Russian Telecoms Proxies Six Months Through 20 March 2000 (20-Day Moving Average) 400

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20 March 2000 IN BRIEF Contents “Panem et circenses” [Bread and Circuses] IN BRIEF ...... 1 Juvenal X 81 POLITICS AND GOVERNMENT ...... 3 MACROECONOMY ...... 5 MEDIA AND COMMUNICATIONS ...... 13 ENERGY ...... 24 SPORTS ...... 25 UPCOMING EVENTS ...... 27 INDEX TO THIS ISSUE ...... 28

with NATO as to pursue his ruthless crackdown in Chechnya.

Not since the Bolshevik Revolution of 1917 has a Russian leader been less bound by ideology.

Putin the pragmatist will focus his country’s con- siderable resources on the task of rebuilding the Putin Rallies the Troops - and Voters (Reuters) weakened former Superpower as an assertive, if not dominant, economic and political player. We’re All Aboard and Ready to Go He has the broad support of an electorate whose national pride was wounded by the West’s Described by its prominent passenger as a “pow- assertiveness in Kosovo and Russia’s reduced erful and obedient machine”, a Sukhoi jet fighter status on the global stage. today spirited presidential campaigner Vladimir Putin to a pre-election morale and image boost- And with less than a week before the election, ing appearance in Grozny, the devastated capi- Putin pledged to start withdrawing troops from tal of Russia’s war torn province of Chechnya. Chechnya. Russian troops occupied Grozny by

From Taipai to the IMF to Russia, this is a big “Modern Russian society does not week for election campaigns, with all their at- identify a strong and effective state tendant promises and posturing. The hot favor- with a totalitarian state: Russia needs ite in Russia’s Sunday presidential election, act- a strong state power.” ing president Vladimir Putin, is all things to all people: both pro-market and pro-welfare and as Vladimir Putin keen to engage the West through reconciling 31 December 1999

Griffin Capital New York +1 212 759-6678/fax 759-6783 [email protected] This material is compiled for the private information of the recipient, and neither Griffin Capital nor its affiliates are soliciting any action or making any recommendations based upon it. This material is based on information provided by sources we deem reliable including Reuters, Bloomberg, PRNewswire, Prime-Tass, Kommersant, Interfax Vremya, The Moscow Times CentreInvest Research,Euroweek, ABN AMRO, company data and other sources, but we do not represent that it is accurate or complete and it should not be relied upon as such. This information does not have regard to the specific investment objectives, financial situation or the particular needs of any individual or entity who may receive this material. Investors should seek financial advice regarding the appropriateness of investing in any securities or implementing investment strategies discussed or recommended in this material and should understand that statements regarding future prospects may not be realised. Vol. III, No. 3 page 1 of 31 RussiaRussia ReviewReview GRIFFIN CAPITAL

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IN BRIEF (Continued) Since the capture of a prominent Chechen war- force on 6 February. lord, Russian Minister for Mass Media and the Press Mikhail Lesin has declared that quoting “The necessary contingent will stay and carry suspected terrorists in print or allowing them to out their duties,” Putin said in comments car- speak on television or radio is forbidden. Very ried on Russian television NTV. “But as for the little adverse war coverage now appears in the excessive part, as I said, there is no reason to local media. These media restrictions resemble hold it here, as we want to get along with our those imposed to little effect by the British gov- obligations over flank limits in Europe.” ernment in the 1980’s in regard to their own separatist movement in Ireland led by the IRA. Putin, the expected first-round winner in Sunday’s election, has done little open cam- In a continuing series of courtly visits with the paigning, relying instead on almost daily televi- great and the good of the West, Putin and his sion appearances for working trips to Russia’s wife hosted British Prime Minister Tony Blair and regions. Putin’s popularity has risen in line with his wife on the 10th in St Petersburg where they Russian’s support for the war against Islamic attended the opening of Sergei Prokofiev’s “War militants in Chechnya. and Peace” in the Marlinsky Theater. The next day, Putin met with World Bank President James Wolfensen to discuss money matters. “Vladimir Putin is like a mirror where everyone sees what they want to. “Russia is, in principle, The lack of a concrete manifesto a self-sufficient country”, is designed to avoid alienating but “if credits are given any part of the electorate.” it is simply stupid to turn them down.” “It would be wrong to break our relations Yury Levada, Director with international financial institutions ... VTsIOM polling institute But it would be wrong to beg for anything.”

In December, Putin said the end to military ac- Vladimir Putin tion in Chechnya was “close.” Putin today gave 8 February no indication of when troops would be withdrawn. Elsewhere, Gazprom Chairman Viktor Earlier this month, Russian artillery and war- Chernomyrdin visited New York City on 22 Feb- planes blasted a village in southern Chechnya ruary as a soft-spoken, “open-for-business” en- where the Associated Press reported 700 rebels trepreneur. He appeared at a meeting organized were fighting Russian attempts to push them by Eurasia Group in New York at the same time out. A week earlier, the AP reported 85 Rus- as former Deputy Prime Minister and Alfa Bank sian paratroopers were ambushed by Chechen Vice Chairman Oleg Susuyev. Susuyev reas- fighters in Chechnya’s southern mountains. suringly opined the Putin administration would not support negative restrictions on foreign participation in joint ventures. “Putin will trample on citizens’ rights in the name of a powerful state.” This week, Sergei Kiriyenko, Former Prime Min- ister of the Russian Federation will be in New Alexander Kabakov York and Washington DC. He previously cau- Kommersant tioned a western audience in their planned in-

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20 March 2000 IN BRIEF (Continued) vestment in the energy sector, given the uncertainties over who will be the key power brokers following Putin’s expected March election.

On 13 March, Putin co-chaired a session of the Foreign Investment Advisory Council in Moscow, a refreshing change from his closed predeces- sor Boris Yeltsin. However, it remains to be seen what he intends to do after listening to the advice of foreign investors. And the uncertainties over who will be the key power brokers following Putin’s expected election remain, with many investors taking a “wait and see” attitude before new appointments are made.

All these visits with the West were preceded by Putin’s astonishing interview with David Frost on the BBC, where he said there is no reason why Russia shouldn’t join NATO. This startling est pace in a decade. remark was promptly downplayed by Igor Ivanov, Russia’s Deputy Minister of Foreign Affairs. Moscow police detained two residents from the Vladimir region, northeast of Moscow, and con- “Putin has no ideology. fiscated Faberge eggs and other works of art In this sense he reflects the state worth $300,000 stolen from the home of a promi- of Russian society nent Moscow antique collector last November. which is tired of being held hostage to history and tired of chaos.” POLITICS AND GOVERNMENT Vyacheslav Nikonov Operation in Chechnya Ended Politika Fund “The military operation in Chechnya ended. And in yet another well orchestrated pre-elec- We can say that the terrorist and tion move, Russian publisher Vagrius published separatist forces were crushed.” on-line a series of interviews with Acting Presi- dent Putin. It may be of some significance that Igor Ivanov the interviews were conducted by staff journal- Russian Deputy Minister of ists from Kommersant, a respected newspaper Foreign Affairs acquired under murky circumstances and now Speaking at the National controlled by Boris Berezovsky. The material Chamber of Commerce contains no policy revelations and may be viewed Santiago, Chile at http://www.vagrius.com/html/books/putin 13 March (Bloomberg) The benchmark Russian Trading System stock index rose to a 21-month as investors who were 10 Mar (Interfax): 85 Russian paratroopers were burned by the country’s default and devaluation ambushed by Chechen fighters in Chechnya’s in 1998 return to an economy growing at its fast- southern mountains on 29 February according

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7 Mar (Interfax): While visiting the textile center POLITICS AND GOVERNMENT (Continued) of Ivanovo, Russia’s Acting President Vladimir to Russian Defense Minister Igor Sergeyev. “A Putin made a series of statements, which seem great number of bandits were eliminated, but to reflect a liberal bent in his economic views. unfortunately our guys were killed too, Sergeyev ...Comment: Putin suggested Russia’s future said, adding, “We will be killing them until the economic development would depend on en- end,” the agency reported. suring freedom for all economic actors, reduc- ing the tax burden, and eliminating artificial con- straints on tariffs for natural monopolies. Putin’s remarks suggest strong support for a market economy and imply he might take measures aimed at the further liberalization of the economy. Given that Putin’s extremely high poll numbers do not need much boosting from pre-election populist rhetoric , his statements may actually reflect his policy views.

6 Mar (Interfax): A Russian court overturned a 8 Mar (AP) Komsomolskoye, Russia: Russian decision by the Central Electoral Commission artillery and warplanes blasted a village in south- that disqualified Vladimir Zhirinovsky, leader ern Chechnya where 700 rebels were fighting of the Liberal Democratic Party, as an official Russian attempts to push them out, the Associ- presidential candidate. Zhirinovsky can run as ated Press reported. a candidate in the 26 March presidential election and will be registerd as such according to The regional military command told the ITAR- Alexander Veshnyakov, chairman of the central Tass news agency that the rebels were suffer- electoral commission. ... Comment: While ing heavy losses as they tried to escape to the Zhirinovsky’s presence on the ballot will not af- nearby mountains. The seizure of fect the likelihood of a Putin victory, it will cer- Komsomlskoye, on the edge of Chechnya’s tainly increase voter interest and participation. southern mountains, undermined Russian claims The flamboyant Zhirinovsky has a loyal core of to have all but defeated the rebels, the AP said. supporters who may have boycotted the election if denied an opportunity to vote for their can- In other reports, snipers in Grozny continued fir- didate. Now that they believe Putin’s election is ing on Russian troops almost a month after the no longer a fait accompli, voter turnout should Chechen withdrawal. Small groups of Chechen increase and Putin will be spared the potential fighters have also entered the city disguised as embarassment of participation less than that le- civilians in order to stage attacks before the gally required for the election to be declared Russian presidential elections on March 26, ac- valid. cording to the federal command. Other candidates include Yuri Skuratov, sus- “All talk about a guerilla war pended general prosecutor of Russia, Gennady is a deliberate Zyuganov, leader of the Communist party, or erroneous mystification.” Grigory Yavlinsky, leader of the Yabloko party and Chechen businessman Umar Dzhabrailov. General Valery Manilov First Deputy Chief of Staff 5 Mar (Bloomberg, Centre Invest Securities): 4 February, Interfax While attending an All-Russia symposium on the

