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Newsline - June 13, 2006


PUTIN NAMES FOUR PROBLEMS OF RUSSIAN ECONOMY
President Vladimir Putin told an international economic forum in St. Petersburg on June 13 that "total foreign investment in Russia -- both direct and portfolio -- has reached $112 billion. I hope that big corporations will further implement their projects in our country and that Russia, in attracting foreign capital to its market, will further aim to improve [the investment] climate," Russian and international news agencies reported. He added that "new opportunities have opened for entrepreneurs, such as special economic zones, concessions, and other approaches used and offered by the Russian government for business development." Putin noted nonetheless that "not all the systemic problems in the Russian economy have been solved.... [We still have] relatively high inflation, monopolization in a number of sectors, bureaucratic barriers, and, unfortunately, corruption." Elsewhere, German Gref, who is minister of economic development and trade, said that the "best-case scenario" for Russia's joining the World Trade Organization (WTO) is early 2007, Interfax reported (see "RFE/RL Newsline," April 13, May 10, and June 7, 2006). "We will not manage technically by the end of [2006]," he added. PM

ROSNEFT ANNOUNCES ITS IPO
The state-run oil company Rosneft announced in Moscow on June 12 that it will soon launch its initial public offering (IPO), Reuters reported. Economic Development and Trade Minister Gref said that it is not clear when the sales will begin, but added that some time in July is the most likely possibility. The company is reportedly seeking to raise about $10 billion in the sale and will use most of the money to pay off its outstanding debt to Western banks of about $7.5 billion. PM

NORILSK COMPLETES A BIG AGREEMENT
The Russian giant Norilsk Nickel and the Anglo-Australian group BHP Billiton, which is the world's largest mining company, announced an agreement in Moscow on June 13 for prospecting for and developing mineral resources in Russia, RIA Novosti reported. The pact, which was signed the previous day, enables joint prospecting and mining for several commodities in specific areas, starting with northwestern Russia and western Siberia. BHP Billiton's CEO Chip Goodyear, said: "This alliance with Norilsk Nickel is a win-win and provides significant growth opportunities for both companies. This is an important step for BHP Billiton and represents a diversification of our geographical base. We look forward to working with our new partner in Russia." His company has operations in 25 countries and market capitalization at around $130 billion. PM

PRESIDENT MARKS RUSSIA DAY...
President Putin praised his predecessor Boris Yeltsin and presented awards to scholars, artists, and Patriarch Aleksy II of the Russian Orthodox Church at a Kremlin ceremony on June 12 marking Russia Day, the day in 1990 when the Soviet-era parliament declared Russian sovereignty and thereby took a major step toward undermining the unity of the Soviet Union, "The Moscow Times" reported on June 13 (see "RFE/RL Newsline," February 1, 2006). One award recipient was not publicly named and did not attend the gathering because he was said to be conducting "research related to national security." Putin, who previously called the collapse of the Soviet Union "the greatest geopolitical catastrophe of the century," referred to Russia Day at the ceremony as a "tribute to Russia's statehood....and the historic choice that the Russian people conscientiously made at the start of the 1990s." He added that "thanks to that choice, we live and work in a democratic state and a free society where the main value is a person and his free spirit." He also said that Russia's "huge" intellectual resources will strengthen the economy and the armed forces. PM

...AS DO DEMONSTRATORS
Elsewhere in Moscow, up to 46,000 pro-government young people wearing identical T-shirts were bussed on June 12 in to demonstrate with slogans such as "Russia is and will be a great power," "The Moscow Times" reported on June 13. But in front of the former KGB headquarters, where the Federal Security Service (FSB) now has offices, about 600 people demonstrated for democracy and against media censorship, hazing in the military, and the war in Chechnya. And air-force commander General Vladimir Mikhailov told Interfax that seven aircraft were sprinkling clouds above Moscow with chemicals to prevent rain until midnight. PM

IS G8 ENERGY DEAL IN THE OFFING?
"The New York Times" reported on June 12 that Russian, European, Japanese, and U.S. negotiators are preparing a text for the July St. Petersburg summit of the Group of Eight (G8) industrialized countries on mutual access to each other's energy markets. Russia wants to invest in Western utilities, pipelines, natural gas facilities, and other infrastructure. It has, however, been reluctant to endorse market principles for its own energy sector, which is increasingly the preserve of state-run monopolies that President Putin uses to project Russian power abroad (see "RFE/RL Newsline," June 12, 2006). The daily reported that Lukoil is buying a chain of 2,000 gas stations in the United States and that unnamed Russian businesses are interested in U.S pipelines and facilities for converting liquefied natural gas (LNG). Igor Shuvalov, who is an aide to Putin and his chief planner for the G8 summit, told the newspaper that "the summit should recognize that Russia plays a key role in providing energy security, and that Russia is ready to open its energy reserves to foreign investment.... We think that after this summit, no one will again question the membership of Russia in the G8." Some of Russia's Western critics have suggested that it be dropped from that group on the grounds that it is neither industrialized nor democratic. An unnamed senior U.S. official told the daily that nobody is trying to exclude Russia, but only to ensure that it does not have monopolies that can manipulate markets. PM

