will follow soon after. Maybe this guy, who was caught stealing 35,000 rubles ($1,040) worth of flowers from a kiosk in southwestern Moscow, was trying to stockpile with these two occasions in mind. He didn't seem to have a very good plan for the heist, it seems. The young fellow, a 19-year-old student, wanted to buy his girlfriend a bouquet of roses for her birthday, city police spokeswoman Marina Molokova told the popular daily Komsomolskaya Pravda. Unfortunately he didn't have the money even for a "crisis" bouquet, KP reported. Instead he smashed in the glass at a flower kiosk outside his girl's apartment building on Bolshaya Cheryomushkinskaya Ulitsa, in the "ecologically clean" area of southwestern Moscow. He grabbed an expensive bouquet off the wall before making the unwise decision to make off with as many flowers as he could carry. It was the greed that doomed him, it would seem, as he left "an entire trail of flowers" on the dirty Moscow snow that the cops used to trace his escape route. The flowers led to his girlfriend's apartment building, which was equipped with video surveillance cameras that captured footage showing which flat the thief disappeared into. He was promptly arrested and now faces up to two years in prison on theft charges. In a more disturbing love-related crime, a Perm region man, Leonid Sharin (first and last names changed), is facing up to 15 years in prison for purportedly beating his wife to death after he discovered that she was cheating with a man she met on the the dating site Loveplanet.ru Leonid loved his wife, Lena, very much, residents in the town of Chusovoi told Komsomolskaya Pravda. But they had marital problems, including difficulties conceiving. He had taken a job in the northern Tyumen region to help make ends meet. On Oct. 23, Leonid was back home and, after a birthday party, he opened up the family laptop to discover that Lena had Loveplanet.ru bookmarked on her web browser. She had registered under the nickname Angel and had been corresponding with a user named Nikas. Leonid discovered seven pages worth of messages, many of them describing the lovers' passionate, illicit encounters, KP reported. He shut the laptop and proceeded to beat his wife repeatedly. The woman died of brain hemorrhaging, Yevgeny Bendovsky, a senior detective with the local Investigative Committee, told KP. Fatal domestic violence often involves alcohol, but neither Leonid nor Lena were inebriated at the time, Bendovsky added. The charge is aggravated manslaughter. The trial began a few days ago.

Fatal Coat Check Beating

The ubiquitous coat-checks at Russian theaters and restaurants can be annoying. It's not that there's anything wrong with leaving your coat at the door. In fact, it's often rather convenient. It's the fact that one is REQUIRED to check one's coat in many venues that can be irksome. If it's a bit chilly in a restaurant, for example, and you'd like to keep a light jacket on, you're likely to be told that it's against the rules or that it's nekulturny. It's unclear exactly what about the coat-check at a local bar perturbed a man in the Karelian town of Segezha so severely that he beat the coat attendant to death. This depressing crime, the Karelian branch of the Investigative Committee notes, "is distinguished by the mercilessness and cynicism with which it was committed." On the night of Jan. 18, the coat attendant was on duty at the bar when he asked a patron to remove his jacket. The response from the customer was swift: He punched the employee in the face. A scuffle ensued, and the customer eventually calmed down and left the establishment — not for long, as it turned out. The man returned two hours later, knocked the attendant off his feet with a "crushing" blow to his skull. He then began stomping on the man's skull as employees and patrons looked on. There was no word on whether any of them tried to intervene. The victim, 38, was taken to the hospital with craniocerebral injuries and died two hours later. Tragically, he had a wife and children, who were "left without a breadwinner," investigators said. Police have arrested the suspect, 27, who had served time for violent crimes but was paroled last year. He is being charged with aggravated manslaughter. If convicted, he faces up to 15 years in prison.

Crime Watch Blog: Lover's Quarrels and Arson Attacks

Ugly times in Karelia. Just a few days after an upset bar patron stomped a coat-check attendant to death because of a no-jacket rule, a pensioner in the northern republic doused his female roommate and her mother with gasoline and burned them alive. The suspect, who was not named in the police report, got into a drunken argument with the 34-year-old woman and her 53-year-old mother. When such an argument turns violent, it is referred to in police jargon as a bytovukha. The woman was described only as his sozhitelnitsa, or "cohabitant," so it was unclear if she was the man's girlfriend, common-law wife or just a fellow resident in a communal apartment in the Karelian village of Gabselga. If they were romantically involved, there was a large age difference: He is 68. In any case, in the heat of the Jan. 23 argument, the suspect poured gasoline over the two women and set them aflame. The mother managed to flee and was hospitalized with burns. The daughter, sadly, died at the scene. The suspect has been arrested and is facing at least a murder charge and likely attempted murder as well. Curiously, this was just one of several incidents nationwide in the last week involving fire attacks and self-immolation. On Jan. 24, a 28-year-old man in the Arkhangelsk region set himself on fire after he lost his job and his wife left him, emergency rescue workers told the Regnum.ru web site. The regional branch of the Emergency Situations Ministry said he went into the courtyard, poured gasoline over himself and set himself alight. Luckily his neighbors noticed the flames and managed to extinguish them using the snow on the ground, Regnum.ru said. Meanwhile, a jealous boyfriend in the Sverdlovsk region set his apartment on fire, injuring his former lover, her daughter and her female friend. The dramatic events unfolded on the night of Jan. 23 in the city of Sukhoi Log. According to regional Interior Ministry spokesman Valery Gorelykh (whose last name derives from the word "burn"), 28-year-old Denis Bakhayev poured the gasoline over himself, his 36-year-old ex-girlfriend, her 15-year-old daughter (a schoolgirl) and her 40-year-old female friend and then "started a fire." Bakhayev died in the flames, while his three victims suffered serious burns. The motive for the crime was jealousy, according to police. A day before the attack, the ex-girlfriend filed a complaint with police that Bakhayev had physically abused her, Newsru.com reported. The regional Investigative Committee gives a slightly different version of events. Bakhayev was living with the woman, according to the committee's report, and when he came home on the night in question the two began to quarrel. Bakhayev began pouring a flammable liquid throughout the apartment and set the place on fire. Firefighters were called to the scene. The three victims came away with burns, while Bakhayev's body was discovered in a room that none of the flames reached. He had apparently died of smoke inhalation. An investigation is under way. Neighbors said Bakhayev had on several occasions argued loudly with the woman and had threatened to burn "property," according to the Investigative Committee.

Abkhazia Expects Deals On Russian Bases Soon

Georgia's breakaway region of Abkhazia expects to sign a deal within a few months allowing Russia to establish a naval base and an air base on its soil, a separatist official said Thursday.NATO expressed concern Wednesday at reports quoting unidentified Russian military sources as saying Moscow planned a naval base in Abkhazia, one of two breakaway regions Georgia seeks to reclaim. There has been no Kremlin confirmation."This is true -- the Russian Federation and Abkhazia are in talks on setting up two Russian bases on Abkhaz soil, proceeding from our treaty on friendship and mutual assistance," Kristian Bzhania, a spokesman for the Abkhaz separatist leadership, said by telephone from the region's capital, Sukhumi."The talk is about a naval base in Ochamchira, where a group of Russian Black Sea Fleet warships will be based, and a former airborne troops base in the town of Gudauta," he said. "We are now talking about this deal being signed, most probably within the next few months."Interfax quoted an unidentified Russian military official as saying the airfield near Gudauta, also known as the Bombara Aerodrome, could accommodate about 20 jet fighters, ground attack aircraft and military transport planes.An Air Force spokesman declined to comment.During Russia's war with Georgia in August -- when fighting focused on the second rebel region, South Ossetia -- Russia sent its warships to Abkhazia and landed its soldiers at the site of the projected naval base, Ochamchire.Georgians spell the port as Ochamchire, while the separatists call it Ochamchira.A naval base at Ochamchire and revival of the airfield could present fresh concern for NATO strategists worried about an assertive Russia projecting its military strength beyond its borders.Abkhazia is close to NATO member Turkey, and the Soviet military presence there was a frontline position in the Cold War.Gudauta hosted Soviet paratroopers and later Russian troops after the Soviet Union collapsed in 1991.