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20 March 2000 POLITICS AND GOVERNMENT (Continued) “Until Russian capital starts returning back to POLITICS AND GOVERNMENT (Continued) the country, foreign investments in Russia will fuel and energy sector, Acting President Vladimir not achieve their full scale. The return of Rus- Putin declared that the government should sup- sian capital from abroad and the decline of its port the process of restructuring utilities. ...Com- flow out of Russia will be a good signal to many ment: Those attending the Surgut gathering of foreign companies. Thus, we want to find a way industry heavyweights witnessed a battle be- to solve this problem. The state should over- tween UES CEO Anatoly Chubais and Fuel and come the weakness and inefficiency of its gov- Energy Minister Viktor Kalyuzhny over the fu- ernment in everything that concerns property ture development of the energy sector. While rights, investors’ rights and creditors rights. We Chubais outlined a 2-5 year plan for reforming will be persistently moving in that direction.” the sector, the Fuel and Energy Minister accused him of poor management of UES, the national ... and Foreign Investors Blush power grid, and claimed that the Chubais reform plan would be disastrous for Russia’s energy sys- 13 Mar (Bloomberg): Throughout this section tem. Putin, speaking after the verbal battle be- are comments from foreign investors and con- tween Chubais and Kalyuzhny, stated that he is sultants at the twelfth meeting of the Foreign leaning more towards supporting restructuring Investment Advisory Council in Russia: of the sector, including the introduction of mecha- nisms to facilitate competition between sector “We applaud the progress that has been participants. Thus, Putin’s statement may be made in Russia and it should be seen as de-facto confirmation of his support for understood by everyone that the Council, the Chubais reform plan. This would mean that Acting President Vladimir Putin and all restructuring of the utility sector is likely to have members of the government share a government support. common objective and that is to make Russia, and the economy of Russia ... a 3 Mar (Associated Press): Duba-Yurt, Russia: preferred investment option for not only Chechen rebels killed 37 soldiers and wounded foreign, but Russian investment. It is 12 others when they ambushed Russian Interior within that context that our Ministry troops in Grozny, the Associated Press recommendations were made reported, citing the military. The ambush is one today and have been for of the largest rebel actions in the Chechen capi- the last several sessions.” tal since Russian forces claimed to have taken full control of the capital February sixth and sig- Bill Kimsey nalled that the rebels remain a force. “This is CEO Ernst & Young International the beginning of a guerilla war,” Baultdin Bakuyev, a Chechen field commander, told the Marlboro Man Rides AP. MACROECONOMY into Kazakhstan Putin Woos Conferees ... 13 Mar (Bloomberg): Philip Morris Cos., the world’s largest tobacco company by sales, will open a $340 million plant in Kazakhstan in May, 13 Mar (NTV): Russian Acting President Vladimir the company said. Putin spoke at a foreign investment conference in Moscow. Following are some of his comments, The factory will make tobacco products to be which were broadcast on NTV: sold in Kazakhstan and other Central Asian re-

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20 March 2000 MACROECONOMY (Cont’d) “BMWs assembled in Kaliningrad currently are publics and could also export tobacco to Rus- being actively sold through the BMW dealership sia. network in Russia,” the company said.

International tobacco companies have invested BMW said it started selling cars assembled in more than $1 billion in the former Soviet Union Kaliningrad in late 1999. Russians already drive since 1992, with most of that going to the Rus- an estimated 120,000 BMWs. BMW sold 1,000 sian Federation. In that time, Philip Morris has become the largest foreign investor in the to- “Mr Putin has encouraged us bacco industry in Central Asia. to come with frank comments on what needs to be changed. Philip Morris entered the Kazakh market in 1993, We see Russia as a rich country. buying up a number of local tobacco producers. Rich in natural resources, Today it claims 80 percent of the local market, rich in its people. making and selling Madeo and international That is a good basis to build on. brands such as L&M and Chesterfield. It is very easy to see the problems and discuss what should be changed. Philip Morris has also invested about $500 mil- But, having followed all these develop- lion in Russia in the past five years, including ments opening a $330 million plant outside St. Peters- in Russia in the past few years ... burg. I think a lot has happened already.”

It is also completing expansion of its plant in the Goran Lindahl Krasnodar region in southern Russia. President and CEO ABB Group Russia Produces 1000th BMW imported cars in Russia in 1998. 9 Mar (Bloomberg): Bayerische Motoren Werke AG, Germany’s third-largest carmaker, Russia’s Economy to Grow in 2000 assembled the first 1,000 cars at a plant in Rus- sia as it seeks to expand in the market. 7 Mar (Bloomberg): Russian economic growth is set to accelerate this year, driven by higher BMW set up a Russian assembly line last year domestic spending and a rise in commodity ex- with Avtotar, a carmaker, in the Kaliningrad report earnings, economists said. gion that borders Poland. BMW said it would invest 215 million deutsche marks ($61.5 mil- The economy could expand between 4 and 5 lion) in the next three years to establish the op- percent after growing 3.2 percent in 1999, said eration and a sales network. The models Oleg Vyugin, chief economist at Troika Dialog planned for assembly include the 5-series se- brokerage and former first deputy finance min- dans and Land Rovers. ister. Other economists agreed with his projec- tion, which exceeds current government fore- International carmakers have been seeking ways casts of 2.5 to 3 percent growth this year. to cut costs and offer more competitive prices after the market for imported vehicles shrank “The source of this increase will be the growth following the ruble devaluation in 1998, which of household consumption and, still further in- made imports more expensive. creases in net exports,” Vyugin said at a meet- Vol. III, No. 3 page 6 of 31 RussiaRussia ReviewReview GRIFFIN CAPITAL

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MACROECONOMY (Cont’d) rubles ($490.4 million) in February, as the government boosted tax and customs duty collec- ing organized by the Russo-British Chamber of tion and cut spending. Revenue totaled 70.4 Commerce. “The growth is absolutely different billion rubles, 23 percent more than budgeted. from last year.” Brunswick Warburg economist Peter Boone Last year, the Russian economy had its best also predicts economic growth of as much as 5 performance since the 1991 collapse of the So- percent this year. viet Union, as producers boosted output to meet rising demand after the ruble’s plunge drove up After the rise in commodities prices and the the price of imports. At the same time, soaring growth of domestic demand, “companies are commodities prices boosted exporters earnings. cash rich and they decided to invest,” Boone “The oil price is high, said. “You’ve got demand coming because in- the macroeconomic picture looks great, vestment has gone up. And benefit of even there is a massive trade surplus higher oil prices than last year. Markets are in and decreased capital flight.” for a surprise. They are not pricing this in at the moment. It’s catching on very fast.” Roland Nash Director of Credit Analysis Last year’s growth was also made possible by Renaissance Capital fewer debt payments that Russia had to make 17 March 2000 (Bloomberg) after deciding to stop paying on about $70 billion of Soviet-era debts and $40 billion of its Trea- sury debt in 1998. Industrial output rose 8.1 percent from 1998 as oil companies, machinery, chemicals and food Domestic demand, which fell last year after the producers boosted output. Russia’s trade sur- ruble devaluation in 1998 slashed purchasing plus widened 50 percent, with exports un- power, will drive economic growth this year, changed at $73 billion and imports falling 30 Vyugin said. The recovery in demand started in percent from 1998 to $31 billion. the second half of 1999, he said.

ABN Amro Bank in London, which previously Higher consumer spending and a minor ruble forecast 2.5 percent GDP growth this year, plans appreciation will lead to about a 10 percent in- to increase its forecast, though it will wait until crease in imports, Vyugin said. Exports will also after the March 26 presidential election for more rise to about $78 billion. signs of political and exchange rate stability that affect consumer spending. Spending has been After oil prices soared this past year, rising to growing, said Ceyla Pazarbasiouglu, chief nine-year highs today, a decline at this point emerging markets economist at ABN Amro. wouldn’t pose a serious risk to economic growth, Vyugin said. “There is a lot of political stability and the oil price [rise] helped Russia a lot - you see that in con- Brent crude rose about 2 percent today, pass- sumer spending,” she said. “We will up our fore- ing $30 per barrel in London for the first time cast as well once the election is out of the way since January 1991. Even if the price plummeted and we know more about fiscal and monetary to below $16 per barrel, Vyugin said, the aver- policy for this year.” age price for the year would still be about $17 a barrel for Russian crude, about the same as last Russia reported a budget surplus of 14.1 billion year.