RUSSIA WANTS MORE ARMS COOPERATION WITH NATO MEMBERS
Vyacheslav Dzirkalin, the deputy director of the Federal Military-Technological Cooperation Service, told ITAR-TASS at a Paris international arms fair on June 12 that Russia wants to improve cooperation with Western partners in arms research, development, production, and modernization, as well as in laying the legal basis for such work. He expressed an interest in modernizing Russian weapons and military hardware to bring them up to NATO standards. Since the Atlantic alliance does not take part in such projects as a bloc, Russia seeks partnerships with individual NATO member states. Dzirkalin added that "the only precondition for this cooperation is strict compliance with Russian laws and observation and protection of Russia's military and economic interests." PM

POLL REVEALS ONLY MODEST SUPPORT FOR CHECHEN PREMIER'S AMBITIONS...
The Prague-based online daily "Caucasus Times" posted on June 13 the findings of an opinion poll conducted from June 1-8 in Grozny, which was part of a larger poll encompassing all the North Caucasus republics conducted with financial support from the U.S. National Endowment for Democracy. The number of Chechen respondents is not clear, but only 27 percent of them named current Prime Minister Ramzan Kadyrov as their preferred candidate to head the republic. Resistance leader and acting Chechen President Abdul-Khalim Sadulayev polled 24 percent, Moscow-based businessman Malik Sadullaev, who was barred from the ballots for presidential head in 2003 and 2004, 12 percent; current administration head Alu Alkhanov, 9 percent; former Russian parliament speaker Ruslan Khasbulatov, 6 percent (most of them women); radical Chechen field commander Shamil Basayev, 4 percent (all of them men); and Russian President Putin and his adviser on the North Caucasus, Aslambek Aslakhanov, 3 percent each. LF

...BUT APPROVAL FOR PROPOSED TERRITORIAL MERGER
Fifty-five percent of respondents in the same poll expressed unequivocal or conditional support for Chechen parliament speaker Dukvakha Abdurakhmanov's recent proposal to merge Chechnya and Ingushetia to form a single republic. Twenty-seven percent said the socioeconomic situation in Chechnya has improved since the beginning of 2006, while 29 percent thought it has not changed much; 55 percent said there has been no improvement in the security situation, and 43 percent were at a loss to specify who is responsible for the ongoing wave of abductions of Chechen civilians. LF

KARABAKH AUTHORITIES REJECT REFERENDUM AS COMPONENT OF CONFLICT SETTLEMENT
An article posted on June 12 on the website of the Foreign Ministry of the unrecognized Nagorno-Karabakh Republic (NKR) and reported on Groong cites arguments against the proposal, allegedly part of the Karabakh peace proposal currently under discussion, that at some indeterminate future date voters in the NKR should decide in a referendum on the enclave's future status vis-a-vis the central Azerbaijani government. The article reasoned that holding a further referendum would call into question the legality of the referendum of December 10, 1991 in which the overwhelming majority of the region's Armenian voters opted for independence from Azerbaijan. It noted that most Azerbaijani voters declined to participate in that plebiscite. The article also argued that if under a phased peace agreement those Azerbaijanis who left Karabakh in the late 1980s and early 1990s are permitted to return, they could within 15-20 years become the majority ethnic group and vote against either independence for the NKR or its unification with the Republic of Armenia. LF

DISSIDENT IRANIAN AZERI CONFIRMS HE WAS DEPORTED FROM AZERBAIJAN
Mahmudali Chehraganli, one of the leaders of the Southern Azerbaijan National Awakening Movement that represents Iran's large Azeri minority, told day.az in a June 13 interview that he arrived legally in Baku, having obtained a visa, but was subsequently detained by security officials who demanded that he leave the country immediately, and after being taken with his family directly to Baku airport, he decided to fly to New York, where the Movement has an office (see "RFE/RL Newsline," June 12, 2006). Chehraganli said that his arrival in Baku "disturbed someone, and the Azerbaijani government acted in accordance with the wishes" of the Iranian authorities. But Azerbaijan's Foreign Minister Elmar Mammadyarov denied on June 12 that Chehraganli was constrained to leave Baku on June 10, day.az reported. Mammadyarov said Chehraganli left Azerbaijan of his own volition after consultations with persons Mammadyarov did not name. The Azerbaijani National Security Ministry similarly denied on June 12 that Chehraganli was deported. LF

