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Tuesday, October 31, 2006

High hopes on new oil futures contract

10–30–2006 RBC NewsRussian Economy Minister German Gref is convinced that Russia’s new export blend crude oil REBCO futures contract has a great future. “The market has received REBCO very positively,” Gref told reporters on Monday. First REBCO deals have already been made, according to the Economy Minister. Any new brand needs time for promotion and recognition, Gref said commenting on the slow reaction of the market to REBCO. He said the Economy Ministry expected this, and that so far “everything goes to plan.” The Russian Export Blend Crude Oil (REBCO) futures contract was launched by the New York Mercantile Exchange (NYMEX) on 20 October 2006.The contract features physical delivery of REBCO on a free-on-board (FOB) basis at the Russian port of Primorsk on the Baltic Sea. The contract size will be 1,000 barrels denominated in US dollars per barrel. The last day of trading will be three business days before the 15th calendar day before the first day of the delivery month. NYMEX will list the contract for 72 consecutive months beginning with the January 2007 contract. Experts say REBCO is set to replace Urals contracts, tied to the price of Brent crude oil. REBCO’s price is calculated based on the market conditions. Given the growing demand for energy and high oil prices, shifting to REBCO will allow Russian companies to boost their profits, which means higher tax revenues. According to Deputy Economy Minister Kirill Androsov, moving to the new oil pricing mechanism will increase budget revenues by about $3 billion a year.

Money laundering in Russia put at $11.2bn

10–29–2006 RBC NewsMoney laundering in Russia is estimated at between RUR 250 billion and RUR 300 billion (approx. $9.3 billion to $11.2 billion) a year, Deputy Interior Minister Andrei Novikov told reporters following an interdepartmental conference on money laundering prevention on Thursday. In this respect, he said, the situation was particularly bad in the credit and financial system and on the consumer market. From January to September 2006, crimes related to money laundering accounted for 31.1 percent of all crimes in the credit and financial system, up from 28.6 percent in the same period of last year. On the consumer market, money laundering crimes made up 19.9 percent, against 24.1 percent last year. The Central Bank continues to combat money laundering, withdrawing licenses from guilty banks. In the first nine months of this year alone, 49 banks were closed at the request of the Interior Ministry, and 60 criminal proceedings were initiated, with total money laundering operations of more than RUR 152 billion (approx. $5.65 billion). Sergei Stepashin, Chairman of Russia’s Audit Chamber, said last week that Russian law did not provide for sufficient transparency of the banking system. Loopholes in the Russian legislation “do not allow us to provide an effective barrier against such widespread financial operations as illegal encashment,” he complained. A bill against those involved in money laundering has been submitted to the State Duma recently. Under this bill, financial institution employees involved in money laundering will be disqualified for five years. This measure will help purify the banking community, the authors of the bill hope.

