www.themoscowtimes.com Monday, Mar. 17, 2003. Page 1 By Boris Fishman Special to The Moscow Times

NEW YORK -- President Vladimir Putin and his economic team were the heroes of the day at the seventh annual forum on Investing in Russia & CIS, hosted by Sachs Associates and Bloomberg at the Plaza Hotel last Thursday.

In formal presentations and private conversations in the lavish reception rooms, conference participants agreed that Putin's stewardship has fostered unprecedented political stability and enabled significant macroeconomic reform in Russia.

"There is a sense of Russia truly coming of age," said former U.S. Ambassador James Collins, now a senior advisor at Akin Gump Strauss Hauer & Feld. "They've always known how to improve the economy, but the political environment hasn't been conducive. With Putin, this missing ingredient is finally in place."

Although the dreary performance of world markets has contributed to more modest GDP growth, the Russian economy had another surpassing year in 2002, outperforming almost every other emerging market. Central Bank reserves exceed $50 billion, foreign debt as a percentage of GDP has fallen by 20 percent since 2000, and real incomes increased by 10 percent last year. Russia was also one of only two nations operating a budget surplus in 2002, said William Browder, CEO of Hermitage Capital Management.

As a result, investor confidence has risen dramatically. General Motors, Caterpillar, and Frito-Lay are developing new projects in Russia, and enterprises as diverse as Nike, Dow Chemical and Wal-Mart have investigated the possibility of joining them. Last month, BP's landmark commitment of $6.75 billion to a joint venture with Tyumen Oil Co. served notice of a new era in foreign investment.

"We've reached the point when this kind of transaction leads to an increase in share price," said Charles Ryan, the CEO of United Financial Group. "Only several years ago, a deal like this would have sent shareholders out of the room gagging." Ryan also pointed out that Russians themselves were showing a newfound faith in their economy. Native capital returned to Russia in record numbers in 2002.

But disagreement between Russia and the United States on war in Iraq deflated some of the prevailing optimism. Both political and economic stability -- and, consequently, the investment climate -- depend on the course Putin elects. If the country sanctions the war, he risks handing the Communists, eager to portray him as an American lapdog, a public relations coup on the eve of parliamentary and presidential elections. A Russian veto, on the other hand, would likely restrict Russia's access to the spoils of postwar Iraq, a crucial source of income Putin would need to offset declines in revenue caused by falling oil prices and unwelcome reforms in pensions and the electricity sector. The Communist opposition draws most of its support from Russians embittered by poverty.

Dimitri Simes, the president of the Nixon Center, noted the dramatic change in Russia's position on the war in recent weeks. "Just several weeks ago, you had Russian officials privately reassuring the American government that the talks with France and Germany were meant merely to appease public opinion back home," he said. "That kind of implicit guarantee hasn't been available in the past 10 days. There is a distinct possibility that Russia may choose to veto. We've really underestimated the degree of resentment in Moscow toward U.S. foreign policy."

Boris Nemtsov, a leader of the Union of Right Forces, said the Russian government felt short-changed by the Bush administration. "After 9/11, Russia was the first country to support the United States in its war on terror," Nemtsov said. "We provided assistance in Afghanistan. We approved American bases in Central Asia. And what did we get in return? Even Jackson-Vanik still exists. It's like a bad joke."

Simes and Nemtsov warned, however, that Russia could not weather the consequences of a veto, referring to the promises of economic retaliation from American officials in recent days.

"We have to think about our long-term strategic interests," Nemtsov said. "We can't afford rash behavior. Sometimes it's tough for men to set aside their emotions, but there's no other choice here. President Putin understands that."

Conference participants disagreed on whether the economy were sufficiently diversified to withstand a fall in oil prices. Christopher Weafer, the chief equity strategist at Alfa Bank, conceded that Russia remains oil-dependent, but he said that it was far less vulnerable than several years ago to a steep slide in oil revenue. "In 1998, the Russian economy needed more than $26 a barrel to balance," he said. "Today, that figure is $16." Whether the Russian economy will come to resemble Portugal's -- as is Putin's much-publicized aspiration -- or Venezuela's, its fortunes determined by boom-and-bust oil cycles, remains to be seen, he said.

Ryan pointed out that the oil sector claimed a mere one-seventh of foreign investment in Russia, and that considerable gains posted in consumer goods, construction and engineering offered evidence of a diversifying economy.

