WHAT THE RUSSIAN PAPERS SAY

MOSCOW, May 16 (RIA Novosti)

Gazeta

Experts Sound Off On Recent Event In Uzbekistan

Mass unrest that swept Andizhan, a city in Uzbekistan, last week
claimed many lives. Russian experts commented in Gazeta, a daily,
on the situation, which remains tense.

Alexei Malashenko, scholar-in-residence at the Carnegie Moscow
Center: The events were provoked by a difficult economic situation
and unemployment, the absence of an opposition and procrastination
with reforms. All of this was the doing of President Islam Karimov.
In a region where the bulk of the population is Muslim, any social
protest will eventually take the form of an Islamic struggle, but
the root of the people’s discontent is their economic desperation.

Alexei Makarkin, deputy general director of the Center of Political
Technologies: Karimov has been recently rushing from Russia to the
U.S. and back. He made the choice last week, when Tashkent announced
its withdrawal from GUUAM (an organization of Georgia, Ukraine,
Uzbekistan, Azerbaijan and Moldova). Karimov needs political support
for his actions, which Russia can provide. Moscow and Uzbekistan may
increase their cooperation and Uzbekistan may soon join the Collective
Security Treaty Organization (its members are Russia, Belarus, Armenia,
Kazakhstan, Kyrgyzstan and Tajikistan) and EurAsEC (Russia, Belarus,
Kazakhstan, Kyrgyzstan and Tajikistan).

Konstantin Zatulin, a State Duma deputy from United Russia: There
are no reasons not to believe Karimov when he says that the unrest
in his country was provoked by extremist organizations, which aim to
establish a Shariah regime. Karimov has always persecuted them rather
harshly. I do not want to whitewash Karimov’s regime, but he is doing
everything correctly, so far.

Sergei Mitrokhin, Yabloko deputy chairman: Karimov’s propaganda
agencies claim that the situation was destabilized by orthodox
Islamists, though it was a revolt of an active part of society and
business against the dictatorship of Karimov. They definitely will
be accused of Islamic tendencies. Russia may soon feel the negative
effects of the events in Uzbekistan. Pandering to Karimov could
push Uzbekistan towards a civil war and the creation of an Islamic
state there.

Vedomosti

Transneft To Build Northern Pipeline

Transneft has allocated 850 million rubles, or 17% of its net 2004
profits, to study the feasibility of constructing an oil pipeline on
the Arctic Ocean’s bottom that could export oil to the United States,
Vedomosti, a daily, reported.

State-run Transneft monopolizes all Russian trunk pipelines.
Transneft Vice-president Sergei Grigoryev confirmed corporate plans,
noting that the pipeline will stretch from Kharyaga in the Komi
Republic to Indiga in the White Sea. The new pipeline would pump
24 million tons of oil per year and requires about $2.2 billion to
complete. Grigoryev said he was sure that Transneft could implement
this project on a par with the Eastern Siberian oil pipeline, which
will cost an estimated $11.5 billion.

There has been discussion of constructing an Arctic oil pipeline
toward the Barents Sea coast for several years. Russian oil giants
like LUKOIL, Yukos, TNK, Sibneft and Surgutneftegaz suggested building
a pipeline toward Murmansk on the east shore of the Kola Bay in the
Barents Sea. However, federal officials did not like the idea of
building a private oil pipeline.

Transneft then suggested working out a Western Siberian – Barents Sea
coast pipeline route. Bureaucrats took their time in choosing between
the Arctic pipeline and the Eastern Siberian pipeline and decided to
build the Taishet – Pacific pipeline in late 2004.

The Kharyaga – Indiga pipeline is a scaled-down version of the initial
Arctic pipeline. It is much cheaper because it can be built with the
Eastern Siberian pipeline, Valery Nesterov, an analyst with Troika
Dialog brokerage said. The Western Siberia – Indiga pipeline, he said,
would cost some $5.6-6.2 billion. And the Murmansk pipeline would cost
about $11.8 billion. According to Nesterov, the Arctic and Eastern
Siberian oil pipelines could be commissioned before 2010. And he
expects this route to be popular with oil tycoons. LUKOIL and Rosneft,
which are developing the Timano-Pechora deposits, are interested in
this route, as are Surgutneftegaz and TNK-BP.

Vremya Novostei/Vedomosti

Authorities Present Claims To Diamond Monopoly

The relatively small tax claims presented by the Prosecutor’s Office to
Russia’s diamond company ALROSA have sparked a big scandal. Sources
close to the company’s management are drawing special attention
to the prosecutors’ intention to audit the activity of ALROSA’s
counterparties, Vedomosti and Vremya Novostei, daily newspapers,
reported.

