Russia



Russia 0900710

Basic Political Developments

• Russia backs efforts to stop climate change - Russia backs international efforts to stop climate change and the Mexican initiative at the G8 summit to create a 10-billion US dollar Green Fund to compensate ecological projects across the world based on the reduction of greenhouse gas emission.

• Kudrin Promises Energy Revolution - Finance Minister Alexei Kudrin on Thursday promised a Russian “energy revolution” this fall when the State Duma considers a bill to make the country 40 percent more efficient in its power use by 2020.

• Russian bombers increasing tensions between London and Moscow, MPs say - Russian bombers flying close to British airspace are raising tensions between London and Moscow and risking collisions with civilian aircraft, MPs have warned.

• Get tough with Russia, MPs urge - The UK and other Nato members should take a tougher approach to Russia, the Commons Defence Committee has urged.

• Egypt Says Deal Found On Wheat - Russia and France have agreed to inspect wheat shipments before exporting them to Egypt, soothing some of Cairo’s concerns over the quality of its grain imports, Egypt’s Trade Minister said Thursday.

• China urges Russia to protect businessmen's interests - China urged Russia in Beijing Thursday to protect its businessmen's interests in Russia. Qin's remarks came following a reporter's question about the recent raid at the Cherkizovsky Market, in the east of Moscow, the Russian capital.

• Russian Mine to Supply Uranium to Junta? – Tyazhpromexport has invested upwards of US$150 million and is constructing an iron processing plant only 10 kilometers from the Burmese Army’s Eastern Command. Russia’s atomic energy agency Rosatom announced that it had reached a deal for cooperation with the Burmese regime on a nuclear program. No further information about this nuclear cooperation has been made public, but suspicions are rife that it is linked to the Hopone Valley mining project.

• Russians Plan Floating Nuclear Plants - The United Industrial Corporation, a Russian manufacturer, said this week that the world’s first floating nuclear power plant will go into operation on Russia’s eastern coast by the end of 2012.

• ‘New Page’ in Enclave Talks - The presidents of Armenia and Azerbaijan will meet in Russia on July 17 and could open a “new page” in negotiations over breakaway Nagorno-Karabakh, the French mediator said.

Customs Union countries may join WTO separately

• Pres aide says Russia still mulls joining WTO individually - Arkady Dvorkovich, an aide to the Russian president, said late Thursday that Russia would consider joining the World Trade Organizations (WTO) individually, ITAR-TASS reported.

• Belarus censors Russian literature and movies - Belarus is to set up a committee to check all Russian films and books for immorality and dissolute content, Russian website Lenta.ru cites Georgi Marchuk of the Belarusian Writers' Union as saying.

• Russia Wants to Open 2nd Military Base in Kyrgyzstan

• Russia asks for second military base in Kyrgyzstan as US gets to keep Manas

• Kyrgyzstan: Russian Delegation Pays Sudden Visit

• Chile to push for chopper deal with Russia despite U.S. pressure - Chile plans to continue talks with Russia on the delivery of five Mi-17 multirole helicopters for the Chilean Air Force despite pressure from the United States, a government spokesperson has said.

• India to assemble Russian “flying tanks” - In July India is to begin assembly of Russia's main battle tank, the T-90. Up to now the country has bought only fully assembled tanks, but now it will build them with parts supplied by Russia.

• Indian navy will be training in the Barents Sea - The Indian navy will use the refitted Russian aircraft-carrier Admiral Gorshkov for a year-long sea-trail in the Barents Sea slated for 2011-2012. Also, what is said to be the final price-tag for the takeover of the second-hand aircraft-carrier was agreed in New Delhi on Wednesday.

• Submarine Nerpa leaves shipyard for tests after Nov test failure

• Sea trials of Russia's Nerpa nuclear sub to continue for 2 weeks - Sea trials of Russia's Nerpa nuclear-powered submarine, which was damaged in a fatal accident during previous tests, will continue for about two weeks, a high-ranking defense official said on Friday.

• New destroyers for Northern Fleet - -We will start the construction no later than 2012, Admiral Vysotsky said to journalists in late June. The vessels will be based in the Northern Fleet and in the Pacific Fleet, RIA Novosti reports.

• Ukraine questions Berezovsky on Yushchenko’s poisoning

• South Russia's top police official dies in hospital after attack - A chief forensic expert, who was shot earlier in the week in Russia's North Caucasus Republic of Ingushetia, died in hospital on Friday, a health ministry source said.

• 2 policemen and 6 rebels killed in Russia’s North Caucasus – report: Two policemen and a Russian soldier died in clashes with militants in the country's restive North Caucasus, along with five rebel fighters, news agencies and officials said on Wednesday.

• Travelers Face Limit of $630 on New Goods - Travelers might be restricted to bringing only 20,000 rubles ($630) worth of goods into Russia without paying customs duties under a government proposal aimed at bolstering crisis-hit customs revenues.

• Orthodox Church Gets a Say on Duma Bills - Russian Orthodox Patriarch Kirill invited the United Russia deputies to his office to voice his angst over EU-backed plans to introduce sex education in Russian schools.

• New head of Federal Security Service of Russian Federation Nizhniy Novgorod area directorate appointed

• Russian police seize wanted gang leader, 20 accomplices - Police nabbed in Moscow the gang leader of a criminal group from the city of Saransk and his main accomplice.

• Russian broadcaster edits out Putin send-up - A satire featuring an annoyed cartoon version of Russian Prime Minister Vladimir Putin was pulled from the air by Moscow broadcaster 2x2, local media reported Thursday.

• Kremlin's 'Gray Cardinal' Steps Out Of Shadows To Tout Reform - What is it with Vladislav Surkov? The reclusive presidential aide, widely known as the Kremlin's "gray cardinal" and a close ally of Prime Minister Vladimir Putin, has been making regular forays into the spotlight in recent weeks -- a telling sign that something is brewing in the Kremlin.

National Economic Trends

• Russian monetary base down 0.05% in week to $126 bln

• Russia c.bank injects 12.25 bln roubles via repos

• Ruble Extends Drop in Worst Week Since February as Oil Slumps

• Russian finance minister says capital outflow to slow next year

• Russian Bad Loans to Exceed 10% by Year-End, Interfax Reports

• Macroeconomic indicators - IMF further lowers Russian GDP forecast

• What will drive growth? - We believe there are three future scenarios: 1) higher oil prices leading to a return of consumption-driven growth; 2) low oil prices leading to an indefinite stagnation as monetary nor fiscal policies are currently supportive of investment-driven growth; 3) a structural policy shift, including bank recapitalization and re-balancing of budget spending, that would lead to a consumption/investment mix, supportive of sustainable growth.

• COMMENT: Russia's economy - horticulturally challenged. Either the economy will start to recover, or asset markets will move lower to reflect the deep recession in the real economy.

Business, Energy or Environmental regulations or discussions

• Sberbank Says GM Balking in Sale of Opel, FT Deutschland Reports

• Russian Region Asks ArcelorMittal for Mines, Vedomosti Says

• Russia region threatens to seize ArcelorMittal mines

• Siberian Lawmakers Seeks Clarity on Two Mines From Evraz

• Mechel may finalize its debt restructuring

• VTB Group provides $450 mln. loan to TMK

• Open Investments: A Sleight Change in Assets

• Belarus bank to buy Dresdner Russian subsidiary

• Renault's Russian Woes - The French automaker's $1 billion, year-old tie-up with Avtovaz may be going sour, with sliding sales and deep losses

• GAZ Group: Alfa Bank demands payment of unsettled debt

• Slowdown signs - GAZ auto group to lay 7,000 by August

• Russia: Avtotor launches assembly of BMW X5 and X6

Activity in the Oil and Gas sector (including regulatory)

• IEA lifts estimate of supply on Russia oil output

• Official says oil export duty could hit $220-$224 per tone

• Russia Majors Profit Even as Oil Price Falls - Russia's oil producers will likely report higher profit margins in the second quarter than they did when oil prices peaked last summer, mainly because a weaker ruble has reduced their costs and they have received relief on taxes exacted on their exports.

• PrimeGen Energy Posts June Production Results for Kochmesskoye Well

TNK-BP feeling bullish - Timothy Summers, the chief operating officer at TNK-BP, said that the investment program for the Russian oil company was based on the understanding that its corporate footprint could change as the economy improves.

• TNK-BP to Invest More in Ukrainian Refining - TNK-BP announced today that it has successfully closed a transaction that brings its effective shareholding in the Lisichansk Refinery close to 100%. The transaction was endorsed by TNK-BP Limited (BVI) Board of Directors in June 2009.

• TNK-BP International raises ownership in Ukrainian Linos refinery to 100%

Gazprom

• Gazprom mulls LNG tanker order - Gazprom Plc may place an order with Severnaya Verf plant for the construction of two liquefied natural gas (LNG) tankers to transport LNG from the Shtokman gas field offshore eastern Russia, said Gazprom Vice President Alexander Ananenkov.

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Full Text Articles

Basic Political Developments

Russia backs efforts to stop climate change



L’AQUILA, July 10 (Itar-Tass) -- Russia backs international efforts to stop climate change and the Mexican initiative at the G8 summit to create a 10-billion US dollar Green Fund to compensate ecological projects across the world based on the reduction of greenhouse gas emission.

“It was recognized as a fruitful initiative,” head of the Russian Federal Service for hydrometeorology and environment monitoring Alexander Bedritsky told reporters on Thursday.

“It is important that every country makes feasible decisions for itself. Developed nations can proceed with discharge reductions, while developing economies like China, India, South Korea, Mexico plan to progress along their programs, as for their emerging economies such actions shall be accompanied by the transfer of corresponding technologies with the necessary financing,” he said.

“All countries, including Russia, agreed with the necessity of joint efforts to overcome the current dynamic in rising global temperature in the world. In order to restrict its growth by 2 degrees by 2050 it is necessary to reduce hazardous emissions into the atmosphere globally by 50 percent, which has been reflected in the summit declaration,” Bedritsky said.

He recalled that Russian emissions into the atmosphere fell since early ‘90s 34 percent both because of decreased GDP and targeted actions. Bedritsky said temperatures in the world rose 0.72 degree in the past century, however in Russia the growth was bigger and exceeded 1 degree in the period.

Climate change triggered the longest discussion at the G8 summit, according to Kremlin economic aide and Russian sherpa Arkady Dvorkovich.

He said the discussion focused on long-term and mid-term goals, financing of emission decrease programs, cooperation in the sphere of technologies, and adaptation to the consequences of the climate change that already took place.

Kudrin Promises Energy Revolution



10 July 2009 By Maria Antonova / The Moscow Times

Finance Minister Alexei Kudrin on Thursday promised a Russian “energy revolution” this fall when the State Duma considers a bill to make the country 40 percent more efficient in its power use by 2020.

President Dmitry Medvedev, who first made the ambitious pledge last summer based on 2007 energy usage, was attending a Group of Eight summit in Italy that included talks on energy efficiency on Thursday. (Story, Page 2.)

Russia’s first draft of the legislation was sent back to the Economic Development Ministry in December after complaints of vague wording. Medvedev threw his weight behind the initiative again last week, calling for a switch to energy-efficient light bulbs and eliminating a “black hole” for energy: poorly built housing.

Kudrin told an economic conference in Ulan-Ude that the bill, to be introduced in September and implemented this year, will include tax incentives to modernize an economy that still consumes three times more energy per production unit than the European Union.

“Provided the government continues to be energetic in pushing this issue forward,” it could meet the 40 percent target, said Igor Bashmakov, who heads the Center for Energy Efficiency and was one of the experts who advised the government on the revised bill.

He said one of the mechanisms outlines a plan to reduce energy consumption per square meter by 15 percent in five years for Russia’s notoriously drafty apartment buildings.

The drive for energy efficiency — spearheaded by the Economic Development Ministry — has been more of a long-term economic interest than an environmental concern.

Arkady Dvorkovich, Medvedev’s top economic adviser, on Wednesday turned a cold shoulder to a G8 initiative to lower greenhouse gas emissions 80 percent by 2050, citing in part his country’s drive to boost efficiency.

He said the target was “not acceptable or attainable,” because “it would hinder our economic growth,” adding that Russia’s carbon emissions were already 30 percent lower than in the benchmark year 1990.

The issue has been a wedge between developed and developing economies, with some arguing that the West was able to grow for decades unhindered by such environmental restrictions. Others contend that developing economies could benefit from the reductions.