Saturday, October 14, 2006

West Has Failed to Learn From 9/11 � Russian Pundit

Sergei Karaganov / Photo from www.lenta.ru06.10.2006 - Rossiyskaya Gazeta by Sergei Karaganov - Despite isolated tactical victories in fight against terrorism, the West has failed to learn the lessons of September 11, Russian pundit Sergei Karaganov wrote in his article titled "The battle was won, but the war is being lost", published by the Russian newspaper Rossiyskaya Gazeta on Sept. 27. The Americans have already lost the political war and the U.S. leadership never took the trouble to understand the origin of anti-Western attitudes.
"I did not want to write this article right after the anniversary of the appalling terrorist act of September 11, 2001. The main theme of the article &mdash the thesis that the world is losing the war on terrorism &mdash would have clashed inappropriately with the poignant tributes to the many innocent victims who died that day. The choice not to write about the failure to learn the lessons of 9/11 or about the misinterpretation of these lessons would have been irresponsible, however, from the standpoint of professional ethics and it would have been an affront to the memory of those victims.
"The war on terrorism is not failing everywhere. There have been some isolated victories, although most of them have been of the tactical variety. We were the first to fight against the expansion of militant Islamic terrorism in Chechnya, and we won that fight, but at an outrageous price. The plans to establish an Islamic caliphate from the Black Sea to the Caspian, with a strong possibility of subsequent movement up the Volga, were crushed. People in Russia who were drawn to the militant branch of Islam and were supported by forces from abroad were taught a grim lesson. As far as I know, there are no Wahhabite seminaries in Russia now.
"We won the fight, but not the battle. Russia chose to rely on the military-psychological containment of extremism and separatism. Too little was done, however, to eliminate their causes: the poverty and underdevelopment of some regions in the North Caucasus, inhabited primarily by Russian Muslims.
"The Americans also won two tactical victories. With our help and Iran&rsquos, they routed the Taliban, who had been moving inexorably into the southern republics of the former Soviet Union. Al-Qaida lost many of its bases, but it did not expire and it was not eliminated. Washington&rsquos other tactical victory was its ability to avert a repetition of the tragic events of September 11 &mdash so far &mdash with the help of internal security measures that seriously undermined the appeal of the American society. The special services, separately and sometimes in concert, managed to prevent many terrorist acts in Russia and other European countries, but many terrible terrorist acts nevertheless were committed.
"This is not the main thing, however. The Americans decided that terrorism had to be combated by forcing democracy on people and clambered into Iraq. They have already lost the political war. The country is mired in civil war and has become a huge training ground for future terrorists of every hue. When the Americans leave, and this event is not that distant, this entire international group of terrorists will start spreading out in all directions. I am afraid they will be moving in our direction too. This proved something that had already seemed obvious enough. Networks like Al-Qaida cannot be destroyed by broad-scale military operations. In fact, this seems to promote their growth.
"Almost nothing has been done in the last few years to foster sensible and extensive dialogue between civilizations or to promote participation in the gentle modernization of the Middle East Muslim states and elite, which are lagging behind the progressive countries.
"The West &mdash or, to put it more precisely, the American leadership &mdash never took the trouble to understand that most of the anti-Western and anti-Christian attitudes do not stem from differing values or from cultural and religious differences. Bin Laden does not have many negative things to say about Western culture. These attitudes are largely a result of the West&rsquos unfair treatment of the countries of that region. This impression, compounded by the region&rsquos underdevelopment, the causes of which I have enumerated more than once in this newspaper, has given rise to an increasingly common and increasingly serious Muslim "Weimar syndrome."
"The mounting anti-Western sentiment cannot be blamed solely on the West, however. Bin Laden&rsquos rapidly multiplying followers are not only defending themselves and avenging themselves. They are also taking offensive action. Their goal is the eradication of Western influence and, in general, all outside military-political influence in the Middle East, the elimination of the relatively moderate Islamic regimes, and the triumph of radical political Islam.
"The worst thing of all is that the West, realizing that it is losing either because of the United States&rsquo outrageous blunders or because of the essential inactivity of Europe, is now on the defensive even on the ideological front. There is no need to justify stupid cartoons in a Danish newspaper or Pope Benedict&rsquos recent statement about "aggressive Islam," which was not exactly politically correct. There have been apologies, official ones at that, for the stupidity and the poorly worded phrases, in view of the organized pogroms they supposedly have sparked.
"These conciliatory efforts by the aggressor are whetting the appetites of the militant Islamists and convincing them that the West can be beaten (furthermore, they see us as part of the West, although a weaker and less malicious part). The aggressive and unsuccessful inculcation of democracy, which evoked protests and ridicule, combined with the ideological appeasement of absurd demands, especially in view of all the insults and threats religious leaders and officials in the Middle East are hurling at the West, Christianity, and Judaism, seems positively infantile in the political sense.
"What should Russia do in this situation, now that this volatile mixture of democratic and Islamic messianism, aggression, and appeasement has driven the world to the verge of a war between these civilizations? First, we must not become a battlefield in this war, regardless of how earnestly we are being encouraged to do this.
"Second, we must develop the structures for cooperation and security in Central Asia and the Middle East as quickly as possible with countries which still have some credibility because they have not made too many mistakes. Above all, these include India and China. The Shanghai Cooperation Organization could fill the vacuum of trust and security and avert the war between civilizations.
"Third, we must fight as much as possible against the proliferation of nuclear weapons in the Middle East with every possible partner, but not at our expense. We do not want Iran to be a nuclear power, but we do not want a hostile relationship with Iran and we cannot afford to have Iran as an enemy.
"Fourth, if the proliferation of nuclear weapons begins, and they start falling into the hands of irresponsible groups or terrorists, which easily could happen as a result of, for example, the predicted sociopolitical upheavals in Pakistan, we must be ready to take the most resolute steps. public officials renounce the use of nuclear weapons in any situation, but I think we cannot exclude even this possibility.
"The fifth and final thing we must do is to make ten times the effort to deescalate the conflict, to expand the dialogue between civilizations, and to avoid involvement in this conflict. We must take a stance of armed neutrality. Everyone knows that it can never be absolute, however. We have to avoid situations forcing us to make a choice. We already made this choice once in Chechnya. It would be too bad if we were to be forced to make this choice again by the stupidity, messianism, fanaticism, or political escapism of others."