SOUTH OSSETIA ACCUSES GEORGIA OF FRAMING DETAINEE
Mikhail Mindzayev, the unrecognized Republic of South Ossetia's interior minister, accused the Georgian authorities on June 13 of seeking systematically to destabilize the situation in the South Ossetian conflict zone in the run-up to the talks, scheduled for June 13 in St. Petersburg, between the presidents of Georgia and Russia, regnum.ru reported. Mindzayev claimed that Georgian police detain, beat, and humiliate Ossetians on a daily basis. He further claimed that Georgian witnesses saw Georgian police plant counterfeit currency on Alan Bazzaev, whom they arrested on June 9 in his home village of Avnevi (see "RFE/RL Newsline," June 12, 2006). Bazzaev has been taken to Tbilisi and remanded in pretrial custody on charges of having in his possession some $100,000 in fake bills. LF

KAZAKH PRESIDENT REAFFIRMS BID FOR OSCE CHAIRMANSHIP
Speaking at an OSCE-sponsored conference in Almaty, Kazakh President Nursultan Nazarbaev said on June 12 that if his country's bid to assume the rotating chairmanship of the OSCE in 2009 is successful, this would enhance stability in the region, RFE/RL's Kazakh Service and Kazinform reported. Nazarbaev added that chairing the OSCE in 2009 would also enhance Kazakhstan's importance "as a bridge between the East and the West" and enable the country to become "one of the 50 most competitive nations in the world." The bid could be hindered by the country's human rights situation and by an electoral record seen as falling short of OSCE standards of democracy -- most recently in the December 2005 reelection of President Nazarbaev, whose landslide victory was criticized by international observers. RG

KAZAKH COURT CUTS PRISON SENTENCE FOR CONVICTED SECURITY OFFICIAL
A district court in Almaty issued a ruling on June 12 to reduce the prison sentence of former National Security Service Colonel Arat Narmanbetov, Interfax reported. Presiding Judge Tleules Nakisbekov said his decision to reduce the lower court's sentence is based on Narmanbetov's poor health. Narmanbetov, originally sentenced to a one-year prison term after being convicted by a district court for libel, received a much less restrictive one-year sentence with conditional probation. The conviction stems from an interview in which Narmanbetov alleged Kazakh First Deputy Foreign Minister Rakhat Aliev was complicit in the murders of prominent opposition leader Altynbek Sarsenbayev and two other people (see "RFE/RL Newsline," February 14 and April 26, 2006). Aliev is married to President Nazarbaev's eldest daughter. RG

KYRGYZ FOREIGN MINISTER REPORTS ON TALKS OVER U.S. BASE
Kyrgyz Foreign Minister Alikbek Dzhekshenkulov announced at a June 12 news conference in Bishkek that a second round of bilateral talks with the United States over the use of an air base in Kyrgyzstan will be convened soon, ITAR-TASS reported. Negotiations held last month over the use of the strategically located Manas Air Base reportedly remained stalled over financial terms (see "RFE/RL Newsline," June 2, 2006). The Manas facility is critical to U.S.-led coalition operations in Afghanistan, and the U.S. reportedly pays an estimated $2.7 million annually to lease the base. RG

TAJIKISTAN PLANS NEW PRISON-OVERSIGHT BODY
Tajik regional prosecutor Foziljon Okhunov announced on June 12 that a new state body is being formed to oversee and inspect troubled prison facilities, Asia-Plus reported. The new body, to be centered in the Khatlon prosecutor's office, is to begin a series of inspections within 10 days and has been tasked with studying measures designed to improve living conditions within the facilities. If effective, the model would be replicated in other regions throughout Tajikistan. Penal oversight is currently limited to one inspectorate in the Tajik Prosecutor-General's Office. RG

UZBEK PRESIDENT MEETS WITH VISITING CSTO SECURITY CHIEF
Uzbek President Islam Karimov met in Tashkent on June 12 with visiting CIS Collective Security Treaty Organization (CSTO) Secretary-General Nikolai Bordyuzha, Uzbek television reported. Karimov and Bordyuzha reportedly reviewed efforts aimed at countering terrorism and narcotics trafficking, fighting organized crime, and combating Islamist extremism in the region. Karimov also briefed Bordyuzha on the planned summit of the Eurasian Economic Community scheduled for the end of the month in Minsk. Although Uzbekistan is not a full member of the CSTO, the meeting is the latest sign of deepening ties between Uzbekistan and the organization. RG

