11 JANUARY 1995
Volume 2, Issue 8
**Russia Promises Oil Flow**
The flow of Russian crude oil to central Europe is due to resume
today, after a 2 day halt in production. This, according to
Chemapetrol, one of the Czech Republic's 2 major oil refineries.
The Russian Friendship oil pipeline, which crosses Ukrainian
territory, was shut off for the second time this year on Monday
as a result of an ongoing dispute between Kiev and Moscow over
transit fees. Now the Russians say the pipeline is open again
for good. The incident once again highlights central Europe's
need for an alternative oil source. Until last month Russian oil
deliveries to the Czech Republic, Hungary and Slovakia averaged
some 400,000 barrels a day. But after Ukraine doubled its
pipeline transit tariffs on January 1st, the Russians stopped
pumping. Operations were partially resumed January 4th, only to
close down again on Monday. The Czech Chemapetrol refinery says
Russia promises the pipeline will stay open this time while
negotiations between Kiev and Moscow continue. Even so, the
government owned Chemapetrol is taking no chances and has drawn
a week's supply of oil from state reserves to guard against any
future shutdown. Hungary and Slovakia too depend on Russia for
most of their crude oil supplies. There are plans to link the
region with the transalpine pipeline at the German town of
Ingolstadt. But construction work on the Ingostadt pipeline
isn't due to begin until next December.
**Hunt For Hungarian Bank Prez**
Gyorgy Suranyi, the supposed front runner to head Hungary's
central bank, is apparently out of the picture. This is
according to Reuters, which quoted an unnamed but reportedly
high-placed source close to the negotiations. Reuters' source
says Suranyi's chances for the job are 20 percent, at best.
Suranyi was the favorite of foreign creditors to replace former
banking chief Peter Akos Bod, who resigned under pressure last
month. Suranyi is a former national bank president. Both he and
Bod served under Hungary's former conservative government. The
report says Suranyi would not be considered politically
acceptable to Prime Minister Gyula Horn's socialist government.
Suranyi now heads the Central European International Bank in
**Austrian Investment Aimed at Central Europe**
Austrian businesses plan to focus on Central Europe over the next
three years. A poll of the country's industrial association says
69 percent of foreign investments by Austrian companies are
planned for Hungary, the Czech Republic, Poland, Slovakia, and
**Hungarian Stocks Fall**
The Budapest stock exchange lost 10.30 points in light volume
yesterday, to close at 14 57.12. Two major stocks, Fotex and
Ibusz reached their lowest points for the past year. Six stocks
gained. Fotex hit under 3 dollars a share and Ibusz was down to
under 8 and a half dollars.
**Lawyers Invade Central Europe**
by David Fondler in Budapest
On the heals of corporate America's occupation of Central Europe
came a brigade of western law firms. At first they were met with
resentment by the local firms, but now, they're becoming
brothers in law, sort of. When large western law firms set up
shop in Central Europe, they brought their western clients with
them. Or maybe it was the other way around. But it doesn't
really matter. The hand-in- hand relationship between corporate
America and corporate law acclimated nicely to Central Europe.
Ken Kasriel, business editor at Business Central Europe
magazine, explains the effect of the initial boom:
"You have some sour grapes from local firms at the fact that some
of the high powered western firms which are fairly heavily
present in the region, for example Baker & McKenzie, Squires,
Sanders and Dempsey, are landing some very high profile clients
and signing off on some rather high profile deals."
Chicago-based Baker & McKenzie, probably one of the world's
largest law firms, has offices in Budapest, Prague and Warsaw.
According to Robert Knepfer, head of the firm's Central European
operations, the Budapest office was the first western law firm
in the region, started in 1987, two years before the fall of the
Wojciech Bialik is an associate in the firm's Warsaw office, he
says at first it solely relied on the Eastern expansions of its
western clients, but that too is changing:
"We observe now a tendency of providing service purely Polish
companies a major consideration being that Baker is being able
to help them with their contacts with their for partners."
According to Bialik 95 percent of the firms Warsaw office is
Polish-trained. He himself was already practicing law before
joining the firm.
"Its attractiveness is its size, its structure which is quite
big, the possibilities of being able of contacting other offices
exchanging maybe knowledge between the offices. This is
sometimes quite crucial, this mix of someone who is from here
and someone who is not from here."
Kasriel says there are cultural reasons for western firms
recruitment of local lawyers:
"Someone born and bred in the culture is going to have a better
appreciation in the cultural nuances that can make a big
difference in a negotiation."
The western firms' desire for local talent has become a common
practice. Kasriel says this poaching of the best and brightest
has been a source of friction in the legal community.
"The western firms were able and are still able to command much
higher fees for their work, therefore making the westerners able
to attract most of the promising recruits from the law school
It has also brought the attention of government. A recent Czech
law regulates western law firms by making the attorneys pass an
oral exam on basic Czech law. A more stringent proposal is being
considered in Poland, calling for all law firms to be 100-
percent Polish owned. Kasriel says that regulations are, in some
"In the case of the Czech one, I think it's pretty reasonable.
It's not a full exam on all the minutia of the Czech body of
law, it's rather to make sure they have a basic grasp of what
the constitution says of some of the basic legal principle and
its done in English."
The Polish proposal, which has not been approved, should spur
considerable debate. Both Kasriel and Bialik question whether it
is in line with the anti-protectionist policies of the European
Union, which Poland wants to join.
Protectionism may not be necessary. Kasriel says the presence of
these so-called "big-boys" on the legal scene has prompted the
locally based firms to get their acts together, both in terms of
customer service and marketing.
Also, somewhat of a revolving door has developed. Increasingly,
local lawyers who were poached by the western firms are stepping
out on their own, forming their own firms or joining growing
Central European ones. Some legal eagles predict that new, East-
West partnerships may be formed, with Czech, Polish or Hungarian
firms setting up shop in London or Brussels.
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