Putin on Russia's Oil Dependence, Foreign Affairs and Religion

12.09.2006 The Financial Times by Stefan Wagstyl - Vladimir Putin met foreign academics and journalists at his countryside residence at Novo Ogarevo on Sept. 9 to discuss Russia’s domestic and foreign policy, energy and economy issues. The transcript of that conversation first appeared on The Financial Times website, and was published on the official website of the Russian president.
Vladimir Putin started with some opening remarks about energy. "Oil and gas energy has always been very sensitive elements of world politics and today this is true as never before. (There are) problems in the Middle East and Iran and this aggravates energy problems around the world. The world is interested in the stability of Russian supplies and in Russia remaining a stable partner for her counterparts. Still we have much in common and a lot of common interests and I propose what should unite us should be to work for cohesion and making the world more reliable and more predictable..."

FT: The oil age may end much sooner than oil runs out because of technological change. How will Russia adjust and develop other sectors?
"We are working in this area. The academy of sciences and business are working on renewable energy sources and hydro-electric energy... We are working on the basis that Russia not only today but in the medium term will play a significant role in world energy.
France has 80 per cent of its energy from nuclear sources. It is 16 per cent with us. We have started and are putting together a programme to build up nuclear energy until we will reach 20 to 25 per cent of nuclear energy in the total energy supplies of our economy.
Solar energy will be more effective in other (warmer) countries. Hydro-energy will be developed. Actually our hydro energy potential is great.
Our assessments (of our potential) are a little less than for China but we will be in second place and we intend to develop the hydro sector.
But we will use the present situation in the market (for oil and gas) it is favourable to develop our renewable energy sources."