“Carbon emission reductions will not limit industrial growth,” Vladimir Chuprov, head of Greenpeace’s energy program in Russia, said in a statement Thursday. “It’s a dangerous misconception. … Switching from carbon fuel to a new energy model will make our economy more competitive.”

Russia’s 1990 emissions were extremely high because of the command economy, reliance on coal, factories operating at partial capacity, and poor technology.

“The economy now is structurally different,” Bashmakov said. “If we continue improving efficiency, it would be possible to keep emissions 35 percent below 1990 levels in 2050 even with a growing economy,” he said, adding that the economy was too undeveloped to make bigger reductions likely.

“By Copenhagen, [emissions] will be 40 percent lower because of the economic downturn,” he said.

The UN Climate Change conference in Copenhagen, Denmark, is expected to establish a new global climate agreement in December to replace the Kyoto Protocol, which expires in 2012.

Russia’s inefficient use of resources has become all the more apparent since the economic downturn, as industry continues to pay full energy bills despite cutting output.

“We’re a major energy supplier, but that doesn’t mean we can mindlessly burn our energy resources,” Medvedev said last week.

Following the president’s critique of the housing sector, Mayor Yury Luzhkov — no stranger to innovative, and sometimes dubious, urban-planning initiatives — jumped behind the measure at a City Hall meeting.

“Heat losses were incredible this winter. We heated the winter air, raising the temperature above Moscow by two degrees,” he said Tuesday, calling for stricter efficiency in new buildings.

But Medvedev’s remarks about outlawing incandescent lights bulb, and replacing them with more expensive and efficient ones, was not well received in all corners.

The Communists of St. Petersburg and Leningrad Region — an activist group best known for protesting the portrayal of Russians in the latest Indiana Jones movie — are rallying support for the old-fashioned bulb, known in Russia as “Lenin’s light bulb” after the Soviet leader’s electrification drive.

“People are being forced to use evil luminescent bulbs that exude deadly ultraviolet rays,” the organization said on its web site Thursday, dubbing efficient light bulbs “Medved lamps.”

“We will protect incandescent bulbs, guard them from this regime and pass them down from generation to generation,” the statement said.

July 10, 2009

Russian bombers increasing tensions between London and Moscow, MPs say



Michael Evans, Defence Editor

Russian bombers flying close to British airspace are raising tensions between London and Moscow and risking collisions with civilian aircraft, MPs have warned.

The Commons Defence Committee urged the Government to take a more robust approach with Moscow over its decision to launch secret flights “without informing the proper authorities”. Long-range Russian Bear bombers have approached British airspace on 18 occasions since 2007.

The flights were “not the actions of a friendly nation and risk escalating tension”, the committee said. It acknowledged that Russia had the right to send long-range bombers into international airspace and did not accuse Moscow of posing a threat to the security of Britain.

None of the bombers — ten flights in 2007, six in 2008 and two this year — had entered British airspace. But they had flown into the “UK flight information region” — just outside territorial airspace — “without authorisation”. On each occasion, the RAF’s quick-reaction Tornado F3 or Eurofighter/Typhoon aircraft had to intercept the bombers and encourage them to leave the area.

All countries are required to communicate that they are making such flights under the International Civil Aviation Organisation (ICAO) regulations to which Russia is a signatory,” the committee said.

Apart from the unfriendly nature of the flights, the MPs said they were also concerned on safety grounds. “These aircraft cut across some of the busiest air routes in the world... and risk leading to serious accidents,” the MPs said.

“Russia should not be making such flights without informing the appropriate authorities,” they added.

The committee said that the Government should make clear to Moscow that “its continued secret incursions by military aircraft into international airspace near the UK is not acceptable behaviour”.

Get tough with Russia, MPs urge



The UK and other Nato members should take a tougher approach to Russia, the Commons Defence Committee has urged.

The MPs said that while co-operation was needed on many issues, it should not mean "accepting the legitimacy of a Russian sphere of influence."

The UK should continue to call on Moscow to withdraw its forces from Georgian territory, the report adds.

Ministers were also urged to take a "more robust approach" about Russian incursions into airspace near the UK.

It said the flights were "not the actions of a friendly nation and risk escalating tension".

Sphere of influence

The committee urged the government to take a "hard-headed" approach to Moscow, based on the reality of Russian foreign policy.

It said that while Russia did not pose a direct threat to British security in the near feature, it is understandable why some Nato members closer to Russia's borders might be worried - especially in the light of Russia's military action in Georgia last year.

It also calls on Nato to provide reassurance to states that feel threatened through robust contingency planning.

"However desirable co-operation with Russia may be, it should not come at the price of accepting the legitimacy of a Russian sphere of influence," it says.

Although the MPs welcomed the resumption of dialogue between Nato and Russia, they said the alliance must discuss areas not just of co-operation but also of disagreement, including Russia's claim to a sphere of influence in former Soviet states.

Egypt Says Deal Found On Wheat



10 July 2009 Reuters

Russia and France have agreed to inspect wheat shipments before exporting them to Egypt, soothing some of Cairo’s concerns over the quality of its grain imports, Egypt’s Trade Minister said Thursday.

Egypt, one of the world’s top wheat importers, has been locked in a dispute over grain quality since an investigation was ordered into Russian wheat imported by an Egyptian firm in May.

In an effort to fix this, the Egyptian Trade Ministry announced new wheat import measures June 23, including a regulation requiring state quality certificates. Major exporters did not have mechanisms to issue such documents.

“We signed an agreement together [with Russia that] for further shipments there will be a government agency that is inspecting wheat before shipping,” Rachid Mohamed Rachid said in an interview. “Russians have accepted that and the French have also accepted,” he said, adding that Russia had agreed to the inspections when he visited Moscow last month, while the French deal was issued a few weeks ago.

Analysts have said the new regulations to ensure the quality of wheat imports have raised the bar so high that it risked deterring some key suppliers.

But Rachid said he thought the system would work, and hoped the measures, which also include doubling financial sureties for inspectors, would not lead to a rise in the cost of wheat.

China urges Russia to protect businessmen's interests



(Xinhua)

Updated: 2009-07-10 15:46

China urged Russia in Beijing Thursday to protect its businessmen's interests in Russia.

"We have urged the Russians to protect Chinese businessmen's interests in Russia and we also reminded all the Chinese entrepreneurs there to abide by the local laws and regulations," Chinese Foreign Ministry spokesman Qin Gang told a routine press conference.

Qin's remarks came following a reporter's question about the recent raid at the Cherkizovsky Market, in the east of Moscow, the Russian capital.

During the operation, according to a report from local media, Russia's Federal Migration Service picked up 150 Chinese.

Qin said China had not received any official notification about the operation, and Chinese embassy in Russia was instructed to investigate.

Russian Mine to Supply Uranium to Junta?



By KHUN CHAN KHE Thursday, July 9, 2009

The UN Secretary General Ban Ki-moon’s controversial two-day trip to military-ruled Burma to discuss the continued detention of Aung San Suu Kyi and conditions in the country prior to the 2010 elections has been widely criticized as a failure. Eight previous diplomatic visits by UN envoy Ibrahim Gambari also failed to dent the intransigence of the military regime.

However, the reason for the UN’s inability to effect positive change in Burma has less to do with these failed diplomatic visits than with the remaining obstacles at the UN Security Council.    

Conventional wisdom suggests that China’s permanent seat on the Security Council and its policy of non-interference in Burma, a policy no doubt underscored by Chinas well-documented interest in maintaining access to Burma’s natural resources, has prevented effective UN action on Burma.

Much less attention, however, has been paid to the obstacle posed by Russia. Like China, Russia has a permanent seat on the Security Council and also blocked a 2007 UN draft resolution that would have applied enormous pressure on the regime. Russia also has interests in Burma’s natural resources, and perhaps in cooperating with the regime’s increasingly public nuclear ambitions.

Since 2006, I have been monitoring an iron ore mining project unfolding around my village in a remote ethnic Pa-O area in war torn Shan State, led by the state-owned Russian company Tyazhpromexport.

The company has invested upwards of US$150 million and is constructing an iron processing plant only 10 kilometers from the Burmese Army’s Eastern Command. This command is responsible for fighting in several areas of Shan State, and Burmese army soldiers have raped, beaten, mutilated, tortured and murdered civilians in their ongoing suppression of ethnic minorities. I, my colleagues, and other organizations have documented these abuses.

The Russian processing plant, which is sited in the Hopone Valley located at the east of the Shan State capital of Taunggyi, is expected to be completed by the end of the year. It is equipped with underground bunkers and is surrounded by two ten-feet-high cement walls and barbed wire.

The direct impact of the project has already been severe: 55 people have been forcibly relocated out of three villages to make way for the factory, and 11,000 acres of farmlands have been confiscated by local authorities on behalf of the company. Complaints by the villagers to local government offices were summarily dismissed.

Preparations for the first of a series of open pit mines in the area by Tyazhpromexport have also begun. Barring a radical change in the way the regime and its corporate partners do business, the forced relocation of approximately 7,000 ethnic Pa-O people living directly around the site is all but certain.

Erosion and the release of mining waste into our main water source, the Thabet Stream, is also a serious concern. This would affect 35,000 people downstream. The company is already diverting the stream to their factory, leading to unusually low water levels this year.

However, there is an even more serious aspect to this operation. In May 2007, one year after Tyazhpromexport declared its involvement in the iron ore project, Russia’s atomic energy agency Rosatom announced that it had reached a deal for cooperation with the Burmese regime on a nuclear program. No further information about this nuclear cooperation has been made public, but suspicions are rife that it is linked to the Hopone Valley mining project.

Local people in my community are worried. Uranium occurs naturally alongside iron ore and the military regime’s Ministry of Energy has acknowledged the existence of uranium deposits in Burma. Extreme travel restrictions have been imposed against local people by the Burma Army around the iron project, and there has been an almost complete lack of public information about the project, to a degree unusual even for the reclusive Burmese regime. Local villagers have quietly heard from staff insiders that the factory will be used to process both iron and uranium.

The Burmese regime’s nuclear ambitions are no secret. For years it has been sending students to Russia to study nuclear technology, and it has normalized relations with North Korea, the world's problem child playing with nuclear arms, despite a problematic history between the two nations. Recently, The US tracked a North Korean ship that was thought to be headed for Burma’s shores with arms and ammunitions, in violation of a UN Security resolution against Pyongyang. The vessel turned around and returned to North Korea.

Japanese authorities arrested three men in June for allegedly attempting to send weapons-making technology to Burma at the behest of North Korean agents, and photos have been distributed showing an intricate tunnel system throughout Burma being constructed with North Korea’s help.

July 9, 2009, 11:07 am

Russians Plan Floating Nuclear Plants



By James Kanter

The United Industrial Corporation, a Russian manufacturer, said this week that the world’s first floating nuclear power plant will go into operation on Russia’s eastern coast by the end of 2012.

The manufacturer, known also as O.P.K., told Green Inc. that the first model would be used to help power Viluchinsk, a city on the Kamchatka peninsula that serves as an atomic submarine base.

O.P.K. said similar models could power other cities in northern Russia in the future. But according to nuclear experts, mining companies are likely to use Russian-built floating reactors to power operations to extract oil and gas and valuable minerals from the Arctic and other remote regions.

O.P.K. is building the plant in the shape of a ship 144 meters (472 feet) in length and 30 meters (98 feet) wide to accommodate two 35-megawatt reactors. Construction of the plant, called KLT-40C, began in February this year.

Concern Energoatom, a nuclear power plant operator, signed a contract this month to buy the first model, worth 226.8 million euros, O.P.K. said.

The cost of the reactors per kilowatt hour would be equal to building a hydropower station and “exploitation of such a particular plant will be much in demand both in industrial and developing regions,” O.P.K. said.

The advantages of floating nuclear plants include maneuverability of the machines so that they can be serviced, as well as the ability to be towed near remote settlements or sites of energy-intensive industries — like water desalination — where need is greatest for electricity.

Other potential benefits include the offshore locale, away from population areas where residents might otherwise object to the presence of nuclear power.

But putting reactors at sea is likely to raise concerns about the safety in extreme weather conditions, vulnerability to terrorism, and disposal of the radioactive waste they produce.