“Tax authorities have revealed the facts of the misuse of 153 million
rubles (about $5.4 million),” Sergei Marchenko, a representative of
the Moscow Prosecutor’s Office, said Saturday. He did not specify the
circumstances of the misuse of funds, possibly, because this episode
was not the main subject of the prosecutors’ attention.

ALROSA, which accounts for about 23% of the world diamond output,
was referred by a presidential decree to strategic companies. The
Russian government controls 37% of company shares, while the Yakutian
government holds 32% and Yakutian uluses (district administrations)
have an 8% share. The remaining shares belong to private owners. In
2004, ALROSA sold its main products worth $2,480.5 million, including
diamonds worth $130.9 million.

Experts are drawing attention to the fact that the claims that
are presented are several hundred times smaller than the diamond
company’s financial flows. The amount of the claims, they said,
rules out the version of the illegal transfer of assets abroad. Most
likely, the claims refer to small administrative violations. It has
not been ruled out that they deal with the relations between ALROSA
and Yakutia, where the diamond monopoly is registered. This version
corresponds to the rationale of the federal authorities’ actions.
Last winter the company’s management was replaced and an additional
issue of its shares was declared.

In late March Prime Minister Mikhail Fradkov instructed relevant
departments to take measures until May 1 to place ALROSA under federal
ownership again and prepare an agreement on property delimitation
with Yakutia.

Natalia Odintsova, head of analysis at Prospekt investment, does not
rule out that this case may lead to a new replacement of the company’s
management. This measure, she said, would play into the Yakutian
government’s hands and those of the company’s minority shareholders
whose shares (about 10%) were arrested in March on the insistence of
ALROSA President Alexander Nichiporuk.

Kommersant

Russia To Assemble VW Pointer And Skoda Octavia

Volkswagen will start building a factory 100 km south of Moscow this
fall, where the first Skoda Octavia and second-generation Volkswagen
Pointer cars are scheduled to be ready by 2007, Kommersant reported.

The construction site already has the required infrastructure.

This full-cycle factory is under Volkswagen ownership and investment
volumes are unknown. However, such investments are likely to match
those of Ford (over $150 million), Toyota ($145 million) and Renault
($250 million). Preliminary reports set the number of cars to be
assembled at the plant each year at at least 25,000.

The Volkswagen project is covered by a governmental resolution allowing
duty-free part imports. The vehicles will therefore cost 12 to 15
percent less than their ready-made equivalents.

The new factory will turn out Volkswagen Golf Vs and Volkswagen

Jetta golf-class sedans, scheduled to replace Volkswagen Boras this
fall. It will also produce Audi A3s and Skoda Octavias. The D segment
Skoda Octavia, which now costs at least $20,800, will be the first
vehicle off the assembly line. A similar VW model could follow.

Second-generation VW Pointers will also be assembled in Russia. These
compact cars are to phase out the VW Golfs being produced in Brazil
and China. Only the Russian market uses the Pointer trademark.

Until recently, all foreign carmakers preferred assembling just one
model, but the new VW factory could produce two or three models on
different platforms. Market players say that Volkswagen’s ambitious
plans could require no more than $100 million to accomplish.

Vremya Novostei

Number Of Divorces, Marriages In Russia Declines

The number of divorces in Russia is gradually declining but almost
every third child is born out of wedlock, the Russian daily Vremya
Novostei reported, citing the latest statistics.

According to a study by the Federal State Statistics Service published
ahead of International Family Day, the number of couples that divorced
last year fell by 164,000, from 800,000 divorces in 2003 to 636,000
in 2004. The progress is evident not only in provinces, but also in
the capital. This year, more than 14,000 families in Moscow filed
for divorce, down by 1,200 couples against the same period last
year. According to researches, more than one third of divorces are
filed by couples that have been married for less than five years.

However, the number of those marrying is also declining. In 2002 and
2003, more than one million marriages were registered in Russia, but
in 2004 the figure was down to 979,700. In Moscow, 4,460 marriages were
registered in April, down by 3,280 against the same period last year.

As a result, the number of children born out of wedlock is soaring.
In recent years, their number has doubled and amounted to about 30%
of all children born in the country, sociologists say. Russia is
approaching European figures, the Statistics Service says. Modern
Russia has also adopted another demographic peculiarity of Europe –
the number of children a family has. Today, the childbearing rate of
Russian women is 1.3 compared to that of 2 in 1989.

The only figure that remains unchanged is the number of people that
decide to get married for a second time: just below one third of
all marriages.