Shuvalov: Tycoons Won't All Get Help

DAVOS, Switzerland -- Russia will not write a blank check to save top businessmen hit by the global economic crisis, and the state expects something in return for helping bail them out, First Deputy Prime Minister Igor Shuvalov said Thursday.Some of Russia's richest men, who borrowed billions of dollars in the boom years during Vladimir Putin's presidency, face difficulties because the value of collateral they put up as security for major loans has plummeted.Russia has spent large amounts helping businessmen such as metals tycoon Oleg Deripaska, once Russia's richest man, refinance foreign debt.But Shuvalov said businessmen should not expect the state to help them with everything and they would have to make compromises."We must have understanding. ... We see that many enterprises that we work with, and their shareholders, have started to feel that the state will save them no matter what," he told reporters at the World Economic Forum in the Swiss ski resort of Davos."Against this background, they have begun to think ... that the state will help them no matter, help them to refinance their foreign debts and give them special programs to buy their production. We have nothing like this in our plans."Russia has spent about $11 billion through state corporation VEB to refinance companies' foreign debts and had received requests for much more financial help, Shuvalov said.He gave no details, but VEB chairman Vladimir Dmitriyev told reporters that Russian companies had made bids for about $90 billion to help them restructure their foreign debts.Russian corporations must pay back $115.7 billion in foreign debt and interest this year, according to government estimates.Putin told investors in Davos on Wednesday that excessive state intervention in the economy would be a mistaken reaction to the crisis.He also said businessmen would have to take responsibility for their decisions, although the state would continue to support national champions."Just because the enterprise is important and has several tens of thousands of workers, we do not simply intend to give out resources and wait for them to come for more later," said Shuvalov, an influential figure in Putin's government."The shareholders and heads of these enterprises must for themselves look at their own personal responsibility," he said.Deripaska last year used his 25 percent stake in Norilsk Nickel, the world's leading producer of nickel and palladium, as collateral for a $4.5 billion loan from VEB.Norilsk's largest shareholder, Vladimir Potanin, and Deripaska, who controls aluminum giant United Company RusAl, have proposed pooling their metals assets with other miners to create an entity that would be part-owned by the Kremlin and wipe out their debts.

Power Vertical Lost in Krasnodar Woods

BOLSHOI UTRISH, Krasnodar Region — Construction in a pristine reserve on the Black Sea has come to an uneasy halt after picketing environmentalists forced police to intervene, but the firm doing the work says it can restart any time, even after federal authorities ordered a criminal investigation.The logging in the Bolshoi Utrish nature reserve came to light last month, sparking protests and a petition drive to halt work on an access road that environmentalists say will open the coast for development of an elite resort. The ensuing dispute has pitted powerful interests behind the project against federal authorities, leaving even the local police unsure of who is calling the shots.The case also highlights the increasingly frequent practice of using complicated ownership structures and contract arrangements to mask who is behind development projects. Commercial pressure to develop the tourism industry often takes precedence over regional and federal environmental protections, not to mention locals' concerns.Earlier this month, the Natural Resources and Environment Ministry ordered the Prosecutor General's Office to open a criminal investigation into the logging by Krasnodar-based builder Glavpromstroi, ministry spokesman Nikolai Gudkov said. Last week, Minister Yury Trutnev personally criticized the project and regional authorities for allowing it to proceed, and he ordered the Krasnodar branch of his ministry's watchdog to make sure that the destruction stops.The regional watchdog, in turn, fined Glavpromstroi 2 million rubles ($60,000) on Monday for logging in a federally protected area and destroying endangered plant species. The local environmental prosecutor has also called the construction illegal and opened a case in an Anapa municipal court, but no date has been set for a hearing.The company, however, says it has appealed the administrative penalty and that there is nothing preventing it from proceeding."Only a court decision can stop the work, and so far we haven't received any documents about a court hearing," Yelena Yegorkina, a lawyer for Glavpromstroi, said Wednesday by phone. "We're just a subcontractor, and we were assured that the construction is legal," she said, adding that the logging had been approved by the -regional branch of the Federal Forestry Agency. Alexander Byuller, deputy head of the local forestry department, told The Moscow Times last month that the logging was for a legal, fire-safety road. And just before New Year's, the project received the blessing of Krasnodar Governor Alexander Tkachyov, who ordered the forestry agency to make sure the road — already well under way — was completed.
Seeing that the logging, which violates at least three federal conservation laws, was continuing despite their appeals, a group of activists decided to brave the cold and camp out at the site to physically block construction during the 10-day New Year's break. "Otherwise, there would have been nothing to protect once the holidays were over," said Andrei Rudomakha, coordinator of North Caucasus Environmental Watch, the main organizer of the blockade. Rudomakha wrote dozens of letters in December to regional authorities and the Natural Resources and Environment Ministry drawing attention to the clear cutting to no apparent affect. Only 1 kilometer of forest remains before the road reaches the coast.
A group of as many as 20 activists camped out near the construction site, interfering with the work and facing threats from Glavpromstroi workers. The tensions boiled over on Jan. 3, when Glavpromstroi deputy director Yevgeny Yemelin arrived and began threatening activists and reporters. He refused to answer questions regarding the work, while his employees attacked reporters who were taking pictures.The next day, some 30 police officers arrived in nine cars and began checking activists' documents and belongings as part of what they said was an anti-terrorism operation. When the search yielded nothing suspicious, police chief Alexander Belostotsky unexpectedly voiced support for the protesters."It wasn't us, and it wasn't you who allowed the work to go ahead," Belostotsky told the activists. He said Glavpromstroi had failed to present documents proving that the work was legal and assured the protesters that he would prevent it from continuing.But when the activists said they would continue to guard the site despite the assurances, Belostotsky hesitated."Would you go against the government and the president?" he asked.He declined to clarify his remarks.
The multitude of orders, accusations and legal challenges over Bolshoi Utrish has made it easier for government officials to pass around blame for a project that no public figure wants to be associated with anymore.The situation is further complicated by overlapping regional and federal oversight of the land. Yegorkina, the lawyer for Glavpromstroi, said the area was protected both as a "regional reserve" and as "part of the Anapa Federal Resort.""Government agencies cannot agree who is responsible, and we are being blamed in the process," she said.The nontransparent nature of the companies and organizations involved in the work has also clouded the dispute. For example, the project includes separate agreements for the logging work — ordered by the forestry department — and the road, which happens to pass through the cleared space. The road, originally supposed to be 8 meters wide, is now more than three times that in some spots, presumably so that construction materials can be brought in to develop a prime, 120-hectare lot along the coast.
The site in question was rented for 49 years by a Moscow-based organization called Foundation for Regional Noncommercial Projects, "Dar," according to an agreement signed by Dar and the forestry department. A copy of the document was obtained by The Moscow Times. Dar pays just over 14 million rubles ($400,000) per year in rent to the federal and regional budgets, which figures to roughly $300 per hectare per month for the secluded seafront property. In return, Dar has agreed to take on forestry duties, including extinguishing fires and creating "fire-safety infrastructure" that would include helicopter pads, fuel storage and construction of more roads.Environmentalists who inspected the past year of land-use archives found no record of a public auction for the right to rent the plot. And the infrastructure clauses, they say, are merely to hide the real purpose of the work. The forest has little of the undergrowth that tends to fuel forest fires, and "there has never been a serious one in the reserve," said Mikhail Kreindlin, an expert with Greenpeace.Utrish visitors who have seen construction plans say the project would entail a large-scale complex of 18 structures. Among them are a five-story building, a health complex, a house for "servants" and two roads with checkpoints, said Muscovite Andrei Pavlov, who was shown the design by surveyors taking soil samples last month.
The contractor for the road is construction company Harvinter, which has worked with the Office of Presidential Affairs on past projects and received an official thank you from then-President Vladimir Putin in 2006 for organizing a Russia-EU meeting in Sochi in May of that year. The Office of Presidential Affairs "organizes and carries out the logistical support" for the president, government and legislature, according to its web site.Harvinter could not be reached for comment.A receptionist at Dar's Moscow office requested that questions about the project be faxed to the "foundation's management," although she declined to say to whom the request should be addressed. The foundation has not responded to questions sent Tuesday.According to registry records, Dar was founded in 2006 by Levit, which is majority owned by Leonid Mikhelson, chairman of Russia's second-largest gas producer, Novatek. He is also a major shareholder in Novatek, including through Levit.Neither Levit nor Mikhelson could be reached for comment. A spokesman for Mikhelson at Novatek said he could not comment on anything pertaining to Mikhelson's other assets. Using an obscure organization to covertly develop prime land into elite resorts is typical in the region, environmentalists said. "This project is characteristic of others on the coast that are developed secretly as private residences," said Rudomakha, of North Caucasus Environmental Watch. As the only place in Russia with access to the Black Sea and a vast untouched mountain reserve area, the region has seen its share of such projects.Glavpromstroi, the subcontractor, was previously involved in road construction for one such resort built for the Office of Presidential Affairs near Gelendzhik, Rudomakha said. The project was presented as a children's sanatorium, but the secrecy surrounding the project — including fences and barbed wire — suggests the presence of more serious visitors.
Authority in the RegionsThe scandal puts Tkachyov, governor of Krasnodar since 2000, in an awkward position. Despite the rebuke from the Natural Resources and Environment Ministry, Tkachyov has not retracted his order demanding that the road through Bolshoi Utrish be completed. Calls to the Krasnodar administration press office went unanswered Thursday.Regional leaders have been quick to heed censure from the federal government, which actively strengthened its control over the regions during Putin's two terms as president. Direct gubernatorial elections were eliminated in 2003 in favor of a system where presidential nominees are approved by local lawmakers. More recently, many new governors have been tapped from outside the regions they are to lead, presumably to keep them more dependent on support from Moscow.But Tkachyov, who was born in Krasnodar and first elected with more than 80 percent of the vote, appears to have the full confidence of Putin and President Dmitry Medvedev, as his region will host the 2014 Winter Olympics in Sochi. Oleg Mitvol, a deputy head of the federal environmental watchdog, said local prosecutors were responsible for failing to act. The investigation ordered by Trutnev, he said, had been "passed off" to the regional prosecutor, who has shown little interest in the case."The regional watchdog is not doing everything in its power to stop the work, but the law enforcement agencies that have proof of criminal activities are not taking action," he said. "If the regional prosecutor wanted to stop the illegal construction, he would do it, and the problem would resolve itself as soon as people start getting arrested."