‘New Page’ in Enclave Talks



YEREVAN, Armenia — The presidents of Armenia and Azerbaijan will meet in Russia on July 17 and could open a “new page” in negotiations over breakaway Nagorno-Karabakh, the French mediator said.

The meeting will be the sixth between Azeri President Ilham Aliyev and Armenia’s Serzh Sargsyan in little over a year.

French envoy Bernard Fassier said the intensity of talks was “unprecedented” in the 15 years since the ceasefire.

“We are now at a very important stage of the negotiation process,” Fassier told a news conference Wednesday in Yerevan.

He said he hoped the meeting would “open a new page in the negotiations.”

A trio of French, Russian and U.S. mediators under the Organization for Security and Cooperation in Europe say they are close to a breakthrough on the fate of the enclave.

(Reuters)

|Pres aide says Russia still mulls joining WTO individually |

| |

|MOSCOW, Jul 10 (Prime-Tass) -- Arkady Dvorkovich, an aide to the Russian president, said late Thursday that Russia would |

|consider joining the World Trade Organizations (WTO) individually, ITAR-TASS reported. |

|Russia is presently contemplating joining the World Trade Organization (WTO) at one time with Belarus and Kazakhstan but as a |

|separate entity, comparing the option with its alternative of joining the organization as a single customs union with these |

|countries, Dvorkovich said. |

|Experts are currently estimating which form of accession to the WTO is more reasonable, Dvorkovich said, adding that a final |

|decision had not been made yet. |

|Consultations show that Russia’s accession to the WTO as a single customs union with Belarus and Kazakhstan would be a difficult|

|process and would take several years, Dvorkovich said. “We need to find an option, with which Russia’s accession to the WTO |

|won’t linger for years,” he added. |

|In mid-June, Russia, Belarus, and Kazakhstan said that they were halting talks on their individual accession to the WTO because |

|of plans to join the organization as a single customs union. The customs union is scheduled to come into force on January 1, |

|2010. |

|Belarus censors Russian literature and movies |

| |

|Today, 12:30 PM |

|Belarus is to set up a committee to check all Russian films and books for immorality and dissolute content, Russian website |

|Lenta.ru cites Georgi Marchuk of the Belarusian Writers' Union as saying. |

|“The morality committee is a public organization, which consists of Belarusian writers, artists, and some people of the artistic|

|world. Also, we want to ask specialists from the Ministry of Culture, Education and Information to help us,” Marchuk said. |

|The new committee will inspect all films and novels from Russia which might offend Belarusian society. |

|“We just want to protect our citizens against films and books, propagandizing pornography, violence and ethnic hatred. Liberty |

|is good, but we are against liberty, which oversteps the limits, liberty bordering on licentiousness,” Marchuk added. |

|Marchuk named Marius Balchunas' film “Hitler Kaput!” and contemporary postmodern Russian writer and dramatist Vladimir Sorokin's|

|novel “Goluboe Salo," as examples of immoral works.  |

|The committee has not started operating yet. However, Marchuk has told the Russian newspaper Kommersant how they will work. |

|“At first, we will ask the producer of the film or writer of the novel to cut the pornographic, violent or extremist scenes. |

|If that does not help, we will ask Belarusian law-enforcement agencies to deprive the producers of their license and to put them|

|on trial,” Marchuk said.    |

|Marchuk is adamant that the new committee has nothing in common with soviet era censorship, because the organization analyzes |

|only finalized artistic output. |

|Despite Marchuk’s claims, many observers in Minsk believe that the new body serves a purely political end. They consider that |

|the committee was set up just to control Russian production, which accounts for 85% of the Belarusian market.      |

Russia Wants to Open 2nd Military Base in Kyrgyzstan



10 July 2009 Reuters

BISHKEK, Kyrgyzstan — Russia, seeking to offset growing U.S. influence in Central Asia, has asked Kyrgyzstan to allow it to open another military base in the country, a senior Kyrgyz official said Thursday.

Russia and the United States both operate their own military bases in Kyrgyzstan, an arrangement security analysts see as a symbol of Moscow’s rivalry with Washington for control over the strategically important region bordering Afghanistan.

The senior Kyrgyz government official said Moscow had asked Kyrgyzstan to allow it to open another military base in southern Kyrgyzstan.

“Russia voiced this request itself,” the source said on condition of anonymity, citing the sensitivity of the issue. “Russia wants to restore its influence.”

The source made his remarks shortly after a Russian delegation led by Deputy Prime Minister Igor Sechin and Defense Minister Anatoly Serdyukov visited Bishkek this week.

Speculation that Moscow might be seeking another base in Central Asia emerged after Kyrgyzstan agreed last month to allow the United States to continue using its Manas air base, reversing an earlier, Russia-backed decision to shut it.

The Kremlin confirmed that talks had taken place in Bishkek.

“I can confirm that Deputy Prime Minister Sechin and Defense Minister Serdyukov were there and held talks,” Kremlin spokeswoman Natalya Timakova said on the sidelines of a Group of Eight summit in Italy.

She refused to elaborate on the topics discussed. The Foreign Ministry and the Defense Ministry declined comment.

The Kyrgyz source said Russia wanted to use an abandoned Soviet-era military facility near the city of Osh in the densely populated Ferghana valley — a strategic location near China and Afghanistan — as a foundation for a new base.

“The issue is being discussed currently,” the source said, adding that the facility still had good military infrastructure.

The U.S.-operated Manas air base opened in Kyrgyzstan in 2001 to support military operations in Afghanistan. Like Russia’s Kant air base, it is located near the capital, Bishkek.

Russia asks for second military base in Kyrgyzstan as US gets to keep Manas



Today, 10:11 PM

Russia has asked Kyrgyzstan to allow the opening of a second Russian airbase in the country, a Kyrgyz official said Thursday, days after Bishkek agreed to keep a key US base in operation, AFP reports.

The request was made on a secret high-level visit to Bishkek by Russian Defence Minister Anatoly Serdyukov and Deputy Prime Minister Igor Sechin, said the source in the Kyrgyz government, who asked not to be named.

"During a meeting with the Kyrgyz leadership the Russians proposed opening a second military base in Osh," a major city in the south of Kyrgyzstan, the source said.

Kyrgyzstan's President Kurmanbek Bakiyev on Tuesday had signed into law a new accord extending the United States' use of the Manas airbase outside the capital Bishkek, which is key to its operations in Afghanistan.

Earlier this year Bishkek had ordered the base closed at the same time as it was offered a major financial aid package by Moscow. But it then changed its mind, allowing the base to carry on as a "transit centre".

"The Kremlin wants to increase military cooperation after the decision to keep the American airbase," the source said.

Russia already maintains the Kant airbase outside Bishkek.

President Dmitry Medvedev's spokeswoman Natalya Timakova confirmed at the G8 summit in Italy that Sechin and Serdyukov were visiting Kyrgyzstan "on the instructions of the president". She did not give further details.

The loss of the US Manas base would have been a blow to international military efforts in

Kyrgyzstan: Russian Delegation Pays Sudden Visit



7/09/09

Now that US troops will be staying at Manas air base, Russia is expressing interest in opening a new military facility in southern Kyrgyzstan.

A top level Russian delegation, led by Deputy Prime Minister Igor Sechin and Defense Minister Anatoly Serdyukov, reportedly visited Kyrgyzstan on July 7 to discuss the issue with Kyrgyz President Kurmanbek Bakiyev and other top officials, according to Russian and Kyrgyz media reports.

Mars Sariev, a political expert, told EurasiaNet any Russian move to establish a military presence in southern Kyrgyzstan could stoke tension between the Kremlin and Uzbekistan. "I don’t think Uzbekistan will like the idea of a Russian base in the south of Kyrgyzstan," Sariev said. "It could escalate and complicate Uzbek-Kyrgyz relations."

Chile to push for chopper deal with Russia despite U.S. pressure



MEXICO, July 10 (RIA Novosti) - Chile plans to continue talks with Russia on the delivery of five Mi-17 multirole helicopters for the Chilean Air Force despite pressure from the United States, a government spokesperson has said.

Chile originally planned to purchase S-70A Black Hawk helicopters from the U.S. but change their mind after Russia state arms exporter Rosoboronexport quoted an estimated $80 million for their Mi-17 V5 craft, which are nearly half the price of the Black Hawks.

U.S. Secretary of Commerce Gary Locke sent a letter to Chilean ambassador Jose Goni on July 1, in which he expressed his "disappointment" with the country's decision.

"It is quite normal. When a decision is made over a purchase of equipment or weaponry there is always a losing side, which becomes disappointed and attempts to defend its point of view," Chilean government official Carolina Toha said.

Chilean Defense Minister Francisco Vidal was earlier quoted as saying that "we should not choose the seller [of weaponry] according to nationality, and decisions on the purchase of weaponry must be based on the results of an open tender."

According to Chilean military officials, the Russian helicopters would be used for search and rescue operations, especially civilian emergencies.

Russian weaponry is popular among many Latin American countries, but Chile has traditionally been a purchaser of western-made equipment.

India to assemble Russian “flying tanks”



09 July, 2009, 18:50

In July India is to begin assembly of Russia's main battle tank, the T-90. Up to now the country has bought only fully assembled tanks, but now it will build them with parts supplied by Russia.

The plan was announced at the Seventh International Exhibition of Arms, Military Equipment and Ammunition which is underway in the Urals.

Uralvagonzavod, based in Nizhny Tagil in the Sverdlovsk region, and Rosoboronexport, the state intermediary agency for export and import of military production, are going to start the serial assembly of T-90S tanks in India at the end of this month, said Plant Director General Oleg Siyenko.

“This is a long-term contract,” he said. “We will be supplying the tank sets in the period until 2015. Rosoboronexport and we plan to start the serial assembly of our products in India in late July. We will work on a full-scale maintenance center in India, as well.”

The T-90 is known as the “flying tank” for its maneuverability and speed.

The event showcases the most advanced weaponry on the market.

Another highlight at the show is the Tunguska-M1, a surface-to-air gun and missile system.

The organizers of the exhibition in Russia’s Nizhny Tagil also had other surprises in store. The Kord 12.7 6P50 heavy machine gun is a weapon that can be used against light armored vehicles. Known as “KORD,” the machine gun is manufactured by Degtyarev plant in different modifications.

This wonder of military engineering is capable of working in extreme conditions ranging from -50 to 50 Celsius. It is not afraid of mud or rain and, as developers say, a 12.7 mm gun can be very effective in combat.

“If, say, terrorists are hiding in a building, you don’t need tanks or anything. You just take this machine gun and destroy the building. You don’t risk the lives of soldiers,” said Roman Spirin, a designer at V.A. Degtyarev plant.

More than 400 companies and 44 foreign delegations are taking part in the exhibition, which also attracted thousands of spectators.

Indian navy will be training in the Barents Sea



2009-07-09

The Indian navy will use the refitted Russian aircraft-carrier Admiral Gorshkov for a year-long sea-trail in the Barents Sea slated for 2011-2012. Also, what is said to be the final price-tag for the takeover of the second-hand aircraft-carrier was agreed in New Delhi on Wednesday.

The aircraft-carrier is currently under reconstruction at the naval yard Sevmash in Severodvinsk. As reported by last week, Russian president Dmitri Medvedev expressed major dissatisfaction with Sevmash’ handling of the aircraft carrier when he visited the naval yard on the White Sea coast.

According to a 2004 agreement the refitted aircraft-carrier should be sold to the Indian navy for 617 million USD, far below what Sevmash today says will be the price-tag for the reconstruction of the old 44.000 tons warship.

To end the long – and what Russia’s President Medvedev calls “the sole irritant' in Indo-Russian relations” - this week Russia and India come together in New Delhi for the final price negotiations.

In what is said to be the firm and final price, India will pay around 2.2 billion USD to Sevmash, a top Indian official told The Times of India after Wednesday’s negotiations.

Most of the trials will still be held in the Barents Sea, apart from training of Indian pilots for MiG-29K take-offs and landings from Russian carrier Admiral Kuznetsov, some of the training will also be conducted in Indian waters to cut costs, according to The Times of India.

The newspaper writes that Indian defence minister A K Antony, told the Indian Parliament on Wednesday that "acceptance trials'' for delivery of the aircraft-carrier to India are `expected to be completed in December 2012.

Upon takeover from the Sevmash yard, Admiral Gorshkov will be renamed INS Vikramaditya.

