Russia



Russia 110929Basic Political DevelopmentsUkrainian delegation in Moscow for gas talks – minister: Delegation of "Naftogaz Ukraine" has left on Thursday, Sept. 29, in Moscow for gas talks with Russia's OAO "Gazprom". This was announced by Minister of Energy and Coal Industry of Ukraine Yuriy Boyko. Russia to insist U.S., NATO take realistic approach to missile threats - envoy to NATORussia-NATO Chicago summit possible if progress made on missile defense – Rogozin NATO provoking another conflict in Balkans – RogozinAmbassador demands investigation of NATO’s firing at Kosovan SerbsRussia supports Jordan’s reform drive - During a meeting with Foreign Minister Nasser Judeh, which was held on the sidelines of the UN General Assembly meetings on Tuesday, the two sides discussed the latest regional developments, especially those taking place in several Arab countries. They also stressed the importance of ongoing cooperation and coordination vis-à-vis issues of mutual concern.UNSC may agree measures on Syria - Russia's UN ambassadorEU, Russia inch towards compromised draft text in UNSC on Syria Politics ?Deputy Foreign Minister Vladimir Titov’s Conversations in Berlin - They substantively examined topical international issues, including pan-European security and Russia-EU and Russia-NATO cooperation, and the situation in different regions of the world. Poland and Russia differ on Smolensk disaster autopsy findings - The news threatens to undermine the entire series of autopsies carried out in Russia in the wake of the plane crash which killed President Lech Kaczynski and 95 others in western Russia last year.Russian military power worries Nordic region - “A rise in Russia’s military operations in the Baltic Sea region is cause for concern among Baltic states Finland, Sweden and Poland, Estonia’s military chief said.Russia moves to bolster Arctic military presence - Anton Vasilev, a special ambassador for Russia's Ministry of Foreign Affairs, was quoted this week by the Interfax news agency as saying his country would be beefing up its presence in the Arctic, and that NATO was not welcome there.Cruiser Adm Kuznetsov to leave for Mediterranean in Nov - Verification is under way of a list of foreign ports to be visited by the Russian ships, including an update in view of the developments in the Middle East and North Africa. The question of the Russian ships' participation in joint exercises together with the navies of countries in the region is being worked out as well, the MNH officer pointed out.Greece, Russia meet on Rodos to discuss investments - “Our interaction in shipbuilding has been good but I know that Greek ship owners want more contracts with Russian companies. At the moment, Greek ship owners are a major force in shipping,” Kedikoglu added.Turkmenistan, Russia discuss joint projects in Ashgabat - The forum will present economic opportunities for Russian regions, in particular, Omsk, Chelyabinsk and Saratov, as well as trade organizations and industrial structures. In addition, bilateral talks are expected to be held with representatives of ministries and departments, heads of private companies, and Turkmen firms.Russian-Turkmen trade reaches 2 bln dollars in first half of 2011“Moscow May Use Karabakh Trump Card Against BP” - "But they have such a serious lever as Karabakh. They may push the button at any moment to create instability, suspending the project," he said, adding that Russia would not be disappointed in case Turkmenistan refuses to join the project.Russia's Hermitage cancels exposition in Japan over nuclear fearsRussian MPs are expected in the occupied territory - Today a delegation of the Russian Federation Council headed by First Deputy Chairman of the Committee on Defence and Security Yevgeny Serebrennikov is arriving in Tskhinvali.Georgia says yes to US missile defense but no to Russia in WTO Saakashvili: U.S. Stopped Russia BombingsAzerbaijan exports to Russia much more energy than it receives - An agreement on the parallel operation of power system of Azerbaijan and Russia is at the consultation stage, Shedrin said.Pro-Russian Activists Quarrel In Ukraine's Crimea Final conf on e-gov't project to be held at EU Moscow office - Cooperation between Russia's regions and the European Union (EU) in promoting the establishment of an electronic government of Russia has entered the finishing straight.United Russia submits election list led by MedvedevRussia’s Election Commission admits lists of candidates for parliamentary electionsRussians living in poverty 'up by 2 mln since 2010'Russia plans over 15 space launches for Q4 2011 Glonass-M to be launched from Plesetsk early on Oct 2 morning – source Russia set for launch of Proton-M carrier rocket with Mexican satelliteThe gigantic Typhoons will be scrapped for metal - The world’s largest submarines did not fit into the limits of the START Treaty???Firefighters extinguish 18 forest fires in Russia's Siberia over past 24 hoursBlast on motorway in Dagestan presumably targeted at local officialEstonian investments come in Dagestan - Within several days, the representatives of "Bell BOATS" and "MIRODON" have been examining the opportunities for companies' participation in investment projects in Makhachkala. Shakira to attend Chechen president's birthday bash New clue in Chechen killings - Six former Chechen commanders were all killed in Turkey over the past four years with the same weapon produced by an arms factory near Moscow for the Russian Military Intelligence Service, or GRU, according to Turkish police sources.Caucasus Muslims Office: Interethnic and interfaith understanding to bring happy future in CaucasusRussia doesn’t blame Muslims as terrorists: CG - H E Consul General of the Russian Federation Andrey V. Demidov has said that his country keenly sought friendly relations with the Muslims of Pakistan. Church official asks journalists no to turn conversation from attempts to justify pedophilia to discussing novels Russian church wants novels bannedDeputy mayor promises not to prolong building of 200 new churches in Moscow "for decades" Moscow housing inspection chief dismissed - "Obyedkov is relieved of the position and discharged from the city's civil service on his own initiative as he retires on a pension," the source aid.Barracks fire in St Pete brought under control, over 200 evacuatedMoscow close to bottom on world list of cities convenient for livingReuters PRESS DIGEST - Russia - SEPT 29vedomosti.ru Russian state officials spent more than 4.5 billion roubles ($141 million) in 2007-2009 to acquire expensive executive cars, the daily says citing a research compiled by a parliament deputy. Russia eyes introducing obligatory Director and Officers Liability Insurance for chairmen of the boards of major state companies. kommersant.ru The European Commission antitrust probe into Gazprom's supplies to its European customers could allow the EU to get more leverage on the company, the daily says. The first test launch of Russia's fifth generation intercontinental ballistic missile has failed, the daily says. ng.ru The earnings of 21.1 million Russians, or 15 percent of the country's population, were below living standards in the first half of 2011, the paper cites official statistics. rg.ru Prime Minister Vladimir Putin awarded a medal named after Russia's prominent 20th century reformer Pyotr Stolypin to a top Kremlin official Vladislav Surkov. ($1 = 31.746 Russian