MINSK BLASTED FOR HARASSING INDEPENDENT TRADE UNIONS
The International Confederation of Free Trade Unions (ICFTU) has criticized the Belarusian authorities' policy vis-a-vis independent trade unions, noting that the government did not implement any of the International Labor Organization's (ILO) recommendations last year, Belapan reported on June 12. "The aim of using the Federation of Trade Unions of Belarus (FPB) as a tool of government was demonstrated as blatantly as ever, and laws were passed allowing the authorities to dissolve trade union organizations at whim," the ICFTU said in its annual report released last week. "New membership thresholds make it impossible for any union outside the FPB to take part in national tripartite dialogue. Independent trade unions faced constant interference and obstruction." The report also says that some 90 percent of all workers are employed on fixed-term contracts, with many of the contracts being short-term, which paves the way for forcing workers out of independent trade unions. In its recommendations issued in 2004, the ILO called on the Belarusian government to make changes in the country's laws to allow unions to organize freely, and to respect independent unionists' civil rights. JM

ORANGE COALITION TALKS BREAK DOWN IN UKRAINE
Our Ukraine has told its partners in coalition talks -- the Yuliya Tymoshenko Bloc and the Socialist Party -- that it feels "free in its actions" and is under "no obligations at present" regarding the two allies in 2004 Orange Revolution, UNIAN reported on June 13, quoting Roman Zvarych from Our Ukraine. In a statement issued on June 12, Our Ukraine said it sees "no prospects of success" in continuing talks on forming a ruling coalition with these two groups. However, negotiators from Our Ukraine have refused to confirm or deny that they will now turn to the Party of Regions led by former Prime Minister Viktor Yanukovych with an offer to form a new government. The three former Orange Revolution allies reportedly differ on the distribution of top government posts (see "RFE/RL Newsline," June 12, 2006). The newly elected Verkhovna Rada, which began its work on May 25 and gathered shortly on June 7, is scheduled to reconvene on June 14. In accordance with a 2004 amendment to the Ukrainian Constitution, the president has the right to dissolve the Verkhovna Rada if it fails to form a ruling majority within one month. JM

UN HEAD IN KOSOVA RESIGNS
Soren Jessen-Petersen, the head of the UN Mission in Kosova (UNMIK), announced his resignation on June 12, international news agencies reported the same day. "After almost two years on the job, it is time for me to rejoin my family in Washington, D.C.," Jessen-Petersen said in a statement quoted by Reuters. A Danish diplomat, Jessen-Petersen is the fifth head of UNMIK. He leaves as talks on Kosova's final status enter a crucial phase, a fact he acknowledged in announcing his resignation. "I am aware, of course, that I will be departing at an important moment in the history of Kosovo. I am confident, however, that the political process leading towards a status decision is on track," he said. "When I arrived in Kosovo, I stated my belief that there will be no normalization, no stabilization in the western Balkans unless the issue of Kosovo is resolved," Jessen-Petersen said, adding that his experience has strengthened that belief. BW

SERBIA COUNTING ON RUSSIA'S SUPPORT OVER KOSOVA
Speaking in St. Petersburg on June 13, Serbian Prime Minister Vojislav Kostunica said he is "counting on Russia's support in resolving the Kosovo issue," Regnum reported the same day. Kostunica made his comments at the opening of the 10th St. Petersburg International Economic Forum. "It is necessary for all forces to prevent violence in international relations," Kostunica said. "Serbia is one nation whose borders are immovable," he added. He said Serbia is prepared to compromise, but will accept only a compromise that "respects international law." Kostunica is scheduled to hold talks with Russian President Vladimir Putin on June 13, Focus reported the same day. BW

EU FOREIGN MINISTERS RECOGNIZE MONTENEGRO
European Union foreign ministers on June 12 gave the go-ahead for member states to establish diplomatic relations with Montenegro, dpa reported the same day. "The Republic of Montenegro is an independent state with full legal personality under international law," EU ministers said in a statement, adding that the bloc also recognizes Serbia's decision to define itself as the Republic of Serbia. EU member states, the statement said, have decided to "develop further their relations with the Republic of Montenegro as a sovereign, independent state, taking full account of the referendum result." The foreign ministers also called on the newly independent states of Serbia and Montenegro "to pursue a direct and constructive dialogue on their future relations," adding that the EU stands ready to support talks. Iceland on June 8 became the first country to recognize Montenegro (see "RFE/RL Newsline," June 9, 2006). It was followed by Switzerland, Russia, Croatia, Macedonia, and Bulgaria. BW