Submarine Nerpa leaves shipyard for tests after Nov test failure



VLADIVOSTOK, July 10 (Itar-Tass) -- The nuclear-powered submarine Nerpa left the Vostok plant, the city of Bolshoi Kamen (the branch of the Amur ship repair plant in the Primorsky Territory) for the Sea of Japan on Friday for the second-time testing, an Amur plant source told Itar-Tass.

On November 8, 2008, a fire-extinguishing system was automatically activated with freon discharge aboard the submarine during the tests in the Sea of Japan. The submarine was not commissioned yet for the Russian Navy. Twenty people died in the accident, and 21 with poisoning were hospitalised. Three of those who died were servicemen, and the rest 17 were civilians -- workers of the Zvezda, Amur and Era plants. Tests of the new submarine were postponed indefinitely.

The Nerpa of Project 971 is a third-generation submarine. The maximum speed is 30 knots. The maximum submersion depth is 600 metres. Its autonomous trip may last 100 days. It has four 533-millimetre and four of 650-millimetre-calibre torpedo systems.

Sea trials of Russia's Nerpa nuclear sub to continue for 2 weeks



MOSCOW, July 10 (RIA Novosti) - Sea trials of Russia's Nerpa nuclear-powered submarine, which was damaged in a fatal accident during previous tests, will continue for about two weeks, a high-ranking defense official said on Friday.

The vessel resumed sea trials on Friday in the Sea of Japan following extensive repairs.

"The sea trials of the Nerpa nuclear submarine will continue for two weeks. All damage on the vessel found during the investigation of the accident has been repaired," the source told RIA Novosti.

On November 8, 2008, while the Nerpa was undergoing sea trials in the Sea of Japan, its on-board fire suppression system went off, releasing a deadly gas into the sleeping quarters. Three crewmembers and 17 shipyard workers were killed. There were 208 people, 81 of them submariners, on board the vessel at the time.

Following the repairs, which cost an estimated 1.9 billion rubles (about $60 mln), the submarine was cleared for final sea trials before being commissioned with the Russian Navy and leased to the Indian Navy by the end of 2009.

India reportedly paid $650 million for a 10-year lease of the 12,000-ton K-152 Nerpa, an Akula II class nuclear-powered attack submarine.

Akula II class vessels are considered the quietest and deadliest of all Russian nuclear-powered attack submarines.

New destroyers for Northern Fleet



2009-07-09

The construction of a new class of Russian destroyers will start no later than 2012, Head Commander of the Russian Navy Vladimir Vysotsky maintains.

-We will start the construction no later than 2012, Admiral Vysotsky said to journalists in late June. The vessels will be based in the Northern Fleet and in the Pacific Fleet, RIA Novosti reports.

The Navy leader stressed that the new vessels will not fully replace the aging vessels of project 956. –This will be a more functionable vessel, more serious, with significantly extended possibilities, he maintained, adding that the new generation of destroyers will be able to operate independently on the world seas.

The Soviet Union and later Russia has built a total of 18 ships of the Project 956, the first of them in 1981. The newest of the vessels are the ”Yekaterinburg” (1998), ”Aleksandr Nevsky” (1999) and ”Vechny” (1999), Rusarmy.ru informs.

Ukraine questions Berezovsky on Yushchenko’s poisoning



KIEV, July 10 (Itar-Tass) -- Ukrainian prosecutors suspect Russia’s wanted and self-exiled tycoon Boris Berezovsky to be involved in alleged poisoning of President Viktor Yushchenko and questioned him in London, the Segodnya daily reported on Thursday.

It said prosecutor Alexei Donskoy questioned Berezovsky in the Ukrainian embassy in London.

The daily quoted Deputy Prosecutor General Nikolai Golomsha as saying Berezovsky’s suspected involvement “is being investigated very thoroughly”.

“We have communicated with Berezovsky in London, and we still have questions to him and we do not conceal that,” Golomsha was quoted as saying.

South Russia's top police official dies in hospital after attack



ROSTOV-ON-DON, July 10 (RIA Novosti) - A chief forensic expert, who was shot earlier in the week in Russia's North Caucasus Republic of Ingushetia, died in hospital on Friday, a health ministry source said.

On Tuesday morning gunmen opened fire on Col. Magomed Gadaborshev's car in Ingushetia's largest city of Nazran.

"Gadaborshev was admitted to hospital in a critical condition shortly after the assassination attempt. He had head injuries," the source said. "Today Gadaborshev died."

Russia's mainly Muslim North Caucasus regions have seen a rise in violence in recent months. Attacks on police, officials and troops have been reported almost daily in Ingushetia and Daghestan.

A suicide bombing late last month left Ingush President Yunus Bek Yevkurov severely injured and killed three of his bodyguards. And in neighboring Daghestan the republic's interior minister was killed in an attack earlier in June.

2 policemen and 6 rebels killed in Russia’s North Caucasus – report



Today, 10:55 PM

Two policemen and a Russian soldier died in clashes with militants in the country's restive North Caucasus, along with five rebel fighters, news agencies and officials said on Wednesday.

The soldier and one of the rebels died following a shootout on Tuesday in Ingushetia, a mountainous region that borders war-ravaged Chechnya, Interfax and RIA-Novosti news agencies reported, citing local officials.

"One professional soldier was killed in the clash and six others were hospitalised with wounds," an unnamed law enforcement official told RIA-Novosti. A rebel was also killed in the clash, the official added.

In a separate incident in Ingushetia, unidentified gunmen opened fire with automatic weapons on an interior ministry vehicle, killing policeman Magomed Balayev, Russia's investigative committee said in a statement.

"He died on the scene from his wounds," it said.

Four rebels were killed Wednesday after being blocked by interior ministry troops in a forest in Ingushetia, said Chechnya's regional leader Ramzan Kadyrov, quoted by Interfax.

The rebels were killed in a still ongoing operation to "liquidate" the fighters responsible for an attack that killed 10 policemen on Saturday, he said.

"Four combatants were killed. Others were arrested," said Kadyrov, whose forces have lately increased their operations in neighbouring Ingushetia.

He added that the "minister of defence" of separatist Chechen rebels, Rusteman Makhauri, was arrested. However, the name does not appear in any list of military officials of the Chechen rebellion.

A policeman was also shot dead on Tuesday in nearby Dagestan, which like Ingushetia is predominantly Muslim and in recent years has been shaken by insurgency, Interfax and RIA-Novosti reported.

In the incident, in Dagestan's regional capital Makhachkala, "unknown people in a Zhiguli car shot two policemen during a document check, one of whom died of his wounds in hospital," a police source told RIA-Novosti.

Clashes between government forces and Islamist rebels are common in Dagestan and Ingushetia. Both regions border Chechnya, which was the scene of two separatist wars after the collapse of the Soviet Union in 1991.

In recent years Chechnya has gained a measure of stability under the strongman rule of its pro-Moscow leader Kadyrov, but human rights groups accuse him of using brutal tactics to suppress the rebels.

Travelers Face Limit of $630 on New Goods



10 July 2009 By Nikolaus von Twickel / The Moscow Times

Travelers might be restricted to bringing only 20,000 rubles ($630) worth of goods into Russia without paying customs duties under a government proposal aimed at bolstering crisis-hit customs revenues.

The plan would lower the maximum value of goods from the current 65,000 rubles ($2,000) and reduce the goods’ maximum weight from 35 kilograms to 20 kilograms.

Travelers would have to show receipts for newly purchased goods, and anything over the price and weigh limits would be slapped with duties, according to proposed regulations posted on the web site of the Federal Customs Service late last month.

But the fate of the plan, which is drawing harsh criticism, appears to be very much up in the air. The Federal Customs Service has removed it from its web site, and a spokeswoman said Thursday that no one was available at the agency to discuss it.

Prime Minister Vladimir Putin met with customs officials Thursday evening in yet another effort to raise government revenues in the area. It was not immediately clear whether Putin discussed with the group the measures targeting travelers.

Experts said such measures would greatly hamper trade and barely help improve customs revenues.

Natalya Orlova, chief economist with Alfa Bank, said the sums were too small to effectively battle the problem of falling state revenues.

“This will just be an extra inconvenience for individuals,” she said.

She said that raising customs tariffs would result in making goods more expensive, which in turn was undesirable in a recession. “The initial problem is falling demand, and that is what causes gray imports to increase,” Orlova said.

The European Union, the country’s biggest trading partner and a prime destination for travelers, said that while it was legitimate for

Moscow to fight illegal imports, the proposed price limit was unrealistic.

Denis Daniilidis, the EU delegation’s spokesman in Moscow, said 20,000 rubles is extremely low. “Russian visitors are very good shoppers who spend a lot of money. Now one pair of shoes or a camera would already be too much,” he said.

Putin spoke against gray imports at the meeting with members of a state border commission in Petropavlovsk, the capital of the northwestern republic of Karelia, which borders Finland.

“Shipments used to be practically outside proper controls when they moved from the border to customs points further inland, and this was capitalized on by dishonest businesses and semi-criminal elements,” Putin said, Interfax reported.

“These loopholes should now be closed,” he said.

Gray imports are typically goods that skirt the full customs levy by being declared at a lower-than-real value.

A major overhaul of the Federal Customs Service, which began last year and involved closing many smaller customs posts, has been mired with disorganization. In March, new terminals in the Moscow region saw long lines and chaos, forcing many companies to pay overtime fees.

Customs chief Andrei Belyaninov told Putin at a meeting Wednesday that the number of customs posts had been reduced from 45 to five in Moscow and from 56 to 12 in the surrounding region.

Hinting at excessive workload, he added that customs both in Moscow and in the Moscow region were working under a simplified regime, according to a transcript posted on the government’s web site.

Customs revenue from both exports and imports traditionally provides a significant share of the country’s state income.

Yet the largely oil-based revenue has plummeted by almost 40 percent this year.

In the first six months of 2009, customs contributed 1.3 trillion rubles to the budget, or a monthly average of 218 billion rubles ($6.85 billion), according to information on the customs service’s web site. In contrast, the customs service contributed an average of 391 billion rubles ($12 billion) per month in 2008, and a record 4.7 trillion rubles ($148 billion) for the whole year.

The government has reacted to this drop with a range of measures mostly focused on raising tariffs and increasing controls.

Orthodox Church Gets a Say on Duma Bills



10 July 2009 By Alexandra Odynova / The Moscow Times

Russian Orthodox Patriarch Kirill invited the United Russia deputies to his office to voice his angst over EU-backed plans to introduce sex education in Russian schools.

He left the meeting with a promise from the pro-Kremlin party that he would be allowed to preview all legislation considered in the State Duma.

The extraordinary agreement grants the Russian Orthodox Church a privilege not shared by any other religious community in Russia and not even afforded to the Public Chamber, the civil society advisory body that is supposed to have the right to examine pending legislation and influence its outcome.

It raises questions about separation between church and state, which is enshrined in the Constitution, and promises to raise new concerns about the growing clout of the Russian Orthodox Church, which has seen a revival since Vladimir Putin rose to power in 2000. Putin, now prime minister after eight years as president, heads United Russia.

Patriarch Kirill invited two senior United Russia deputies to his office near the Christ the Savior Cathedral on Wednesday to express his worries about the Duma’s ratification of the European Social Charter on May 20.

The charter, which Russia was obliged to approve as part of its membership in the Council of Europe, guarantees people’s right to housing, health, education, employment and other issues.

It also requires public schools to offer sex education and member states to establish juvenile justice systems aimed at deterring minors from committing crimes — two matters that the patriarch told Deputies Andrei Isayev and Vyacheslav Volodin that he opposes strongly.

Kirill said parents should be responsible for both sex education and disciplining their children, not the government.

“We told the patriarch … that the ratification of the charter won’t require any changes in Russian legislature and won’t lead to circumstances that will frighten the public,” Isayev said in a statement.

At the meeting, Kirill also asked whether he could preview upcoming legislation to prevent any misunderstandings in the future, and the deputies agreed.

“We agreed that we would show the patriarchate the State Duma’s plan for legislative work and hold preliminary consultations on all questions that may raise doubts to avoid mutual misunderstanding,” Isayev told Interfax.

Opposition politicians criticized the arrangement and called it a ploy for United Russia to boost its ratings amid the economic crisis.

“They can hold discussions with whoever they want, but there is the Constitution, which says the church and government are separate,” said Boris Nemtsov, a former deputy prime minister and leader of the Solidarity opposition group.