Is Russia an energy superpower?
"I would prefer to abandon the terminology of the past. Superpower is something which we used during the cold war time. Why use it now?... We have tremendous potential in the energy sector and not everybody appreciates the potential of this energy. What is at issue now is how to make use of this tremendous potential.
It would be highly appropriate for Russia not just to produce and sell but to use this favorable factor in the economy — not only to solve some problems but to develop high technologies. We should not just consume hydro-carbon-fuel but use it to develop nuclear energy, hydro power and renewable energy sources. This is what we are going to do.
I have never stated Russia is an energy superpower but we have more reserves than almost anybody else. We have always behaved and we will continue to behave in a responsible way. We intend to participate in the elaboration of common rules in the energy sector and to abide by rules which are developed together. But these should be fair rules that include the production of energy, the transport of energy and the consumption of energy.
"(The G8) agreed that security should not be just for consumers but also for producers." Putin complained about long term take or pay gas contract where he said consumers had broken agreements. "Our security is hurt by this."
[Putin referred to the European energy charter which Russia is under pressure from the EU to implement and open its gas pipelines to private companies. He said Russia had analyzed the proposal and had found "extreme profits will go to intermediaries between producers and consumers". "It will not bring down prices. Prices will continue at current levels or grow. This (ie cooperation in energy) should be equal cooperation. If they want something from us, if we allow them in what will be the benefit for us. They said they will remove some (barriers) but there is no gas production in Europe and no gas pipelines in Europe. So let’s have something equivalent in western Europe and discuss how we will be let in."
Putin complained that although Cocom lists have been cancelled the US state department still maintained high-technology export controls.)
Putin also complained the European Energy Charter did not create an open market in nuclear fuel. "In the nuclear fuel market we should be put on to an equal basis." France was free to supply nuclear fuel, he said. "We hear no hue and cry over this but...this (Russia’s position on the charter) is presented as Russia’s refusal to ratify. ..First do what you agreed to do."
"What we want is to achieve equal relations. We don’t want superpower status. We believe this status is deliberately fostered within the EU in order to remind (people) that Russia (used to be) the evil Soviet Union."]

How do you see relations with Asia developing over the next 10 years or so?
"Economic activity is moving from the Atlantic ocean to the Pacific ocean.....Russia has a certain natural advantage because it also borders the pacific ocean....we are talking with our neighbors and partners.
We would like to settle all our outstanding disputed issues with Japan, including the territorial issue on acceptable conditions for Russia and Japan.....the search for the solution will not be easy or fast but it will be possible.
As for China, we have reached a level of relations we never had before.....I believe in our entire history relations are at their best...(The conditions exist) for maintaining the best possible relations for a long time." Putin talked of common economic and political interests including in manufacturing, military equipment, technology and energy.
".....As for energy, today only 3 per cent of our exports are accounted for by Asian countries. But in 10-15 years from now that region will account for 30 per cent of our exports in the oil and gas portfolio. We intend the construction of two gas pipelines from west and east Siberia and we intend to go forward with these projects.....experts are working on possible routes for west and east Siberian pipelines. I believe we have very good prospects and it is quite doable.
(As for oil), we have started the construction of a pipeline with an (annual) capacity of 50-80 million tons. About 250 kilometers has been already built in a year. I am sure we will (soon) bypass Lake Baikal..."
Putin said the pipeline would be built to Skovorodino about 100-150km from the Chinese border. Russia would discuss with Japan how to transport oil from Skovorodino to the pacific coast — initially by rail and later, in the second stage of the project, by pipeline. "We are working on how to do it because we want the second stage to be as economically viable as the first stage. We need to do more (oil) exploration work in east Siberia.

How do you intend and to manage and use the large budget surpluses you are accumulating?
"The present and future of our economic policy and our personal priorities boil down to the fact that the (increases in) expenditure levels should not exceed the percentage growth in the economy and should be closely linked to the efficiency of our country. We are very aware of the fact that there should be a healthy developing economy in this country."
Putin said "additional funds" drawn from reserves accumulated in the stabilization fund and in the government budget were available but he expressed concern about the possible impact on inflation which had to be reduced to "acceptable" rates. He forecast inflation would be 9 per cent this year and hoped that in the next few years it would drop to 4-5-6 per cent. Spending on health care, welfare and education would increase — not in the manner of a petrodollar economy but in line with economic growth.
Putin said the government had grouped spending into special projects, including health care, education, welfare and infrastructure. Agriculture was also on the list because agriculture meant not only food production but the livelihoods of about 40m people.
However, Russia in contrast to some European states, Russia would not subsidize exports or close its markets to for agricultural products. "We will do what is in the interests of our own consumers. We will use customs regulations but we are not intending to close down our markets and shut down our economy because it would be immoral and detrimental to the consumers our country."
Putin said he also wanted to diversify the Russian economy by promoting high technology and other sectors through the creation of high technology zones and through tax policy. "We have been gradually shifting the burden of taxation to the energy sector so we can release high technology from very excessive taxation."