ALBANIA SIGNS PRE-MEMBERSHIP PACT WITH EU
Albania on June 12 signed a Stabilization and Association Agreement (SAA) with the EU, Reuters reported the same day. Albanian Prime Minister Sali Berisha and EU Enlargement Commissioner Olli Rehn signed the agreement at a ceremony during a meeting of EU foreign ministers in Luxembourg. An SAA is a crucial first step toward joining the union, but EU officials said Albania still faces a long and difficult path before membership. "This is the first stepping stone towards the European Union for Albania," Rehn said. "It will foster mutually beneficial economic and political relations between Albania and the EU. Nevertheless, Albania still faces difficult reform challenges," he said. "We now look to Albania to show determination in fulfilling the commitments it has made," he added. Berisha called the agreement an "historical landmark towards fulfillment of Albanians' dream to return and reunite with their European family." BW

TRANSDNIESTER SEEKS DIRECT RAIL LINK WITH MOSCOW
The head of the railway system in Transdniester said on June 12 that the breakaway Moldovan region will push for a direct link between Tiraspol and Moscow, ITAR-TASS reported the same day. A Chisinau-Tiraspol-Moscow rail link, which ran through Transdniester, was suspended in February, according to ITAR-TASS. "The Bendery-Chisinau-Moscow train, which Moldovan authorities launched at the beginning of June, is inconvenient both for Transdniestrian and Moldovan passengers because it runs through the north of Moldova, which adds another 10 hours of travel time and increases the fare," Transdniester railway chief Sergei Martsinko said. He proposed restoring the Chisinau-Tiraspol-Moscow line, but noted that there is disagreement with Moldova about revenues. "Chisinau proposes that all earnings from transit will go to the Moldovan railway [system]. We disagree with that," Martsinko said. The conflict between Moldova's and Transdniester's railway administrations dates back to 2004 when Tiraspol seized control of the sections passing through the separatist region. In response, Chisinau redirected trains to Moscow and St. Petersburg through northern Moldova, bypassing Transdniester. BW

IS HISTORIC U.S.-RUSSIAN AUTO PARTNERSHIP NEARING ITS END?
When it was formed in 2001, the General Motors-AvtoVAZ joint venture was considered a major step toward economic revival in postcommunist Russia. The marriage of the U.S. and Russian automotive giants has for the most part been successful.

But cracks in the relationship emerged after AvtoVAZ was taken over by the Russian state last year. Now, with General Motors expected to announce on June 13 the construction of its own independent assembly plant, some are wondering if the partnership is meant to last.

General Motors Corporation (GM) began courting AvtoVAZ in 1999, as Russia was emerging from a ruble crash and subsequent economic crisis. Within two years, GM-designed cars were soon rolling off the assembly lines at a new plant in Russia's automaking hub of Tolyatti, 1,100 kilometers south of Moscow. By 2005, the venture was producing about 50,000 mid-priced sedans and sports utility vehicles -- the Viva and Niva, respectively -- sold under the Chevrolet brand.

The companies were equal partners in what was seen as a mutually beneficial project. General Motors stood to gain access to Russia's largely untapped auto market, one of the fastest-growing in the world. The number of cars sold in Russia is expected to jump from the current 1.8 million a year to 2.8 million annually by 2010. And of the $22 million Russians currently spend on new automobiles, more than half was used to purchase foreign cars.

AvtoVAZ, meanwhile, looked to benefit from Western expertise and capital. The Russian company was hoping to revitalize its own outdated lineup, which consisted mostly of its low-cost Lada models.

The third investor in the deal was the European Bank for Reconstruction and Development (EBRD), which viewed the $332 million project as key to its efforts to revitalize Russia's ailing automotive sector.

Richard Wallis, senior adviser to the EBRD in Moscow, said the bank had high hopes that the joint venture would lead to a major revival of the auto industry in Russia. "It was the first auto major setting up production in Russia after the fall of communism and, of course, the hopes were for GM's suppliers to follow in GM's footsteps. These goals have not all been met. But there have definitely been major investments in related industries -- for instance, in tires and particularly in windscreen glass," Wallis said. "And there have been others as well, which are the result of the arrival of GM, which was followed by other automakers, and by the creation of this joint venture."

Automakers to follow GM in setting up plants in Russia included U.S.-based Ford, the French automaker Renault, and South Korea's Kia. And in recent months, deals worth about $1 billion have been announced by Japan's Toyota and Nissan, Germany's Volkswagen, and Italy's Fiat. Russian Economic Development and Trade Minister German Gref has predicted investments by foreign automakers may double by 2008.

But at the same time, GM-AvtoVAZ -- Russia's first car-production joint venture -- is showing signs of falling apart. It's a scenario that highlights the risks automakers could face in forging future partnerships in Russia.

The joint venture enjoyed some success. Among other things, it gave GM the foothold it wanted -- the automaker's Chevrolet make is now the second-highest-selling foreign car in Russia, seeing sales increase over 40 percent for the first five months of 2006. And early large profits paid for GM's initial investment.