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20 March 2000 MACROECONOMY (Cont’d) in cash and 1/3 in precious metals. The prices of natural gas, which lag by about • Russia’s January budget revenue totaled six months behind oil prices, will bring more rev- 61.1 million rubles whereas spending to- enue for OAO Gazprom, Russia’s natural gas taled 61.4 million rubles, making a bud- monopoly and the world’s biggest natural gas get deficit of 300 million rubles. producer, which supplies over a quarter of West- ern Europe’s gas. • Russia’s Tax Ministry reported that Janu- ary federal budget tax collections were “Gazprom has started to get additional revenue 40.4 billion rubles, which is 27.4 percent already,” with the same volume of export, Vyugin above the target set by the government. said. The Ministry said it collected 337.4 billion rubles in taxes in cash in 1999, more The average exchange rate this year will be than double the amount collected in 1998. about 31 rubles per dollar and the ruble could The Tax Ministry aims to collect 390 bil- fall to between 33 rubles and 34 rubles per dol- lion rubles in taxes in 2000. lar by the end of the year, Vyugin added. Russia’s 2000 budget assumes an average ruble • Russia’s money supply grew by 10.5 exchange rate of 32 per dollar. billion rubles ($370 million), or 2.3 percent, to 321.7 billion rubles from 311.2 ECONOMIC INDICATORS 20 March: (Interfax, billion rubles on 6 March. The money Bloomberg) supply was 307 billion rubles in the week ended 7 February. • Russia’s GDP could grow 2.5 percent to 3 percent in 2000 instead of 1.5 per- FINANCE cent as earlier forecast, according to Rus- sian First Deputy Prime Minister of Fi- Lufthansa Opens Pulkovo Terminal nance Mikhail Kasyanov. He added “If the tendency of growth of tax collections 20 Mar (www.russiajournal.com): Lufthansa will persist, then no noe would talk about Aviation Group, together with the St. Petersburg an unreal budget.” and Leningrad regional governments and private investors, plans to open a new cargo terminal at • The foreign trade surplus rose to $42.2 Pulkovo, St. Petersburg’s main airport, Russian billion in 1999 from $16.9 billion in 1998. weekly The Russia Journal reported. Lufthansa will hold 40 percent; and private investors will • Russia’s monthly inflation rate for Feb- hold 20 percent, according to Ulrich Ruger, ruary was 1.0% as the government re- Lufthansa’s regional director for Russian and duced spending and the ruble remained former Soviet States. Ruger said the terminal steady against the dollar. January in- will open in 2002 and require a total investment flation was 2.3 percent. of as much as $13 million, the paper said. • Russia’s foreign currency and gold re- Lufthansa currently handles cargo in Russia as serves rose by $400 million to $14.3 part of another joint venture, Airport-Moskva, with billion in the week ending 10 March. Russia’s main air carrier, Aeroflot, based as Mos- Russia’s reserves in 1999 reached a low cow Sheremetyevo-1 terminal. on 1 April, when they were about $10.8 billion in April. About 2/3 of reserves are 20 Mar (Bloomberg): Kvaerner ASA, a Norwe- Vol. III, No. 3 page 8 of 31 RussiaRussia ReviewReview GRIFFIN CAPITAL

20 March 2000 FINANCE (Continued) on 6 March. The rate had previously been set FINANCE (Continued) at 45 percent in January. Real borrowing is not gian construction company, said it will sell its 75.6 generally made at the official refinancing rate. percent stake in the Russian shipyard Kvaerner However, budget revenues could be indirectly Vyborg Shipyard JSC to St. Petersburg-based affected, as taxes on deposits are higher in ZAO AKO BARSS for an undisclosed sum. where interest rates exceed the CB refinancing rate Kvaerner will book a “small” loss on the sale, which will be completed in four weeks. The loss Kasyanov Projects Borrowing is covered by charges of more than 2 billion kroner ($237 million) the Kvaerner took last year to 17 Mar (Reuters, Prime-Tass, CentreInvest Re- exit shipbuilding. search): First Deputy PM Mikhail Kasyanov says that Russia may need “four, not six billion dol- Chief Executive Kjell Almskog decided in April lars” in foreign credits this year. …Comment: to sell the shipbuilding unit and other assets such The “six billion” that Kasyanov mentioned is ac- as turbines and metals equipment to revive earn- tually the $5.96 billion that was budgeted yes- ings and cut debt. The company, which removed terday in accordance with special legislation. about a third of its workforce in the process, sold The breakdown of anticipated loans, as reported assets for about 5.3 billion kroner last year to by Prime-Tass, is as follows: up to $2.6 billion focus on more profitable construction, engineer- from the IMF, another $2.2 billion from the World ing and oil equipment businesses. Bank, and up to $1.4 billion from foreign governments and private lenders. Including all World Courts Approves Bank loans in this calculation is a bit tricky, since Bankruptcy of Fifth Largest Smelter at least $500 million of them are designated for specific projects and not for budget expenditures. 20 Mar (Interfax): A Russian court approved the bankruptcy of OAO Novokuznetsky 16 Mar (Reuters): Kasyanov reports that the Alyuminievy Zavod, Russia’s fifth-largest alu- government may review its average ruble to minum smelter, Russian news agency Interfax dollar rate forecast from the current average of reported. Under the ruling by the Siberian court, RUR 32/US$. the company will be under the control of an outside manager for one year. OAO NIKOil Touts Russia to Bankers Kuzbassenergo, a subsidiary of RAO Unified Energy Systems, Russia’s electricity distribu- 16 Mar (PRNewswire): Although it may still be tor, initiated bankruptcy over debts for electricity too early to hail Russia’s blossoming economy, supplied to the company, Interfax reported. the vital signs have improved noticeably with Vladimir Putin at the head of the Russian Fed- Novokuznetsky Alyuminievy was forced into eration and a new State Duma elected. That bankruptcy because of about 1.45 billion rubles was the key point made by Nikolai Tsvetkov, ($50.9 million) of debts in January. the president of Russian investment banking giant NIKOil at the 4th Annual Conference on 20 Mar (Bloomberg): Russia’s central bank low- Investing in Russia and the CIS today at the New ered its benchmark refinancing rate to 33 per- York Plaza hotel. cent to try to boost the economy by giving producers access to cheaper loans. Russia had Speakers included former Russian Prime Min- only just reduced the rate to 38 percent from 45 ister (and leader of Right Wing Forces in the

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FINANCE (Continued) billion debt to bank creditors, for the new 10- year and 30-year bonds by the end of April. State Duma) Sergei Kiryenko representing Russia also will have to pay $270 million in cash Russia’s economic liberals, political analyst to bondholders as part of the debt swap if all Dmitry Simes (President of the Nixon Center holders apply for the exchange, the agency said. for Peace and Freedom), prominent financier Nikolai Tsevtkov of NIKoil and industrial entre- Russia agreed with its bank creditors in Febru- preneur Kakha Bendukidze of Uralmash. ary to reduce its $31.8 billion Soviet-era debt and extend payments over a 30-year period. For the first time in Russia’s recent history, both Standard & Poors said it will raise Russia’s sov- the political and business leaders seem to have ereign credit rating only after the government united in the support of one candidate - Vladimir implements debt agreements with bank credi- Putin for president. Sergei Kiryenko noted that tors. Putin as President will proceed along the path of reforms by ‘capitalizing the positive gains’ of New Rules in Lichtenstein the Yeltsin period. The financial market participants such as Nikolai Tsvetkov of NIKoil high- 14 Mar (AP): Lichtenstein, the principality situ- lighted the fact that there is still a discrepancy ated between Austria and Switzerland, approved between the actual situation in Russia and the laws to combat money laundering as the gov- Western perception of it. Back in 1997, over- ernment contested claims it’s a haven for finan- whelmingly positive investor’s attitude towards cial crime, the Associated Press reported, citing Russia had little to do with the underlying Prime Minister Mario Frick. The laws will further economy. Mr. Tsvetkov said that today the eco- oblige financial institutions to report suspicious nomic situation had improved and the macro- deposits, extend bribery sanctions to cover pay- economic factors were much stronger, yet the ments to foreign officials and force banks to foreign investor’s sentiment toward Russia was make more thorough checks on the origin of in- cautious. coming funds. Last year, German weekly maga- zine Der Spiegel said Latin American drug According to the speaker, for the first time since bosses, Italian Mafia and Russian organized the breakup of the Soviet Union, the Russian crime are laundering money in Lichtenstein government has a window of opportunity to work under the protection of government officials, poli- as one team with the State Duma in passing the ticians and bank officials, among others, the AP legislative acts vital to economic reform. Grow- said. ing political stability and the prospects of Vladimir Putin’s presidency have already spurred the Verwaltungs- und Privat-Bank AG, a Lichtenstein Russian sock market, sending the RTS index private bank, is suing the president of the Ger- up 30% in the last month. man intelligence service, or BND, after Der Spiegel cited BND’s accusation the bank laun- London Club Update dered money.

14 Mar (Interfax): Russia said it expects to ex- Offshore Havens Off Limits? change its Soviet-era debt to bank creditors for new bonds by May, Russian news agency 14 Mar (Kommersant): Russian Tax Minister Interfax reported, citing Finance Ministry officials. Alexander Pochinok said Russia should end The government probably will announce the ex- double-taxation agreements with countries that change of PRIN, or principal notes, and IANS, have offshore zones, Russian daily Kommersant or interest-arrears notes, that represent its $31.8 Vol. III, No. 3 page 10 of 31 RussiaRussia ReviewReview GRIFFIN CAPITAL

20 March 2000 FINANCE (Continued) $550 and 750 million to Russia this year, said the government needs to do more to enforce reported. “Further existence of offshore zones laws concerning investment. shouldn’t be allowed as it is hurting all developed countries ... their liquidation should be con- Foreign investors burned by the August 1998 sidered,” Pochinok said at an international con- Treasury debt default and subsequent economic ference on double taxation. He said Cyprus collapse want more guarantees before they put should be one of the first countries with which money into Russia again, Frank said. Russia should end the double-taxation agreement. “Russia stands at a critical juncture,” he said. “Russia’s new leadership has a unique chance Russia is trying to stop capital flight estimated to rebuild the weakened authority of the state at over a billion dollars a month. and to revitalize Russia’s transition to a market- based, democratic society.” Private Capital to Drive Growth The EBRD, which also has been involved in re- 13 Mar (Bloomberg): The European Bank for organization of the Russian banking system, said Reconstruction and Development said foreign the government has done little to investigate investors are prepared to return to Russia less stripping of assets by shareholders and man- than two years after the government’s debt de- agement of banks since the default. The bank- fault if fair competition and shareholder rights ing system needs private capital to recover, not are enforced. new state-owned banks, the EBRD said.