Stavropol's Ex-Mayor Denied Asylum

An Austrian court has ruled in favor of the extradition of former Stavropol Mayor Dmitry Kuzmin, who fled Russia in 2007 amid corruption charges and has requested political asylum in Austria.A local court in the Austrian town of Korneuburg ruled that Kuzmin can be extradited to Russia, where he faces charges of embezzlement and libel, Friedrich KЪhl, a spokesman for local prosecutors, told The Moscow Times by telephone Thursday.Kuzmin's lawyer immediately appealed Wednesday's ruling, and the case will now be sent to the Vienna Higher Court, KЪhl said.The criminal case against Kuzmin, which unfolded ahead of the State Duma elections in December 2007, has been called a smear campaign against a leader who had become too serious a threat in the Stavropol region to the pro-Kremlin party United Russia, whose election ticket was led by then-President Vladimir Putin. In March 2007, Kuzmin led A Just Russia, a center-left, pro-Kremlin party created in 2006, to a rare victory in regional parliamentary elections over United Russia and the political machine of United Russia and Alexander Chernogorov, then the governor of Stavropol.Kuzmin is one of dozens of mayors, the last directly elected officials in Russia, to face criminal prosecution in recent years.Kuzmin has applied for political asylum in Austria, and if his request is granted extradition would be unlikely, KЪhl said. He said, however, that questions of asylum are beyond the Austrian judiciary's competence. "He claims that he is being politically persecuted in Russia, but the court ruled that the question of asylum should not directly affect [Wednesday's ruling]," KЪhl said.The court also dismissed Kuzmin's claim that documents provided by Russian authorities were not sufficient to justify extradition. "The court decided that the international arrest warrant is quite enough," KЪhl said.In November 2007, just weeks before the Duma elections, Kuzmin was removed from A Just Russia's ticket over purported campaign violations.In a bizarre twist, a senior local police official announced during a televised news conference at the time that Nazi flags and medals had been found during a search of Kuzmin's office. The Nazi regalia were shown repeatedly on local television in the run-up to the elections.Kuzmin fled the country shortly before the Duma elections, and a Stavropol court subsequently stripped him of his office and sanctioned his arrest in absentia.Acting on an international arrest warrant, Austrian authorities in August detained Kuzmin at Vienna's Schwechat airport. He was later released on bail on the condition that he does not leave Austria, said KЪhl of the Korneuburg prosecutor's office.Following his arrest, the Investigative Committee issued a statement saying it would request Kuzmin's extradition. The politician has been charged on two counts of abuse of office, including the embezzlement of 19 million rubles ($807,000), as well as one count of libel, the committee said at the time. If convicted, he faces up to 10 years in prison. Austria and Russia have both ratified a European extradition convention, greatly easing extraditions. It could take weeks, if not months, until a Vienna court hears Kuzmin's appeal of Wednesday's ruling, KЪhl said.Kuzmin's lawyer in Austria could not be reached for comment Thursday.Calls to the Stavropol branch of the Investigative Committee, which has been handling the case against Kuzmin, went unanswered Thursday. A woman who answered the phone at the committee's federal headquarters said no one was available to comment.

State Lays Out Job Stimulus Program

Opening up a private business in Russia may no longer prove to be a daunting task — for the unemployed, that is. To stimulate employment and the economy, the government will give 60,000 rubles ($1,700) to unemployed Russians as startup capital to open small businesses, Deputy Health and Social Development Minister Maxim Topilin said Thursday. In addition, the government will provide subsidies to companies to put employees facing imminent layoffs through re-education and training programs, Topilin said. Other workers will be paid to relocate to areas within their regions where jobs can still be found. Topilin announced these and other measures aimed at fighting the country's billowing unemployment rate on Thursday and said they would be implemented as early as next week in the five regions that had most quickly offered proposals for the federal government's 43 billion ruble ($1.3 billion) employment-stabilization package: Krasnoyarsk, Yaroslavl, Tatarstan, Tyumen and Bryansk."Now [unemployment] stands at 5.8 million [people]. It is difficult to forecast, but I think it could reach around 7 million by the end of this year," Topilin told reporters.The number of unemployed workers rose by 1 million from September to December, now making up 7.7 percent of the work-age population, according to the State Statistics Service, which calculated its figures using the International Labor Organization's methodology. Despite numerous appeals by President Dmitry Medvedev and Prime Minister Vladimir Putin, many regional governments missed a Jan. 15 deadline to submit proposals to stimulate employment."We had to extend the deadline indefinitely," said Yevgenia Okoreva, a spokeswoman for the Health and Social Development Ministry, which is implementing the program. As of Thursday, 66 regions had submitted proposals, Okoreva said. Not all of Russia's 83 regions are required to submit proposals. The city of Moscow, for example, is not seeking federal funds and has created its own department to tackle the issue.Next Monday, agreements between the federal government and the five regions whose programs were approved will be signed, and "nothing will stop them from getting to work," Topilin said.The federal government will subsidize 95 percent of each region's employment program, but the regions must come up with the remaining 5 percent and adjust their 2009 budgets accordingly. Zoya Rozhnova, the head of Krasnoyarsk city's employment service, said by telephone that she was "thrilled" that the government was allocating the entire region 667 million rubles ($19.7 million) in unemployment relief.Before submitting their program to the government, Krasnoyarsk government and labor authorities went to major regional employers to evaluate their labor situation and ask them about their needs for workforce retraining programs, Rozhnova said."We are very optimistic that the funds will make a difference here," she said. The government is clearly worried about soaring unemployment. Medvedev told regional authorities at a conference on Jan. 21 that "job security is one of our top priorities, one of the government's principal social obligations.""Unemployment and the labor market have never gotten as serious attention from the government as now," said Dmitry Badovsky, deputy director of Moscow State University's Institute of Social Systems. As of Jan. 21, some 14,100 businesses around the country had announced imminent plans to lay off 365,000 employees and reduce 549,000 full-time workers to part-time, an employment status that also includes mandatory unpaid vacation, Topilin said. The government's employment-stabilization program is made up of four components — specialist training and workforce re-education, public works creation, job relocation assistance and small business development.The government's aim is to create at least 901,000 jobs, including 700,000 new temporary positions across the country and 50,000 new jobs in small business. It also will offer professional development and training programs for 114,000 workers facing imminent layoffs; give companies subsidies to pay for the employment trial period for 10,000 new university graduates; and subsidize the costs for 27,000 people to move to work in another area of their region.A large portion of the temporary jobs the government aims to create will be in the area of public works, including infrastructure and municipal services projects such as road building and the painting and cleaning up of schools and hospitals, Topilin said. For small business, the government will give 60,000 rubles to a target number of 50,000 unemployed Russian citizens to open their own enterprises, Topilin said. Only those officially registered as unemployed will be eligible to apply for the funds, a one-year advance payment on their monthly unemployment checks. The regional governments' employment agencies will help applicants legally register their businesses and create business plans.While praising the government for its attention to the labor market, economists and employment specialists were skeptical of the program's economic effectiveness. "It is well-documented and proven that subsidizing jobs is not an effective method of job creation," said Vladimir Gimpelson, director of the Higher School of Economics' Center for Labor Research. "When the subsidies stop, the jobs go too."Gimpelson was also pessimistic about giving money to the unemployed to open businesses."The usual corruption, bureaucratic regulation and inefficiency of government administration will get in the way," he said. Alexandra Eftivyeva, chief economist at VTB Capital, said the best way to support employment was not to directly support people but to help their employers "restore their working capital credit.""Right now, companies are laying off because they do not have enough capital to pay salaries," she said.Gimpelson said it would be difficult to find jobs even for those retrained in new fields of work. He compared Russia's labor market to an ocean with two islands: a "vacancy" island and an "unemployed" island. "For the unemployed to get to the island of vacancies, they get retrained and educated on the way," he said. "But now we only have one island: the island of the unemployed, and no island with vacancies. Until the island with vacancies comes back, I don't know how the program for re-education can work."

