Caucasus-Poti ferry line resumes operation after 13-year break

ITAR-TASS News Agency
March 23, 2005 Wednesday

The Caucasus-Poti ferry line resumed operation after a 13-year break.
The first ferry with grain supply for Armenia went on this route on
Wednesday, the press service of the Russian Transport Ministry said.

Only two trial voyages will be made so far, the press service said.
The ferry Annenkov with 18 wagons went on the first voyage. The ferry
will come back with manganese ore supply in five days. The second
voyage with grain supply is scheduled for the beginning of next week.

The agreement on the opening of the ferry line was signed in Tbilisi
on January 10, 2005.

The opening of the ferry communication across the Black Sea and the
Sea of Azov is very important, as the railway communication by land
between Russia and Georgia has been suspended for the last 12 years.
The railway communication has been resumed in August 1992 after the
armed conflict in Abkhazia has started. As a result supplies for
Armenia and Azerbaijan were made on motorways bypassing Georgia that
made the way much longer and the cost of supply much higher. Not only
Georgia and Russia but also Armenia, Azerbaijan and Central Asian
states will use the ferry line.

ArmenTel says wants no delay for country’s 2nd mobile operator

Prime-Tass English-language Business Newswire
March 23, 2005

YEREVAN, Mar 23 (Prime-Tass) — Armenian national telecom company
ArmenTel does not want to delay the start of operations of Armenia’s
second mobile operator K-Telecom, Vasilios Fetsis, Armentel’s CEO,
told reporters Wednesday.

K-Telecom is holding negotiations with ArmenTel regarding cooperation
on Armenia’s mobile market and on the 25 MHz frequency, which is used
by ArmenTel and is expected to be divided between the operators.

Fetsis said that the companies have agreed upon all matters except
the issue of how much K-Telecom should pay for use of ArmenTel’s
lines. ArmenTel offered K-Telecom ‘close to liberal’ tariffs, Fetsis
said, adding that K-Telecom wants to use the lines for next to nothing,
which is impossible.

K-Telecom may build its own network, but it is more profitable and
quicker to rent lines from ArmenTel, Fetsis said.

Fetsis said that if the companies do not come to an agreement on
the matter in four-six months, the issue is expected to be regulated
by Armenia’s Transport and Telecommunications Ministry, adding that
negotiations have already lasted for more than four months.

Fetsis said that ArmenTel plans to invest 15 million – 20 million
euros in mobile network development in Armenia in 2005. The total
amount of investments this year is estimated at 50 million euros,
including 25 million euros planned for fixed-line investment.

In 1997, Greek company Hellenic Telecommunications Organization SA
(OTE) paid U.S. USD 142.470 million to gain control of a 90% stake in
ArmenTel. It bought a 41% stake from the Armenian government and a 49%
stake from Trans-World Telecom.

According to the agreement between OTE and the Armenian government,
ArmenTel was granted the right to hold a monopoly for 15 years, but in
September 2003 the government initiated a procedure to amend ArmenTel’s
license due to the allegedly low-quality services it provided.

In November 2004 the Armenian government decided to make amendments
to ArmenTel’s license, depriving the company of its exclusive right to
provide GSM, mobile satellite and mobile radio communication services
in the country.

But the company kept its monopoly on IP telephony voice transmission
services. End

Sverdlovsk governor discussing economic ties with Armenia
By Tigran Liloyan

ITAR-TASS News Agency
March 23, 2005 Wednesday

YEREVAN, March 23 — The coming working visit by Russian President
Vladimir Putin to Armenia and opening of Year of Russia in Armenia will
be a new impetus for the further development of bilateral relations
which are already at a high level. This idea was repeatedly emphasized
at meetings which Governor of the Sverdlovsk Region Eduard Rossel
held here on Tuesday.

Receiving the guest, Armenian President Robert Kocharyan advocated
“combining the economic potential of the republic and the region”. He
suggested specifying in what directions the two sides can enter markets
of each other, to think of restoring contacts between machine-builders
and machine-tool builders of Armenia and similar enterprises in the
Sverdlovsk Region.

The governor proposed at a meeting with Armenian premier Andranik
Margaryan that an Armenian Trade House should be opened in
Yekaterinburg, the administrative center of the Sverdlovsk Region. To
encourage cooperation, he voiced support for mounting exhibitions of
goods from Armenia and establishment of joint ventures.

Armenia established active trade and economic relations with 25
subjects of the Russian Federation in the past few years. For instance,
it concluded agreements on cooperation with the Leningrad, Saratov,
Astrakhan and Kirov regions as well as with the Krasnodar Territory
and the Moscow city government.