Private capital is poised to fuel a resurgence of “The creation of new state-owned banks does Russian economic growth,” EBRD First Vice not represent a viable solution,” Frank said. “It President Charles Frank said in a prepared risks further distorting competition in markets speech delivered today. “It will come from do- where Sberbank (Russia’s state-owned savings mestic as well as international sources, but only bank) already holds a dominant and highly privi- if investors begin to believe it is safe to invest leged position.” and operate in Russia.” Sberbank holds 84.7 percent of all deposits in Investors who fled Russia after the August 1998 Russia in early 1999. default are starting to give the market a second look as the economy expands at its fastest pace The EBRD also called for more transparency in in a decade. Stocks and bonds are at their high- financial reporting by banks and companies. est levels since the default. Banks that can’t survive should be allowed to fail, Frank said. The EBRD lost about $40 million from investments in Russia’s Tokobank and Inkombank, “Our views on the need for bank restructuring once among Russia’s top 20 banks. It’s also reflect in large part the views of the investor com- been struggling to salvage loans to OAO munity,” Frank said. “If we begin to gain com- KamAZ, Russia’s biggest truck maker and OAO fort that the policies of the past are behind us Gorkovsky Avtomobilny Zavod, Russia’s second and there is a new commitment to reform, other biggest carmaker, among other companies that investors are likely to reach a similar conclu- stopped paying. sion.””

The EBRD, which has said it may lend between 29 Feb (Kommersant): The Russian govern- Vol. III, No. 3 page 11 of 31 RussiaRussia ReviewReview GRIFFIN CAPITAL

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FINANCE (Continued) rency Exchange, Russia’s main currency exchange, were bid at 5 percent, compared with ment plans to borrow from the Central Bank 4.5 percent on Friday. They were offered at 9.6 in March to help meet foreign debt payments, percent, compared with 8.75 percent on Friday. Kommersant reported, citing Finance Minister Mikhail Kasyanov. The minister said yester- Seven-day rates were bid at 7 percent, com- day that there will be a “serious lack of funding pared to 5 percent on Friday, and were offered in March.” The government can borrow about at 13 percent, compared to 9 percent on Friday. $1 billion from the Central Bank, according to this year’s budget, and March foreign debt pay- Thirty-day rates were bid at 15 percent compared ments total $2 billion, the paper said. to 12 percent on Friday, and were offered at 24 percent, compared to 20 percent on Friday. The IMF suspended lending to Russia because of concerns about the government’s war in The official CBR exchange rate was set at Chechnya and the legislature’s failure to pass 28.39 rubles per dollar for Tuesday compared amendments to the bankruptcy law and other with 28.41 rubles per dollar for Saturday. The legislation required by the fund. rate was set at 28.74 rubles on 18 February.

29 Feb (Bloomberg): The city of Moscow said “The ruble is strengthening because the trade it made a $17 million interest payment on its surplus is so high, so there are a lot of dollars $295 million loan. changed into rubles because of the rules for exporters, and the ruble strengthens,” said The four-year loan runs through 2002. Moscow Gohoon Kwon, senior economist at ABN Amro, borrowed the money August 1998 at an annual in an interview with Bloomberg on 17 March. interest rate of 11.5 percent, payable semi-an- nually. The city refused to disclose the lender’s “We are cautiously optimistic name, saying only that it was a major Western that two IMF tranches bank. will be released this year. If Russia gets two tranches, “The money was transferred yesterday,” said then I think the ruble Sergei Pakhomov, chariman of Moscow’s mu- will average 30.3 a dollar this year nicipal borrowing committee. and stand at 32 by the end of the year.”

Russia’s borrowers’ debt servicing costs have Goohoon Kwon soared in ruble terms as the currency has fallen Senior Economist more than 78 percent against the US dollar since ABN AMRO Bank, London August 1998. “The Central Bank is not intervening in the mar- MONEY MARKETS (Bloomberg, at the close of kets. That is clear. The government is spend- trading, 20 March) ing less than they are earning. Oil and gas are helping, of course. The Bank of Russia’s overnight deposit rate was fixed at 3 percent, down from 1 percent “The trade surplus and the twin surplus were so on Friday. On 18 February, the rate was fixed at big that even if the central bank is buying dol- 1%. lars, the currency is still strengthening,” Kwon said. One-day rates on the Moscow Interbank Cur-

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FINANCE (Continued) Orion Capital Advisors Ltd., a closely held advisory and investment management group focused on the former Soviet Union and Russian The government last borrowed on the domestic Funds IG, a Russian investment group joined market on 23 February when the Ministry of Fi- Rambler in buying a controlling stake for an un- nance raised 3.4 billion rubles in the first sale disclosed amount. of Treasury bills since the government’s Au- gust 1998 default. The government sold 98- “Lenta.ru is the number one news portal in Rus- day bills at an average yield of 20.1 percent. sia, so this is a key investment for us,” said Vic- tor Huaco, president of Orion Capital Advisors The refinancing rate was set at 38 percent on in Moscow. “We want to continue building Ram- 7 March, down from 45% on 24 January. The bler and Lenta.ru will help us do that by provid- bank announced 7 March it was cutting the over- ing news for Rambler.” night lending rate to 33 percent from 40 percent. The new rate of 38 percent will become effec- Rambler already has a large segment of the Rus- tive on 21 March. sian Internet advertising market. The company wouldn’t disclose whether it or Lenta.ru has MEDIA AND COMMUNICATIONS earned money.

Government’s Club on Internet Tax “Lenta is just building, and companies that are building typically do not make money in the ini- 20 Mar (Interfax): Russia does not plan to tax tial stages,” Huaco said. activities on the Internet, according to Russian Tax Minister Alexander Pochinok, Russian Orion and Russian Funds announced in Janu- news agency Interfax reported. Pochinok said ary that they had acquired controlling stakes in Russia will only impose taxes on the Internet Rambler, in one of the first major investments in if Western Europe does. “We will do this so Russia’s Internet market. that our tax revenue does not go to the West,” Pochinok said, the agency reported. Rambler is like Yahoo.com, though it has the ability to search for grammatical variations of The Russian market for Inernet-related services Russian words, essential for any search engine was worth about $160 million in 1998, said the dealing with the Russian language. Russian Internet Technologies Center. About 2.5 million Russians use the Internet currently, Rambler reported 459,800 users in December said Peter Kirkow, senior economist at ICE Se- 1999. curities Ltd. in London. Gurevich & Co. Start Vermya Novostei Rambler Buys Online Content Lenta.ru 17 Mar (Interfax): Russian daily Vremya MN appointed Dmitry Murzin new chief editor, after 20 Mar (Bloomberg): Rambler, Russia’s lead- the previous editor Vladimir Gurevich resigned ing Internet search engine, together with a group with all journalists, Interfax reported. The last of investors took control of online newspaper issue of the paper managed by Gurevich was Lenta.ru to create a new Web site and expand issued on 6 March. operations. Gurevich and his team of journalists this week

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20 March 2000 MEDIA AND COMMUNICATIONS (Continued) The satellite network was to shut down at mid- night Friday, after last-ditch searches failed to began publishing a new newspaper called find a qualified buyer to save the struggling sys- Vermya Novostei that will come out five times tem. Now it will begin taking its satellites out of a week, the agency reported. orbit, letting billions of dollars worth of communications gear burn up in the atmosphere. Vremya MN competes with Russian daily Kommersant, a leading business paper, and A sad end for a system that, just 16 months ago, Vedomosti, a daily set up last year by Dow Jones promised to revolutionize the communications & Co’s. Wall Street Journal, Pearson Plc’s The world by offering the first phones able to call Financial Times and Independent Media, a anywhere on Earth. Dutch-owned publisher. Iridium will take its place among the 20 largest Requiem for Iridium bankruptcies in U.S. history, with little to show for its ambitions but a pile of $3,000 satellite 17 Mar (www.totaltele.com): A few years ago, phones that no longer work. when Iridium was still developing its business model, David Deans had a backup plan. Iridium was forced to file for bankruptcy protection in August after failing to find enough sub- Deans, then the market development manager scribers to support the satellite network it spent for Iridium’s North American franchise, joked with close to $5 billion to build and maintain. In its his co-workers that they should make a deal with first two quarters as a commercial service, Iri- the Franklin Mint. That way, if the worldwide sat- dium attracted a scant 10,000 customers. ellite telephone network failed, the phones could still be sold as collector’s items. The problem wasn’t so much that Iridium didn’t work as that it didn’t work well enough. Its hand- Maybe the idea wasn’t so far off. sets were clunky, it wasn’t functional indoors, and its prices — often several dollars per minute Iridium World Communications has failed to at- — just weren’t what customers were used to. tract a qualified, last-ditch offer to rescue it from liquidation and now will begin pulling its satel- In a world accustomed to sleek cell phones and lites out of orbit, letting billions of dollars worth steadily falling calling costs, Iridium was an idea of space-age communications gear burn up in that arrived after its time was ripe. If Iridium’s the atmosphere. demise proves anything, it might be that in today’s adrenaline-driven technological change, “No bid was received which was a qualified bid,” it doesn’t take long to make a visionary idea Iridium attorney William Perlstein told the U.S. obsolete. Bankruptcy Court in Manhattan on Friday after- noon. Iridium’s failure doesn’t mark the death knell for the rest of the satellite communications indus- Those two themes form the crux of Iridium’s his- try, however. GlobalStar, the second satellite tory — its conception a decade ago, the stag- system to launch anywhere-on-earth phone ser- gering cost of rolling out its 66-satellite network, vice, is taking a beating among investors in the and its short-lived effort as a satellite telecom- wake of Iridium’s failure. The company has yet munications provider in a world that saw little to disclose how many subscribers it has signed need for its pricey services. up.

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MEDIA AND COMMUNICATIONS (Continued) for this process and deserve close attention.

Meanwhile, Craig McCaw, the telecom serial Nor does it hurt sector prospects that the Minis- entrepreneur who backed out of a last-minute try of Communications and Svyazinvest are now bid for Iridium, is going forward with plans to headed by two competent professionals, Leonid resurrect a less-costly satellite venture, ICO Glo- Reiman and Valery Yashin respectively. Both bal Communications. had successful management careers in PTS and are close allies of acting president Vladimir Putin. But putting up a satellite network isn’t the same Reiman and Yashin are strong proponents of as turning it into a viable business. Iridium’s fol- sector restructuring which be the key to releas- lowers have yet to prove that their investments ing the value currently hidden in Russian can stay aloft on Earth. telecoms.