Budget Deficit Could Drain Much of Stabilization Fund

A significant portion of Russia's $215 billion stabilization fund will be spent in 2009 to cover the country's budget deficit, said Finance Minister Alexei Kudrin at a State Duma meeting on Friday. “This year is the peak of the crisis, and we’re starting from the idea that a significant part of the Reserve Fund will be spent, but not all,” he said. The country is facing a budget shortfall of 4.4 trillion rubles ($124.6 billion), or 5.4 percent of GDP, and if the government's 2009 budget is not revised, the deficit could reach as much as 6.1 percent of GDP. On Jan. 22, Prime Minister Vladimir Putin ordered the Finance Ministry to revise its 2009 budget based on a new average oil price of $41 per barrel, down from the previously forecast $70. Urals blend crude, Russia's main oil export, was trading at $43 a barrel on Friday, down from its July high of $143. Last year the stabilization fund, supplied since 2004 by windfall oil and gas revenues, was divided into the National Welfare Fund and the Reserve Fund, which stand at 2.8 trillion rubles and 4.5 trillion rubles, respectively. In December, the welfare fund loaned 340 billion rubles to Vneshekonombank, as part of a $200 billion dollar bailout package aimed at revitalizing the country’s ailing financial sector. First Deputy Prime Minister Igor Shuvalov, speaking to the parliament on Friday, said the government would "most likely" have to cut back on expenditures in 2009.

Will The Real Gazprom CEO Please Stand Up

The great Russian-Ukrainian gas war is over, and it is time to assess the outcome. On the surface, the result looks promising. Finally, Russia and Ukraine have concluded a normal long-term gas agreement.
Both gas prices and transit tariffs are market-related and based on clear principles without shady intermediaries or arbitrariness. The gas prices will probably average $230 per 1,000 cubic meters in 2009, while investment bankers had expected $250.Prime Minister Vladimir Putin claimed that Ukraine had an obligation to guarantee transit of Russia's gas since Kiev ratified the Energy Charter Treaty (which Moscow has not ratified).Putin lamented that the "European Union is placing Russia and Ukraine in the same category," but the supplier in this transaction is also obligated to deliver. Vedomosti perhaps put it best: "Gazprom's reliability as a supplier is inseparable from Ukraine's as a transit state."Corruption and Ukrainian domestic politics were major factors in a conflict in which the prime antagonists were Prime Minister Yulia Tymoshenko and Dmitry Firtash, partial owner of the shady intermediary RosUkrEnergo.Both Tymoshenko and Putin claim that RosUkrEnergo through Ukrainian President Viktor Yushchenko's administration disrupted the gas negotiations on Dec. 31.Tymoshenko walked away from this conflict with an outstanding victory. RosUkrEnergo has been excluded from the Russian-Ukrainian gas trade, losing profits of at least $1 billion a year.At his news conference on Jan. 8, Putin implausibly denied that he knew Firtash, although both were co-founders of RosUkrEnergo in July 2004. Subsequently, Gazprom sold RosUkrEnergo's debt of $1.7 billion to Naftogaz, allowing Naftogaz to squeeze Firtash out."Finally, we eliminated a big political slush fund, which fed several political forces," Tymoshenko said. Firtash has spent lavishly on Ukrainian politics, mainly on former Prime Minister Viktor Yanukovych's Party of the Regions but also on Yushchenko's administration.The elimination of RosUkrEnergo will cleanse Ukrainian politics of gas money. Although Yanukovych has sensibly kept a low profile, his campaign financing will most likely dwindle in the end.Gazprom's cost in the gas war was very high. Its direct financial loss was about $2 billion, but its reputation has suffered even more since the gas monopoly has proven itself an unreliable supplier.Its customers will try to reduce their dependence on the state-run gas monopoly, but when Gazprom is the problem new pipelines are of little help.Before the conflict broke out, Gazprom opened a web site that criticized Ukraine. This suggests that Moscow was gearing up for a fight. Gazprom and Putin pulled no punches in going after Kiev. "The current situation shows a high degree of criminalization of power in Ukraine," Putin said.During the January 2006 Russia-Ukraine gas conflict, Gazprom's stock price skyrocketed because investors were impressed when the company pushed for higher export prices at a time of rising energy prices.During the latest gas war, however, Gazprom's stocks plummeted as investors objected when the company treating its customers recklessly by demanding unrealistically high prices at a time of sharply falling energy prices.Meanwhile, European gas consumers suffered considerably, and the European Union looked terribly weak, having failed to learn anything from previous gas wars.But one European politician stands out as a true leader -- German Chancellor Angela Merkel. During Putin's news conference with Merkel on Jan. 16 in Berlin, Merkel lectured him like a teacher to a schoolboy, placing the responsibility on Moscow, and Putin ate his teacher's humble pie.Austria, France, Hungary, Germany and Italy have quietly built up gas reserves that could last for three months; they have learned the lesson from 2006.Now, other European countries are likely to build up large reserves and further diversify their energy supplies, although this is very expensive.Putin has the most complex motivation in all of this. By directly commanding Gazprom and taking over the negotiations, Putin confirmed the old assumption that he is the real CEO of Gazprom.Although Ukraine had paid its gas bills by Dec. 30, Putin ordered the disruption in the gas supply, making him the main culprit.Gazprom's damaged reputation will likely impair its stock price and debt rating. The conflict was also a disaster for Russia's foreign policy. President Dmitry Medvedev's hastily arranged "gas summit" attracted no heads of state and was the largest snub to Russian diplomacy in recent memory.Putin has been identified as one of RosUkr-Energo's main beneficiaries, but now he has accepted the fact that this middleman will have to be eliminated from gas transactions. Moreover, he looked panicky when he lost himself in technical details, accusing Ukraine of "theft" of tiny gas volumes, far smaller than customary losses.In the end, the gas war had to be settled by Russian and Ukrainian prime ministers. The press photos showed a strident Ukrainian prime minister, while Putin looked increasingly frustrated.So why did Putin instigate the gas war in the first place? My suspicion is that his main purpose was to whip up Russian patriotism against Ukraine and enhance support for the government in a time of economic decline. This was perhaps his only success.According to the state-run pollster VTsIOM, 63 percent of Russians believed that Ukraine was solely responsible for the conflict.Another suspicion is that Putin hoped to destabilize Ukraine by exploiting its domestic divisions and its severe financial crisis. If this were his goal, he failed. Tymoshenko had little choice except to liquidate RosUkrEnergo since it was an issue of her political survival.After Putin and Tymoshenko signed the gas peace treaty, Ukraine has eliminated a major source of corruption. Now it should reform its distorted energy sector to improve efficiency and save energy.Ukraine must stop subsidizing its imports of gas, and it should also raise the government's purchasing price for domestically produced gas to stimulate domestic production.And the EU should get more serious about its own energy security. Whatever Putin's motive was, he is likely to offer more shocks as the situation grows worse for both Russia and Putin in a deepening economic crisis. The EU must realize that it needs a Russia policy no less than it requires an energy policy.Only two winners are apparent -- Tymoshenko and Merkel.There are many losers: Firtash, European gas consumers, Gazprom, its shareholders, Yushchenko and, last but not least, Putin.