From: Emil Lazarian | Ararat NewsPress

ACTION PLAN OF 9TH MEETING OF US-ARMENIA TASK FORCE ON ECONOMIC
COOPERATION SIGNED YEREVAN

MARCH 23, NOYAN TAPAN. On March 23, Minister of Finance and Economy
Vardan Khachatyran and U.S. Ambassador John Evans signed the Action
Plan of the most recent meeting of the U.S.-Armenia Task Force
on Economic Cooperation (USATF). The current document highlights
areas in which the two governments are cooperating in the fields
of development assistance. “This Action Plan is our development
roadmap,” said Ambassador Evans of the signing ceremony. “It helps us
set clear goals and ensures that we are cooperating as governments
toward a bright future for the Armenian people.” Over the last
decade, the US government provided over 1.5 bln dollar assistance for
Armenia. According to the press service of the RA Minisry of Finance
and Economy, topics in the 30-point action plan include ways to improve
fiscal administration, strengthen the banking sector, fight corruption,
engage the business community, meet Armenia’s needs in the public
service sector and strengthen ongoing cooperation in the agricultural
and humanitarian sectors. The document also acknowledges the Government
of Armenia’s eligibility for the Millennium Challenge Account (MCA)
and the need to register progress in MCA eligibility areas. The
U.S.-Armenia Task Force on Economic Cooperation was established in
January 2000 as a way to institutionalize government-to-government
dialogue on development issues, promote further economic cooperation
and maximize the effectiveness of assistance programs implemented by
the United States Government. Meetings are held twice a year (once
in the United States and once in Armenia) The next USATF meeting is
tentatively scheduled to be held in May 2005 in Yerevan.

Agency WPS
DEFENSE and SECURITY (Russia)
March 23, 2005, Wednesday

FOUR ARMED RUSSIAN PEACEKEEPERS DETAINED IN THE ZONE OF THE
GEORGIAN-ABKHAZIAN CONFLICT

Four armed Russian peacekeepers (one is originally from Armenia, two
– from Russia and one from Kabardino-Balkaria) were detained by
Georgian law enforcement agencies in the zone of the
Georgian-Abkhazian conflict. Police of the Samegrelo district stated
that the Russian peacekeepers did not have documents. They refused to
give up and Georgian policemen had to open fire in the air. After
that the peacekeepers surrendered. The peacekeepers stated that they
were looking for a horse, which ran away from their unit. Georgian
policemen currently question the soldiers. They will soon be passed
over to the command of Russian peacekeepers.

Source: Regnum information agency, March 21, 2005

Railroad ferry link between Russia, Georgia opens Wednesday

Prime-Tass English-language Business Newswire
March 23, 2005

MOSCOW, Mar 23 (Prime-Tass) — The opening of the railroad ferry
link between Russia’s Kavkaz seaport in the Krasnodar Region and
Georgia’s Poti seaport opened Wednesday, the press service of Russian
Transportation Ministry said.

Two trial voyages were expected to be made, the press service said.

The press service said that on Wednesday the first ferry carrying 18
railway cars loaded with grain to Armenia is expected to sail from
Kavkaz to Poti. The ferry is expected to return in five days with
railway cars loaded with manganese ore.

The second ferry passage, which will also carry railway cars loaded
with grain, is scheduled for the beginning of next week.

The agreement on opening the railroad ferry link was signed on
January 10.

The land-based railroad link between Russia and Georgia was cut in
August 1992 after the breakout of an armed conflict in Georgia’s
breakaway republic of Abkhazia. Armenia, Azerbaijan and Central Asian
states may also use the Poti-Kavkaz route. End

VAZGEN MANUKIAN, PARUIR HAYRIKIAN AND ASHOT MANUCHARIAN TO LEAVE FOR MOSCOW

YEREVAN, MARCH 23, NOYAN TAPAN. On March 23 Vazgen Manukian, the
Chairman of the National Democratic Union, Paruir Hayrikian, the
Chairman of “National Self-Determination” union and Ashot Manucharian,
the Political Secretary of Armenian Socialist Powers and Intellectuals’
Union, leave for Moscow. According to reliable sources informing
Noyan Tapan correspondent about it, the goal of the visit is to
move Armenian-Russian relations “to the natural field”. During the
three-day visit the politicians will have meetings with high-ranking
authorities and political parties of Russia.

Agency WPS
The Russian Business Monitor (Russia)
March 23, 2005, Wednesday

VNESHTORGBANK WILL NOT BE SOLD

It looks that President of Vneshtorgbank Andrei Kostin has persuaded
the Kremlin to give up sale of the bank’s shares to foreign
investors. Kostin announced that this issue was not considered in
presence of President Vladimir Putin. According to Kostin, IPO is the
best way to privatize the bank.