Regional Telecoms a new “Buy” Minister Knows Best

17 Mar (CentreInvest Securities): Primorsky 16 Mar (www.moscowtimes.ru): The Russian Electrosvyaz (ESPK RU) was rated a new “buy” Press Ministry warned the media that quoting by CentreInvest Securities Analyst Vladimir Chechen rebel leaders or showing them on TV Bagrov. 7 095 564 8290/7 501 796 9089 or Dan violates the law on fighting terrorism, Russian Rapoport at +1 212 809-8707. …Comment: We daily The Moscow Times reported. Russian Min- believe Russia’s second- and third-tier telecoms ister for Mass Media and the Press Mikhail Lesin are poised for significant operating improve- said quoting suspected terrorists in print or al- ments which will drive valuations. lowing them to speak on television or radio is forbidden. Deputy Minister for Mass Media and Among the most important operational changes the Press Mikhail Seslavinsky said Elected include the widespread introduction of time bill- Chechen President Aslan Maskhadov and ing, rapdid growth in Internet usage, broadly Chechen warlord Shamil Basayev were among implements tariff rebalancing and reform and the those barred from the media because they are consolidation of small regional operators into wanted on terrorism charges, the paper said. large supra-regional operators. The Russian military earlier detained Andrei Both the Ministry of Communicaitions and Babitsky, a reporter for the US-funded Radio Svyazinvest appear committed to large-scale Liberty who was covering the war, accusing him restructuring likely to result in the creation of eight of collaborating with rebels; after holding him to ten regional operators. This restructuring will incommunicado for several weeks, the military increase liquidity, centralize purchasing and admitted it had him, then claimed to exchange management control and reduce costs. him for Russian prisoners of war.

Svyazinvest has already announced the merger Rostelecom Competition of the 12 companies in the northwestern region. Svyazinvest aims to have last 20 unlisted re- Threatens National Security gional telecoms included in the RTS. The merger process has already been launched in five re- 15 Mar (Operator): Rostelecom will retain mo- gions, with the city and long-distance switching nopoly in domestic long distance market. operations merging with regional operators. The …Comment: During a meeting at the Telecom- St. Petersburg merger of SPMMT, PTS and St. munications Ministry, Leonid Maevsky, Chairman Petersburg Telegraph will establish a road map of the Duma Sub-Committee on Energy, Trans- Vol. III, No. 3 page 15 of 31 RussiaRussia ReviewReview GRIFFIN CAPITAL

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MEDIA AND COMMUNICATIONS (Continued) networks, including one linking Berlin and Helsinki. port and Communications, said that Rostelecom will retain its near-monopoly position in the long Other companies are using similar infrastructure distance market. Maevsky further reported that to build networks. Energis Plc has spend 600 Transtelecom, a communications holding of the million pounds ($951 million) stringing cable from Railway Ministry, will not be granted a license to the National Grid electricity poles and through provide long distance services for at least the London’s underground subway network, while next two to three years. He added that competi- Enron Corporation has said it is building a tele- tion in this area could create a threat to national communications network. security. Moreover, Transtelecom’s network does not meet international standards such as those 7 Mar (PRNewswire): Kaspersky Lab - the only already established at Rostelecom. author, developer and global supplier of AVP (AntiViral Toolkit Pro) is now establishing major Vimpelcom to Issue Shares long-term commitment to sales and technical support of its rapidly growing American user 10 Mar (Bloomberg): Vimpelcom plans to au- community. thorize additional shares. …Comment: The company announced that it intends to hold an Apart from the long success o the AVP for DOS, EGM on April 13, 2000 to consider the authori- Windows 3.xx, Windows 95 & 98, NT and Novell, zation of an additional share emission and to Kaspersky Lab are the only anti-virus company work out related procedures. According to to produce unique products for LINUX, FreeBSD Vimpelcom management, it is considering an and BSDi UNIX versions, in addition to the only issue of about 7 million common shares, which multi-session ) S/2 on-access scanner and ad- could be converted into 9,333,333 ADRs. The vanced macro detection and removal for MS company will try to minimize share dilution as Office 2000 (www.avp2000.com). much as possible while still providing conditions attractive enough to bring in outside capital. The Russian Internet Retailer company’s board plans to set aside about Ozon Attracts Investors 500,000 shares for an employee stock option plan as an incentive for key personnel. In addi- 7 Mar (Bloomberg): Russian shopping is about tion, it was disclosed that the company is seek- to make the leap into the 21st century after a ing additional financing from all market sources group of investors bought St. Petersburg-based and may consider issuing debt as well as eq- Internet retailer Ozon, which competes mainly uity. A convertible bond issue may be the most with itinerant sellers of pirated videos and CDs. attractive option. Baring Vostok Capital Partners, Moscow broker- 8 Mar (Bloomberg): Eni SpA, Europe’s fourth- age United Financial Group and other private largest oil company, said it will consider laying equity investors bought 51 percent of Ozon for telephone cable lines under the Black Sea as $1.8 million and agreed to invest an additional part of its Blue Stream gas pipeline project, which $1.2 million over the next year. will link Russia and Turkey. Ozon competes with vast outdoor markets and Rome-based Eni said it formed joint-ventures underground city passages, where sellers hock with OAO Gazprom, Russia’s natural gas com- cheap, unlicensed products. Offering books and pany, and Gaztelecom, a Russian telecom com- videos on its www.o3.ru website, Ozon must also pany, to study proposals for fibre optic cable Vol. III, No. 3 page 16 of 31 RussiaRussia ReviewReview GRIFFIN CAPITAL

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MEDIA AND COMMUNICATIONS (Continued) Ozon started off as part of a software and technology consulting company in St. Petersburg overcome the limitations of Russia’s cash- called Reksoft. They produced software for based society. Internet commerce. When they tried the software out, people started buying, and Ozon was “The biggest problems for Internet retailers born. It operates from the basement of an apart- in Russia are payment methods and boot- ment building in St. Petersburg. legging,” said Vladislav Metnev, an analyst at Moscow-based Aton brokerage. “Few people UFG and Baring Vostok Capital Partners also have credit cards and even fewer trust credit will advise Ozon on marketing. Advertisements cards, and black marketed, priated videos will - began to appear today on Russia’s NTV televi- by their nature - always be cheaper than videos sion station, in association with Intel Corp., the or books sold through the Internet.” world’s largest chip maker.

Investors said Ozon’s appeal will be in selling Ozon now employs about 50 people. The Rus- higher quality, legal products, and in allowing sian-language site has about 20,000 videos and customers to browse at their leisure at the site. books on offer and plans to expand that to 150,000 by year end. The company will open a Until now, Ozon, founded in 1998, has marketed warehouse in Moscow this year to increase the mainly to Russians living abroad, in Israel and speed and scope of delivery. the United States, who wanted to find Russian- language videos and books, said Evgeni Boiarov, The Russian market for Internet-related services a senior associate at United Financial Group. was worth about $160 million in 1998, said the Now, the company’s sales are set to grow in Russian Internet Technologies Center. About Russia, thanks to the expanding economy and 2.5 million Russians use the Internet currently, highly educated workforce, he said. said Peter Kirkow, senior economist at ICE Se- curities Ltd. in London. “We expect very fast growth of the Internet in Russia: if anything will grow in Russia, then it Most Group Trades Gas for Cash will be the Internet and e-commerce,” Boiarov said. “Ozon reaches people with access to the 7 Mar (Vedomosti): Most Group, the Russian Internet in Russia: these people are highly edu- media and banking company, plans to sell its cated and well off, or they are students who will stake in Moskovskaya Toplivnaya Kompaniya be one day. That gives amazing scope for prof- to city-owned Tsentralnaya Tolpivnaya its.” Kompaniya, Russian daily Vedomosti reported, citing the chief executive of Most-Oil. Ozon’s revenue in December was $70,000 and Tsentralnaya Toplivnaya Kompaniya, or Central is growing at about 20 percent per month said Fuel Company, has received a $100 million loan Boiarov. from a commercial bank to buy the shares next week. The investors said Ozon was just their first venture into Internet investments in Russia. They’ve CFC assets were transferred to Moskovskaya started a company called ru-Net, with initial capi- Neftyanaya Kompaniya last year to create an tal of more than $20 million and are looking for integrated oil company on the basis of MNK, the similar investments. They have another ven- paper said. ture under discussion right now.

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MEDIA AND COMMUNICATIONS (Continued) Capacity provided by Express-6A will allow Moscow’s retail fuel market generates about $5 Intersputnik to offer a much wider range of ser- billion to $7 billion in revenue per year, accord- vices, including Ku-band state and regional ing to various analysts’ estimates. digital TV and broadcasting.