He warned that the agreement could lead to closer ties between the government and church, which already work together in many areas. For example, the Federal Court Marshals Service reached a deal with the church late last month for priests to denounce unpaid debts as a sin in their sermons.

Nemtsov said the church would now be able to shape the country’s laws.

“Of course it will influence the party’s politics, although they are doing it for PR purposes at the moment,” he said.

Communist Deputy Sergei Obukhov said he had no problem with the Orthodox church weighing in on legislation, but other faiths should be allowed to participate as well.

“The problem with the State Duma is that it is not enough open to the public,” Obukhov said. “We think that all confessions should participate.”

Putin’s spokesman Dmitry Peskov declined to comment on the issue Thursday.

Putin incidentally met with Kirill on Thursday in one of the churches of the Valaam Monastery on an island in Karelia. Putin was in the northwestern republic for a meeting with customs officials.

Supporters of sex education say the lessons are desperately needed to fight HIV in Russia, where the rates are among the highest in the world.

“Our government is separate from the clergy. Schools should do what they think is necessary,” said Olga Romanova of Project Hope, which writes books and trains teachers on sex education.

But Romanova said the church probably would not have a great influence on legislature regarding sex education. “It will just lead to nothing,” she said. “Everyone wants the children to live, and most of the clergy consist of intelligent people.”

Alexander Brod, a human rights activist and member of the Public Chamber, said he believed the church would not have “considerable influence” on legislation.

He said the Public Chamber deserved at least the same privilege as the church to preview legislation.

Calls to church representatives went unanswered Thursday. United Russia officials also were unavailable for additional comment.

While the Russian Orthodox Church opposes sex education, it has taken a much milder stance on legislature concerning alcoholism and tobacco — two issues blamed for Russia’s demographic crisis and a host of social ills.

The church had a booming tobacco and alcohol business that led to a scandal in the 1990s. Kirill, then the metropolitan of Smolensk and Kaliningrad, was nicknamed the “tobacco metropolitan” in the media for allegedly profiteering from the church’s privilege to import cigarettes duty-free. The church’s department for external relations, which Kirill formerly headed, was at one time believed to be the biggest supplier of foreign cigarettes in Russia. The church stopped the duty-free cigarette imports in 2007.

New head of Federal Security Service of Russian Federation Nizhniy Novgorod area directorate appointed



09.07.2009

Valery Nazarov, the former Assistant to the Plenipotentiary of the President of the Russian Federation in Volga Federal District, has been appointed the head of the Federal Security Service (FSB) of the Russian Federation Nizhniy Novgorod area directorate, online paper NewNN.ru reports. It marks that the press service of the FSB Nizhniy Novgorod area directorate has confirmed the information on Nazarov's appointment and his introduction to the directorate’s personnel.

The former head of the Federal Security Service of the Russian Federation Nizhniy Novgorod area department Oleg Khramov has been transferred to a higher post in Moscow; he has become the

chief of the Operative information department of the FSB of the Russian Federation. Khramov headed the FSB Nizhniy Novgorod directorate since May, 2006, news agency Nizhniy Novgorod expands.

Valery Nazarov was born on May 4, 1954, in the city of Lukhovitsy of Moscow oblast. In 1977 he graduated from the Moscow Energy Institute. Between 1977 and 1981 he worked as an engineer-adjuster, chief of technological department of the directorate of the USSR Ministry of Radio Industry. In 1981 – 1984 he was the deputy head of Moscow shop of communications of the Russian Federation State Committee on Maintenance with Petroleum Products. Between 1984 and 2006 Nazarov served in different posts in the state security system. In 2006 - 2008 he worked as the head of the Federal Security Service of the Russian Federation Orel area directorate.

Since December 25, 2008, he was the Assistant to the Plenipotentiary of the President of the Russian Federation in Volga Federal District (the Directive of the Head of Administration of the President of the Russian Federation S.Y.Naryshkin, No1896), according to news agency Nizhni Novgorod.

Russian police seize wanted gang leader, 20 accomplices



MOSCOW, July 10 (Itar-Tass) -- Police nabbed in Moscow the gang leader of a criminal group from the city of Saransk and his main accomplice. A total of twenty bandits from the criminal group have been arrested as for today, spokesman of the criminal department of the Russian interior ministry Andrei Zlyden told Tass on Thursday.

He said Sergei Deniskin is accused of 17 grave crimes, including nine murders, three abductions, and five armed assaults. The gang leader was on the international wanted list.

“The criminal group included people with criminal record, and representatives of authorities have been involved in its activities,” Zlyden said.

Police also seized Deniskin’s right-hand man Stanislav Vechkenzin who was “in charge of the criminal business to provide intimate services and engaged in racketeering and abductions.”

Zlyden said the two have disclosed their arms cashe in a forest in Mordovia, where police found two grenade launchers, three submachine guns, two pistols and three revolvers, three silencers, two hunting guns with cartridges.

Gang members are accused of organizing a criminal group, banditry, murder, racketeering, inflicting heavy health damage, illegal arms turnover.

Russian broadcaster edits out Putin send-up



Jul 9, 2009, 14:24 GMT

Moscow - A satire featuring an annoyed cartoon version of Russian Prime Minister Vladimir Putin was pulled from the air by Moscow broadcaster 2x2, local media reported Thursday.

The channel edited out an approximate one-minute-long sequence out of an episode of the US cartoon series South Park, the RIA Novosti agency reported.

Media concern Prof Media, which owns 2x2, did not provide a reason for the deletion.

Bloggers on Russian internet sites have speculated that the pro- government censorship was return for the renewal of the company's broadcasting license.

Religious groups accused the channel of 'extremist propaganda' for its broadcast of the satirical South Park and have called for the channel's closure.

July 09, 2009

Kremlin's 'Gray Cardinal' Steps Out Of Shadows To Tout Reform



by Claire Bigg

What is it with Vladislav Surkov?

The reclusive presidential aide, widely known as the Kremlin's "gray cardinal" and a close ally of Prime Minister Vladimir Putin, has been making regular forays into the spotlight in recent weeks -- a telling sign that something is brewing in the Kremlin.

The flurry of activity has fueled speculation that the Kremlin's top ideologue is scrambling to restore faith in the regime amid a devastating economic crisis.

"Surkov is the architect of a political system that is coming undone at the seams," says Nikolai Petrov, a political analyst at the Carnegie Center in Moscow.

"When this process began following the [economic] crisis, Surkov said that there was no need for radical change, that all we needed to do was wait for everything to fall back into place. Now, it is becoming clear that things are not returning to normal on their own and that the system must be somehow reshaped."

End Of The Social Contract

The global economic downturn has hit Russia's energy-based economy particularly hard, bankrupting factories, stalling construction, and prompting angry citizens to take to the streets over lost jobs and unpaid wages.

Until now, the bulk of Russians had been happy to give up a measure of freedom in return for prosperity.

But the economic crisis, by unraveling this so-called social contract, has shaken the very foundations of the "power vertical," the top-down political system built by Surkov over the past decade at the behest of then-President Putin.

Surkov, whose official title is first deputy chief of staff of the president, for years operated largely behind the scenes. But he has recently emerged in a far more public role, and has surprised many by using his forays to openly advocate liberal reform.

It's a striking departure from his trademark concept of "sovereign democracy," which critics view as a set of Putin-era measures aimed at consolidating Kremlin control and undermining civil liberties.

It also raises question about where Surkov's allegiances now lie: with his former boss, the still powerful Putin, or with President Dmitry Medvedev, widely seen as more liberal than his predecessor?

Surkov's liberalization efforts certainly fit the mood of the moment, and not only in Russia. In an interview with the Associated Press on the eve of his visit to Russia this week, U.S. President Barack Obama appeared intent on driving a wedge through the Putin-Medvedev tandem, and made no secret of his preference for Medvedev -- praising the latter's openness while criticizing Putin's "outdated" Cold War rhetoric.

It was during Obama's visit that Surkov was appointed to a bilateral committee overseeing Russian-U.S. relations. He was named co-head of the commission's working group on civil society, sparking an outcry from Russian rights activists.

The New 'Liberal'

That appointment was just the latest step in what appears to be a professional makeover for Surkov. In April, he became the chairman of a Russian commission aimed at easing a tough law on nongovernmental organizations -- a law that he had himself helped draft.

In June, he hosted conciliatory talks with leaders of opposition parties.

Addressing young State Duma deputies just days later, Surkov urged the ruling United Russia party, which heavily dominates parliament and the broader political scene, to reach out to other parties.

In that speech, Surkov explained that Russia's political structure had matured, and that liberalization was the next logical step in the process of establishing a stable, democratic, multiparty system in Russia.

His seeming transformation may prove startling to Moscow's political elite.

Surkov oversaw a range of unpopular crackdowns on dissent during the Putin era -- most notoriously the Kremlin campaign to rein in regional leaders, whose popular election was scrapped in 2004, and the controversial legislation that placed the activities and funding of nongovernmental groups under strict state control.

Still, many Russians share his original notion that "Russian democracy" is best established step by step, from above.

"He is a clever man and he understands the situation; this can't be denied," says Sergei Filatov, the head of the presidential administration under Boris Yeltsin. "One can agree with him on a number of things because any national transformation comes at a huge price, which creates tensions and resistance."

Filatov suggests Surkov is "trying to perform this transformation gradually."

"Of course, what's happening is disgusting to watch because it's not democracy," he adds, "but on the other hand, democracy needs to be built. On its own, it will take many, many years to come."

Just A Facade?

Others, however, doubt the Kremlin's commitment to democracy.

Surkov's liberalization drive, they say, is nothing more than an attempt by Putin and his hard-line entourage to save its skin amid the most severe and sustained grassroots protest it has ever faced.

"The political system's liberalization is inevitable, it's already taking place," Petrov says. "But it's taking place as a reaction to the current changes [and] it's driven by the system's urge to survive, to meet the emerging challenges. If the system is unable to radically modernize, it will simply lose control and be replaced by another system."

Petrov says Surkov could end up making mere cosmetic changes instead of radically rethinking the political structure which he so meticulously assembled.

A sign of this may be Surkov's high-profile visit last month to the Russian region of Bashkortostan, just days after regional leader Murtaza Rakhimov -- himself a United Russia member -- publicly lamented the lack of political diversity in the country and blasted the level of centralization as "worse than in Soviet times."

Although Surkov insisted that the visit had been planned long ago, many saw it as a move to publicly chastise Rakhimov over his unprecedented show of disobedience and patch up the rifts emerging within United Russia over how to handle the economic crisis.

Kremlin critics say ousting Surkov is the only way to lift Russia out of its political impasse, given his role in shaping the now-embattled "power vertical."

"I think Surkov is a very dangerous man for the country, a man who manically tries to control all political and social processes taking place in the country," says Ilya Yashin, one of the leaders of the Solidarity opposition movement. "This is a very dangerous trait for a politician. Surkov plays a very tragic role in our country. He is largely responsible for the negative centralization of power in recent years. I think everyone will celebrate when this person is sacked."

Surkov has long been the bete noire of Russia's opposition.

He is seen as the man behind Nashi, the combative pro-Kremlin youth group, and is thought to wield huge influence over both houses of parliament as well as the country's judicial system.

Relatively young -- his official biography puts him at just 44 years -- Surkov has an impressive career behind him. He was a senior executive for former oil tycoon Mikhail Khodorkovsky and oligarch Mikhail Fridman throughout the 1990s, and briefly served as deputy director of a state-run television channel before being appointed presidential deputy chief of staff in 1999.

In 2005, Surkov watched silently as his former benefactor Khodorkovsky was sentenced to eight years in prison on fraud charges after a legal onslaught widely seen as politically motivated, earning him the reputation of a cynical opportunist in opposition circles.

'Prince Of Darkness'

"Surkov does everything he can to inflate his own role. In fact, he is a half-baked entertainer who thinks he is the prince of darkness and the creator of Russia's backstage politics," says political analyst Andrei Piontkovsky. "Surkov is a relatively young man who has already betrayed many people and caused massive harm to the country. He has a long, sated, comfortable, and shameful life ahead of him."

The secrecy surrounding him has done little to foster trust in Surkov.

But the inscrutable spin doctor seems to enjoy the various rumors and speculation swirling around him.

Four years ago, he stunned Russia by declaring that his father was Chechen and that he himself was born and spent his early childhood in Chechnya.