The Shanghai Cooperation Organization (SCO)...
Putin said he was surprised by the scale of the SCO’s development. Russia had not planned for it to have a wide role but to limit itself to less significant issues such as border controls between China and the states of the former Soviet Union. "A historic event" was the signing of a border treaty with China two years ago — achieved after 40 years of negotiations. The SCO developed a central role in the settlement of border issues.
"The organization (then) started to develop and spread out. I am aware of the fact that in the depths of the special services perhaps people will think that Russia and China have some clandestine motives. Are they cooking something up there?" But Putin denied this, saying that countries created the organization to cooperate with each other. "After the bipolar world collapsed there was a demand for other centers of power. We understand this great principle but we are not planning anything like that. The SCO has a good future. We are not going to turn this organization into military-political bloc...."

What is Russia’s position in the crisis over Iran?
"Russia is opposed to the proliferation of mass destruction weapons including nuclear weapons and in this context we call upon our Iranian friends to abandon the uranium enrichment program. The Iran problem is only part of the problem of threshold countries — countries which would like to develop nuclear energy for civilian programs.
Russia has several concerns.
First, the enrichment of uranium for the level needed for the nuclear energy sector...is very difficult to control. If a country does any enrichment it is very difficult to verify whether the threshold has been crossed between energy and weapons programs and spent fuel is a problem because it can be used to produce weapons grade uranium. Therefore we propose the creation of international centers for spent fuel so counties can develop nuclear energy without their own fuel cycles.
(As for Iran), yes, indeed, they do have the right to state of the art technology. Why not in nuclear energy?" Putin argues that Iran was a special case among countries developing nuclear power such as Brazil and South Africa. "We should recognize that neither Brazil nor South Africa have established in their constitution that some other state should be destroyed....This is not to the benefit of world security...Iran is in a very dangerous area, the Middle East area. That’s why we ask the Iranians to consider some alternatives.
As regards (United Nations) sanctions, I think we should together with our partners in the Group of Six think together and conduct additional consultations with the Iranian state and only afterwards think about proceeding to a sanctions regime."

How will Russia respond to its population decline and the issues raised by immigration?
Putin said, firstly, that Russia was taking steps to try to increase the birth rate by improving medical centers for women, increasing social benefits for mothers and children and for those who adopt children. Russia had to create conditions for women to return to work more easily after child birth and to invest in housing.
Next, the government was committed to reducing the death rate by cutting the deaths of those people, men especially, who died prematurely through alcoholism or accidents at work.
Thirdly, immigration was nothing new for Russia. The problems caused were less acute than in the west because Russia was a multi-ethnic and multi-religious country. Immigrants from the states of the former Soviet Union (who dominate Russia’s inflows) were not foreign to Russia and spoke Russian, said Mr Putin.
"Many immigrants come to western countries and there are arguments. In our case people have not yet arrived and they are already assimilated... Of course we should take care of the interests of the indigenous people and we do."

Does Russia prefer a strong or a weak European Union? What is its stance on Kosovo and on regions with frozen conflicts?
"we are interested in Europe being a strong state...It’s not easy for us to maintain dialogue with the EU if there are no clear cut structures or if Europe is in a transition or transformation phase when every few months a president or chairman is changed...We are not going to manipulate or engage in some manipulations inside the EU. And what’s more if the European states speak with a single voice in my opinion it will create favourable conditions for the development of international relations..."
(As for frozen conflicts,) we are ready to work with all our international partners and the EU as a whole in dealing with problems whenever and wherever they exist. This includes Abkhazia, South Ossetia, Nagorno Karabakh and Transdnistra.....
... As far as Kosovo is concerned we have (UN) Resolution 1244 and we cannot manipulate or ignore the Security Council decisions. Also our actions in this respect should be coordinated certainly and care should be taken of all interests in the process. One can`t apply one rule to Kosovo and other rules to other situations. In what way is the Kosovo situation different from the Abkhazia situation or the South Ossetia situation. In nothing. They are no different. If we start to manipulate the situation we will find problems. People will feel disappointed and disillusioned."
In Kosovo, we have to think about what’s going to happen in future if Kosovo`s independence is recognized.....We heard it said things would be alright in Iraq but in Iraqi Kurdistan only the Kurdish flag is raised."