Roubles) (Writing By Tatiana Ustinova) RIA Russian Press at a Glance, Thursday, September 29, 2011Editorial: Another reason not to join the Russian army - The Russian army is having a hard time filling its ranks with draftees. About half of all potential recruits never show up for induction. Bribes to obtain medical deferments are common, and there is no real social stigma attached to draft dodging.FT: Putin's intended return as president unleashes open rebellion within the Kremlin - Mr Medvedev’s entire presidency (Mr Putin was constitutionally prohibited from a third successive term) now appears to have been an elaborately constructed play, whose final act was the return of the former KGB colonel to his job next March.Yet Another Example of The Economist's Awful Russia Coverage - We have been asked a lot recently about the "Russia: Time to Shove off" piece that ran in the Economist earlier this month. Yet Another Example of The Economist's Awful Russia Coverage - By Mark AdomanisNational Economic TrendsInflation continues to decelerate in September - According to Rosstat, Russia's weekly consumer inflation was 0% last week (19-23 September), after shrinking by 0.1% since the beginning of September; YtD inflation amounted to 4.6%.Russia Macro View - That Sinking Feeling Ruble Weakens Third Day This Week Against Dollar, Euro at OpenKremlin Moves Rumble the Ruble - By ANDREW PEAPLE Russia strengthens positions at world grain marketsRussia Grain, Pulses Harvest at 86.4 Million Tons, Ministry SaysRussia resumes sugar exports for first time since 1999Central Bank may ease requirements for two major banks - The Central bank of Russia (CBR) may refrain from introducing sanctions against Sberbank and the Bank of Moscow for infringing the law on the national payment system by introducing a temporary moratorium for the two financial institutions, RBC Daily reports MENT: Russian banks - Late to the party - David Nangle of Renaissance Capital Business, Energy or Environmental regulations or discussionsRussian shares down, indexes lose 0.9%-1%Globaltrans to shell out $1.2bn on M&AAeroflot flies 23% more passengers in 8 mthsBillionaire Potanin May Seek Norilsk ControlNorilsk May Borrow $4 Billion for Buyback, Vedomosti SaysTMK considering USD 3 billion in investments in US Russia and RomaniaActivity in the Oil and Gas sector (including regulatory)Lukoil to start supplying lubricants to AfghanistanRussian Watchdog Wants Oil Refiners Spun Off, Kommersant Says - Russia’s Anti-Monopoly Service proposed splitting oil companies into production, refining and retail businesses to defend independent retailers, Kommersant reported, citing Igor Artemyev, head of the body. International conference on Arctic shelf opens in MurmanskKamchatka gasoline stations owners agree to lower fuel pricesTNK-BP Says It Paid $1 Billion to Partner With HRT in AmazonBP to stay in Russia despite lawsuit and raidsLukoil’s Lawsuit against Customs Agency Postponed - Experts should have completed the technical expertise on the case November 9Gas imports from Russia are expected to reach USD 545/1000 cubic meters - The price of gas imports from Russia is expected to reach USD 545 for 1000 cubic meters this October, according to Agerpres newswire. This statement was made by Hilmar Kroat-Reder, member of the Petrom directorate and responsible for the natural gas market, during a conference on energy.GazpromGazprom to be offered several Belarusian assets - Russian state giant Gazprom may get its hands on several major Belarusian assets, Alexander Surikov, Russian ambassador to Belarus, claimed to Prime on Wednesday, as Belarus insisted it expects no delay to the next tranche of the Russian-led bail out programme.Romania's top oil and gas company Petrom , controlled by Austria's OMV , is in talks to sell about 130 petrol stations it holds in Romania, almost a quarter of its total gas stations, to Serbian oil firm NIS, majority owned by Russia's Gazprom Neft , market sources said. Gazprom Seeking Short-Term Debt Amid Market Rout: Russia CreditUPDATE 2-Europe's fear of Russian gas behind Gazprom raidsGazprom Gas Supply Contracts Are Focus of EU’s Antitrust Probe - By Aoife White and Anna Shiryaevskaya The Empire Strikes Back: European Energy and the Return of Gazprom - Matthew Hulbert and Dr. Christian Brutsch------------------------------------------------------------------------------------------Full Text ArticlesBasic Political DevelopmentsUkrainian delegation in Moscow for gas talks – minister 8:58AM GMTKYIV. Sept 29 (Russian Energy News) – A Ukrainian delegation is in Moscow for talks on gas issues on Thursday, Ukrainian Energy and… CORRECTED GOOGLE TRANSLATIONNaftogaz went to negotiate with Gazprom 29.09.2011 11:04 Delegation of "Naftogaz Ukraine" has left on Thursday, Sept. 29, in Moscow for gas talks with Russia's OAO "Gazprom". This was announced by Minister of Energy and Coal Industry of Ukraine Yuriy Boyko. According to him, the talks will discuss a wide range of issues. Earlier, the head Gazpromexport Alexander Medvedev said that Gazprom asked European customers not to worry, saying that there is no threat of another "gas war" between Russia and Ukraine, which transports Russian gas to Europe. In turn, Prime Minister Mykola Azarov said that Ukraine and the Russian Federation in November, will change the existing contracts between NAK "Naftogaz Ukraine" and "Gazprom". He promised that the new price for Russian gas will be effective from January 1, 2012. However, the spokesman for OAO "Gazprom" Sergei Kupriyanov said that Russian and Ukrainian side has not agreed to the revision of gas supply contracts. Ministry of Industry 29, 2011 11:27Russia to insist U.S., NATO take realistic approach to missile threats - envoy to NATO. Sept 29 (Interfax) - Problems of negotiations on missile defense aspects were discussed in a tense atmosphere at an ambassadorial meeting of the Russia-NATO Council on Wednesday, Russian permanent envoy to NATO Dmitry Rogozin told Interfax."I presented findings by American researchers from the University of Massachusetts, which confirm the Russian Federation's concerns that the U.S. plans of deploying its missile defense group in the northern seas and on Polish territory on the third and fourth stages will pose a real threat to the Russian strategic nuclear forces," he said."If our NATO partners do not believe our Russian researchers and experts, the Defense Ministry and the Foreign Ministry, then they should at least listen to their own experts. They virtually have nothing to parry such information," Rogozin said.Russia will continue "to use authority, opportunities, and goodwill of our partners, researchers from Europe and the U.S., to ensure that the United States and those who support it in NATO regarding the missile defense deployment plans in Europe take an appropriate approach, which presumes that, if there are missile threats, then a system opposing them should be absolutely proportional to these risks," he said. "And when all plans are being sewn together and all agreements are being signed already now, including with Warsaw, on deploying U.S. missile defense elements right near Russia's northwestern borders on the pretext of the so-called much talked-about Iranian missile threat, there should be no illusions that Russia will silently swallow such propagandistic moves. We won't swallow this, and if we don't obtain coherent reaction from our partners