The Role Of Russian Organized Crime In The Gas War Of January 2009

WASHINGTON, DC -- On January 20 Alexei Miller, the CEO of Russia’s state-owned gas monopoly, Gazprom, made an amazing confession. He told Interfax that in late December 2008, when negotiations between Ukraine and Russia on a new gas supply contract broke down, the party largely responsible for this was RosUkrEnergo (RUE), the Swiss-based middleman company that sold Central Asian gas to Ukraine.
RUE is 50 percent owned by Gazprom and 45 percent by a Ukrainian businessman, Dmytro Firtash. “Yes, it is true that when the prime ministers of Russia and Ukraine agreed to a price of $235 for 1,000 cubic meters of gas… RosUkrEnergo proposed paying $285. This company was betting that by making such an offer it would remain in the market,” Miller stated. What Miller failed to explain is why RUE would dare undermine the Russian government.From its inception RUE has been accused of opacity by the media and of “criminality” by Ukrainian Prime Minister Yulia Tymoshenko. Most of the charges centered on Gazprom’s partner in RUE, Dmytro Firtash, and his alleged links to a notorious Russian mobster, Semen Mogilevich. Dmytro Firtash has denied any direct links to Mogilevich. This might be true, but the indirect links suggest that Mogilevich was indeed tied to Firtash, the Kremlin leadership, and the Ukrainian elite.The history of RUE began in December 2002 when Firtash registered a company in Hungary named Eural Tran Gas (ETG), which signed a contract with Gazprom on December 5, 2002, becoming the middleman in the Turkmen- Ukrainian gas trade.Strange circumstances surrounded ETG’s creation: unemployed Romanians became principles of the company; an Israeli lawyer with ties to Mogilevich became a nominal director of the company; and Andras Knopp, a former Hungarian communist cultural functionary with no knowledge of the gas business became the director of the company.Even stranger was Firtash’s refusal to reveal that he was the ultimate beneficiary of ETG. Soon after the contract was signed, ETG was given a $70 million loan by Gazprom Bank, which also became the guarantor of a $227 million loan to ETG by Vnesheconombank.By July 2004 media criticism of ETG forced the Kremlin to eliminate the company and create RosUkrEnergo in its place. RUE came into being during a meeting between Russian President Vladimir Putin and then-Ukrainian President Leonid Kuchma in Yalta.At that time both leaders stressed that RUE would be a fully transparent company, tacitly acknowledging media reports that ETG was opaque. One of the two co-directors of RUE was Konstantin Chuychenko, a former KGB officer, the head of Gazprom’s legal department, and a classmate of Dmitry Medvedev (Chuychenko’s biography was posted on the Gazprom website, www.gazprom.com, but was removed after he left Gazprom to join Medvedev’s administration).The other co-director was Oleg Palchykov, the former director of the ETG office in Moscow who represented Centragas, a company silently controlled by Firtash. Palchykov’s appointment as co-director of RUE was met with a great deal of skepticism.“His [Palchykov’s] candidacy was submitted by Raiffeisen Investment [the nominal owners of Centragas]; and we were unable to stop it,” Alexander Ryazanov, the deputy director of Gazprom and a member of RUE’s coordinating committee, told the Russian newspaper Vedomosti.Why Gazprom wanted to prevent Palchykov’s appointment in the first place was not clear. Gazprom had always insisted that their partners in RUE were honest, transparent businessmen. Had this view suddenly changed?Part of the explanation could be that the Moscow ETG office Palchykov headed was located in a building on Novy Arbat 14 that was also used by an alleged mobster, Igor Fisherman, who was wanted together with Mogilevich by the FBI.According to Vedomosti on May 30, 2006, Fisherman was Firtash’s partner in the purchase of 75 percent of a Russian company Zangas. The flow of money from RUE to Gazprom was also murky. Apparently it first went to a shell company in Cyprus and then on to Moscow to another shell company, “Rubin”. Why wasn’t the money sent directly to Gazprom?Chuychenko, Dmitry Medvedev’s man in RUE, however, remained adamant in his whitewashing of Firtash and RUE. “Dmytro Firtash is a very well-known figure in the gas business,” Chuychenko told Ukrayina Television on December 1, 2006. “He has been working in the gas business in Ukraine for a long time, so his appearance in this field was no accident.”On October 9, 2007, Medvedev made an incredible statement on the German television station ARD: “We will most likely review the scheme of our relations [with Ukraine] and will end the existence of middlemen structures, which we do not fully understand.” How could Medvedev, the head of Gazprom’s board of directors, not understand what RUE was?Chuychenko’s claims about Firtash were soon disputed by Putin, who told Interfax on January 8, 2009: “50 percent of RUE belongs to Gazprom… the Ukrainian side belongs to persons we do not know…they showed us Mister Firtash once…”A controversy over massive Ukrainian debts to RUE and RUE to Gazprom heated up in January 2008, and Mogilevich was arrested in Moscow in February 2008. He was charged with aiding a Russian businessman, Vladimir Nekrasov, the alleged owner of the chain of Arbat Prestige perfume stores, in a tax evasion scheme. Documents from the Russian business registry in the possession of Jamestown, however, show that Firtash was instrumental in creating Arbat Prestige.The day after the Ukrainian-Russian gas agreement was signed, the Russian press reported that a Moscow court had ordered that Mogilevich and Nekrasov remain in detention until March 23. Was the timing coincidental or was it linked to RUE’s debt to Gazprom?The litany of contradictions voiced by top Russian officials in the RUE case, as well as documented evidence, suggests that organized crime is linked not only to RUE; it is a stark indication that corruption in the Kremlin has expanded since Putin’s election in 2000. Who stood to benefit from RUE? Putin claims it was the Ukrainian leadership — the facts suggest otherwise.

Yushchenko Instructs PM To Save Artek Children Center

KIEV, Ukraine -- Ukraine's president has instructed the country's prime minister to look into and take urgent measures to prevent the possible closure of the cash-strapped International Children's Center Artek in Ukraine's Crimea.
During a video link between Kiev and Moscow devoted to the problem, Artek's chief doctor, Mykhailo Bezugliy, blamed interest groups, which plan to take over the center's land valued at some $100,000 per 100 sq m, for orchestrating its financial woes.The opposition Party of Regions has accused Viktor Yushchenko and Yulia Tymoshenko of pushing Artek to bankruptcy."Public attention, generated by media reports, in particular those saying the government is pushing Artek to bankruptcy... are causing concern," the presidential press service quoted Yushchenko as saying.The president gave the prime minister one week to deal with the matter.Located in the southern Crimea not far from Yalta,the area of the crimeajewel Artek is famous as the main Soviet-era pioneer camp that took children in all year round since the 1930s and even carried on working during World War II, when the center moved to Altai.It remained a unique international meeting place for children of all ages from all over the former Soviet Union and other countries after the breakup of the U.S.S.R. when already under Ukraine's jurisdiction, but closed in January over a lack of funds.It is currently supervised by the Ukrainian president's property management committee.Artek General Director Boris Novozhilov said in Kiev on January 16 that the center could cease to exist within a year as the government had not provided any funding for the former Soviet recreation camp for three years. On Monday he was hospitalized with heart problems.

Slain Moscow Reporter Buried In Sevastopol

SEVASTOPOL, Ukraine -- Anastasiya Baburova, who chased after the assassin of human-rights lawyer Stanislav Markelov only to be killed by the same unidentified gunman, was buried in her native Ukraine on Jan. 26.

Baburova, 25, was a Moscow journalist with one of Russia’s few remaining independent newspapers, Novaya Gazeta.She and Markelov were slain less than a mile from the Kremlin, just after the lawyer held a Jan. 19 press conference to condemn the early release from prison of a Russian army colonel convicted of killing an 18-year-old Chechen woman in 2000.Baburova was from Sevastopol.Agence France Presse reported that several dozen mourners attended the funeral Mass held in St. Vladimir Orthodox Cathedral in the center of the Crimean port city before she was laid to rest in a cemetery on the city’s outskirts.Her mother, Larysa Baburova, told the French news agency that her daughter a year ago had complained that her work was too dangerous, saying: “Mum, I am not going to live long like this.”Novaya Gazeta – one of the few Russian newspapers that allow criticism of the Kremlin in its coverage – has been hit by tragedy several times, including in 2006, when star journalist Anna Politkovskaya was gunned down in Moscow.If these murders follow the disturbing Russian pattern, no killers will be found.