According to the Kremlin's official website, Surkov was born near Lipetsk, a city some 400 kilometers south of Moscow.

His revelation at the time was followed by reports in the Russian media that he changed his name from Aslambek Dudayev to the more Slavic Vladislav Surkov when he and his mother left Chechnya.

Despite his epithet of "gray cardinal," Surkov has proved a lot more colorful than his generally dull Kremlin colleagues.

He has written two albums for the popular Russian rock band Agata Kristi, for instance. Rumor has it that Surkov also pens best-selling thrillers under the pseudonym of G. A. Zotov.

While oppositionists and rights campaigners continue to call for his head, others say his ouster would do little to break the political stalemate.

There are suggestions that Surkov, the virtuoso political architect, might instead be co-opted to help build another, more democratic political edifice.

Some commentators say that Surkov, regardless of his past, could even play a central role in ushering in the much-awaited "thaw."

"I would not demonize Surkov or exaggerate his influence," says political analyst Petrov. "It would be more logical to use him and his team in a more constructive manner, because I don't see any other team capable of handling these problems more efficiently. As a political manager, as a person who deals with the problems of ruling authorities, he is probably one of the most efficient."

RFE/RL's Russian Service contributed to this report

National Economic Trends

Russian monetary base down 0.05% in week to $126 bln



MOSCOW, July 10 (RIA Novosti) - Russia's Central Bank said Friday the country's narrowly defined money supply (M1) was 3 trillion 987 million rubles ($126 billion at the current exchange rate) as of July 6, down 0.05% in the week since June 29.

According to the Bank, M1 money supply consists of the currency issued by the bank, including cash in vaults of credit institutions, and required reserves balances on ruble deposits with the Central Bank.

Russia c.bank injects 12.25 bln roubles via repos



10-JUL-2009 09:08

MOSCOW, July 10 (Reuters[pic]) - The Russian central bank injected 12.25 billion roubles ($384.2 million) of one-day funds into the banking system[pic] at a rate of 8.79 percent in its first repo auction of the day on Friday. The minimum interest rate[pic] was set at 8.5 percent. A maximum of 15 billion roubles had been on offer for the two repo auctions scheduled for the day. Following are results of the latest auction, provided by the central bank on its Web site (cbr.ru): Date July 10 July 9 July 8 Session 1st 1st 2nd Amount (bln rbls) 12.25 14.94 0.13 Bids (bln rbls) 12.25 14.94 1.29 Average rate 8.79 8.78 9.50

Ruble Extends Drop in Worst Week Since February as Oil Slumps



By Denis Maternovsky

July 10 (Bloomberg) -- The ruble extended declines in its worst week against the dollar in five months as concern about a prolonged global recession sent oil, Russia’s chief export, toward its biggest weekly drop since January.

The Russian currency depreciated 1 percent to 32.1012 per dollar by 11:15 a.m. in Moscow, bringing its drop this week to 2.7 percent, the most since February. It weakened 0.5 percent to 44.7242 per euro.

Oil fell 0.9 percent to $59.87 a barrel, extending this week’s decline to 10 percent, on speculation fuel consumption in the U.S., the biggest energy-using nation, will remain subdued. Gasoline stockpiles increased over the Independence Day weekend, the peak of the summer driving season, a July 8 report showed.

The movements against the dollar and the euro left the ruble at 37.7806, the weakest in two months against the central bank’s target dollar-euro basket, which is used to manage swings that hurt Russian exporters.

The basket is calculated by multiplying the dollar’s rate to the ruble by 0.55, the euro to ruble rate by 0.45, then adding them together. The ruble remains within the 26 to 41 band the central bank pledged Jan. 22 to defend.

To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@

Last Updated: July 10, 2009 03:22 EDT

Russian finance minister says capital outflow to slow next year



ULAN UDE, July 10 (RIA Novosti) - Russian Finance Minister Alexei Kudrin forecast on Friday that capital outflow from Russia will slow next year and 2011 could see capital inflow starting again.

"In 2009 outflow will continue and perhaps even into next year," Kudrin, who is also a deputy prime minister, told journalists in the East Siberian Buryat Republic.

The minister said however that outflow next year was expected to be less than in 2009.

The Central Bank said earlier net capital inflow into Russia reached $7.2 billion in the second quarter of 2009 while net outflow in the first six months of the year stood at $27.6 billion.

The Russian government expects the country's economy to shrink by 2.2% in 2009.

Kudrin said non-payment of bank loans calculated to International Financial Reporting Standards (IFRS) would exceed 10% by the end of the year.

"Having overcome the crisis, I hope we will see an inflow of investment in 2011," he said.

Russian Bad Loans to Exceed 10% by Year-End, Interfax Reports



By Paul Abelsky

July 10 (Bloomberg) -- Russian bad loans will slightly exceed 10 percent of total loans by year-end according to international accounting standards, Interfax reported, citing Finance Minister Alexei Kudrin in Ulan-Ude.

By Russian standards, bad loans will be just under 10 percent of the total, the Moscow-based news service reported, citing Kudrin.

To contact the reporter on this story: Paul Abelsky in St. Petersburg at pabelsky@

Last Updated: July 10, 2009 03:03 EDT

Macroeconomic indicators - IMF further lowers Russian GDP forecast



Friday, 10 Jul 2009

Interfax quoted the IMF said in its World Economic Outlook that the International Monetary Fund has increased its 2009 GDP decline forecast for Russia to 6.5% from the 6% it was predicting in April.

However the IMF improved its 2010 GDP forecast by 1 pp to positive 1.5%.

The IMF also worsened its forecast for CIS economies in 2009 by 0.7 pp to negative 5.8% or, minus Russia by 1 pp to negative 3.9%.

The 2010 GDP growth forecast for the CIS was improved by 0.8 pp to 2% or, minus Russia, by 0.1 pp to 3.2%.

(Sourced from Interfax)

What will drive growth?



Citi

July 10, 2009

As there is substantial debate regarding the shape and speed of economic recovery, we look into drivers of potential growth in Russia. During the years prior to crisis, consumption had been the key driver of growth in Russia contributing over 5 percentage points on average over the 5 years prior crisis. Strong consumption was mainly driven by real wage growth in excess of productivity stemming from incomplete sterilization of balance of payments inflows. At the same time investment stagnated as the high perceived country risk led to a lack of long-term funding. The situation improved gradually and since 2007 investment began to pick up reaching about 25% by end-2008. Financial crisis brought lead to a sharpest decline in investment with the GFCF falling by 23% YoY in May. We believe there are three future scenarios: 1) higher oil prices leading to a return of consumption-driven growth; 2) low oil prices leading to an indefinite stagnation as monetary nor fiscal policies are currently supportive of investment-driven growth; 3) a structural policy shift, including bank recapitalization and re-balancing of budget spending, that would lead to a consumption/investment mix, supportive of sustainable growth.

Why is investment important for Russia's growth? Let us consider one by one the key factors behind economic growth: labor, investment, and total factor productivity (or creativity driven growth). Labor is set to decline in Russia over the medium term, total factor productivity that has been an important driver of growth since the transition began has recently stalled, while investment remains substantially below other emerging markets. Furthermore, research suggests that market access through improved infrastructure leads to significant increase in firm's productivity. Also, spending on infrastructure in already dense economic areas (which should be less costly and easier to administer) leads to better overall results.1

The recent global financial crisis is particularly dangerous for Russia's investment and therefore medium term potential growth. Investment is particularly sensitive to a sudden stop in capital inflows. To a large extent private investment spending until recently relied on external funding. Domestic banking system relied for about half of its liabilities on external borrowing. Furth domestic pension and insurance systems largely underdeveloped there are no domestic sources of long-term funding.

However, even if the funding were available, undercapitalized banks will, in our view, continue to contract credit in order to improve their capitalization as the government funds allocated for bank recapitalization in our view fall short (less than US$20 bn compared to our estimated recapitalization need of about US$90 bn). This will first of all be damaging for investments. In addition, budget policy is heavily geared towards current spending. According to our estimates, capital spending in federal budget accounted on average for about 10% since 2000, while the share of government wages increased from 14% to about 20% in 2007. It is noteworthy that since then the authorities stopped publishing economic classification of the budget spending. However, according to the government anti-crisis plan, over 50% of 2009 budget spending is geared towards wages and social spending. As a result, we conclude that as of now neither monetary nor fiscal policies are supportive of investment vesting any economic recovery on the oil prices rebound leading to a return of consumption-driven growth.

COMMENT: Russia's economy - horticulturally challenged



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Roland Nash of Renaissance Capital

July 10, 2009

The divergence between financial markets and the real economy in Russia is startling. The recovery in debt and equity markets in the first half stands in stark contrast to the collapse in economic activity and the stubborn absence of green shoots. In the second half, something has to give. Either the economy will start to recover, or asset markets will move lower to reflect the deep recession in the real economy.

In our view it is economic recovery that will come through in the second half, driven by the re-engagement of financial markets with Russian credits. While the situation is clearly fragile, we believe that the dangers are exaggerated. Russia has had nine months to prepare for a new round of the global financial crisis. Massive government intervention has put Russia in a stronger position to deal with any further fallout. Corporates and banks have built up around $100bn of dollar assets, more than enough to compensate for debt repayments of $60bn. We do not subscribe to the popular thesis of the second wave hitting Russia. The ability to repay, together with loosening credit conditions globally, are contributing to the first cautious signs that markets are again opening up to Russian credits. In the second quarter, $500m was raised in equity markets for oil and gas exploration companies, and it seems that new money is being raised for the real estate sector. That risk appetite exists for some of the most beaten sectors of Russian industry bodes well for the market as a whole.

More importantly, domestic markets are becoming increasingly active. An appreciating ruble, rising reserves and falling interest rates are encouraging demand for ruble debt. We estimate that Russian corporates will issue around RUB400bn ($13bn) in the second half. Equally, the government is both encouraging and demanding banks to start lending. Well-publicised plans are in place to provide at least RUB460bn ($14bn) of new capital into the banking sector over the next 12 months. At the same time, the central bannk will likely cut interest rates by another 150 bps by year-end. These measures, together with the recovering value of collateral, as proxied by asset markets, should increase the willingness of banks to begin lending again.

Finally, the fiscal stimulus planned in response to the crisis should start having an impact in the second half. Despite a fall in revenues from 22% of GDP to 18% in 2009, expenditures are expected to rise from 16% of GDP to 22%. The shift in the central government’s budget position from an 8% of GDP budget surplus in the first nine months of 2008 to a planned deficit of 8% in 2009 is arguably the biggest government stimulus package globally.

The opening up of credit markets, looser monetary policy and fiscal stimulus all suggest that economic growth can resume more strongly than current expectations would imply. After seasonal adjustment, we expect quarter-on-quarter growth to resume in the third quarter and expect GDP in the second half to be 4% higher than in the first. While this would still imply an annual GDP decline of 8% on 2008, we think that year-on-year growth will resume in the first quarter next year at an annual rate of 4%. Our forecast for growth in 2010 is 3.5%. A resumption of growth will likely result in a further decline in weighted average cost of capital (WACC), and an increase in target prices. As we move into the second half, we therefore view any pullback below our end-2009 RTS target of 1,200 as an opportunity to buy into Russian equity.

Of course, it goes without saying that the oil price remains a major risk. Oil inventories are close to all-time highs and utilised capacity is historically low. Financial demand clearly makes economic sense as a hedge against dollar depreciation, but at some point the stuff has to be burnt. As in Russia, the resumption of economic activity globally is a necessary condition for continued appreciation. Equally, Russian politics has a nasty habit of flaring up over the summer, and there are uncomfortable signs of growing tension between the two heads of Russian power. Interpretation of the closed world of Russian politics is as much an art as a science, but any concrete signs of instability creeping into Russia’s power-vertical will inevitably spook the market.

But using an average WACC of 14% (down from 16% in the second quarter), and with a price of $55 per barrel of oil estimated in 2009, rising to a long-term average of $80 in 2011, our discounted cash flow fair value for the RTS has increased to 1,350 (average upside potential of 40%). If economic recovery gets under way, it is not unrealistic to expect the RTS to move back towards 1,600 in 2010.

Business, Energy or Environmental regulations or discussions

Sberbank Says GM Balking in Sale of Opel, FT Deutschland Reports



By Tom Lavell

July 10 (Bloomberg) -- OAO Sberbank Chief Executive Officer German Gref views General Motors Corp. as presenting the most obstacles to a sale of the carmaker's Opel division, Financial Times Deutschland reported, citing the bank chief.