in the negotiations, we will have to resort to the best guarantee of which Czar Alexander III said calling the army and the navy Russia's only allies," Rogozin said.va(Our editorial staff can be reached at eng.editors@interfax.ru)Russia-NATO Chicago summit possible if progress made on missile defense – Rogozin 29/09/11 7:28AM GMTBRUSSELS. Sept 28 (Russian Military News) – The Russia-NATO Chicago summit, set for May 2012, is possible only if agreements have been reached… NATO provoking another conflict in Balkans – Rogozin: 28 September, 2011, 21:12Edited: 28 September, 2011, 22:54 NATO peacekeeping force KFOR has sent more troops to the Serbian-Kosovo border following bloody clashes there. But as Russia’s envoy to NATO Dmitry Rogozin told RT the alliance is creating a new conflict in the region."It's another mistake that NATO is making by provoking another conflict in the Balkans,” Dmitry Rogozin said. According to witnesses, KFOR has deployed armored vehicles, sandbags and barbed wire around the Jarinje border crossing, about 100 km (60 miles) from Kosovo's capital, Pristina, on Wednesday. “It seems my NATO colleagues don't have a clue what the consequences of their involvement in the conflict could be,” Dmitry Rogozin said. “Instead of taking a neutral position in accordance with the UN Security Council resolution, they took the side of Kosovo-Albania. Basically, NATO is blocking the only road of life between the Kosovan Serbs and Serbia. It's the international peacekeepers who are involved in the civil conflict in the north of the region.”NATO reinforced the border a day after clashes which left 16 Kosovo Serbs and four KFOR members injured.Milan Jakovljevi?, the director of Kosovska Mitrovica Health Center, said six people sustained serious injuries from live rounds and one person had been taken to the ophthalmology ward due to eye problems caused by tear-gas, Serbian radio and television broadcaster B92 reported. Both sides blame each other for starting the violence, in which rubber bullets and tear-gas were used by NATO forces.It is believed the clashes took place when alliance peacekeeping forces tried to dismantle a roadblock set up by Serbs. NATO’s spokesperson insists that KFOR troops had fired on Serb protesters in the Mitrovica region in response to an attack by the crowd.Meanwhile, according to Rogozin, NATO does not want to discuss the situation in Kosovo or to investigate the latest bloody accident. ?“They are hiding behind formal phrases that mean nothing,” he said.“We are witnessing outright lies about what kinds of measures have been used against the civilian population in Kosovo. We have been told that only rubber bullets and tear-gas were used. But according to the information from the hospital, all the injured have gunshot wounds. And physicians from Mitrovica complained about the bombardment of ambulances, which were transporting the wounded from the conflict zone," Rogozin told Interfax news agency.Russia has demanded that NATO creates a commission to investigate what happened in the region. “I have just asked for an objective investigation into what the so-called NATO peacekeepers are doing in Kosovo. But they just ignored my question,” Rogozin said. “If NATO is concerned about its reputation they should stop this immediately, become neutral again, and investigate the crimes that have taken place against the civilians in northern Kosovo,” he added.He stressed that Russia would support and protect civilians, and would also protect decisions made by the UN Security Council. ?John Laughland of the Paris-based Institute for Democracy and Cooperation agrees the deployment of KFOR troops has reactivated a ‘frozen conflict.’“If they took away their newly sent force from the borders between the northern Kosovo and the rest of Serbia, then yes, I do think that the region would go back to being peaceful,” John Laughland told RT.20:55?28/09/2011ALL NEWSAmbassador demands investigation of NATO’s firing at Kosovan Serbs, September 28 (Itar-Tass) – Russia’s ambassador to NATO, Dmitry Rogozin has issued a demand that NATO officials investigate the incident, in which NATO forces opened fire at Kosovan Serbs near the Jarinje check-post in Kosovo.He wrote about his demand at his Twitter microblog.“I’ve demand an investigation of the fact of fire by NATO servicemen at Kosovan Serbs, who protested against the blocking of the administrative border between Kosovo and Serbia,” Rogozin said.“What I’ve heard in response is apologies only,” he said. “Irresponsibility of this sort leads to a war.”Earlier, a demand to investigate the incident was made by Serbia’s President Boris Tadic, who had a telephone conversation with NATO Secretary General Anders Fogh Rasmussen.Tuesday, KFOR servicemen made an attempt to pull down the barricades that the Kosovan Serbs had put up in front of the Jarinje check-post. They opened fire with rubber bullets and used teargas after the Serbs had thrown several stones at them.In retaliation, the Serbs hurled a few improvised bombs at the troops.The incident left four KFOR soldiers and seven Serbs wounded.Russia supports Jordan’s reform drive (JT) - Russia’s Foreign Minister Sergey Lavrov commended Jordan’s current drive towards reform and development, stressing his country’s support for the reform process. Lavrov also stressed Russia’s support for Jordan’s efforts to achieve regional peace and stability, the Jordan News Agency, Petra, reported.During a meeting with Foreign Minister Nasser Judeh, which was held on the sidelines of the UN General Assembly meetings on Tuesday, the two sides discussed the latest regional developments, especially those taking place in several Arab countries. They also stressed the importance of ongoing cooperation and coordination vis-à-vis issues of mutual concern.Judeh briefed his Russian counterpart on current political, economic and social reform implemented in Jordan, emphasising that a major goal is to engage the youth in the decision-making process. Judeh and Lavrov stressed the importance of the Palestinians and the Israelis returning to negotiations, which they said should lead to the establishment of an independent Palestinian state on the basis of the 1967 borders. Judeh asserted that the establishment of a Palestinian state is a Jordanian interest, adding that all final status issues, including Jerusalem, security, borders, water and refugees are also significant as far as Jordan’s future is concerned. Also on Tuesday, Judeh met with Lebanon’s Prime Minister Najib Mikati over means to boost ties between the two countries in all fields. Talks with Mikati, whose country holds the rotating presidency of the Security Council for September, focused on the Palestinian request for full UN membership. The two officials also reviewed other recent developments in the region. 29 September 2011UNSC may agree measures on Syria - Russia's UN ambassador 29, 2011 09:58 Moscow TimeThe United Nations Security Council may agree a draft resolution aimed at stopping violence in Syria, Russia’s Permanent Representative to the UN Vitaly Churkin told reporters in New York.He was speaking after a two-hour debate at the council on two draft resolutions, one submitted by Russia, the other by a group of European countries. The main aim is to stop violence and launch a political process that would lead to reforms and to a situation that would suit the Syrian people, the diplomat said.Earlier, France’s ambassador to the UN Gerard Araud said that a draft resolution on Syria may be finalized on Friday. Damascus welcomed the Russian-proposed draft that does not stipulate sanctions against menting on the issue, Syria’s Permanent Representative to the UN Bashar al-Jafari said that any proposals that could counterbalance the European and American positions deserved approval.