Intersputnik to Launch Express-6A The Express-3A satellite will be used by Intersputnik primarily for C-band high-speed 7 Mar: Intersputnik’s strategic plan to modern- Internet access channels for the Middle East and ize its telecommunications services will gain new Africa from Europe (with a possibility to use Earth momentum with the service introduction of two stations of Intersputnik’s member states), as well new Express-A-series satellites starting in April. as from North America. Ku-band capacity on the Express-3A is planned to be used for digital The first of these spacecraft, the Express-6A, is TV broadcasting. to be launched on a Proton booster at the beginning of March. Under an agreement with the Russia’s Krasnoyarsk-based NPO-PM produces Russian Satellite Communications Company the Express-A satellite bus, while Alcatel Espace (RSCC), Express-6A will begin operations with of France supplies the payload. Intersputnik in April. Internet Boosts Rostelecom Value The Express-6A’s launch will be followed in June by the orbiting of Express-3A. This satellite will 6 Mar (Bloomberg): OAO Rostelecom shares be taking over relay duties from the Stasionar- have more than doubled in the three months and 11 (Gorizont-26) satellite. are set to rise further on optimism growing demand for Internet services will boost the Rus- These two Express-A-series satellites are sian long-distance phone service’s profits. Russia’s newest and most capable telecommunications spacecraft. They each carry 12 C-band Rostelecom shares have gained 28 percent in and 5 Ku-band high-power transponders. the past two weeks and 119 percent since the start of December, while the benchmark RTS “We are working hard to modernize the stock index rose 71 percent. The company, with Intersputnik Communications System, and the a near monopoly on long-distance service in addition of two new state-of-the-art satellites will Russia, is gaining on optimism its Internet busi- enable us to meet the requirements of today’s ness and a new trans-Russian fiber optic net- telecommunications markets,” Intersputnik Di- work will drive growth according to investors and rector General Gennady Kudryavtsev said. analysts. “The new Express-A-series spacecraft have a significant relay capacity, and will help satisfy “We are seeing an internet boom spilling over the rapidly growing demand of our customers in from the US into Europe and now spreading to Indian and Atlantic Ocean regions. They will Eastern Europe and Russia,” said David Mapley, complement the next-generation LMI-1 satellite managing director of Shimoda Capital Advisors that was launched last year under the Lockheed Ltd., in London, which has about $250 million Martin Intersputnik joint venture.” Express-6A under management and owns the stock. is the second satellite built in the Express-A sat- “Rostelecom is a sleeping giant.” ellite series. The initial spacecraft was destroyed in a Proton launch accident last October. Last year, Rostelecom’s revenue from Internet services more than tripled to $6.8 million from

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MEDIA AND COMMUNICATIONS (Continued) the Internet,” said Scott Blaklin, President of the American Chamber of Commerce in Moscow. $1.2 million, said Andrei Braginsky, a telecom- “There is greater internet density here in Russia munications analyst at MFK Renaissance. Cur- than anywhere else in Central and Eastern Eu- rently, Internet traffic represents just 1 percent rope.” of overall revenue, though that’s set to change. Companies such as Cisco Systems Inc, the “Rostelecom has shown tremendous growth in world’s number one maker of computer-network- Internet traffic,” said Braginsky. “I predict rev- ing equipment, and Intel Corp., the world’s larg- enue of about $20 million from Internet traffic est chip-maker, made recommendations to the this year.” Russian government to foster the growth of Internet usage and e-commerce. Russia is in a Rostelecom probably lost about $261 million in strong position they said, because of its well- 1999, on revenue of $720 million, said Yevgeny educated workforce and large numbers of engi- Golossnoy, an analyst at Troika Dialog. The date neers and technical experts, unusual for an will be reported in June. In 1998, the company emerging market. lost $534 million on revenue of $868 million. “e-commerce is growing at an exploding pace Analysts are mixed on the outlook for 2000. globally, and it’s important that Russia meets and Golossnoy expects another loss, of about $130 exceeds the global pace,” said Ron Lewis, man- million, while Alexander Kabanovsky, associate aging director of TerraLink Technologies, an director in charge of telecommunications at Internet strategy consulting group that has Brunswick Warburg in Moscow, predicts a profit, worked in Russia for five years. of more than $120 million. Growing Internet usage also would help bridge “Rostelecom is offering exceptionally cheap Russia’s vast distances, as it doesn’t matter in rates to Internet Service Providers in Russia,” one person is in Moscow and the other 9,000 Kabaknovsky said. “The company is the domi- kilometers away in Vladivostok, a city on Russia’s nant force in the Russian internet structure.” eastern cost on an arm of the Sea of Japan. 3 Mar (Bloomberg): Russia is poised to benefit The biggest challenges, participants at a con- from a boom in Internet use and electronic com- ference in Moscow said, are widespread tax merce if authorities grasp the opportunity and evasion. The Internet would make it easier for remove bureaucratic hurdles, said executives the government to monitor commercial activity, from some of the world’s biggest computer com- and harder to avoid paying taxes, which could panies. discourage growth among small businesses and consumers. Regulations also need to be eased, The Russian market for Internet related services the companies said. A law is needed to recog- was worth about $160 million in 1998, said the nize electronic signatures, as well as classifica- Russian Internet Technologies Center. By the tion of taxes on Internet transactions. end of 1999, 7.8 million adult Russians were using the Internet, the center estimated, though actual usage may be higher because many Government E-commerce Program people have Internet access at work or school. 3 Mar (Prime-TASS): Ministry of Telecommuni- “I think few countries in the world are better po- cations intends to submit an E-commerce de- sitioned to take advantage of e-commerce and velopment program for federal government ap-

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MEDIA AND COMMUNICATIONS (Continued) the United States. proval in April 2000. …Comment: According to Sonera Ivan is an end to end service, 24-hour Alexander Volokitin, Deputy Minister of Telecom- surveillance is assured by the INOC (Sonera’s munications, this comprehensive program was International Network Operation Centre). The developed with the participation of leading service can be customised to fit the needs of telecom and high-tech service providers and has every customer, and can be opened within a very been endorsed by the Russian Ministry of Eco- short time after receipt of order. nomics. The program’s main focus is on clarify- ing those legal and security issues that repre- The full commercial operations of Sonera’s Ivan sent major obstacles for the further development service will commence in the spring of 2000. of e-commerce in Russia. In the program, electronic money transfer systems for the Central As a provider of global connections, Sonera Bank are seen as a core element in developing Carrier Networks Ltd has been investing in the an on-line payments system. Russian market for a long time and has obtained valuable information from different associates This is positive news for Rostelecom, MGTS, on operating on the Russian markets. Sonera’s Uralsvyazinform, PTS and Kubanelectrosvyaz, Ivan service is a part of this expansion. all of which are actively developing their own Internet infrastructures and have enjoyed con- For further information, contact : siderable market share growth in their respec- [email protected] tive regional niches. ISP’s to Pay Big Brother’s Earpiece Sonera Debuts Ivan Service 20 Mar (By Jeremy Scott-Joynt): Russia’s 29 Feb (Company): Sonera is introducing a SORM-2 Internet monitoring rules seem to ap- unique service: a network service administered peal to governments in Europe and the US. by a single operator between Russia, Europe and the USA. The Ivan network is operated and European Internet service providers now fear marketed by Sonera Carrier Networks Ltd, a they too may have to pick up the tab for gov- subsidiary company owned entirely by Sonera. ernment monitoring of electronic mail and other Internet communications, as a result of The network administered by Sonera covers the new U.K. and European legislation. distance between Moscow and New York, and it has numerous connection points in Europe. The Plans are in hand to put ISPs on the same foot- main trunk consists of the FROG cable (St. Pe- ing as public telecoms operators with respect to tersburg-Moscow line, completed in 1999), the tapping and traffic analysis, which would require FRL cable (Finland-Russia line, completed in them to install new equipment and infrastruc- 1994) and Sonera’s back-bone network to Eu- ture at a cost that could reach 500 million (E811.9 rope and USA. million) across Europe. Sonera’s Ivan service offers a reliable, fast and Neither the European Council of Ministers nor high-quality network connection to its custom- the government of the United Kingdom, which ers. Sonera is confident that the service will be is the first European country to introduce a com- in great demand throughout the area covered prehensive law on the interception of communi- by it, from Russia to Europe and all the way to cations, have yet defined exactly what facilities

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ing bilateral talks with ISPs over the next few MEDIA AND COMMUNICATIONS (Continued) months to work out exactly what’s required,” he they will require ISPs to provide, although the said. United Kingdom’s government has suggested a capacity of one intercept per 500 incoming phone The U.K. Internet Service Providers Association lines. (ISPA), based in London, claims that without substantial financial assistance many ISPs - But the sums called for could amount to as much especially the plethora of small, local ones that as 10% to 15% of annual infrastructure spend, were nowhere near making a profit - would ever according to submissions made to the U.K. gov- be able to afford the additional costs of support- ernment by London-based Demon Internet Ltd. ing state monitoring of Internet traffic. and other Internet service providers. “ISPs don’t want to be the police of the Internet, “These are new and onerous requirements,” said and in any case they don’t have the money,” said Sally Weatherall, director of international regu- Nicholas Lansmann, secretary general of ISPA. latory affairs for ISP UUNet UK in Cambridge, England. “The issue for ISPs is on the one hand “If governments want that, they’ll have to pay getting clarity on what’s required, and on the for it.” other finding out how the financial burdens are going to be dealt with.” ISPA and other organizations have pointed out that in the United States the Communications Demon’s submission estimates that it alone Assistance for Law Enforcement Agencies would have to provide additional transmission (CALEA) Act - now going into effect after five capacity equivalent to about 1 megabit per sec- years of wrangling over just what capabilities the ond for the sole use of law enforcement agen- Washington DC-based Federal Bureau of Inves- cies. tigation can legitimately demand - has set aside $500 million for subsidizing both telecoms and The United Kingdom’s Regulation of Investi- Internet service providers. The U.K. equivalent gatory Powers (RIP) Bill, at present being de- for ISPs alone, ISPA suggests, would work out bated in the U.K. Parliament, is the first testbed to about $60 million. for European legislation governing interception and monitoring of ISP traffic. A conservative estimate would indicate that re- peated across Europe, with the total spend as The bill calls for interception capabilities to be much as $500 million. provided by all communications service providers (CSPs), updating previous legislation that The U.K. initiative is a by-product both of the only covered licensed public telecoms operators. way that communications technology has out- grown the legislation which underpins law en- The bill also allows for secondary legislation to forcement agencies’ surveillance, and of increas- determine how costs are split between the gov- ing collaboration between governments and ernment and CSPs, but does not promise any national security agencies concerning the in- financial assistance. terception of communications.