Valeriy Khoroshkovsky Appointed Deputy Head Of Ukraine’s Spy Agency

KIEV, Ukraine -- President Victor Yushchenko raised eyebrows on Jan. 28 appointing billionaire media magnate Valeriy Khoroshkovsky as deputy head of Ukraine’s spy agency, the State Security Service, or SBU, as it is commonly called.
The controversial appointment comes amidst a deepening rivalry between Yushchenko and Prime Minister Yulia Tymoshenko.Both are expected to square off for the presidency later this year or in early 2010.Khoroshkovsky, who has served as head of Ukraine’s Customs Service, claims to own one of Ukraine’s leading television channels, Inter, via a holding called U.A. Inter Media Group.Tymoshenko identified Dmytro Firtash, the billionaire who controlled natural gas supplies to Ukraine via Swiss-registered Rosukrenergo, as a media partner of Khoroshkovsky.Tymoshenko’s gas agreement this month removed this intermediary, which her political camp claims has been “corrupt” and funneled money to her opponents, Yushchenko and ex-premier Victor Yanukovych.Khoroshkovsky this week admitted that Firtash has an option to buy into the Inter media group, but insisted Tymoshenko tried to buy Inter channel herself, or have it sold to other investors.

Pirates’ Prison

KIEV, Ukraine -- From economic crisis to gas crisis, from autumn into winter, 17 Ukrainian sailors have remained hostages aboard the MV Faina cargo ship, seized by Somali pirates on Sept. 25.
The men are still waiting for rescue, amid reports that some of them are suffering poor health and that all of them are imprisoned in terrible conditions – enduring scorching temperatures off the lawless east African coast and spending most of their time in a cramped room aboard the hijacked ship.After months of staying silent at the Ukrainian government’s request, relatives of the crew have run out of patience and are now speaking out. They are alarmed by the indifference and inability of the nation’s political leaders to free the crew after four months of captivity, the longest of any in a recent upsurge of high seas piracy in the Indian Ocean.“Faina is a cold-blooded, slow and incredibly cynical murder of 17 boys, who were unlucky enough to be born on the territory, declared as independent Ukraine,” said Victor Shapovalov, father of crew member Denis Shapovalov.“I don’t even dare to call it a state. A state, by definition, pre-supposes territory, population, government and a president. Ukraine is missing the two last ones,” Shapovalov said. “Nothing has been done in four months. Nothing. The government turned a deaf ear to its 17 citizens and we [parents] will find other ways to save their lives.”The relatives of the Faina crew note that their sons’ captivity didn’t even rate a passing mention in either the New Year’s greeting of Ukrainian President Victor Yushchenko or Prime Minister Yulia Tymoshenko. The sailors’ mothers also say they recently spent hours in the rain trying to get into the Presidential Secretariat, but were rebuffed. They note that the website of the Ministry of Foreign Affairs has a hyperlink to Euro 2012, the soccer championship to be co-hosted by Ukraine, but not to the Faina standoff.The Ministry of Foreign Affairs deny indifference and inaction, and has blamed the interference of third parties for scuttling talks to liberate the crew. Sources and reports identify the third person as Michele Ballarin, an American businesswoman with connections to United States intelligence whose self-described aim has been to turn Somalia from a failed state into a functioning country. Ballarin claims to be trying to broker a deal freeing all hijacked ships in the region and is quoted by military.com as saying: “My goal is to unwind all 17 ships and all 450 people they’ve been holding.”Ukraine’s Foreign Ministry “takes all necessary measure to rescue citizens,” according to spokesman Vasyl Kyrylych, noting that “according to international experience, state structures, as a rule, do not take a direct part in the negotiation process.”So far, however, nobody appears to be successful in freeing the sailors.Faina is owned by Israeli citizen Vadim Alperin, owner of Tomex Team, Inc., and a former deputy of the Odesa City Council. Many of the ship’s crew and their relatives are also from the Black Sea port city.At a Jan. 22 news conference in Kyiv called by the crew’s relatives, Alperin’s representative said that negotiations with the pirates – more than 40 are believed to be aboard the ship – are making progress.“We had already reached an agreement on a $1.7 million ransom,” said Victor Murenko, Alperin’s representative. Murenko, however, said that the pirates rejected some conditions and the deal fell apart. It was revived again on Jan. 21, Murenko said, when the two sides reached an agreement on the ransom amount. He expected release of the sailors within several days. But, as this Jan. 29 edition of the Kyiv Post went to press, the men were still in captivity.So the desperate parents are trying everything to win the release of their loved ones. They are now planning to file a lawsuit against the government.At their Jan. 22 news conference, the parents said they are tired of hearing stories about how negotiations were on the brink of success, only to be disrupted by various third parties.“The informational vacuum is unbearable,” said Svetlana Mgeladze, mother of Faina crew member Roland Mgeladze. “We can’t stand anymore hearing ‘they have water, food and fuel; keep on waiting’ from the Ministry of Foreign Affairs.”On Jan. 25, parents of the Faina crew got a rare present: a brief phone call from the ship’s crew. Relatives say the credit for arranging the phone call goes not to the Ukrainian government, but to Abdi Muhammed Nur, a representative of the non-profit Human Rights Watch.The telephone conversation was as troubling as it was brief.“We bear up with our last bit of strength,” Denis Shapovalov told his father. He said that the sailors get only one meal a day – rice and noodles – and have irregular supplies of water and poor sanitary conditions. The parents also said their sons told them that the talks were stalled because the pirates wanted to deal directly with the ship’s owner, a step they say hadn’t been taken yet.Besides the 17 Ukrainian crew members, two Russians and a Latvian are also aboard the ship. The vessel’s Russian captain, Vladimir Kolobkov, died of a heart attack two days after the hijacking. His remains are still on board, reportedly kept in a refrigerator.The hostage ship’s complicated identity and mission are raising fears among parents that some Ukrainian government officials don’t want to see the ship returned.The ship sailed under the Belize flag and carried 33 Soviet-type T-72 battle tanks along with other weapons and ammunition. While Ukraine and Kenya insist the tanks were bound for Kenya’s military, Agence France Presse reported that the United States and the pirates themselves have said the weapons were destined for rebels in southern Sudan. If true, the shipments would be in violation of a U.N. Security Council embargo on weapons trade with Sudan.“I judge by the fact that absolutely nothing has been done,” said parent Svitlana Mgeladze. “Probably somebody wants it to be this way.”If the shipments were destined for a prohibited destination, it wouldn’t be the first time that Ukrainian arms exports made scandalous international headlines. During the Leonid Kuchma era, Americans accused Ukraine of supplying Saddam Hussein-led Iraq with advanced radars. More recently, Russians accused Ukraine of supplying Georgians with weapons during the August war. While Ukraine has defended its right to sell arms to Georgia, the proof of radar sales to Iraq never materialized.Oleksiy Tolkachev, head of the non-profit Public Committee of National Security, spoke at the Jan. 22 press conference and he agreed that the ship raises potentially troublesome questions for Ukraine. “Ukrainian weapons trafficking has created international scandal and is viewed as another foundation for the possible impeachment of Victor Yushchenko,” Tolkachev said. “If this ship comes back, an investigation will be held and many questions will be asked.”Victor Shapovalov, father of Denis, a 33 year-old graduate of Odesa National Marine University, has no intention of giving up efforts to save all aboard the Faina. “I raised my son not to lose him to mercantile interests of some shabby leaders of this ‘formation,’” Shapovalov said, referring to Ukraine.

Ukraine Assembly Fails Again To Oust Cbank Head

KIEV, Ukraine -- Ukraine's parliament failed again to oust Central Bank Chairman Volodymyr Stelmakh on Monday, passing a resolution annulling his tenure that was dismissed by the president's office as "unconstitutional".
This was the third attempt by Prime Minister Yulia Tymoshenko's faction in parliament to persuade President Viktor Yushchenko to sack the veteran chairman, blaming him for a fall in the hryvnia currency and the state of banks' refinancing.The two former allies have fought constantly on virtually all issues for months, delaying policy making just as the global financial crisis grips the ex-Soviet state.Under the constitution, only the president can initiate the dismissal of the central bank chief, which must then be approved by parliament. Although lukewarm towards the central bank, Yushchenko has refused to sack Stelmakh."This decision is illegal and unconstitutional," presidential spokeswoman Larysa Mudrak said by telephone.The central bank's top economic adviser, Valery Lytvytsky, said Stelmakh would continue in his job after returning from holiday. He was not able to say when that would be."He knows that he is the legal head of the central bank and he will continue work after his holiday," Lytvytsky said by telephone.A total of 227 members -- one more than the minimum needed -- approved the resolution. Parliament passed a no confidence vote in Stelmakh on Dec. 26 and again asked the president to dismiss him two weeks ago.By voting to rescind the 2004 appointment, Tymoshenko's bloc hoped to find another mechanism of getting rid of Stelmakh.Parliament also passed a resolution naming Yushchenko solely responsible for Ukraine's financial woes. Tymoshenko has called for his resignation in December.Lytvytsky said the central bank was currently under the control of First Deputy Chairman Anatoly Shapovalov."The market is not going to be overjoyed by this latest twist in the story, but we hope that it will remain calm thanks to our intervention aimed at maintaining the positive trend (of the hryvnia's rate)," Lytvytsky said.The hryvnia traded at 8.1 to the dollar, slightly weaker than last week when it stood at a touch stronger than 8/$.Dealers said the central bank had communicated its policy well in January with almost daily interventions that have injected liquidity and helped strengthen the hryvnia from December historic lows of 9.5-10/$.But parliament's very moves made them nervous."If management of the central bank changes, then there will be a question -- how will the bank behave?" said one dealer.