(RIAN)EU, Russia inch towards compromised draft text in UNSC on Syria Politics ? 9:34:00 AM ? UNITED NATIONS, Sept 29 (KUNA) -- Security Council European countries and Russia late Wednesday said they are inching towards a compromised draft resolution that would condemn the continued violence in Syria, with both parties hopeful the gaps between their rival texts will be soon bridged and a vote would possibly take place on Friday.The Council met late Wednesday to examine two competing draft resolutions from UK, France, Germany and Portugal on one hand, and another one from Russia.The EU draft resolution circulated late Tuesday, contrary to an earlier version circulated last August and stalled for months because of a Russian threat to veto it, does not call for any sanctions.It "strongly condemns" the continued systematic human rights violations in Syria, demand an "immediate end to all violence," call for an inclusive Syrian-led political process and for political reforms.It would request the Secretary-General to report on the implementation of the resolution within 15 days from its adoption, and express its "determination to adopt targeted measures, including sanctions." in the event the report states that Syria has not complied.The rival Russian draft, void of any sanctions, would also condemn the violence in Syria, but in the draft's preambular part, call for an inclusive-led political process, urge "tangible progress" in implementing the promised reforms, allow international monitors and media to enter the country, release all political prisoners, and reaffirm the need to resolve the crisis "peacefully, ruling out any military intervention from outside." Experts in the Council are expected to merge the two drafts and come up with a compromised text that would be acceptable to both parties. They are scheduled to hold an informal meeting later today Thursday.Asked how he felt about the EU draft, Russian Ambassador Vitaly Churkin told reporters after the Council closed-door session "It will depend on how serious they (EU co-sponsors) are going to be in an effort to produce something that we can rally around. I think it can be done, but there are still certain things that if they are still there, will make it impossible for us to go along with," in reference to the threat of sanctions.Asked how soon the vote would take place, he said "as soon as we have a good resolution, It is important to work fast, but it is also important not to make mistakes and to calibrate the message that the Council will be sending" to Damascus.Portuguese Ambassador told reporters "I think we are getting closer to an agreement." A European diplomat, who spoke on condition of anonymity, said the 15 Council members are "closer together. there were some constructive comments as we tried to bridge the gaps" between the two sides."We're taking on board the European text a number of elements from the Russian text. There was certainly nothing that was insurmountable," he stressed.However, he added, "we'll try to keep the sanctions' threat in. We're not taking it away. We're trying to find a way to meet their concerns, but we have no intention to drop it altogether. We're finding a way of sending a more unified message, so that the message is heard more clearly in Damascus." Another European diplomat also said "the new compromised draft will take into account what was raised by the delegations (Russian and Chinese) and will try to accommodate them as much as possible, while keeping at the same time the core European elements." (end) sj.asa KUNA 290934 Sep 11NNNNPRESS RELEASE Deputy Foreign Minister Vladimir Titov’s Conversations in Berlin Minister of Foreign Affairs of the Russian Federation Vladimir Titov met in Berlin with the German Chancellor’s foreign policy adviser, Christoph Heusgen, and also held consultations with Werner Hoyer, Minister of State at the Federal Foreign Office, and State Secretary of the Federal Foreign Office Emily Haber on September 27. A range of practical matters relating to bilateral cooperation in the light of the agreements reached at the end of the Summit-level Interstate Consultations (Hannover, July 18-19, 2011) was discussed. The parties clarified the schedule of political contacts for the near term, as well as the progress of preparation and the holding of the cross-cultural years of Russia in Germany and Germany in Russia in 2012-2013. They substantively examined topical international issues, including pan-European security and Russia-EU and Russia-NATO cooperation, and the situation in different regions of the world. September 28, 2011Poland and Russia differ on Smolensk disaster autopsy findings 10:35 Initial findings by Polish medics indicate that the Russian autopsy on Polish MP Zbigniew Wassermann, one of the victims of the 2010 Smolensk disaster, was only 7 to 10 percent correct in its analysis. The news threatens to undermine the entire series of autopsies carried out in Russia in the wake of the plane crash which killed President Lech Kaczynski and 95 others in western Russia last year.Zbigniew Wassermann, an MP for the Law and Justice party, was exhumed in August at the request of his family and approved by Poland's Chief Military Prosecutor's Office.As was clarified at the time, the action was not taken owing to doubts over the identity of the buried man, but rather over the details of the autopsy.Wassermann's remains were taken from Krakow to Wroclaw, south west Poland, where a second autopsy was conducted by the city's Medical Academy.Russian and Polish findings appear to tally only on the most basic matters, such as the height of the victim and the main external injuries.However, Polish medics claim that there are faults in such questions as the number and location of fractures. Furthermore, the Wroclaw specialists say that some organs were not even analysed by the Russian medics.Meanwhile, Jerzy Kawecki deputy leader of the team that led the Polish autopsy, told RMF FM Radio that it is necessary “to wait until all the results of the tests have been provided for consultative discussions.”The report will now be sent to the Chief Military Prosecutor's Office, which approved the Wassermann family's initial request for an exhumation. (nh/pg)Russian military power worries Nordic region, 29 September 2011 10:37“A rise in Russia’s military operations in the Baltic Sea region is cause for concern among Baltic states Finland, Sweden and Poland, Estonia’s military chief said.‘Russia has significantly increased its military presence in the western region (Baltic) and has created a new west strategic command that is – to believe its own military head – much more powerful than was the Leningrad military district,’ General Ants Laaneots, head of Estonia’s defence forces, said in an interview on Estonia’s public ETV website Friday.