But sales consistently fell well below target, and the venture barely posted a profit in 2005. Together and individually, both GM and AvtoVAZ have begun experiencing financial strains. AvtoVAZ's profits slumped by 75 percent between 2004 and 2005. GM, meanwhile, reported a global loss of $8.6 billion in 2005.

Jason Stein, a staff reporter for the Munich-based "Automotive News Europe," said the relationship also took a hit when AvtoVAZ was taken over by Russia's state arms exporter, Rosoboroneksport, in late 2005. "The relationship has been tense at best. It was launched in 2001 with basically a joint venture with GM and AvtoVAZ, and the intention was to get General Motors into the Russian market. But of late that situation has been a little bit strained, mainly because the AvtoVAZ plant is a state-owned plant and the Russian government is quickly realizing the benefit of increasing car production -- increasing car sales, and my feeling is that they would like a larger piece of that action," Stein said.

Within months of the Rosoboroneksport takeover, a dispute with suppliers led to a 10-day production halt. By April 2006, AvtoVAZ said it was looking into ways to end its relationship with GM. The Russian company also announced plans to build a massive new factory to produce an all-new car of its own -- with $5 billion in promised funding from the state. In addition, its arms-export management was expressing interest in producing a new military vehicle.

Other potential suitors have also entered the scene. AvtoVAZ spokesman Vladimir Yakushenko early this month told the Russian business daily "Vedomosti" that the firm is in talks with "a huge number of hypothetical partners." Renault is reportedly offering to provide AvtoVAZ with a new car design and is seeking a 20 percent share of the Russian automaker. Others have expressed interest as well, including China's Shanghai Automotive Industry Corporation, which is reportedly interested in producing automobiles at AvtoVAZ facilities.

Those reports, coupled with GM's expected ground-breaking of a $100 million plant near St. Petersburg, have led to speculation that the joint venture could be nearing its end.

AvtoVAZ did not respond to a formal request for an interview. But Marc Kempe, spokesman for General Motors in Central and Eastern Europe, downplays such talk. Kempe characterized GM's joint venture with AvtoVAZ as the "first leg" of the company's Russian operations, with the "second leg" being its assembly of GM Hummer SUVs, Cadillacs, and other vehicles at a Russian factory in Kaliningrad. St. Petersburg, he said, will soon be the company's "third leg."

"We're just about to announce a third leg to our approach in Russia, which will be an assembly plant -- the details of which we'll announce very soon, in the next few days," Kempe said. "So we will then have three legs to stand on in Russia. What we are going to be announcing very soon doesn't replace either of the first two."

Recent changes to the board of directors of the GM-AvtoVAZ venture may help smooth things over. But Stein of "Automotive News Europe" wonders how long GM will be willing to endure tension in its relationship with AvtoVAZ once its new plant, expected to start production this summer, becomes fully operational over the next two years.

One thing that is clear is Russia's market potential. Flush with oil money, Russians' spending power is on the rise, and Stein said they are looking "to turn in their old Ladas and buy shiny new Western-automaker models."

But those automakers without a presence in the Russian market better hurry. Duty-free regulations (up to 30 percent) currently granted to automakers producing in Russia are expected to expire once the country joins the World Trade Organization -- something, theoretically, that could happen by the end of this year.

QUESTIONS EMERGE OVER SHELVED UN HUMAN RIGHTS REPORT ON AFGHANISTAN
A report by the UN High Commissioner for Human Rights, originally scheduled for release in January 2005, has raised concern among donor countries regarding the human rights records of some senior Afghan officials and members of parliament, "The Guardian" reported on June 12. "The UN has been intimidated" and is "afraid to rock the boat" because of powerful warlords who are now in positions of power, Sam Zarifi of the New York-based Human Rights Watch is quoted as saying. The report accuses Wolesi Jirga (People's Council) legislator Abd al-Rabb al-Rasul Sayyaf of ordering a massacre of Shi'a in Kabul in 1993, and of allegedly telling officers, "Don't leave anyone alive; kill all of them." The report's co-author, Patricia Gossman, said she is "bewildered" by the delays in the publication of the report, which she described as "truth telling," rather than "a bill of indictment." Responding to a question over the delay in the publishing of the report, UN Assistance Mission in Afghanistan (UNAMA) spokesman Aleem Siddique said in Kabul on June 12 that the "report was presented" to the Afghan government in January 2005 and that there was "nothing new" in the report, UNAMA's website indicated. Siddique said the report is part of an effort by the Afghan government and the international community to "initiate a Transitional Justice Action Plan" in Afghanistan. The Afghan government has "accepted the report," Siddique added, and is "due to present that report in the coming months." AT