Most presentations ignored Iraq and oil dependence altogether, focusing instead on strides in ownership rights and debt servicing, and reforms necessary to encourage investor confidence. Speakers said an overweight, obstructionist bureaucracy and a weak judiciary sabotaged foreign investment, as did unreliable corporate governance and persisting corruption. As usual, the harshest criticism was reserved for the banking sector. A proliferation of small banks subsisting on negligible assets unbound by effective regulation have resulted in mistrust of the banking system.

Nonetheless, the consensus seemed to be that Russia had earned investment-grade status, the coveted seal of approval conferred by rating agencies such as Moody's. Helena Hessel, a director at Standard & Poor's, was less sanguine. She cited the deceleration of reform in view of impending elections and declines in GDP growth as reasons the upgrade was at least two years away.

Browder coyly undermined her assessment.

"It would seem that the market has been a better indicator of economic performance," he said. "The credit agencies failed to downgrade Russia for 163 days after it defaulted in August 1998. They did a little better with Enron -- that downgrade came only two days after the company filed for bankruptcy."

The comment drew grateful snickers from an audience sapped by a day of phlegmatic presentations delivered either in a joyless monotone or with ear-straining speed required by the brief time allotted to speakers.

Rushing through his PowerPoint presentation, Weafer seemed to propose that oil sector reform might begin with the unpronounceable names of firms like Surgutneftegaz, but the audience, casting longing looks toward the coffee and dessert being served in the outside hall, failed to pick up on the humor.

In the reception chambers, the mood was more upbeat. Though half the name tags on the welcome table remained unclaimed, the conference brought together many old acquaintances and business partners, lending a genial atmosphere to the proceedings. Amid the bullish banter of the assembled brokers, investors, and company executives, it was sometimes difficult to imagine they discussed a nation that only four years ago seemed at risk of receding into chaos. Indeed, if it weren't for the surnames, the accidental visitor might have assumed this was a fund drive for the South Koreans. The bland lunch of grilled chicken and pasta salad was avowedly stateless in its influences, and the gallantly attired Russian executives who made presentations seemed to have embraced the global nature of their economy to the point that the English translator wandered the halls without much to do. Investment in Russia seemed a no-brainer.

"We are always accused of being boosterish here," said Robert Langer, the bearded, affable moderator of the afternoon panel and a partner at Akin Gump. "And we certainly should talk more about what we've gotten wrong. But I think the glass is definitely half-full rather than half-empty. What it's full of, I'm not sure I could tell you."

www.vheadline.com Posted: Sunday, March 16, 2003 By: Patrick J. O'Donoghue

Fugitive CTV leader Carlos Ortega has been ratified as president of the Venezuelan Confederation of Trade Unions despite his current status as an asylum-seeker at the Costa Rican embassy in Caracas.  CTV director Pablo Castro had hoped to land the plum job for himself but following a weekend meeting of the CTV's executive committee, Castro decided to put his personal ambitions on ice until at least the smoke clears on Ortega's final destination.

There appears to be some discussion as to whether Costa Rica will afford Ortega diplomatic or territorial asylum after ruling out political asylum in view of Ortega's refusal to submit to the jurisdiction of the Venezuelan courts.  He went into hiding a couple of weeks back vowing to conduct a clandestine campaign to have President Hugo Chavez Frias removed from office, telling his supporters that he would never contemplate leaving Venezuela.

Nevertheless, as VHeadline.com had earlier reported, intense negotiations have been going on with the coup-supporting Spanish government to allow political asylum in Madrid for Ortega and co-conspirator, Fedecamaras president Carlos Fernandez ... although the latter is currently under luxury house arrest at his villa in Valencia (Carabobo State).

Meanwhile, opposition TV news channel Globovision is excitedly proclaiming that during the last 12 months, nine Venezuelan opposition leaders have been able to evade justice by keeping up a curtain of subterfuge, moving hideout on a nightly basis to avoid capture by Venezuelan security agents.   Foreign Minister (MRE) Roy Chaderton Matos says it is an exclusively policing matter to capture the fugitives and to bring them to trial by relevant courts but anti-Chavez AN deputy Felipe Mujica says Ortega and other opposition fugitives have been able to "run rings around attempts to capture them because of general police incompetence."  Nevertheless, the opposition is claiming in the world's media that the Chavez Frias government is conducting a campaign of "political persecution" against them...

www.vheadline.com Posted: Sunday, March 16, 2003 By: Roy S. Carson

President Hugo Chavez Frias says a big surprise is in store for adversaries who are still conspiring against his government in continuing clandestine meetings despite the failure of their 2-month stoppage and last April's abortive coup d'etat.  Speaking on his weekly 'Alo Presidente' broadcast, Chavez Frias said security services have reported a string of covert meetings by parties interested in destabilizing the government.  "I can promise them a big surprise ... they will be neutralized!"