‘This is causing worries in Finland, Sweden, Baltic State and Poland,’ Laaneots said.Ex-communist Poland became a Nato member in 1999 while the three ex-Soviet Baltic states joined in 2004. Neutral Finland and Sweden remain outside the Western military alliance...”THE SWEDISH WIRE 25 SeptemberLEHTIKUVA - SARI GUSTAFSSONRussia moves to bolster Arctic military presence News | Eye on the Arctic | Sep 28, 2011 Just days after Gen. Walt Natynczyk, Canada's chief of defence staff, left Moscow after meeting his counterpart last weekend, a Russian official announced that the country would be increasing its Arctic military presence, a move that could increase tensions in the resource-rich area.Anton Vasilev, a special ambassador for Russia's Ministry of Foreign Affairs, was quoted this week by the Interfax news agency as saying his country would be beefing up its presence in the Arctic, and that NATO was not welcome there.Russian Prime Minister Vladimir Putin was in Iceland this week meeting with the country's leaders, with the Arctic being at the top of the agenda, local media reported. Putin, according to the Moscow Times, then announced that Russia would be ordering three nuclear and six diesel icebreakers to be delivered by 2020, with the goal of expanding transportation in the Arctic.In July, Russia said it would create two specialist brigades to be based in the Arctic. It's not known if the latest announcement is tied to that declaration or if additional forces will be moved to the region. A brigade can typically contain up to a thousand soldiers.The Canadian military said in a news release that the purpose of Natynczyk's three-day visit to Moscow last weekend was "to gain the Russian perspective on a range of issues to improve and develop Canada's bilateral military relationship with Russia."Natynczyk told CBC News after the visit that it was a "good relationship-building event."The Moscow visit by a Canadian chief of defence was the first in almost a decade.The military highlighted the counter-terrorism training exercises the two countries have been involved in, as well as a number of training programs, in its release, but made no mention about the Arctic.The Defence Department was asked to provide details of the meeting and what was discussed, and whether the Arctic issue was part of the discussions, but no information was provided. Officials pointed to the press release that was issued prior to the meetings.Arctic a priority for HarperPrime Minister Stephen Harper has made a priority of increasing Canada's presence in the North, as the countries that border the Arctic region eye the vast amount of oil and other resources in the area.The North Pole itself is considered an international site and is administered by the International Seabed Authority. But if a country can prove its underwater shelf is an extension of its continental border, then it can claim an economic zone based on that.There has been tension with Russia as the two countries wait for the UN to rule on legal claims in the resource-rich area. In that vein, a military presence is also seen as a way to stake an even higher claim in the Arctic region.Since 1994, the Russians have staffed year-round a research base called Ice Station Borneo on the deep Arctic ice, only 60 kilometres from the pole. Their planes have sometimes approached Canadian airspace and jets have been scrambled to shadow them.The Canadian Forces has said is has a "real, growing, and long-term presence in its Arctic region," and has been in the North since 1898.In August, Canada held one of its largest military exercises, dubbed Operation Nanook, in the North. The month-long operation involved more than 1,000 troops.Canada, along with Russia, Denmark (including Greenland and the Faroe Islands), Finland, Iceland, Norway, Sweden, and the U.S. belong to a group called the Arctic Council, which was created by the Arctic nations in 1996 and is billed as a high level intergovernmental forum.This story is posted on Alaska Dispatch as part of Eye on the Arctic, a collaborative partnership between public and private circumpolar media organizations.12:39?29/09/2011ALL NEWSCruiser Adm Kuznetsov to leave for Mediterranean in Nov, September 29 (Itar-Tass) — The heavy air-capable cruiser Admiral Kuznetsov at the head of a squadron of Northern Fleet ships will set out on a long-distance voyage in November this year to accomplish combat duty missions in the Mediterranean Sea and the North-Eastern Atlantic, anofficer at the Main Naval Headquarters (MNH) of Russia told Itar-Tass on Thursday."The Admiral Kuznetsov will go to the Barents Sea on November 13 and moor up there to take on board an air wing -- eight jetfighters Su-33, several MiG-29K, as well as two ASW helicopters Ka-27. The air wing will be drilling the tasks of takeoff and landing onto the deck of the carrier for a week."On November 19, the Admiral Kuznetsov will set out on a three-month cruise to the Mediterranean and the Atlantic. The large anti-submarine ship Admiral Chabanenko will be together with the cruiser among the the carrier group of ships for screening and combat support purposes," the MNH officer said.Verification is under way of a list of foreign ports to be visited by the Russian ships, including an update in view of the developments in the Middle East and North Africa. The question of the Russian ships' participation in joint exercises together with the navies of countries in the region is being worked out as well, the MNH officer pointed out.As of now, the Design 1143.5 cruiser Admiral Kuznetsov -- a fifth Soviet-built heavy air-capable cruiser -- is the only operational one in the Russian Navy. The cruiser made four long-distance voyages to the Mediterranean and the North Eastern Atlantic. The cruiser can carry 26 shipboard fighter planes Su-33 and MiG-29 K and 24 ASW helicopters -- eighteen Ka-27 and Ka-29, two Ka-27PS, and four Ka-31.The cruiser's full-load displacement is 60,000 tonnes and maximum speed is 29 knots; cruising range is 8,400 miles; crew membership is over 1,900, including over 600 air pilots and technicians of the air wing.The ship's armament includes twelve launchers of anti-ship missile Granite, four six-tube launchers of anti-aircraft missile Kinzhal (dagger), eight launchers of the anti-aircraft system Kortik (dirk), six six-tube 30-mm artillery mounts AK-630M, and two rocket-assisted bomb-throwers RBU-12000 Udav (python).The Admiral Kuznetsov joined the Northern Fleet in January 1991. By now the cruiser has gone through at least three periods of repairs with an aggregate duration of six years.01:48?29/09/2011ALL NEWSGreece, Russia meet on Rodos to discuss investments (Greece), September 29 (Itar-Tass) — The first Greek-Russian investment conference “New Horizons of Economic Relations of Greece and Russia in the sphere of investment policy, commerce and tourism” is opening on Rodos Island on Thursday.The forum’s organizers told Itar-Tass that plenary meetings would discuss problems and prospects of Russian-Greek relations at contemporary stage. Other topics will include the creation of a new economic model for bilateral partnership, investments in Greece and other countries of southern Europe, the development of regulations for mutual interaction and cooperation in the sphere of energy, tourism, immovable property and banking business.A briefing for Russian and Greek journalists will be held on Thursday afternoon.The first plenary meeting will take place on Friday.Simos Kedikoglu, the head of the Greece-Russia friendship group in the Greek parliament and the chairman of the Greece-Russia friendship society, said in an interview with Itar-Tass that the Rodos conference was a vital and necessary undertaking.