A spokesman for the Home Office, the depart- For about eight years, a group of government ment responsible for the bill, said no defined and law enforcement officials from 20 countries fund was being set aside to cover ISPs’ and and territories - the 15 member states of the EU, other organizations’ costs. “We will be hold- the United States, Canada, Australia, New

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20 March 2000 MEDIA AND COMMUNICATIONS (Continued) “Once the dust settles, who will sue whom?,” he MEDIA AND COMMUNICATIONS (Continued) said. “The fact that [an interception] is not judi- Zealand and Hong Kong - have been meeting cially authorized is a real risk.” to determine common requirements for tapping and interception. U.K. Bill could act as deterrent to corporates

According to EU civil rights watchdog, Within the United Kingdom, the sound and fury Statewatch, the series of meetings, known as surrounding the Regulation of Investigatory Pow- the International Law Enforcement Telecom- ers (RIP) Bill has concentrated less on the fi- munications Seminar (ILETS), have shaped nancial burden on Internet service providers and both U.K. and European policy on the matter. more on the bill’s stipulations concerning en- cryption. The members of the Group of Eight (G8) - the United Kingdom, the United States, Canada, These stipulations, one U.K. lawyer advising France, Germany, Italy, Japan and Russia - have multinationals on Internet law warns, could drive already agreed, in accordance with one ILETS business that relies on secure communications requirement, that ISPs should in principle be out of the United Kingdom, losing money both compelled to collect, and store, data that passes for ISPs and for the economy as a whole. through their servers. Donald Ramsbottom, an independent lawyer The requirements set out by ILETS have already who works in cryptography, said recent contact appeared in a Convention on Mutual Legal As- with his clients indicates that for large corpora- sistance (MLA), proposed by Europe’s Council tions, the bill could render the United Kingdom of Ministers and debated in the European Par- an unsafe place to do business. liament last month. “Every time I talk to a big corporate client they’re Members of European Parliament amended the shocked, and their first reaction is that I can’t be Convention to prevent member states intercept- serious,” said Ramsbottom. “Then you go ing communications in other member states’ through it line by line, and they realize it could territory without their consent, and to ensure ju- have very severe implications, especially for glo- dicial oversight of interceptions. bal communications providers for large corpo- rations that need their communications to be The latter - the question of who authorizes completely watertight.” interception and collection of, say, e-mail traffic - is also worrying ISPs. As it stands, the law makes it an offense not to supply law enforcement agencies with the The U.K. RIP Bill enables a range of agencies, cryptographic key to encrypted messages. from tax collection authorities to health and plan- Under most circumstances, supplying the plain ning organizations, to order interceptions with- text is not enough. And should one have lost the out the intervention of a judge. key, the burden of proof is on the accused to prove the negative. Telling anyone about the Donald Ramsbottom, a lawyer who advises cor- interception - even if one is a system adminis- porations on Internet and cryptography law, said trator telling his or her boss - is punishable by this could put Internet service providers at risk five years in jail. of legal action should the subject of intervention lose business or suffer an unjustified breach of Giving up the key renders all communications confidence. readable - a gift, said Ramsbottom, to anyone

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20 March 2000 MEDIA AND COMMUNICATIONS (Continued) indulging in the growing field of industrial es- The five indicators, charted on the basis of a 2- pionage. day moving average are i) the widely followed AK&M Index of Russian Telecom shares, ii) “Once you’re in, you’re into everything,” he said. shares of Global TeleSystems, Inc., approxi- mately half of whose revenue is derived from its His clients have talked seriously about moving Russian network, iii) ADRs of VimpelCom, to Ireland or Germany, both jurisdictions that Russia’s largest mobile phone operator, iv) the are promising their law enforcement agen- IFC’s Index of Investable Russian shares and v) cies will not demand the keys to encrypted the Barclays Wireless index (scaled by a factor messages. of 1/3).

The following graph shows the correlation be- On 1 October, Global TeleSystems listed its 65% tween five indicators of portfolio investment ac- owned Russian operations subsidiary on the tivity in Russia and its telecom sector based on Nasdaq as “Golden Telecom” (NASD: GLDN), publicly quoted share and index values reported from which time we included those shares in our for the six months ending 20 March 2000. monthly report.

Russian Telecoms Proxies Six Months Through 20 March 2000 (20-day Moving Average) 400

350 AK&M Russian Telecom Index 300 Barclays 250 Wireless/ 3 200 IFC Investable 150 Russia Index 100 Vimpelcom ADRs Index Value or US$/Share 50 GTS Group Golden Telecom 0

20-10-99 03-11-99 17-11-99 01-12-99 15-12-99 29-12-99 12-01-00 26-01-00 09-02-00 23-02-00 08-03-00 Week of ... Prepared by Griffin Capital

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20 March 2000 ENERGY SACE Approves Blue Stream Credit Shell Azerbaijan Acquires 15 Mar (Prime-TASS): Gazprom reports that 25% Inam Concession SACE, Italy’s import-export agency, has approved loan guarantees to finance a $2.9 billion 10 Mar (Company): Shell EP International has project to supply gas to Turkey. …Comment: consolidated its presence in the high potential This ensures that Blue Stream will enjoy a com- Caspian oil and gas sector with the acquisition petitive advantage over the rival Trans-Caspian of a 25 per cent interest in the Inam licence, Gas Pipeline project. The latter plan, a joint ef- offshore Azerbaijan. fort of General Electric, Bechtel Group and Royal Dutch/Shell Group, calls for shipping gas from The announcement comes after the completion Turkmenistan under the Caspian Sea to Turkey. of the deal whereby Shell Azerbaijan Explora- However, while the Trans-Caspian project has tion and Production B.V. will acquire the respec- yet to secure financing, construction of tive 12.5 per cent interests of Monument Re- Gazprom’s Blue Stream Project is already un- sources (Caspian) Ltd, a wholly owned subsid- der way. iary of LASMO plc, and Central Fuel Caspian Sea Ltd. The transaction was completed on EBRD Loans LUKOil $150 million Thursday March 9 having received all the nec- on Benchmark Terms essary approvals from SOCAR (the Azerbaijan state oil company) and operator BP Amoco. 11 Mar (Financial Times): EBRD plans to lend LUKOil $150 million. The three-year credit will Partners in the Inam concession will now com- provide working capital for Russia’s largest oil prise SOCAR - 50 per cent, BP Amoco - 25 per producer. To address investor’s concerns about cent (operator), and Shell - 25 per cent. LUKOil’s lack of transparency, the credit includes a condition on a timetable to publish results The Inam prospect lies in the Caspian Sea off- according to US GAAP accounting standards shore Azerbaijan in water depths of 30 to 100 within the next few months. meters. The partners in the project are jointly committed to 3D seismic acquisition over the li- The company must also disclose by this sum- cense area and the drilling of two firm explora- mer the beneficial owners of a 9 percent tion wells. To date, some 538 square kilometers stake in the group which was sold last year of 3D seismic data have been acquired and by the government to two obscure Cypress- preparations are underway for the drilling of the based companies believed to be controlled first well, which is anticipated to spud during the by LUKOil’s directors. third quarter of 2000.

Due to the disappointing performance of previ- Shell acquired the 25 per cent interest in Inam ous costly loans and investments made by the for a consideration of around US$36 million. EBRD in Russia, LUKOil’s loan is collateral- Exploration costs (Shell share) are anticipated ized by an assignment of oil revenues, with to be in the region of US$30-50 million in order a clause that any arbitration will occur in to fully meet PSA commitments up to end 2001. London. Although active in Azerbaijan in the early years of the last century, in the last few years Shell

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20 March 2000 ENERGY ( Continued) companies have focused their activities in the Caspian region on building a strong portfolio in Kazakhstan and Turkmenistan.

This culminated in 1999 with first operations and test oil production in Kazakhstan and the sign- ing of agreements in Turkmenistan with the aim of evacuating gas to the rapidly growing Turkish market.

Recognizing the need for these projects to be sustainable and the closely linked nature of the oil and gas business in the Caspian, Shell has now developed a fully integrated regional strategy with the aim of becoming one of the leading oil and gas producers in the region. The successful entry into the Inam license is a key element of that strategy. SPORTS

World Biathalon Relay Captured by Russia Schalken in the $4.95 million Masters Series tournament at Indian Wells California. Andre Agassi was also defeated by 14th seed Hicham 11 Mar (AFP): The Russian men’s biathalon Arazi in the second round. Kafelnikov retained relay team won the weather-delayed 4 x 7.5km his one-point lead over Andre Agassi at the top world title in Lahti, Finland on Saturday, reclaim- of the ATP Champions Race after both skipped ing a title they last won in 1996. last week’s tournaments. The Russian quartet, who were at one point lag- In the ATP rankings, Kafelnikov has 208 points ging behind in sixth place, soared past the Nor- to Australian Open winner Agasi’s 204. Magnus wegians, who have not won a major title for 30 Norman of Sweden is third with 178, while Pete years, to beat them by 39.8 seconds. Sampras ranks seventh with 118 points. Olympic champions Germany, who had been Under the new ranking system, players start the leading the original world championship race year on zero and accumulate points through the when it was abandoned in February in Oslo, had season ending Tennis Masters Cup from 27 to settle for bronze, finishing 53.6 seconds be- November to 3 December in Lisbon. They count hind the Russians. their best 18 performances to determine who finishes world number one. Kafelnikov Ranks First, Tough Going Ahead at Ericsson Cup Martina Hingis retained the world number 1 spot ahead of Lindsay Davenport in the latest WTA Third-seeded Yevgeny Kafelnikov lost to Sjeng rankings after their final at the State Farm

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20 March 2000 SPORTS (Continued) Women’s Tennis Classic in Scotsdale, Arizona.

Anna Holds on at Tenth in WTA Ranks

Anna Kournikova, a losing semifinalist in Scotsdale, has an WTA ranking of tenth. Monica Seles also climbed one spot to eighth as Julie Halard-Decugis slipped to ninth.

The tour now heads to Key Biscayne Florida for the Ericsson Cup. The men will be competing for the second Masters Series event of the year, while the women join them for what was formerly known as the Lipton Championships. Andre Agassi and Pete Sampras head the seedings for the 96-strong draw. Though Yevgeny Kafelnikov is currently top of the Champions race, he has yet to make it past the fourth round in Florida.