Klitschkos Look To Hold All Four Belts In 2009

MOSCOW, Russia -- Vitali and Wladimir Klitschko are worried that promoters will deny them the chance of holding all four heavyweight titles. The Ukrainian brothers currently hold three of the belts - Wladmir is the IBF and WBO champion, and Vitali is the WBC champ.

Only WBA champion Nikolai Valuev stands between a historic four-belt family sweep.The Klitschko brothers claimed Monday that Valuev's promoters, American Don King and German Wilfried Sauerland, are holding up the chance for one of them to take his title by offering an unacceptable share of the purse."Around the world fans and experts want to see this fight," Vitali Klitschko said. "But these promoters are doing everything to make sure that this fight doesn't go ahead."Vitali Klitschko said the purse should be split 50-50 because it would pit champion against champion.Both Vitali, 37, and Wladimir, 32, said they would be ready to fight the 2.14-meter (7-foot) Russian, and Valuev himself has appeared agreeable to the idea."The most important thing is to bring the belt to the family," Wladimir Klitschko said.If the fight does go ahead, Wladimir Klitschko said, it will likely be toward the end of the year due to all the planning required.That might be too late for the brothers to achieve their dream of holding all four belts at one time.Vitali Klitschko, who announced his retirement in 2005 but came back in 2007, is preparing for the mandatory defense of his WBC title against Juan Carlos Gomez of Cuba on March 21.He had hoped to fight Britain's David Haye in June in London, but will instead take on the WBC's No. 1-ranked challenger in Stuttgart.Wladimir Klitschko said he would now likely face Haye, though arrangements are in their infancy, and named Chris Arreola as another possible opponent this year.The brothers reiterated they would never break a promise to their mother and square off against each other in the ring."Our mom will not survive this fight, and we have to take care of her," Wladimir Klitschko said.

EU Chief Says Ukraine Won't Reopen Gas Deal

BRUSSELS, Belgium -- The European Union said Tuesday that Ukraine's president has promised he will not reopen a 2009 energy deal with Moscow that restarted natural gas service to EU countries last week.

Russia halted gas shipments to Europe over Ukrainian pipelines for two weeks earlier this month amid a contract dispute over what Ukraine should pay for Russian gas in 2009.Ukrainian President Viktor Yushchenko indicated last week he wanted to revisit the gas deal with Russia, saying its terms will further undermine his country's economy, but he backed off that view at EU headquarters.In a joint news conference with Yushchenko, EU Commission President Jose Manuel Barroso said it was now key for both sides to improve relations and help Ukraine upgrade its energy and pipeline networks so it can regain the trust of EU gas clients.Barroso said Ukraine "will honor its commitment" to the deal signed with Russia.Yushchenko said his country would "perform its responsibility as a transit state.""The agreements signed are not easy ones (but) Ukraine fully takes up full-fledged transit to the European consumers," Yushchenko said.Barroso said he was convinced the Ukraine wanted to deepen its ties with the EU and added that the EU was keen to do that as well. Ukraine has been seeking membership in both the EU and NATO."But of course in the energy sector there was a problem, and we have to solve that problem," Barroso said. "We have to state very clearly that we were not happy, in fact we were very disappointed."The European Union gets a quarter of its gas from Russia, most of that over Ukrainian pipelines. The gas cutoff left many EU nations reeling, searching frantically for alternative energy sources in the midst of winter.Barroso said the EU would work with Ukraine to seek new international investors to modernize the ex-Soviet state's energy networks and to link the country into central European electricity grids. An investors meeting is planned for March 23, in Brussels.

Medvedev Aims to Sweet-Talk Uzbeks

President Dmitry Medvedev arrived in Samarkand on Thursday seeking to persuade Uzbekistan that it should ignore the overtures of European suitors hunting for alternatives to Russian energy supplies.Both Uzbekistan and Turkmenistan pump all their exported gas via Russia but are showing signs that they are open to new alliances -- a change that could threaten Russia's control over the region's energy."Uzbekistan, like its neighbors, is trying to diversify its relations," said Azhdar Kurtov of the Strategic Research Institute. Medvedev will meet Uzbek President Islam Karimov on Thursday at the start of a two-day visit, his first since he was elected president last year.Europe depends on Russia for a quarter of its gas, and anxiety over the reliability of those supplies was increased by the Russia-Ukraine dispute, which disrupted flows to about 20 states in the European Union."It is unwise for one member state to rely on one country for its energy supplies. This was not secure," European Commission President Jose Manuel Barroso said this week.Europe's hopes for diversifying its energy supplies rest in large part on the Nabucco project, a plan to pump up to 31 billion cubic meters a year of gas from the Caspian Sea region to Europe, bypassing Russia.The problem is that for now, there is not enough gas to put into the planned pipeline. Iran is a possible source, but the standoff over Tehran's nuclear program makes that awkward for the Nabucco project's European backers.The other potential source is Central Asia, which exports about 70 bcm a year -- roughly Italy's annual consumption.Turkmenistan is the region's biggest exporter, but Uzbekistan plays a crucial role in Central Asia's energy system because Turkmen gas is pumped across its territory.Just as with Iran, building closer energy ties with Central Asia has been politically sensitive for Europe.Uzbekistan was the subject of EU sanctions after violence in the town of Andizhan in 2005. Uzbek officials said 187 people were killed in a police action against armed Islamist militants. Witnesses said hundreds of unarmed civilians were killed.Brussels last year dropped most of its sanctions. Soon after, Uzbekistan pulled out of the EurAsEc customs union, a Moscow-led body used by the Kremlin to underline its clout in former Soviet satellites.Moscow has another reason to want to keep Uzbekistan in its orbit: the interest being shown by the United States in military bases and supply routes in Central Asia.The U.S. military's regional chief, General David Petraeus, visited the region recently to explore new transport routes to supply U.S. operations in Afghanistan.That has fueled speculation that Washington could re-establish a military presence there instead.

Companies Switch From Rubles to U.E.