EUROPEANS SAID TO BE UNHAPPY OVER CHOICE OF NEW KABUL POLICE CHIEF
European diplomats in Kabul are reportedly angry over Afghan President Hamid Karzai's selection of Amanullah Gozar to be the new chief of police in Kabul, "The Guardian" reported on June 12. In documents said to be circulating among European diplomats in Kabul, Gozar is accused of extortion, illegal seizure of land, and involvement in the kidnapping of three UN employees in 2004. The unidentified sources claimed the names of Gozar and 12 other former mujahedin commanders with links to narcotics trafficking were added at the last minute to a list that had been prepared by the U.S., German, and Afghan officers as part of a drive to weed out corruption from Afghanistan's police departments. A European diplomat reportedly called the appointment of the 13 commanders "not acceptable." "It's very sensitive," Karzai's chief of staff, Jawed Ludin, said of the addition of the 13 commanders. "Building institutions should not be seen as sidelining any sector of the society, especially the mujahedin." Karzai appointed Gozar to replace Jamil Jonbesh, who also has been accused of murder, torture, and accepting bribes (see "RFE/RL Newsline," June 5, 2006). Speaking after his appointment, Gozar said: "President Karzai appointed me and he knows all about my past. Let anyone with allegations bring them to court." AT

UN WORRIED ABOUT PURPORTED PLAN TO FORM TRIBAL MILITIAS
The UN is concerned about a purported plan devised by the Karzai administration to form tribal militias, UNAMA spokesman Siddique said in Kabul on June 12, according to Kyodo News Agency. Siddique claimed that such a plan would undermine the continuing UN Disarmament of Illegal Armed Groups (DIAG) program. "Our view is that there is a risk that rearming groups will undermine the DIAG," Siddique told Kyodo. "That is our concern." DIAG, launched in 2005 and mostly funded by Japan, is designed to disarm an estimated 125,000 illegal militiamen. The administration's purported plans to form tribal militias remain vague, but Karzai has hinted at recruiting tribal militias loyal to Kabul to counter the neo-Taliban threat. In a related story, the former governor of Helmand Province in southern Afghanistan, Sher Mohammad Akhundzada, has claimed to have "raised 500 people" and is working on "their registration," "The Guardian" reported on June 12. "The Finance Ministry pays them [the militiamen] $200 a month," Mohammad Akhundzada said. While the use of tribal militias could offer a tactical solution to challenge the neo-Taliban ascendancy in parts of the Pashtun heartlands, critics argue that the ultimate goal is the establishment of strong and effective state control in those areas of Afghanistan. AT

IRAN URGED TO SWIFTLY EXAMINE ATOMIC PROPOSALS
An unnamed U.S. State Department official told Reuters in Vienna on June 12 that Iran must not be allowed to examine "indefinitely" a recent proposal concerning its nuclear program while at the same time continuing to pursue sensitive fuel-making and related activities. He was speaking on the sidelines of a meeting of the International Atomic Energy Agency (IAEA) governing board, which met the same day to discuss Iran's program. He added that ministers from the Group of Eight (G8) industrialized countries will likely discuss "where we stand on Iran" at a scheduled meeting on June 29-30, Reuters reported. Also on June 12, IAEA Director-General Muhammad el-Baradei said Iran needs to improve its cooperation with the UN nuclear inspectorate, and he urged Iran to help clarify remaining questions on its nuclear program, Reuters reported. Reuters also quoted the EU High Representative for Common Foreign and Security Policy Javier Solana as saying in Luxembourg on June 12 that he hopes to contact Iran by June 17-18 to learn its views on the nuclear proposal (see "RFE/RL Newsline," June 6, 2006). VS

IRAN STANDS BY ENRICHMENT RIGHTS
Government spokesman Gholam-Hussein Elham said in Tehran on June 12 that Iran's positions on the nuclear fuel cycle and "peaceful nuclear technology" are "clear," and that "we have said our country has attained this technology, and this is a recognized right" of Iran, ISNA reported the same day. He said Iran will not discuss its "evident right" with the five permanent members of the Security Council plus Germany, the states most actively involved in the effort to curb Iran's nuclear program. "That is because it is not acceptable in international norms for a country to negotiate over its evident, legal, and recognized rights, and this is not negotiable," he said, adding that Iran could discuss "shared concerns" about its program. Iran, Elham added, is examining its own nuclear dossier proposals to the great powers and will make statements at an unspecified date. He separately dismissed safety concerns over the Bushehr nuclear plant being built on the Persian Gulf. Gulf neighbors have in the past expressed concern over its environmental impact. Elham said Western and Eastern specialists have participated in the project and "the highest standards" have been respected, ISNA reported. VS