Is it right for senior Kremlin officials to assume jobs at the head of large state corporations such as Igor Sechin at Rosneft?
"We are talking about a general practice and not about the presidential administration. It applies to the government as well. It’s not that people are working in the Kremlin and in private companies. They don’t work in the companies, they only represent the interests of the state in a company where there is a state-owned share." Putin said this had no bearing on how these officials dealt with other companies. In future independent lawyers could represent the interests of the state. "But at this stage it isn’t realistic because these lawyers would immediately start taking care of their own interests..."

What of Russia and Germany and the issues raised by other EU states about the planned Baltic gas pipeline?
Putin said there was political and economic competition among EU states. "Several of our partners believe that developing (bilateral) ties including energy ties are not in their interests and they`re trying to interfere with that just like they interfered in the pipeline between Russia and Germany. Nothing has changed in that (behavior)...This is the only explanation of the very confused problem of the Northern Gas Pipeline. It does not damage anybody’s interests. It does not harm anyone. It does not take anything away from anyone. The $60bn worth of gas which are been contracted will go through the new route. We are not taking any (gas) pressure from pipelines going through Poland and Ukraine. They are still there. (Their) experts understand it very well. They simply pretend they don’t know it.
What I am very much surprised is that there are some political fears in Germany. That they don’t understand (these issues)...This is a very practical connection between the Russian and European gas systems, made without damaging any interests. The struggle against this project can only be political.
"It seems serious people do understand this and the (German) government takes a very pragmatic stand in the interests of their country...."
Putin expressed satisfaction with plans for Russian pipeline investments in Hungary Bulgaria and Greece and said he was not concerned about western plans for the Nabucco pipeline which could link central Europe, Turkey and the Caspian.
"I said we intend to increase oil and gas exports to Asian countries (to 30 per cent of the total). We will certainly do it but there’s a lot of political involved."
Putin referred to Ukraine saying that Russia had to consider the $5bn a year it has lost annually over 15 years in supplying cheap gas to Kiev. But — "Thank God" - there was finally an agreement earlier this year to raise prices.
"Our European and American partners decided to support the Orange Revolution...It’s is kind of shocking, problematic...If you started it, then go ahead and pay (ie subsidies to Kiev). You want the long term political benefits but you want us to pay. (If) you don’t want to pay, take a realistic look at the situation."
Putin argued that Europe would suffer economically if its metal industries paid $250 per thousand cubic meters for gas while Ukrainian competitors paid $50. "It’s a political decision by our western European and American partners. It`s a mistake and a bad approach.
"But despite all the problems we have achieved (in Ukraine) benefits for all European partners." Putin said the negotiations over the gas contract with Ukraine had been difficult but Russia had succeeded in reaching separate agreements for transit to gas to Europe and the supply to Ukraine. "The five-year transit contract which governs the energy supply to Europe, this is a huge step towards energy security in Europe. Great credit should be paid to President Yushchenko. He is a serious and responsible politician who does not go for expediency and who is a serious player in this market and makes Ukraine a respected country...."

