VZCZCXRO8783
RR RUEHDBU RUEHSK RUEHVK RUEHYG
DE RUEHLN #0139 3491502
ZNR UUUUU ZZH
R 151502Z DEC 09 ZDS
FM AMCONSUL ST PETERSBURG
TO RUEHC/SECSTATE WASHDC 2873
INFO RUEHMO/AMEMBASSY MOSCOW 1777
RUCNCIS/CIS COLLECTIVE
RUEHLN/AMCONSUL ST PETERSBURG 3242

UNCLAS ST PETERSBURG 000139 
 
CORRECTED COPY - ADDING CAPTIONS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM
SUBJECT: SMALL BUSINESS OWNERS CRY FOUL OVER CITY'S EVICTION PLANS 
 
¶1. (SBU) Summary:  A running property dispute between local 
small-business owners and the St. Petersburg city administration 
has escalated, as the administration recently announced it will 
evict the entrepreneurs in January 2010 from a market they 
leased from the city in 2001. The lease expired in 2004, so the 
city seems within its rights to clear the property.  Local 
prosecutors have brought criminal cases against some of the 
leaders of the entrepreneurs' association representing the 
owners; one of those leaders alleges he was beaten by city 
police as an intimidation tactic.  That leader accuses city 
officials and a member of the Governor's family of seeking to 
drive the owners out of the market in order to gain control of 
the lucrative business site.  End summary. 
 
 
 
¶2. (SBU) The Khasan Market in St Petersburg opened in 2001, 
under a three-year lease agreement between the city and the 
managing company "Omi," which operates the market.  The market 
houses scores of small business owners and their employees, and 
Omi claims to have invested $17 million in infrastructure 
improvements to the facility.  The city and Omi have been unable 
to agree on an extension of the lease since it expired in 2004; 
the market has been operating without a valid lease since then. 
 
 
 
¶3. (SBU) The St. Petersburg city government recently announced 
it would evict the entrepreneurs operating out of the Khasan 
Market on January 15, 2010.  The building reportedly will be 
demolished, and a new building will be built by 2011 at the 
city's expense.  No details have been released yet regarding who 
will own or lease the new building, or what it will be used for. 
 
 
 
 
¶4. (SBU) In a November 20 meeting with Conoffs, Grigoriy 
Solominskiy (a leader of the St. Petersburg Association of Small 
and Medium Size Businesses, as well as Omi's principal lawyer) 
said the market's real problems began after the owners of Omi 
rebuffed an "offer" from Sergey Matviyenko, son of St. 
Petersburg Governor Valentina Matviyenko, to buy shares in the 
enterprise.  Solominskiy added that after Omi rejected 
Matviyenko's offer, the market began to face "pressure" from the 
city government. 
 
 
 
¶5. (SBU) Solominskiy said direct pressure on the market included 
random police raids on shop stalls, and arbitrary criminal 
charges brought against shop owners.  Solominskiy stated that he 
and Sergey Abrazheev, General Director of Omi, also were 
recently charged with criminal offenses.  Solominskiy was 
charged with insulting police officers during an October 9 raid 
on the market.  He rejects the charge, and claims he has a 
videotape proving he only asked plainclothes police to identify 
themselves.  The police refused to do so, Solominskiy claims, 
beating him instead and then taking him to a police station 
where he was formally charged. 
 
 
 
¶6. (SBU) Solominskiy believes the criminal case against him is 
supported by city officials, since he is convinced his political 
and pro-entrepreneur activities have made him enemies within the 
city administration.  (Note:  Solominskiy was one of the 
founders of the Petersburg Civil Committee, a now defunct 
organization which previously had coordinated opposition groups' 
activities in the city.)  He further believes that once certain 
city officials learned of the police charges against him, a 
decision was made to prosecute his case to the fullest extent of 
the law in order to silence, as he put it, "a politically 
inconvenient figure for the city administration." 
 
 
 
¶7. (SBU) Comment. There may be less to this "David vs. Goliath" 
story than meets the eye.  As Solominskiy freely admitted, the 
current commercial occupants of the business center have been 
using it without a valid lease for the past five years.  So it 
appears the city would be within its rights to evict the tenants 
in the absence of a new lease agreement.  Solominskiy's 
encounter with the police was captured on videotape and posted 
on his blog site, which we have reviewed.  The footage clearly 
shows him being pushed to the ground - but not beaten - by one 
unidentified man in plainclothes before being forced into a car, 
after which he claims he was taken to a police station where he 
was then charged with insulting the police.  Although there is 
no direct evidence of Sergey Matvienko's involvement in the 
market controversy, his business fortunes have certainly 
improved since his mother became governor of St. Petersburg. 
 
GWALTNEY