In a throwback to the turbulent 1990s, some real estate companies and car dealers are repricing their fees in "conditional units" instead of rubles.While conditional units — known as u.e. in Russian — were originally a euphemism for the U.S. dollar during the period of the ruble's instability in the 1990s, it has since come to represent values ranging from the dollar to the euro to a ratio between the two. The government, fueled by complaints from confused buyers and pride in the then-robust ruble, initiated a crackdown on conditional units from 2004 to 2006. But a loophole provided by two competing pieces of legislation suggests that there is room to maneuver.Companies are maneuvering as they scramble to minimize losses from the depreciating ruble, which has lost nearly 20 percent of its value since November. The Central Bank said Thursday that it had "finished" with the devaluation of the ruble.Real estate developer PIK Group began listing its prices in conditional units at the beginning of January, spokeswoman Natalya Konovalova said. The company calculates the mean of the dollar and the euro based on Central Bank rates, and clients pay the company the equivalent amount in rubles."The use of conventional units was around four years ago, and now because of the economic downturn a lot of builders are using this form of measurement again," she said.Most developers are quoting prices in dollars or conditional units these days, she said.The use of conditional units is appearing in other sectors as well. Advertising agency Begun has started selling online ads for 2 to 50 conditional units apiece. The trend is also popular in the auto sector, where foreign cars produced by BMW, Toyota, Mazda and Mitsubishi are priced in conditional units based on euro or dollar rates, Autonews.ru reported.Natalya Orlova, chief economist at Alfa Bank, said that other sectors were also likely to return to conditional units if the ruble remained volatile."If the ruble exchange rate doesn't stabilize at a level of 30 to 33 rubles a dollar in the coming two or three months, then I think a lot of companies will think about using" pricing such as conditional units, Orlova said.So far, the re-emergence of conditional units appears to have occurred primarily in the real estate sector, one of the hardest hit by the financial crisis. Property firm DSK-1, which like PIK received bailout loans from Vneshekonombank, announced this week that it would begin pricing apartments in conditional units after Feb. 1. DSK-1 refused to comment on the decision Thursday.The real estate sector has a history of pricing in dollars, and it was only briefly during the first half of 2008 that landlords began switching to the ruble, betting that the currency would appreciate, said Alexei Yazykov, a real estate analyst for Renaissance Capital.The practice of pricing in conditional units used to be popular with hotels, airlines, restaurants and supermarkets. In 2006, a U.S. lawyer sued Hyatt, Radisson and Marriott for using unfair conditional unit exchange rates in Moscow. Radisson and Marriott said they had not decided to use conditional unit prices again, but one hotelier said it would be a good idea."Today the hotel is losing quite a bit due to the exchange rate. What the government needs to do is allow [businesses] to go back to either conditional units or euro rates," said Michel Stalport, area vice president for the Rezidor Hotel Group's Russian SAS Radisson hotels.He said he believed that the hotel was required to quote its prices in rubles. Other businesspeople said they could use conditional units. The confusion stems from two separate pieces of legislation: the Law on Protection of Consumer Rights, which states that the price of goods and services must be displayed in rubles, and Article 317 of the Civil Code, which allows parties to agree on prices in conditional units as long as the payment is in rubles. Travel agencies, for one, have never fully switched to rubles."Airline tickets are still linked to foreign currency, even though these are tickets sold in Russia," Orlova said. "This means there is clearly a way to recalculate all prices on a daily basis based on a foreign currency."All International Air Transport Association members fix prices at an international exchange rate set by IATA every Wednesday. This week's rate is 43.5 rubles per euro. The government has long pushed for the demise of the conditional unit. Critics of the conditional unit, such as State Duma Deputy Valery Galchenko, have labeled the use of the measurement unpatriotic, and then-President Vladimir Putin issued a decree in March 2006 forbidding state officials from quoting prices in currencies other than rubles.Oleg Zamulin, assistant professor at the New Economic School, said companies are unlikely to flock to the conditional unit because it would be disadvantageous for them to switch currency rates individually when competitors are still using ruble rates.Entire industries switching to the conditional unit would take years, Zamulin said."It took a long time for companies to switch from using conditional units, and it will take a long time for them to switch back," he said.

Authorities Seeking Chichvarkin's Arrest

Authorities are seeking the arrest of former Yevroset chairman Yevgeny Chichvarkin, who left the country late last year and has not returned, in connection with allegations of smuggling, kidnapping and extortion. The Yevroset founder's whereabouts are currently unknown, and speculation has swirled that he will remain abroad permanently given the possibility of arrest in Russia. The Basmanny District Court on Wednesday is to rule on whether to grant investigators' request to issue a warrant for Chichvarkin's arrest, Moscow City Court spokeswoman Anna Usachyova told The Moscow Times on Friday. Chichvarkin's lawyer, Yury Gervis, said investigators were seeking his client's arrest as part of a criminal case against two former Yevroset employees, Boris Levin and Andrei Yermilov. Levin and Yermilov were arrested in September on suspicion of smuggling, kidnapping and extortion. Gervis could not say what specific charges Chichvarkin might face, saying he first needed to study case materials provided by investigators. Usachyova of the Moscow City Court said she had no information on possible charges against Chichvarkin. A spokeswoman for the Investigative Committee, which is investigating the case against Levin and Yermilov, declined to comment Friday. Chichvarkin's assistant, Natalya Ikonnikova, who answered Chichvarkin's cell phone Friday, told The Moscow Times that her boss was on vacation abroad. She said she did not know which country he was in or when he might return to Russia. Ikonnikova said she learned from the media that investigators wanted to arrest Chichvarkin. Gervis refused to comment on Chichvarkin's whereabouts but said there was little chance his client would appear at Wednesday's court hearing, "given the current circumstances." Investigators believe he may be hiding in London, where several Russian businessmen who have fallen out with authorities currently reside, Kommersant reported Friday. However, an acquaintance of Chichvarkin's told The Moscow Times on Thursday that while the businessman was "somewhere in Europe," he was "certainly not in the U.K." "He will come back soon," the acquaintance said. Chichvarkin was questioned by investigators in the Levin and Yermilov case after their arrest in September. He has said the two men were arrested in connection with a case involving former employee Andrei Vlaskin, who was charged with reselling phones stolen from shipments to Yevroset. Vlaskin later paid 20 million rubles in damages to settle the case. Levin, Yermilov and two other Yevroset employees are suspected of kidnapping Vlaskin in 2003 and holding him in a rented apartment until he paid back the money and returned the handsets, Kommersant reported Friday. Chichvarkin has vigorously defended his former employees, saying they are guilty of nothing. Chichvarkin founded Yevroset in 1997 and subsequently turned it into the country's largest mobile phone retailer. In late September, citing liquidity woes, he sold Yevroset to billionaire Alexander Mamut in a deal that reportedly involved Mamut paying $400 million in cash and assuming $850 million in debt. Chichvarkin, however, stayed on as chairman of the company until November, when he announced he was stepping down to focus his energy on promoting the Right Cause, a new Kremlin-backed pro-business party, whose Moscow branch he had been tapped to lead. The party's co-chairman, Leonid Gozman, told The Moscow Times on Friday that the party was ready to support Chichvarkin in his legal battle and that the offer was open for him to head up the party's Moscow branch if he returns to Russia and is not arrested. "Our decision [to appoint Chichvarkin] doesn't depend on the opinion of investigative bodies," Gozman said. Gozman called the request for an arrest warrant "yet another example of the onslaught against business" by authorities. Right Cause leaders said they had not been in contact with Chichvarkin for several weeks. The party's co-chairman, Boris Titov, said Thursday that Chichvarkin went on vacation abroad before New Year’s and that he had not spoken with him since. State Duma Deputy Igor Lebedev, a senior Liberal Democratic Party official, said Chichvarkin's flirtation with the new Kremlin-backed party was merely an unsucessful attempt to buy political capital in order to ward off criminal prosecution, RIA-Novosti reported Friday. Chichvarkin last summer participated in the annual party congress of United Russia, which has an overwhelming majority in the Duma and is led by Prime Minister Vladimir Putin.

Central Bank Sets Bottom For Ruble

The Central Bank sought to put a limit on the ruble's gradual slide on Thursday, setting its floor 10 percent below current levels after the currency stabilized in recent sessions.The Central Bank said it would stop widening the ruble trading corridor from Friday -- a process that cut nearly a fifth off the currency's value since November -- and would switch to a managed float.The statement ended a two-month long period of creeping devaluation as the government strove to bring the currency in line with weak oil prices and an economy that it expects to slip into its first recession in a decade this year."From Jan. 23, 2009, the upper boundary of the technical corridor will be set at 41 rubles" versus a euro/dollar basket, the Central Bank said in a statement."The stated value is defined taking into account the remaining risks of worsening terms of trade for the Russian Federation, but the Bank of Russia sees these risks as moderate and does not plan to change this boundary in the coming months," it said.The move comes after Russian officials noted that the depreciation could be coming to an end and after the ruble began to show its first signs of resilience. On Tuesday, it posted its biggest-ever rally versus the basket, and on Thursday it closed at 37.03 -- some way off the Central Bank's weakest boundary."It is a sensible move. They had been very keen to avoid a sudden devaluation for political reasons, so we have this instead," said Nigel Rendell, emerging foreign exchange strategist at Royal Bank of Canada in London."A lot of people have been short on the ruble for a long time, and they might decide the game is up and close their positions so there might be some short-term support," he said. "But the longer-term trend is clearly down unless we get some kind of inversion in the oil price."The Central Bank argues that the softly-softly approach to devaluation has avoided panic among a population that remembers the ruble losing more than two-thirds of its value during the 1998 financial crisis.Prime Minister Vladimir Putin this week ordered that the 2009 budget be reworked at an average price for key export oil of $41, less than half the originally forecast $95.That would mean an economic contraction of 0.2 percent this year, according to updated Economy Ministry forecasts.However, falling imports -- as the domestic economy slows -- will likely keep the trade balance in surplus, giving the ruble some support.Many Kremlin watchers expect Putin to seek a return to his old job as president in 2012, though he himself has not declared an interest.Analysts say his chances of doing that hinge on the handling of the current financial crisis, with the ruble one key factor. But the announcement of a managed float is unlikely to silence the analysts who say controlling the ruble's depreciation -- which has cost a third of Russia's reserves since August -- is too expensive, and a one-off large move or even a free float are needed.Russia's reserves fell a record $30.3 billion in the week to Jan. 16, data on Thursday showed, slipping below the $400 billion mark for the first time since May 2007.