SAUDI, IRAQI OFFICIALS VISIT TEHRAN
Saudi Foreign Minister Saud al-Faisal was in Tehran on June 12 to meet with Iranian President Mahmud Ahmadinejad and Foreign Minister Manuchehr Mottaki to discuss regional politics, the nuclear dossier, and Iraq, ISNA reported. Al-Faisal said after his meeting with Mottaki that "Saudi Arabia supports the peaceful resolution of Iran's nuclear issue" and is grateful that Iran has declared it is not pursuing nuclear weapons. Ahmadinejad later told him the two states should cooperate in "energy management" and activate a joint committee to oversee various areas of bilateral cooperation. He said Iran and Saudi Arabia should work with Iraq's government to promote security and progress in Iraq, ISNA reported. Separately the same day, Ahmadinejad met with Iraqi Vice President Adil Abd al-Mahdi in Tehran, ISNA reported. Ahmadinejad said "intelligence and sympathy" have helped form a new Iraqi government and are the key to future successes. With such qualities, he said, Iraqis will prevent "the occupiers" from achieving their goals of "pillaging Iraq's resources and the continuation of insecurity." Al-Mahdi said he hopes for an expansion of Iraq-Iran ties and Iran's participation in unspecified water, electricity, and oil projects, ISNA reported. VS

POLICE BEAT TEHRAN DEMONSTRATORS
Police and security forces, including baton-wielding female agents, beat mostly female demonstrators gathered in central Tehran on June 12 to call for equal civil and legal rights for women in Iran, RFE/RL's Radio Farda reported the same day. One unnamed participant told Radio Farda that "a very large crowd" of demonstrators included older women, girls, and boys. Another witness told Radio Farda that police surrounded the crowd, then began to break up the gathering, apparently before the protest event had formally begun, beating participants and arresting some people, many of whom were driven away in minivans to unspecified locations. "There has been a lot of fighting, [and] people were chanting slogans," the witness told Radio Farda. The source said police commanders and plainclothes agents were directing the forceful response from a nearby mosque. VS

WITNESSES FOR FORMER IRAQI LEADER WITHDRAW TESTIMONIES
During the 33rd session in the trial of the deposed Iraqi leader Saddam Hussein, the judge read statements from four defense witnesses withdrawing their earlier testimonies and claiming that the former president's defense team bribed and intimidated them into testifying. Two of them had testified that Chief Prosecutor Ja'far al-Musawi bribed people in Al-Dujayl to testify against Saddam Hussein and his co-defendants (see "RFE/RL Newsline," May 31, and June 1 and 6, 2006). The defendants are on trial for reprisals against the population in Al-Dujayl after a failed assassination attempt on Hussein in 1982. The four witnesses were arrested for presenting false statements to the court. The court also listened to three witnesses, including two former bodyguards of Hussein's half-brother, Barzan al-Tikriti, and a former security official from the revolutionary court that ordered the execution of 143 Al-Dujayl residents, AFP reported the same day. Al-Tikriti, who is also one of his co-defendants, was ordered out of the courtroom after calling Chief Judge Ra'uf Rashid Abd al-Rahman "a dictator," international media reported on June 12. Defense lawyer Curtis Doebbler criticized the court for not giving the defense team adequate time and for not responding to their requests. The trial will resume on June 13. BAW

AL-QAEDA IN IRAQ APPOINTS AL-ZARQAWI SUCCESSOR...
Following the death of its leader in Iraq, Abu Mus'ab al-Zarqawi, Al-Qaeda on June 12 announced in a statement posted on the Internet that Abu Hamza al-Muhajir has been unanimously chosen as the movement's new leader, international media reported the same day. Al-Muhajir does not appear on a U.S. list of terrorists nor has his name featured prominently in Al-Qaeda statements, AP reported on June 12. He was also not among the men commonly mentioned as a possible successor to al-Zarqawi. The statement described al-Muhajir as "a beloved brother with jihadi experience and a strong footing in knowledge." Al-Zarqawi was killed in a U.S. air strike on June 7 on a safe house in which he was staying. According to the results of an autopsy announced on June 12, al-Zarqawi survived for around an hour after the first bomb struck and died 25 minutes after U.S. troops arrived on the scene, RFE/RF's Radio Free Iraq reported on June 12. U.S. Major General William Caldwell said DNA tests have confirmed al-Zarqawi's identity. BAW

...AND BUSH SAYS HE WILL BE 'ON OUR LIST'
U.S. President George W. Bush responded to Al-Qaeda's appointment of al-Muhajir by saying, "I think the successor to al-Zarqawi is going to be on our list to bring to justice," Western media repoted the same day. Bush also said, "I fully recognize [al-Zarqawi's death is] not going to end the war." At least 34 people were killed in Iraq on June 12, Reuters reported the same day. BAW

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