“It’s important for Greece to develop cooperation with Russia in the power sector, in the exploration of natural resources, industry, shipbuilding, the introduction of new technologies and tourism,” Kedikoglu said. He personally wished that a Russian technology for solar power stations operating on photo elements could appear in Greece because that sector is going to develop actively.The Greek MP called for developing cooperation in shipbuilding.“Our interaction in shipbuilding has been good but I know that Greek ship owners want more contracts with Russian companies. At the moment, Greek ship owners are a major force in shipping,” Kedikoglu added.Turkmenistan, Russia discuss joint projects in Ashgabat September 2011, 12:05 (GMT+05:00)Turkmenistan, Ashgabat, Sept. 29 / Trend , H.Hasanov /Ashgabat is hosting the Turkmen-Russian economic forum on Sept. 28-30, organized by both countries’ Chambers of Commerce to form intergovernmental agreements, the local media reported today."Russian business showed significant interest, paying attention to Turkmenistan’s initiatives to create joint ventures, participate in tenders, present specific projects for cooperation in Turkmenistan’s priority sectors, and confirm a high willingness for their implementation," the Neytralniy Turkmenistan newspaper reported.The forum organizers have indicated that development of the energy sector, transportation infrastructure, communications, industry, the construction industry, and agriculture are promising areas for cooperation.The forum will present economic opportunities for Russian regions, in particular, Omsk, Chelyabinsk and Saratov, as well as trade organizations and industrial structures. In addition, bilateral talks are expected to be held with representatives of ministries and departments, heads of private companies, and Turkmen firms.The Russian delegation includes representatives of the Russian Presidential Administration, the Economic Development Ministry, Russian companies, and other organizations. The delegation is headed by Vice-President of the Chamber of Commerce and Russian Federation Industry Alexander Rybakov.Turkmenistan is represented by heads of ministries in trade and international relations, economics and finance, oil and gas industry and mineral resources, textile, construction, energy, communications and transport sector agencies, the banking sector, and the Union of Industrialists and Entrepreneurs of Turkmenistan.Do you have any feedback? Contact our journalist at trend@trend.az00:43?29/09/2011ALL NEWSRussian-Turkmen trade reaches 2 bln dollars in first half of 2011, September 29 (Itar-Tass) — Trade turnover between Russia and Turkmenistan reached some two billion U.S. dollars in January-August 2011.The vice-president of the Russian Chamber of Commerce and Industry, Alexander Rybakov, described it as a good result. However, he told a two-day economic forum that opened in the Turkmen capital on Wednesday that the figure still didn’t reflect the huge potential of Russian-Turkmen economic interaction.A business delegation from Russia, including entrepreneurs from Moscow, St. Petersburg, Omsk, Saratov, Chelyabinsk and other parts of Russia has brought cooperation proposals to Ashgabad.“Relations between Turkmenistan and Russia make the weather in the entire Central Asia. We fully share this assessment given by the presidents of Russia and Turkmenistan during their last meeting,” the head of the Russian delegation said at the forum.Alexander Rybakov, the vice-president of the Russian Chamber of Commerce and Industry, said that Russian companies were participating in more than 30 projects in Turkmenistan. Another twenty projects are ready to be launched in the sphere of hi-tech production. About a hundred proposals made by Turkmen agencies and entrepreneurs are in the process of development. Priority areas of cooperation as set forth by the sides include the power sector, textiles, the light industry, raw materials, building materials, education and tourism.“We are focused on innovative projects. The future of our relations lies with them,” Rybakov emphasized.“Moscow May Use Karabakh Trump Card Against BP” , 29 September 2011 08:22 Moscow is quite likely to use the Karabakh trump card against British Petroleum to frustrate the Azerbaijan-Turkey natural gas pipeline deal, an Azerbaijani expert said. Speaking about Russia's plans on BP in an interview with the Azerbaijani news website SalamNews, political analyst Zardush Alizade said Moscow has no real lever to hamper the company's project."But they have such a serious lever as Karabakh. They may push the button at any moment to create instability, suspending the project," he said, adding that Russia would not be disappointed in case Turkmenistan refuses to join the project."Russia's main goal is to prevent Europe from accessing the Central Asian gas reserves. As for Azerbaijan, it is already connected with Europe thanks to its oil and natural gas. At the same time Azerbaijan wishes to increase its oil export to Europe via the Turkish territory," he said.It comes after recent reports that BP is planning to build a 1,300 km pipeline to make its natural gas accessible to Europe. The pipeline is expected to connect the Shah Deniz natural gas mine with Turkey and the West.Tert.amRussia's Hermitage cancels exposition in Japan over nuclear fears 29, 2011, 7:50 GMT Moscow - Officials at Russia's national museum the Hermitage cancelled an art exposition planned in Japan because of fears of radioactivity from the damaged Fukushima nuclear power station, the Interfax news agency reported on Thursday. The traveling display of rare glass sculptures from Russia's Tsarist era was to have opened its doors in December in the city Takasaki, some 230 kilometres from Fukushima. The artworks had been on display in other Japanese cities including the capital Tokyo, some 20 kilometres more distant from Fukushima than Takasaki, the report said. The Hermitage's exhibition Glass Admired by the Russian Imperial Court contains 327 items from the 16th through the early 20th century. The display began touring Japan in July. Russian MPs are expected in the occupied territory 10:23 Today a delegation of the Russian Federation Council headed by First Deputy Chairman of the Committee on Defence and Security Yevgeny Serebrennikov is arriving in Tskhinvali. On September 30th Russian senators will meet with members of the so-called "parliament". Vice-speaker of the "parliament" Yuri Dzitstsoyty said that they would discuss socio-political situation in the Tskhinvali region on the eve of the "election" of a new head of the puppet regime. It is also planned to discuss socio-economic development.RT News line, September 29Georgia says yes to US missile defense but no to Russia in WTO would welcome the installation of X-Band radar inside the country to participate in US missile defense of Central Asia and the Middle East against Iran, the internet portal the Daily Beast quotes President Saakashvili as saying in an exclusive interview. The portal says Republican senators John Kyl and Mark Kirk have pressed the Pentagon to cancel the installation of the radar system in Turkey later this year and instead move it to Georgia. Turkey said they would host the radar only on condition of non-disclosure to Israel of any data obtained through the radar. “We are willing to share with any