What are you three biggest achievements and what advice to you give to your successor?
Putin said his achievements were to enhance the standing of the Russian state, boost the economy and repay foreign debt, and restore the international status of Russia. For the future more had to be done to improve the lot of the poor, to fight corruption, to deal with the population decline, encourage local self-government and diversify the economy.
Putin returned to the question of Kosovo. "I don’t know whether we will make the timing the resolution (which the US has suggested could happen this year) or what it will look like. But we will seek to use the rules of international relations so that they can be applied to all regions of the world. We will be guided by the interests of the participants in international relations in Europe including Serbia. And if the solution would not acceptable to us we will not hold back from using our right of veto."

What do you understand by the term sovereign democracy and what do you think of the debate in Russia about this concept?
Putin said that sovereignty had to do with a country’s capacity to conduct its affairs without interference from abroad, while democracy had to do with a country’s domestic political context.
So these were two different things. But, at the same time, the world was becoming more globalised. Countries which had made economic progress and which could manipulate global mass media could project their influence through the media across national borders. "Of course there are still different nations but the global world in which we live creates a platform for such discussions. I don`t think it`s harmful if people argue about this."

Is religion important in stabilizing Russia?
"Russia has always been a very religious country." Putin recalled how his own family came from a village 130 kilometers from Moscow, where his family could use church records to trace its history back to the seventeenth century. "I had never thought how stable society was. For 300 years the family lived in the same village and went to the same church."
The Communist revolution changed every thing and created a spiritual vacuum. "Major harm has been done by the state to religions — to Jews, to the Orthodox and to Muslims — and this harm has not yet been compensated. "I think the state should support the church but at the same time we are a secular state...."

Why is it that Russian policy is positive towards the US but there is a lot of anti-American sentiment in the media, including in the state-controlled media?
Putin said the programs reflected Russian life and Russian society while foreign policy pursued pragmatically. "There is a certain dichotomy between the sentiments of the public and their perceptions — and our real policy."
Putin complained that sometimes it was difficult to work with the US on issues. "We are not going to work against American interests but we are to uphold our interests taking account the interests of our partners. This works well only if our interests are taken into account (by others).
"We have very good relations with president Bush. We want to enhance our relations with the US." Putin complained that while other countries were able to set up lobby groups in Washington, the state department was not allowing Russia to do so, and would not explain why not. "This is a critical issue. It is the presumption of guilt which was applied to the Soviet Union and now it’s mechanically transferred to Russia..."

Are you strengthening further central control over the region and do you still rule out standing for a third term in 2008?
"Public opinion is that an overwhelming majority would like stability without any change (in the leadership). But I don’t think stability can be assured by one man alone but by the overall state of society and this depends on the constitution to a large degree.. I say everybody should be equal before the law. I have no right to have any exceptions made for myself. This would be destabilizing."
As far as centralization of power is concerned, Putin said he thought he had done the right thing in assuming the power to nominate regional governors and take the power to do so away from the local populations. This was necessary in a country without effective parties, where local clans bound together by economic interests could take power. In any case, regional parliaments retained the right to reject the Kremlin’s nominations.
Meanwhile, the Kremlin was encouraging the development of municipal government which had "never before happened in the past." This is a very significant step which has not been finalized yet. The notorious vertical power is not just a construction but it’s a redistribution of authority and power. It’s a search for the best possible organization of the state so that each level of the state is most effective. Not everything has been optimal but we are searching for effective solutions.