GM efforts to explain how the unit should run two days after going bankrupt was ``not very credible,'' while the Moscow-based bank has no problems with its bid partner or with German federal or state governments, the newspaper cited Gref as saying. GM responded that it won't ``leave the door open'' to the Russian bidder gaining access to its technology, FT Deutschland said, citing an unidentified spokesman.

Click here for web link

Last Updated: July 10, 2009 02:31 EDT

Russian Region Asks ArcelorMittal for Mines, Vedomosti Says



By Anastasia Ustinova

July 10 (Bloomberg) -- Russia’s Kemerovo region asked ArcelorMittal to hand over two coal mines to the local administration rather than halt operations, Vedomosti reported, citing a telegram from Governor Aman Tuleyev to the company.

The regional head also said he would do everything possible to get ArcelorMittal’s license to a coal field revoked should the company fail to respond to his proposal, the newspaper said. The two mines employ 2,300 people, according to Vedomosti.

ArcelorMittal declined to comment, Vedomosti said.

To contact the reporter on this story: Anastasia Ustinova in Moscow at austinova@

Last Updated: July 10, 2009 01:19 EDT

Russia region threatens to seize ArcelorMittal mines



Fri Jul 10, 2009 3:42am EDT

MOSCOW (Reuters) - Russia's Kemerovo region has notified ArcelorMittal (ISPA.AS: Quote, Profile, Research, Stock Buzz) that it will seize two of the world's largest steel maker's mines if production levels do not increase, a statement from the Siberian region said.

"If your team is not able to stabilize production at these facilities, then we propose that you hand them over without compensation," Kemerovo governor Aman Tuleyev said in a telegram addressed to the multinational's chief executive, Lakshmi Mittal, and cited in the statement on the Kemerovo website.

Reuters has been unable to reach ArcelorMittal's Siberian operations for immediate comment on the telegram.

ArcelorMittal acquired three Siberian coal mines from Russia's Severstal (CHMF.MM: Quote, Profile, Research, Stock Buzz) in 2008, becoming one of the few foreign companies to enter the market.

However, in March the company said it may temporarily close two of its three Russian mines because of the slump in global demand.

ArcelorMitall also said it would introduce a voluntary retirement program at the Anzherskaya and Pervomayskaya mines in western Siberia and redeploy some key operating personnel to the third mine, Beryozovskaya.

(Reporting by Alfred Kueppers and Natalya Shurmina; editing by Philippa Fletcher)

Siberian Lawmakers Seeks Clarity on Two Mines From Evraz



By Yuriy Humber

July 10 (Bloomberg) -- Lawmakers in the Siberian region of Kemerovo asked Evraz Group SA for “clarity” over the future of two mines as the social situation may deteriorate should they be closed, according to a statement on the regional assembly’s Web site.

To contact the reporter on this story: Yuriy Humber in Moscow at yhumber@

Last Updated: July 10, 2009 02:31 EDT

Mechel may finalize its debt restructuring



Alfa

July 10, 2009

According to Mechel's subsidiaries' disclosure documents, which were made available on the company's site yesterday, Mechel has reached an agreement with the Oriel Resources ($1.5 bln) bank syndicate and possibly extended the maturity on other ($1.7 bln and $0.3 bln.) bank syndicate loans. We think that the company may sign the final agreement in the near future. The announced terms of the restructuring seem to be in line with what was disclosed by the company earlier, but the maturity date is set for December 12, i.e. in three and a half, not three years, as was previously anticipated.

The interest rate on the restructured debt has not been disclosed and it appears that they are still being negotiated. According to disclosures, there are three options, with one of them being a 6% annual coupon. We also do not know if the restructured loans' principles amortize, as we would expect, or come due on December 12, or what restructuring fees were incurred.

Earlier Mechel disclosed the main principles of the restructuring, but uncertainty increased as the restructuring was delayed. Also, the current restructuring might include a small extension of other loans in addition to the Oriel Resources loan.

VTB Group provides $450 mln. loan to TMK



Press release

July 10, 2009

As part of state support of Russian industry VTB Group will provide $450 mln. loan to TMK. The loan will be provided for a 365 days period with an annually prolongation option, but not more than for 1825 days.

The loan is provided for a partial buyback of TMK's second Eurobond issue arranged by UBS and VTB Capital.

Mikhail Butrin, Co-Head of Global Banking at VTB Capital, Investment Business of VTB Group, said: "Providing loan to TMK is a significant project in terms of VTB Group's initiative to support Russian business. TMK is Russia's largest manufacturer and exporter of steel pipes and ranks among the top three global pipe producers. The loan will enable TMK to further develop its business and strengthen its positions on world steel pipes market".

Open Investments: A Sleight Change in Assets



VTB Capital

July 10, 2009

According to a company press release, in 1H09 Open Investments sold a number of its assets to companies affiliated with Interros, controlled by Vladimir Potanin. We estimate that the Potanin and Mikhail Prokhorov jointly control about 80-85% of Open Investments. Vedomosti speculates that i) the assets were sold at market terms, in separate transactions and without the approval of the Board or shareholders, and ii) representatives of Onexim Group (controlled by Prokhorov) were unaware of the deals.

The assets sold can be classified into two groups: income generating and land bank. The first group (Novotel, Meyerhold and Pavlovo Podvorie) generated some USD 30mn in 2008 (Pavlovo Podvorie was not fully operational), or 11% of revenues. However, it is questionable whether land plots or units in residential gated communities could be sold at the moment, and so income generating properties are the only source of sustainable cash flow in the current environment.

With regards to the land bank, we think that the purported sale includes the most interesting land plots (in terms of location) which are potentially the most lucrative for sale (either as land plots or as units in residential gated communities): Large Zavidovo, Lukino, Pestovo and land plots on Yaroslavskoye Shosse.

This would leave Open Investments with:

- the Pavlovo, Pestovo and Martemyanavo residential gated communities (about 30% presold, except Pavlovo 1 that is almost fully sold), where we expect sales to be down 50-70% YoY in 2009; and

- a land bank that does not currently generate any cash flows and is capital intensive for the company: Gorki 10, Timonino, Large Pestovo and up to 16,000 hectares north and west of Moscow.

- Commercial properties under development (Sochi, Domnikov and Opin Plaza)

We view the news as negative for the company. Were the list of assets sold to be confirmed, we consider that potentially the most promising developments (both residential and income generating projects in commercial) have been stripped out. And while we are unaware of the deal price, we think that the valuations could well have been depressed in the current environment and so not provide much help to the company in developing its remaining land bank.

Furthermore, Open Investments is not financially stretched: as of 1 January 2009, it had USD 252mn cash on its balance sheet and must repay USD 190mn debt this year, so we see no liquidity gap in 2009. The rest of its debt (USD 330mn) is long-term, with the majority (USD 182mn) due no earlier than in five years. The rationale behind the reported deal is therefore a mystery to us.

In terms of corporate governance, we view this news as negative. Were the deals completed without the approval of both Interros and minorities (as Vedomosti speculates), this could potentially result in a wave of legal filings against the company. We note that as of 30 June 2009, the company's Board of Directors included both representatives of Interros and Onexim Group.

Belarus bank to buy Dresdner Russian subsidiary



July 9, 2009

The biggest bank in Belarus, Belarusbank, is in negotiations with Germany's Commerzbank to buy its Russian subsidiary of Dresdner bank.

Commerzbank recent bought its German rival Dresdner, leaving it with two Rusisan subsidiaries - its own name subsidiary and the Rusisans Dresdner subsidiary.

With one bank too many in Russia the German owner is keen to dump its extra bank in Russia while the Belarusians are willing to pick up an outlet in Russia.

Belarusbank is the republic's largest bank and is looking to expand. It is interest in the Russian bank as some 60% of Belarus' export trade is with Russia and much of that goes though Belarus bank.

The two sides are in preliminary negotiations, but at this stage the deal looks more than likely to go through. Neither side will admit to talks nor have they given out any financial details of the deal.

Renault's Russian Woes



The French automaker's $1 billion, year-old tie-up with Avtovaz may be going sour, with sliding sales and deep losses

By Carol Matlack

When Renault (RENA.PA) plunked down $1 billion last year to take a 25% stake in Russian carmaker Avtovaz, Renault boss Carlos Ghosn described the tie-up as "a relationship whose time has definitely come."

But could the relationship already be going sour? Clobbered by a steep decline in the Russian auto market, Avtovaz (AVAZ.RTS) lost nearly $800 million in 2008 on sales of $6 billion. Sales this year are down 45%. Avtovaz's auditors on July 2 questioned its ability to make payments on $1.7 billion in debt and raised doubts about its future "as a going concern." A few days before that announcement, Avtovaz said the senior Renault executive on its management board was leaving the company and would be replaced by a Russian.

Renault says the French executive, Yann Vincent, left the company for personal reasons and that Renault concurred in the decision to replace him with Igor Komarov, Avtovaz's executive vice-president for finance. A Renault spokeswoman acknowledges that Avtovaz is in financial distress but says it has sufficient funds to keep going, thanks to some $790 million in loans and other aid it has received recently from the Russian government. "We remain confident in the future of the partnership," she says.

Cushioning the Hit

So far, Avtovaz's troubles have had limited impact on Renault's bottom line. Indeed, Renault received $305 million in royalty payments last year for licenses for automotive platforms, transmissions, and engines that it has provided Avtovaz to develop new versions of its Lada car based on Renault's low-cost Logan line. That helped cushion Renault against Avtovaz's operating losses. During the first six months of consolidated results, from March through September 2008, Renault booked a $162 million loss from Avtovaz, including a $117 million writedown on the value of the investment.

Losses from the subsequent six months of the partnership—to be reported with Renault's first-half 2009 results on July 30—will be heavier and could include a further writedown. But Gaetan Toulemonde, an auto analyst with Deutsche Bank (DB) in Paris, says the financial risk to Renault isn't worrisome. "When you look at the condition of Avtovaz, it's probably comparable to Dacia," a crippled Romanian carmaker that Renault took over in the 1990s and turned into the first production site for the Logan line.

A bigger question for Renault is the dire state of Russia's overall automotive market. Sales in June were down 56% year-on-year, to only 118,579 vehicles, the Moscow-based Association of European Businesses said on July 8, adding that it expected "a challenging second half" of the year as well.

The Russian government has been offering loan subsidies to car buyers but finding few takers, as the country's economy is forecast to contract 8.5% this year. On July 6, Prime Minister Vladimir Putin signed an order nearly doubling the price ceiling on cars qualifying for subsidized loans. But that won't help Avtovaz, because most of its cars are priced below the earlier ceiling of about $10,000.

Stiffer Competition

Few think Moscow would allow Avtovaz, Russia's biggest carmaker, to fail. But the government life support it's receiving isn't enough to finance development of the low-cost cars it wants to build.

While Avtovaz and Renault wait for the crisis to ease, another Russian automaker is angling for a tie-up with a European partner. GAZ (GAZA.RTS), whose best-known car is the Volga, has teamed with Canadian auto parts group Magna (MGA) in a bid to acquire Opel, General Motors' European unit. That, along with Russian expansion by automakers such as Ford (F), Toyota (TM), and Volkswagen (VOWG.DE), means Renault and Avtovaz will face stiffer competition.

For now, Avtovaz says it will continue operating as usual. "The group continues as a going concern and has no plans or need to discontinue or significantly reduce activities," the company said in a statement on July 2.

And Renault says it remains optimistic that its bet on Avtovaz will pay off handsomely. "The Russian market still has enormous growth potential," a spokeswoman says. "When we do emerge from the crisis, we'll be able to tap into that potential."

Matlack is BusinessWeek's Paris bureau chief.

GAZ Group: Alfa Bank demands payment of unsettled debt



UralSib

July 10, 2009

New details available. According to Vedomosti, on Wednesday Alfa Bank won two legal proceedings against affiliated structures of GAZ Group (GAZA - Not Rated) associated with unsettled debt totaling $1.4 mln (RUB44.7 mln). If GAZ Group fails to pay this overdue debt, Alfa Bank will make an application to start bankruptcy proceedings with the company's subsidiaries. This claim by Alfa is only one of a number from the bank against GAZ-affiliated structures. According to available data, the minimum total amount of all current claims by Alfa is $63 mln, with the total debt of GAZ group against Alfa Bank exceeding $250 mln. The total debt of GAZ Group amounts $1.4 bln (RUB44.88 bln), with $1.3 bln (RUB40 bln) due to banks and $153 mln (RUB4.88 mln) to bond holders.