country, including Israel,” said Saakashvili. Meanwhile the head of Georgia’s Foreign Ministry has said Tbilisi cannot give its approval to Russia’s WTO bid unless Moscow allows Georgian customs agents to monitor the borders of Abkhazia and South Ossetia.Saakashvili: U.S. Stopped Russia Bombings 26, 2011 7:59 PM EDT For months, bombings linked to Russian intelligence disrupted life in the former Soviet republic of Georgia. In an exclusive interview with Eli Lake, the country’s president credits the Obama administration—particularly Secretary of State Hillary Clinton—for stopping them through quiet diplomacy. Azerbaijan exports to Russia much more energy than it receives September 2011, 10:50Azerbaijan, Baku, Sept. 28 / Trend , E.Ismayilov /Russia’s Trade Representative in Azerbaijan Yuri Shedrin stated that Azerbaijan supplied to Russia electricity in the amount of 342.9 million kilowatt-hours worth $21.8 million in seven months of 2011.During this period, Russia delivered to Azerbaijan electricity in the amount of 2.5 million kilowatt-hours worth $0.2 million, he told journalists today.An agreement on the parallel operation of power system of Azerbaijan and Russia is at the consultation stage, Shedrin said.The sides are also in talks on the issue of pumping oil through the Baku-NovorossiyskBaku hosted in early September a meeting of the working group on amendments to an agreement on the Azerbaijani oil transportation through Russia, dated Jan.18, 1996.Shedrin said the working groups of each party agree on the volume of transportation, tariffs, as well as the quality of oil.The bilateral Russian-Azerbaijani inter-governmental agreement on the transit of Azerbaijani oil via the Baku-Novorossiysk pipeline was signed in 1996. It provides for transportation of 5 million tons of oil a year at the rate of $15.67 per one ton of transited oil.SOCAR transships its own oil, as well as oil of joint ventures and operating companies operating in Azerbaijan's onshore fields, through Novorossiysk.Until late 2007, AIOC was the operator of Baku-Novorossiysk. The structure then transferred these functions to SOCAR.Do you have any feedback? Contact our journalist at trend@trend.azPro-Russian Activists Quarrel In Ukraine's Crimea 28, 2011 SIMFEROPOL, Ukraine -- Pro-Russian activists in Ukraine's Crimean peninsula have accused a moderate pro-Moscow group of betraying the "Russian movement" in Crimea, RFE/RL's Ukrainian Service reports.The activists held what they called a "people's tribunal" for several hours on September 28 in the Crimean capital, Simferopol, where they read a list of "sins" committed by Russian Community of Crimea leader Serhiy Tsekov and his colleagues, saying that they had betrayed voters.At the end of the gathering the activists announced a "verdict" of "eternal shame."Tsekov, who is also a deputy in the Crimean parliament, did not comment on the accusations. His nongovernmental organization quoted an earlier decision by the Coordination Council of Russian Compatriots, which forbids groups from encouraging a split in the pro-Russian movement in Crimea.Local observers note that the Russian Community of Crimea has close links to the Russian consulate office in Crimea.Analysts say tensions have been created because of plans by Moscow to increase its financing of pro-Russian groups abroad.Crimean analyst Mykola Semena told RFE/RL that the "Russian pre-election campaigns are being transferred to Ukraine."About 60 percent of Crimea's 2 million people are ethnic Russians and Russian is the dominant language on the peninsula, which has greater autonomy than other Ukrainian regions.Crimea was transferred from the Russian Soviet republic to the Ukrainian Soviet republic in 1954.Read more in Ukrainian here 08:33?29/09/2011ALL NEWSFinal conf on e-gov't project to be held at EU Moscow office, September 29 (Itar-Tass) — Cooperation between Russia's regions and the European Union (EU) in promoting the establishment of an electronic government of Russia has entered the finishing straight.The implementation of a project on the theme of "The State for Citizens", encompassing the territory stretching from the Baltic Sea to the Pacific Ocean, has continued for two years. The EU allocated two million euros for carrying out the project which is to be introduced to the public at-large and the Russian establishment at the EU representative office here on Thursday.European diplomats say the project is intended to promote not only a more active interaction between Russian regions but also stable contacts with partners in EU countries. Summing up the preliminary results of the work done, an EU Office staff member said that about 3,000 public employees from 53 regions of Russian had undergone training. In all, 25,000 people took part in the development of new electronic services.This is not the first project being implemented by the EU in partnership with the Russian Ministry of Economic Development and the Ministry of Communications and Mass Media. In the period from 2004 to 2009, similar programmes were alternately introduced in Arkhangelsk, Kaliningrad, Novgorod, Petrozavodsk, and St Petersburg.This time the project has covered the entire territory of Russia, European diplomats emphasize.RT News line, September 29United Russia submits election list led by Medvedev ruling United Russia party has submitted its list of candidates for registration at the Central Election Commission. According to Sergey Neverov, the secretary of the presidium of the party’s general council, the slate includes 416 members of United Russia and 183 other candidates, including those nominated by the Popular Front. President Dmitry Medvedev, who heads the list, is unlikely to take part in the election debates with other parties, Neverov said. He noted United Russia has “a serious team of debaters.”Russia’s Election Commission admits lists of candidates for parliamentary elections 29, 2011 10:34 Moscow TimeRussia’s Central Election Commission continues to admit lists of candidates for December parliamentary elections for certification.On Thursday, the ruling United Russia party is to file its list of candidates.??Patriots of Russia, Liberal Democratic Party of Russia and Yabloko have already submitted their lists.Certification procedure is to be completed by October 6.After that the parties will undergo registration procedure.The election to the State Duma, lower house of parliament, will be held on December 4.?TASSRussians living in poverty 'up by 2 mln since 2010'(AFP) – 1 hour ago?MOSCOW — The number of people in Russia living below the poverty line has grown by about two million in the first six months of 2011, new figures released by the state statistics service said.The total number of Russians living in poverty has reached 21.1 million after the first six months of the year, up from 18.1 million last year.The share of the population living in poverty also grew to 14.9 percent from last year's 12.8 percent, according to official figures.The poverty line was defined after the second quarter of 2011 at 6,505 roubles per month per capita ($204), which grew from 5,625 roubles from the same period last year.Inflation was 4.7 percent since the beginning of the year. The Russian government has aimed for a 7.5 percent inflation for the year 2011.International institutions such as the World Bank have said this year that poverty in Russia remains a key concern amid sluggish growth and modest earnings. The country needs to work on effectiveness of its public spending to improve the situation, the World Bank report said earlier this month.Copyright ? 