World Bank Says Russia�s �Unpredictable� Policy Deters Investment

13.10.2006 MosNews - Russia’s “unpredictable” policy decisions are deterring investment and leaving the country far behind rival developing economies China and India in global competitiveness, the World Bank said on Thursday, Oct. 12.
“The investment climate in Russia has ameliorated considerably over the last several years, but it still has an unstable character,” it said in a new report that was quoted by the AFX.
“In Russia, one of the main problems, according to firm surveys, is policy instability... not knowing what policy changes are going to occur tomorrow,” said Raj Desai, one of the report’s authors, while presenting the report.
Regulations that are “interpreted inconsistently” and “selectively applied... can have a deterring effect on investment,” Desai said.
Moscow has rattled some of the biggest Western firms working in the country in recent weeks, including energy titans Shell, Total and ExxonMobil, with regulatory moves widely seen as a campaign to revise the investment terms it agreed with the companies in the 1990s.
Analysts have said that Moscow’s ultimate motivation is to increase the stake of state companies such as oil giant Rosneft and gas monopoly Gazprom in the country’s most valuable energy projects.
Adding to the unpredictability is “preferential treatment for some firms over others,” Desai said.
The author pointed to a new report on global competitiveness by the World Economic Forum, an independent Geneva-based economic group, that ranked Russia 75th out of 117 countries surveyed in terms of its regulatory atmosphere, with 117th being the worst. This contrasted sharply with China, which was ranked 48th, and India, which was 50th.
Also hampering Russia’s global economic competitiveness is far lower worker productivity than other developing states, the World Bank report said. “For one dollar of salary, Russia workers produce two times less products than an Indian or Chinese worker,” the report said.
Productivity in Russia’s manufacturing sector is rising more slowly than salaries, “which limits competitive capacity on the international market,” the World Bank said.

Central Bank ChairmanDefends Russian Banks� Right to Invest in Europe

Sergei Ignatyev / Photo from www.lenta.ru13.10.2006 MosNews - Foreign banks are welcome to expand in Russia, but Russian banks also have the right to invest in Europe, head of the Russian Central Bank Sergei Ignatyev told a press conference in Dresden on Thursday, Oct. 12.
His comments came in reaction to concern expressed in France and Germany over the purchase of 5 percent stake in the European Aeronautic Defense and Space Company (EADS) by Russian state bank Vneshtorgbank.
Sergei Ignatyev was in Dresden for a seminar between the European Central Bank, euro zone national Central Banks and the Bank of Russia. Speaking at the seminar Ignatyev said that the Russian Central Bank is aiming to gradually reduce inflation and ensure the stability of the ruble. In the long run, it wants to drastically reduce its involvement in the foreign exchange market, he said.
Seminar participants agreed that Russia currently enjoys strong growth momentum, but some said that maintaining such high growth rates over the longer term will be a challenge.
European Central Bank President Jean-Claude Trichet said that strong GDP growth in Russia has a positive impact on the euro zone and that Russia is an important strategic partner for the euro area, particularly in the energy sector.

Thursday, October 05, 2006

9/11 Memorial by Zurab Tsereteli Unveiled in U.S.

Photo: AP12.09.2006 MosNews - A 100-feet monument by Moscow sculptor commemorating victims of terrorism in the United States has been unveiled in New Jersey, the RIA-Novosti news agency reported on Tuesday. Zurab Tsereteli’s Tear of Sorrow to the more than 3,000 victims of 9/11 attacks and the 1993 bombing of the World Trade Center in New York left St. Petersburg for the U.S. last August. The names of those who lost their lives are inscribed on the bronze monument. The 150-metric ton monument is a gift from the Russian government. At the unveiling ceremony, the sculptor said, “All that I can say is in front of you. This Tear of Sorrow will become a tear of joy if the U.S. and Russia unite in the fight against terrorism.” The centerpiece of the monument — a huge crystal sculpture representing a tear with water pumped inside it — sits atop a 30-meter-tall bronze-plated iron stele cut in half. Bill Clinton and Secretary of the Homeland Security Department Michael Chertoff attended the unveiling ceremony. In September 2003, Tsereteli, who has been both praised and criticized for mammoth bronze monuments in Moscow, and the mayor of New Jersey agreed to have the monument erected on the Hudson peer overlooking the World Trade Center redevelopment site. However, the mayor died and New Jersey City Hall refused the Russian sculptor’s gift because local residents objected. Controversy also emerged when it transpired that the sculptor had mistakenly included the names of about 40 people on the monument who had survived the attacks, but were on some lists of presumed fatalities. In March 2005, the authorities of nearby Bayonne offered a site for the monument.

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