State support should help. Earlier this week the State anti-crisis commission under the direction of Igor Shuvalov approved state guarantees for GAZ Group for RUB20 bln ($637 mln), which should allow the company to restructure its debt with banks for a total of RUB40 bln ($1.3 bln). This should allow GAZ Group to resolve its debt problems with a major part of its creditors in the short term. We also think that State support means GAZ Group will be able either to reach agreement with Alfa bank on debt restructuring terms that suit both parties (Alfa bank has been the only bank to disagree with the restructuring of GAZ Group's debts), or refinance this debt amount. Hence, we do not consider the risk of bankruptcy initiation by Alfa as a significant one for GAZ Group.

Slowdown signs - GAZ auto group to lay 7,000 by August



Friday, 10 Jul 2009

Interfax citing Mr Nikolai Satayev the region's industry minister as saying that GAZ automobile group will lay off approximately 7,000 staff at its plants in the Nizhny Novgorod region by August 1st.

Mr Satayev said that "We had a meeting with management at the Gorky Automotive Works the day before. They confirmed they'd be making cuts by August 1st about 7,000 jobs. They will affect the Nizhny Novgorod region's enterprises in general."

He said that additional federal and regional budget funding is being considered to help or retrain those who lose their jobs.

Mr Alexander Khinshtein a State Duma deputy and chairman of the lower house's expert council on the automobile industry said earlier that GAZ would lay off 6,500 workers at its flagship plant in Nizhny Novgorod this summer.

Earlier reports said the company intended to lay 4,500 staff off at the plant in July to August. The plant had 11,500 employees before the redundancies began.

The GAZ group consists of 18 factories, sales and service outlets.

(Sourced from Interfax)

Russia: Avtotor launches assembly of BMW X5 and X6



By: Zoran Samardzic, Friday, July 10, 2009,

Avtotor has launched assembly of an additional two BMW models – the X5 and X6 – in Kaliningrad. For this purpose, the company opened a second line with annual capacity of 15,000 units.

Current plans call for 1,000 X5 and 1,000 X6 models to be assembled in Kaliningrad annually. Avtotor already assembles BMW 3 and 5 Series and X3 models.

Trial assembly of BMW vehicles in Kaliningrad began in 1997, followed by the start of serial production in 1999. During the initial year, 555 vehicles were assembled. In November 2007, the 20,000th BMW vehicle was produced.

Last year, Avtotor assembled 6,414 BMW vehicles and in the first five months of 2009, output reached 1,224 vehicles. The production plan for this year includes 6-7,000 BMW vehicles.

In Russia in the first half of this year, BMW sold 7,829 cars, down 12% from the same period in 2008.

Activity in the Oil and Gas sector (including regulatory)

Jul 10, 2009, 4:00 a.m. EST

IEA lifts estimate of supply on Russia oil output



LONDON (MarketWatch) -- The International Energy Agency, in its monthly report, revised higher its estimate of non-OPEC supply by 330,000 barrels a day, citing stronger-than-expected Russian output, as it left its 2009 view unchanged for a 2.9% drop in global oil demand. The IEA expects 2010 demand to rise by 1.7%, or 1.4 million barrels of oil a day, to 85.2 million barrels a day.

Official says oil export duty could hit $220-$224 per tone



bne

July 10, 2009

Russia's oil export duty could grow from July's $212.6 per tonne to $220-$224 per tonne in August, Alexander Sakovich, deputy head of customs payments at the Finance Ministry, told Interfax.

JULY 10, 2009

Russia Majors Profit Even as Oil Price Falls



By JACOB GRONHOLT-PEDERSEN

MOSCOW -- Russia's oil producers will likely report higher profit margins in the second quarter than they did when oil prices peaked last summer, mainly because a weaker ruble has reduced their costs and they have received relief on taxes exacted on their exports.

Oil producers' profits have endured a roller-coaster ride since last summer, when prices for the commodity reached almost $150 a barrel before declining steeply to the end of the year and into 2009.

The speed of that pullback was particularly painful for Russian firms because of the country's tax system, which last year recalibrated export duties every month, using oil prices from two months earlier. That meant falling oil prices exacted a double toll; the lesser revenue was effectively taxed at a higher rate. That was changed from Jan. 1, and the tax is now based on an oil price dating back one month rather than two.

"Higher oil doesn't work its way down to better earnings," analysts at Moscow-based brokerage UralSib said of Russia's oil companies.

Some companies found that sending crude abroad resulted in losses toward the end of 2008. Leonid Fedun, deputy chief executive at Russia's second-biggest oil producer, OAO Lukoil Holdings, dubbed the fourth quarter "the worst in history."

Since then, a mix of a devaluation of the ruble and tax breaks have pulled the industry back into profitability.

The industry also faces tough times in terms of production. After reaching double-digit growth figures in the beginning of the decade, Russia's oil output fell last year for the first time since 1999. With oil fields in Western Siberia -- the country's main production area -- maturing rapidly, Russia's biggest oil companies OAO Rosneft, Lukoil, TNK-BP Ltd., Surgutneftegaz and OAO Gazprom Neft must invest heavily into new and more difficult-to-reach areas in order to keep up production.

Russian oil majors such as Lukoil sell most of their crude and oil products in dollars abroad and the majority of their costs are in rubles. The ruble's value fell by one-third last winter. Combined with crude prices, which climbed above $70 a barrel in the second quarter, producers saw an immediate rise in profits.

"Russian oil companies are now making more money than they were last year, possibly even at the peak of oil prices," said UniCredit analyst Artem Konchin.

But some of the currency benefits have been erased lately, as the ruble has regained some of its value. The ruble also now trades in rough tandem with the price of oil, so any benefit to Russia's oil majors from a recovery in oil prices could be undermined by the impact of a stronger euro.

"We don't think this [devaluation of the ruble] is a sufficient reason to buy into the sector, given the impact that would have on investor sentiment," said Oswald Clint, from brokerage Sanford C. Bernstein.

Despite significant tax breaks at the beginning of the year, including the recalibration of export duty and a lowering of both the mineral extraction tax and income tax, company executives say further cuts are needed to encourage and keep the sector from stagnation.

Deutsche Bank analysts forecast Russia's biggest oil producer, Rosneft, to post a 50% rise in second-quarter earnings before interest, tax, depreciation and amortization to $3.5 billion compared to the first quarter. In comparison, the bank currently expects Ebitda to rise just 6% in the July-to-September period versus the second quarter.

"In any case, oil companies won't see such an intense rise in earnings in the third quarter as they did in the past three months," said Tatiania Kapustina, an equity analyst for Deutsche Bank in Moscow.

PrimeGen Energy Posts June Production Results for Kochmesskoye Well

PrimeGen Energy Corp.  7/9/2009

URL:

PrimeGen Energy has reported on June production for the Kochmesskoye well at Timan-Pechora, Russia. The well commenced commercial oil production on June 17, 2009, and the Company has received production results for the first 21 days. Total oil produced and sold was 25,200 barrels with an average daily production rate of 1,200 barrels per day.

The swab test analysis of the well during the completion phase indicated that the production rate should exceed the original estimate of 1,400 barrels per day. The I.P.R.s (Initial Production rates) are being evaluated and production has, over many days in the month, exceeded a rate of 1,300 barrels per day. The Kochmesskoye well is the first of a multi-well program drilled at Timan-Pechora by PrimeGen. The 2009 development program calls for the drilling of a minimum of 30 wells to develop the field. When fully developed, the 30 wells should give a daily production rate at Timan-Pechora of 35,000 barrels per day.

Robert Charlton, President, stated, "The first month production at Timan-Pechora is what we believe to be the start of a lengthy and profitable operation. As Timan-Pechora is developed, the oil reserves will become a core asset to the Company's future cash flow."

Using current pricing for Timan-Pechora crude oil, PrimeGen has now projected that the well has generated $1.6 million in revenue or $19.2 million per year and will payout its entire cost in 3 months. Currently, oil at Timan-Pechora has been priced at over $65.00 per barrel.

The Timan-Pechora Project area currently consists of 24 existing production oil wells with close to one billion barrels and 132 BCF of proven reserves. A discovery well tested 5,589 BOPD from zone at 3,958-3,974 meters. Timan-Pechora region is 17 kilometers from Ukhta, a major town in the Republic of Komi. The oil plays are situated approximately 1,200 km from Moscow. Its surrounding areas have well established infrastructure, allowing all year access for field operations. Power lines and a major highway pass through the territory. There is also a branch of the Transneft pipeline between Ukhta and Moscow that passes directly over the project. Additional transportation routes include a railway system, with the nearest terminal located close to Ukhta.

TNK-BP feeling bullish



Published: July 9, 2009 at 12:59 PM

MOSCOW, July 9 (UPI) -- Anglo-Russian energy venture TNK-BP announced it will examine increasing its capital investment to match trends in the current market.

Timothy Summers, the chief operating officer at TNK-BP, said that the investment program for the Russian oil company was based on the understanding that its corporate footprint could change as the economy improves.

His comments came as the board of directors in June opted to allocate some $400 million for capital investments.

Investment analysts note TNK-BP saw a recovery in oil prices as a sign to move aggressively as Russian rival LUKoil has an investment program that is nearly twice as large as the Anglo-Russian venture, the Russian business daily News Time reports.

"Oil prices were rising in the last several months, and the company decided to increase its investment program by 20 percent," said Valery Nesterov, an energy analyst at the Troika Dialog investment bank.

Nesterov noted that if TNK-BP is to remain competitive in the current market climate, it needs to ramp up its investments. He cautioned, however, that if the economy were to collapse again, that optimism may be quickly erased.

"The market situation is favorable now and allows oilmen to think about additional investments," he said. "However, the market is still very unstable."

TNK-BP board directors will take up the matter at their next regular meeting scheduled for July 24.

TNK-BP to Invest More in Ukrainian Refining



Thursday, Jul 09, 2009

TNK-BP announced today that it has successfully closed a transaction that brings its effective shareholding in the Lisichansk Refinery close to 100%. The transaction was endorsed by TNK-BP Limited (BVI) Board of Directors in June 2009. The details of the transaction are subject to a confidentiality agreement.

Going forward, the company is interested in further modernization of its Ukrainian refining assets, aiming to increase refining efficiency and enable the company to meet Ukraine’s market demand for high quality motor fuels. In addition, the company plans to continue its work to further improve environmental standards, industrial safety and labor conditions for its staff in Ukraine.

"Ukraine is one of key operating regions for TNK-BP," said Mikhail Fridman, interim TNK-BP CEO, "by investing more in refining, we make an important step towards growth of our Ukrainian business."

TNK-BP International raises ownership in Ukrainian Linos refinery to 100%



Citi

July 10, 2009

TNK-BP Holding's parent company, TNK-BP International, increased its ownership in Linos from 71% to "almost 100%". The company has not disclosed any further details. Although the news should be neutral for TNK-BP Holding, we note that the deal appears to be yet another step towards consolidation of the group's assets and possible IPO - the remote possibility of which the company has recently announced.

Alexander Korneev

Gazprom

Gazprom mulls LNG tanker order



7/9/2009 3:57:51 PM GMT

MOSCOW: Gazprom Plc may place an order with Severnaya Verf plant for the construction of two liquefied natural gas (LNG) tankers to transport LNG from the Shtokman gas field offshore eastern Russia, said Gazprom Vice President Alexander Ananenkov.

Ananenkov said Severnaya Verf plant, part of United Industrial Corporation (OPK), is the only enterprise in Russia with the ability to build such particular vessels.

Gazprom will prepare contracts to start the construction the first vessels. The details for the tender on the construction of the two vessels will be drawn up during the fourth quarter of 2009. The tender will then be formal, said Ananenkov.

Ananenkov said it would be necessary for OPK to renovate the plant's facilities to build this type of vessel. OPK reported that the company has already started the construction of a shipbuilding complex for large-capacity vessels.

Ananenkov said that 10 platforms to allow for the transportation of LNG will need to be constructed, as well as 80 vessels for servicing of the platforms. Ananenkov noted that the Baltiysky plant, also a part of OPK, also has great chance in securing an order.

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