In 2004, assets of Vneshtorgbank group reached $20 billion, capital
amounted to $3 billion, credit portfolio amounted to $11 billion and
net profit amounted to $440 million. Almost 100% of Vneshtorgbank
shares belong to the government. The group of Vneshtorgbank includes
Russian Commercial Bank in Switzerland and bank with the same name in
Cyprus, Austrian Donaubank, East-West United Bank in Luxembourg,
Armsberbank in Armenia, United Bank of Georgia and four subsidiary
banks in Russia including Guta-bank acquired in 2004.

It was Mikhail Kasyanov who proposed privatization of Vneshtorgbank
after he achieved reassignment of almost 100% of Vneshtorgbank shares
from the Central Bank to the government in summer 2002. At first, it
was planned to sell 10% blocks of Vneshtorgbank shares to IFC and
EBRD. In summer 2003, IFC approved issue of a $200-million credit to
Vneshtorgbank that could be converted into shares of the bank. In
December 2003, consultants hired by Vneshtorgbank (J. P. Morgan and
Ernst & Young) estimated the bank’s business at $3 billion. However,
the EBRD was ready to buy 10% of Vneshtorgbank shares for $150
million or 50% less than expected by the government.

After Kasyanov’s dismissal in February 2004, negotiations were
stalled. Vneshtorgbank did not take the money offered by IFC. Kostin
mentioned new candidates for Vneshtorgbank shares, Italian Mediobanca
and German Deutsche Bank. In any case, not a single party ever
reported about details of negotiations. Recently President of the
Moscow-based subsidiary of Deutsche Bank Alexis Rodzyanko announced
that negotiations on sale of Vneshtorgbank shares to the German bank
were not conducted.

Opening a subsidiary bank in Ukraine on March 19, Kostin announced in
presence of Russian President Vladimir Putin and Ukrainian President
Victor Yushchenko that neither a large nor a small block of the
bank’s shares would be sold to foreign investors. The President of
Vneshtorgbank explained, “Such mechanisms for creation of public
companies like IPO are more efficient.”

Just a few days earlier, presidential aide Igor Shuvalov said that
Vneshtorgbank should be privatized slowly and large international
financial institutions should become buyers of its shares. Now
Shuvalov calls negotiations with the EBRD on sale of a stake in
Vneshtorgbank a mistake. A representative of the EBRD only said that
the fate of the deal was up to the government of Russia.

The Supervisory Board of Vneshtorgbank is headed by Finance Minister
Alexei Kudrin. It was impossible to obtain his comments. Arkady
Dvorkovich, member of the Supervisory Board of Vneshtorgbank and
director of the presidential expert department, believes that
Kostin’s proposal regarding IPO is worth discussion. A source close
to the Kremlin presumes that IPO will make Vneshtorgbank more
transparent and will lead to appearance of independent directors on
the Supervisory Board and shares of the bank may become a blue chip.

Alexei Akinshin, Deputy CEO of Vneshtorgbank, reports that the bank
is going to hold consultations with the Finance Ministry first and to
propose IPO to the Supervisory Board after publication of its annual
report. Akinshin adds, “We have big plans for 2005, connected with
development of investment banking. We are going to organize IPOs for
the clients and can organize our own IPO.” According to Akinshin,
preparation of the deal after its approval by the Supervisory Board
will take approximately six months.

Akinshin also says, “Theoretically the IPO may take place already by
the end of 2005.” However, he points at the circumstance that may
hinder the deal. This is a proposal of the National Banking Council
to reassign shares of Russian banks abroad (Moscow Narodny Bank and
Eurobank) to Vneshtorgbank. Akinshin explains, “It would be logical
for potential shareholders to submit their bids after the final
formation of the structure of Vneshtorgbank.”

Over the last few years, business of Vneshtorgbank has been growing
rapidly. The bank actively borrows money in the West and has issued
Eurobonds worth $3 billion. On the basis of Guta-bank acquired in
summer 2004, Vneshtorgbank is going to develop retail business. The
bank is also actively developing markets of CIS countries. Analyst of
Standard & Poor’s Ekaterina Trofimova comments, “Vneshtorgbank is
growing at a very serious pace and prospects for growth of its market
share are very high.”

General Director of RusRating Richard Heinsworth says that bringing
shares of Vneshtorgbank to the exchange the state will improve
investment climate in the Russian banking sector. In any case, adds
Trofimova, in the near future the government will retain control over
Vneshtorgbank anyway, which foreign investors will hardly like.