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20 March 2000 UPCOMING EVENTS

21 Mar: Washington, D.C. Four Seasons Hotel: Eighth Annual United States Russia Business Council’s “US - Russian Trade and Investment Forecast Conference” featuring Sergei Kiriyenko, Former Prime Minister of the Russian Federation, Thomas Pickering, US Under Secretary for Political Affairs and former US Ambassador to the Russian Federation and H E Yuri Ushakov, Ambassador of the Russian Federation to the US. www.usrbc.org or Jeff Jones of the US-Russia Business Council, 202 739-9190.

27-31 Mar: London Marriott Hotel: IIR’s ASP European Summit: www.asp- summit.com.asp2000.htm

1 Apr: UN High Commissioner for Human Rights, Mary Robinson, scheduled to visit Chechnya.

10-15 Apr: Rio de Janeiro, Riocentro: ITU Telecom Americas 2000 www.itu.int/Telecom or +41 22 730 6161/fax +41 22 730 6444

26-28 Apr: Cancun, Fiesta Americana Coral Beach: IBC’s Fourth Annual UWC Global Summit: Global Wireless Convergence: Strategies for the Future www.uwcc.org or Chris Pearson at [email protected] or +1 425 372-8925/fax 372 8923 at the Universal Wireless Communi- cations Consortium

3-5 May: Barcelona, Hotel Fira Palace: AiC Worldwide’s Submarine Networks World 2000 (EMEA Regions): www.submarine.networks.com or +44 20 7242 2324/fax 7242 2320.

8-11 May: Cannes, Royal Hotel Casino: IBC’s Third Annual GPRS Conference: www.gprscongress.com

14-19 Jun: Silicon Valley, California: IEEE International’s 3Gwireless 2000 www.3Gwireless.com

15-17 May: London, The Dorchester Hotel: “Assessing International Broadband Wireless Access Markets” IBC Conferences Limited +44 171 637-4383 www.ibctelecoms.com/bwa

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20 March 2000 INDEX TO THIS ISSUE Symbols Central Fuel Company 17 CentreInvest Securities 15 3D seismic acquisition 24 Chernomyrdin, Viktor 2 3Gwireless 2000 27 Chubais, Anatoly 5 A Cisco Systems Inc 19 Communications Assistance for Law Enforcement ABB Group 6 Agencies Act (CALEA) 21 ABN Amro Bank 7 Conference on Investing in Russia and the CIS 9 Agassi, Andre 25 Convention on Mutual Legal Assistance (MLA) 22 AK&M Index of Russian Telecom 23 Cryptographic keys 22 AK&M Index of Russian Telecom shares 23 Cryptography law 22 AKO BARSS 9 Cypress-based companies 24 Alcatel Espace 18 Cyprus 11 Almskog, Kjell 9 D American Chamber of Commerce in Moscow 19 ASP European Summit 27 Deans, David 14 Assessing International Broadband Wireless Access 27 Demon Internet Ltd. 21 Assignment of oil revenues 24 Der Spiegel 10 Aton brokerage 17 Dzhabrailov, Umar 4 B E Babitsky, Andrei 15 E-commerce development program 19 Bagrov, Vladimir 15 EBRD 24 Bakuyev, Baultdin 5 ECONOMIC INDICATORS 8 Barclays Wireless index 23 Eni SpA 16 Baring Vostok Capital Partners 16 Ericsson Cup 25 Bayerische Motoren Werke AG 6 Ernst & Young International 5 Benchmark Refinancing Rate 9 European Bank for Reconstruction and Development 11 Bendukidze, Kakha 10 Express-3A 18 Berezovsky, Boris 3 Express-6A 18 Biathalon relay 25 Blair, Tony 2 F Blaklin, Scott 19 Blue Stream 16, 24 Faberge eggs 3 BMW 6 Federal Bureau of Investigation 21 BND 10 Foreign Investment Advisory Council 3, 5 Boone, Peter 7 Foreign trade surplus 8 BP Amoco 24 Frank, Charles 11 Braginsky, Andrei 19 Frick, Mario, Prime Minister 10 Broadband Wireless Access Markets 27 FRL cable 20 Brunswick Warburg 7, 19 FROG cable 20 Frost, Sir David 3 C G C-band 18 Caspian 25 Gazprom 8, 24 Caspian Sea 24 GDP 8 CBR exchange rate 12 Global TeleSystems, Inc. 23 Central Fuel Caspian Sea Ltd. 24 GlobalStar 14 Golden Telecom 23

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20 March 2000 INDEX TO THIS ISSUE (Continued) Golossnoy, Yevgeny 19 Lesin, Mikhail 2, 15 Government monitoring of electronic mail and other 20 Levada, Yury 2 GPRS Conference 27 Lewis, Ron 19 Grozny 5 Liberal Democratic Party 4 Gurevich, Vladimir 13 Lichtenstein 10 Lindahl, Goran 6 H Lipton Championships 26 Hingis, Martina 25 Lufthansa Aviation Group 8 LUKOil 24 I M IANS, or interest-arrears notes 10 ICO Global Communications 15 Maevsky, Leonid 15 IFC 23 Manilov, General Valery 4 IFC’s Index of Investable Russian shares 23 Mapley, David 18 Inam prospect 24 Maskhadov, Aslan 15 Industrial espionage 23 McCaw, Craig 15 Inernet-related services 13 Metnev, Vladislav 17 Intel Corp. 17 MFK Renaissance 19 International Law Enforcement Telecommunications Minister for Mass Media and the Press 15 Seminars (ILETS) 22 Ministry of Communicaitions 15 Intersputnik 18 Ministry of Telecommunications 19 Iridium World Communications 14 Money Markets 12 ITU Telecom Americas 2000 27 Money Supply 8 Ivanov, Igor 3 Monitoring of ISP traffic 21 Monthly Inflation Rate 8 K Monument Resources (Caspian) Ltd, 24 Moscow, City of 12 Kabakov, Alexander 2 Moskovskaya Toplivnaya Kompaniya 17 Kabanovsky, Alexander 19 Most Group 17 Kafelnikov, Yevgeny 25 Murzin, Dmitry 13 Kaliningrad 6 Kalyuzhny, Viktor 5 N Kaspersky Lab 16 Kasyanov, Mikhail 8, 9, 12 Nash, Roland 7 Kazakhstan 5, 25 NIKOil 9 Kimsey, Bill 5 Nikonov, Vyacheslav 3 Kiriyenko, Sergei 2 Nixon Center for Peace and Freedom 10 Kiryenko, Sergei 10 NPO-PM 18 Komsomolskoye, Russia 4 NTV 2, 5, 17 Kournikova, Anna 26 O Ku-band 18 Kudryavtsev, Gennady 18 OAO Kuzbassenergo 9 Kvaerner ASA 8 OAO Novokuznetsky Alyuminievy Zavod 9 Kvaerner Vyborg Shipyard JSC 9 OAO Rostelecom 18 Kwon, Goohoon 12 One-day rates 12 Orion Capital Advisors Ltd. 13 L Overnight Deposit Rate 12 LASMO plc 24 Ozon 16 Lenta.ru 13

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20 March 2000 INDEX TO THIS ISSUE (Continued) P Sonera Carrier Networks Ltd 20 Sonera Ivan 20 Pakhomov, Sergei 12 Sonera’s Ivan service 20 Paratroopers 3 SORM-2 20 Pazarbasiouglu, Ceyla 7 Standard & Poors 10 Philip Morris Cos 5 Submarine Networks World 2000 27 Pickering, Thomas 27 Susuyev, Oleg 2 Pochinok, Alexander 10, 13 Svyazinvest 15 Primorsky Electrosvyaz (ESPK RU) 15 PRIN, or principal notes 10 T PSA commitments 24 Pulkovo 8 Tennis Masters Cup 25 TerraLink Technologies 19 R Thirty-day rates 12 Trans-Caspian project 24 Radio Liberty 15 Transtelecom 16 Rambler 13 Treasury bills 13 Ramsbottom, Donald 22 Troika Dialog 6, 19 RAO Unified Energy Systems 9 Tsentralnaya Tolpivnaya Kompaniya 17 Refinancing rate 13 Tsvetkov, Nikolai 9 Regional Telecoms 15 Turkish market 25 Regulation of Investigatory Powers (RIP) Bill 21 Turkmenistan 25 Reiman, Leonid 15 Reksoft 17 U Reserves 8 Robinson, Mary 27 U.K. Internet Service Providers Association (ISPA) 21 Rostelecom 15 UN High Commissioner for Human Rights 27 ru-Net 17 United Financial Group 16 Ruger, Ulrich 8 Uralmash 10 Russian Funds IG 13 US - Russian Trade and Investment Forecast Confere 27 Russian Internet Technologies Center 13, 19 Ushakov, Yuri 27 Russian Press Ministry 15 UUNet UK 21 Russian Satellite Communications Company (RSCC) 18 UWC Global Summit: Global Wireless Convergence: S Russo-British Chamber of Commerce 7 27 S V SACE 24 Vagrius 3 Sampras, Pete 26 Vermya Novostei 13 Sberbank 11 Verwaltungs- und Privat-Bank AG 10 Seles, Monica 26 Veshnyakov, Alexander 4 Sergeyev, Igor 4 Vimpelcom 23 Seslavinsky, Mikhail 15 Vimpelcom 16 Seven-day rates 12 Volokitin, Alexander 20 Shell Azerbaijan Exploration and Production B.V. 24 Vremya MN 13 Shell EP International 24 Vyugin, Oleg 6 Shimoda Capital Advisors 18 W Simes, Dmitry 10 Skuratov, Yuri 4 Weatherall, Sally 21 Snipers 4 Women’s Tennis Classic 26 SOCAR (the Azerbaijan state oil company) 24

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20 March 2000 INDEX TO THIS ISSUE (Continued) Y Yashin, Valery 15 Yavlinsky, Grigory 4

Zhirinovsky, Vladimir 4 Zyuganov, Gennady 4

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