Chavez Frias says the right-wing opposition is now "acting out of desperation, behaving like crazy people rather than to face up to the fact that they're losers!"  He says he fully expects to continue as Head of State for the full period of his mandate until January 10, 2007 ... even with a mid-term revocatory referendum which he fully expects to win by a clear margin.  "There are 1,390 days left until a successive revolutionary government comes to power ... my government has already made significant advances but they are modest compared with what is still to come.  We have targets set in education and public health and we are putting our shoulders to the grindstone with 1.3 billion bolivares investments in health despite the setbacks we have seen in the attempted coup d'etat and more than $4 billion the losses produced by the opposition sabotage of Petroleos de Venezuela (PDVSA)."

Chavez Frias says that according to year's end 2002 statistics, infant mortality has been reduced from 2.16% to 1.73% since he assumed the Presidency in 1999.  Health Minister Maria Urbaneja says that even the opposition has been forced to admit the achievement although the President says "it is not time to rest on one's laurels but to attack endemic social problems with renewed efforts ... we have increased investment in the treatment of cancer by 84% and in education we have invested an average of 4.053 billion bolivares per year over the last four years, representing an increase of 215%."

Medical volunteers are to kick-start a national Special Plan for Health for Everyone organized by the Armed Services Unified Command (CUFAN) and the Ministry of Health & Social Development (MSDS).   CUFAN C-i-C, General Benito Verde Graterol says 10 billion bolivares have already been assigned to the project which will see medical volunteers take key positions around Venezuela.  The plan also includes an accelerated clearance process for imported medicines and to boost domestic production of essential medicaments and materials for public health services.

Education Minister  Aristobulo Isturiz says that for the first time, more than one million children have been able to attend regular schooling and that a further 600,000 are to be incorporated into the school system at the earliest opportunity.

Rounding up his Sunday talk show, President Chavez Frias said he sincerely regrets that opposition deputy Timoteo Zambrano attempted to drag the First Lady, Marisabel Rodriguez de Chavez into the political fray in a truly irresponsible manner when, last week, he called on the International Red Cross to investigate the alleged "disappearance" of Mrs. Chavez,, who was immediately found shopping in a Barquisimeto (Lara) shoe shop.  "It is just this kind of irresponsible thing that makes fodder for the worst elements in the opposition media ... they too easily pick up malicious comments from people who have no respect for anyone."

www.vheadline.com Posted: Sunday, March 16, 2003 By: Patrick J. O'Donoghue

Metropolitan Mayor’s wife, Martha de Peña has announced that she will shortly be opening her center for teenage mothers.

• The center will cater for 30 teenage mothers taking in and caring for their children, while they work, study or learn a profession.

Project coordinator Anabella Acosta says she has managed to group together an excellent team that will help the teenage mothers gain the right to a normal and social life.

Mrs. Peña insists that the girls will learn about birth control, health and childcare and responsible parenthood.  “Last year of the 23,247 births at the Concepcion Palacios Maternity Hospital, 156 of the mothers were between the ages of 10-14 and 5,551 between 15-17.”

Sociologist Ivonne Marrero has high expectations because she says it’s a pioneer project, which gives the girls emotional and psychological support to face the new challenge of bringing a baby into the world.  The Caracas Lottery has donated the center’s building in San Bernardino.

www.vheadline.com Posted: Sunday, March 16, 2003 By: Patrick J. O'Donoghue

Playing cat and mouse game, Venezuelan Confederation of Trade Unions (CTV) president Carlos Ortega’s lawyer, Omar Estacio has declared that his client has not asked for territorial asylum.

Splitting words, Estacio admits that Ortega has asked for and received diplomatic asylum but is currently assessing his options.

This morning the lawyer visited the Costa Rican Embassy where Ortega is holed up and afterwards threw out a suggestion that the Inter American system offers a series of alternatives and Ortega is weighing them up before making a final decision.

Among the alternatives under discussion is for Ortega to hand himself over to the authorities creating a potential security problem for the government.

Observers say the government will not offer Ortega house arrest but preventive arrest until his trial comes up.

Ortega is said to be angry about reactions to his asylum among the opposition and inside the CTV itself. It has been learned that lawyers have been putting out feelers to people connected to the Inter American Human Rights Court about the viability of obtaining a legal restraining order against the government for alleged human rights against the trade union leader.