Source: Vedomosti, March 21, 2005; Gazeta, March 21, 2005

COLLISIONS OF ARMENIANS AND COSSACKS IN NOVOROSSIYSK RUSSIAN TOWN

PanArmenian News
March 23 2005

23.03.2005 02:42

/PanARMENIAN.Net/ According to the information provided by a resident
of Novorossiysk Russian town situated in the Krasnodar region of
Russia about 200 Cossacks attacked one of the region of the town,
Yerkramas, the newspaper of Armenians of Russia reports. Armenians as
well as cars, cafes and shops belonging to them are being assaulted.
The incident was caused by a collision that took place last night in
one of the cafes. According to the data available, Cossacks headed
by ataman of the town Cossack society Vladimir Petrushin came up to a
group of young people, who were celebrating a birthday. A squabble was
followed by a fight. As result the ataman was injured. Presently he
is in hospital, where he has been operated on and his health state is
stable. A criminal case was initiated. Mayor of Novorossiysk Vladimir
Sinyagovsky held a special sitting with the representatives of the
national communities of the town and stated that the “instigators
will be punished.” The parties agreed not to tense the situation
and restrain emotions. Luys, the society of the Armenian culture
of Novorossiysk reported that the Armenian side was maintaining the
agreement and called its compatriots to calm. However it is difficult
to predict the further development of the situation.

Agency WPS
DEFENSE and SECURITY (Russia)
March 23, 2005, Wednesday

ROLLER-COASTER

SOURCE: Novaya Gazeta, No 20, March 21 – 23, 2005, p. 12

by Pavel Felgengauer

MOSCOW HAS LOST THE CAUCASUS

Positions of the Russian military in the Caucasus appeared invincible
only a decade ago, in 1995. An accord was signed with Azerbaijan on
the use of the Gabala radar, an element of the Soviet missile attack
early warning system that enabled Moscow to “see” the south. A
military-political alliance with Yerevan, Armenia, was made. Russia
had over 15,000 servicemen in Georgia, and Russian border guards
manned the border with Turkey in 1995.

Everything has changed. Armenia is choosing between Iran and the
United States to lean on because it does not feel it can rely on
Moscow, Azerbaijan hopes for establishment of NATO bases on its
territory, the parliament of Georgia demands withdrawal of Russian
military bases… and Moscow is at a loss.

Retaining all external tokens of military, political, and economic
domination of the Caucasus, Moscow has failed to accomplish anything
by way of solutions to the Karabakh, Abkhazian, or South Ossetian
problems. The parliament of Georgia refused to ratify the treaty on
military bases. Efforts to put the conflicts on hold were undertaken,
but these efforts did not enable Russia to retain the favorable
atmosphere or its own influence.

Hostilities in Chechnya tied up all more or less combat ready units
Russia retained and demonstrated the Kremlin’s growing military
weakness. The Caucasus ruling elites got the impression that Russia
was not settling local conflicts first and foremost because it lacked
the strength and the will to do so. Traditional economic ties with
Moscow maintained the semi-impoverished condition but did not
facilitate development of the countries of the region.

In 2002, the Kremlin began distributing Russian passports in Abkhazia
and South Ossetia, clearly preparing for annexation of the
territories at a more convenient moment. Georgia found itself without
a choice because Russian military bases on its territory became the
fifth column.

That was how official Moscow set up a no-win situation in the
Caucasus, a situation in which every new step would only escalate
tension. There is lots of military hardware at the Russian bases in
Georgia (the 12th in Batumi and the 62nd in Akhalkalaki) – 114 tanks,
hundreds of armored personnel carriers and battle infantry vehicles,
artillery pieces… only 4,000 or so servicemen, most of them locals.

Mixed formations comprising Russian commanders and local servicemen
are not reliable by default. Should the Georgians decide to take over
the bases, resistance will be light – if any.

The Duma in Moscow is screaming in fury, claiming that Tbilisi must
be taught a lesson. How? Russia is tied up in Chechnya where it has
to reinforce its troops in fear of Shamil Basayev and Ramzan Kadyrov
alike. Even a complete economic blockade of Georgia is impossible.
The West will come to Tbilisi’s help, and particularly Turkey. Bases
in Batumi and Akhalkalaki were established against Turkey, and Ankara
will be happy to see them become history. It will only up its own
clout with the Caucasus. Along with everything else, the US Senate is
determined to demand from Moscow an unconditional withdrawal from
Georgia and Trans-Dniester region in return for its membership in the
World Trade Organization.

Russia is facing a choice between a hopeless conflict on the one hand
and a shameful but rapid withdrawal. Very soon now, Moscow will only
retain in the Caucasus small enclaves in Abkhazia and South Ossetia –
strategically pointless dens of smugglers and criminals. But even
that will not last. Sooner or later, through war or not, but Tbilisi
assisted by the West will reestablish its control over them.

As a matter of fact, the Caucasus is but a single example. The
growing discrepancy between the weakening capacities and colossal
aspirations are decidedly turning Russia into a global laughing
stock. The Russians always swell with pride over absolutely anything
nowadays only in order to cringe in shame soon afterwards and start
whining about dual standards.

Translated by A. Ignatkin