2011 AFP. All rights reserved. More ?Russia plans over 15 space launches for Q4 2011 8:40AM GMTMOSCOW. Sept 29 (Interfax-AVN) – Russia plans more than 15 space launches from three spaceports in the remaining three months of this year… Glonass-M to be launched from Plesetsk early on Oct 2 morning – source 8:39AM GMTMOSCOW. Sept 29 (Interfax-AVN) – A Soyuz-2-1B rocket will lift off Plesetsk, Arkhangelsk region, early on Sunday morning to position a Glonass-M navigation… Russia set for launch of Proton-M carrier rocket with Mexican satellite 29/09/2011MOSCOW, September 29 (RIA Novosti)Russia's Proton-M carrier rocket with a Mexican telecommunications satellite, QuetzSat-1, will be launched on Thursday from the Baikonur space center in Kazakhstan, a spokesman for the Russian Space Agency (Roscosmos) said."The launch of the Proton-M carrier rocket with QuetzSat-1 satellite has been scheduled for Thursday at 22:32 Moscow time [18:32 GMT]. The separation of the satellite from the carrier rocket has been slated for Friday at 7:45 Moscow time [3:45 GMT]," the spokesman said.This will be a second launch of Proton-M carrier rockets equipped with Briz-M boosters, following a recent string of launch failures in the Russian aerospace industry.On August 18, a Russian Proton-M rocket lost an Express-AM4 satellite that was designed to provide digital television and secure government communications for Siberia and the Far East.One week after the Express-AM4 went off course, a Soyuz-U booster malfunctioned, preventing a Progress M-12M cargo spacecraft from reaching orbit and a link-up with the International Space Station (ISS).The gigantic Typhoons will be scrapped for metal: 29 September, 2011, 04:52Edited: 29 September, 2011, 04:53 Ilya Kramnik The world’s largest submarines did not fit into the limits of the START Treaty???The Project 941 Akula strategic missile submarine, better known as Typhoon, will be written off by 2014 and scrapped for metal, Defense Ministry representatives told Izvestia. All three Typhon-class submarines, which are currently in operation, will be dismantled: the Dmitry Donskoy, Arkhangelsk, and Severstal.??? Military officials explain that using the submarines for their intended purpose is impossible due to contractual restrictions, and their reconstruction is unjustifiably expensive.?? However, representatives of the Sevmash shipyard, where these submarines were built, say that the vessels could be re-equipped to become underwater gas transport tankers or year-round maritime carriers.?? “We are willing to develop some other options for their application. The vessels could transport liquefied gas, oil or cargo for Arctic ports under Arctic sea ice. This type of reconstruction need not be very expensive,” say shipbuilders.? Military experts say that the career of the Typhoons had been destroyed by the Borei-class, a new submarine, which is being built at Sevmash for the Bulava rockets. Their successful trials have made it pointless to maintain the bulkier and more expensive Typhoons.????? “A Borei crew is one and a half times smaller than that of a Typhoon, and there is a difference in maintenance cost. Meanwhile, Borei is a far-more improved vessel, which is a lot harder to detect in water,” argue military experts.? The Defense Ministry explained that any improvements of vessels cost tens of billions of rubles. “It would be better to spend this money on new ships,” said one Defense Ministry representative.? The fate of the enormous submarines has been decided by START-3, which was signed by the Russian and US presidents in the spring of 2010. It has limited the strategic arsenals of each country to 1,550 nuclear warheads. Meanwhile, it is possible to install more than 1,100 nuclear warheads on the new Project 955 Borei submarines and the operational Project 667BDRM Delfin-class ballistic missile submarines alone.? The remaining 400 nuclear warheads will be used with long-range aviation and the Strategic Rocket Forces (RVSN). Meanwhile, the three Typhoons simply do not fit the bill. One Typhoon is able to carry 120-200 nuclear warheads, and an entire fleet of these boats will “eat” almost a fourth of Russia’s nuclear arsenal.?? Military expert Captain Konstantin Sivkov believes that Typhoons could be kept for other needs. “Large internal capacity makes it possible to place various arms and equipment in the submarines, turning them into cruise missile carriers. The US has chosen a similar track, having re-equipped four Ohio missile carriers for cruise missiles. Today, these submarines can be used in special operations as a naval base for military divers and mini-submarines. We, too, would benefit from such vessels,” Sivkov told Izvestia.?? At the same time, the president of the Institute for Strategic Assessments, Aleksandr Konovalov, noted that the time of Typhoons is a thing of the past. “It is an enormous thing, the biggest submarine in the world, triple-hulled and very expensive to operate. Moreover, there are no rockets for them,” said Konovalov. According to him, it could cost hundreds of millions of rubles to recycle the typhoons, which is a lot less than re-equipping them to meet other needs.Firefighters extinguish 18 forest fires in Russia's Siberia over past 24 hours 29/09/2011NOVOSIBIRSK, September 29 (RIA Novosti)Firefighters and rescuers extinguished 18 forest fires on the total area of over 700 hectares in Russia's Siberia over the past 24 hours, the regional department of the Russian Emergencies Ministry reported on Thursday.The department also said that firefighters continue battling remaining wildfires in the region that cover a total area of some 100 hectares.Wildfires across Russia are common during dry and hot summers and in the fall. Most fires start because of the careless behavior of local residents.Forest fires devastated a number of regions in central Russia last year, killing 62 people and leaving thousands homeless.11:28?29/09/2011ALL NEWSBlast on motorway in Dagestan presumably targeted at local official, September 29 (Itar-Tass) — An explosion of a jeep loaded with explosives in the Levashinsky district of Dagestan on Wednesday was presumably an attempt on the life of the head of the Gergebilski district municipality, Magomed Magomedov, a representative of the Russian Investigative department for Dagestan told Itar-Tass on Thursday. Magomedov's motorcade numbering two armored cross country jeeps was passing by exactly when the blast went off. Neither Magomedov nor his guards were hurt in the incident. The two jeeps from Magomedov’s motorcade were slightly damaged.The explosion in the abandoned jeep left on a motorway near the settlement of Khadzhalmakhi killed a policeman and a family of seven who were in another jeep which passed the detonating car. Several more policemen were wounded in the incident.The suspicious jeep with no one inside was spotted on the crossroads on a motorway in the Levashinsky district on Wednesday afternoon. When the jeep was examined by policemen an unknown terrorist activated a powerful explosive device inside the jeep.The explosion killed eight, including an eleven- year-old girl. Six other policemen who received wounds of a different degree of seriousness were hospitalized.Criminal proceedings have been instituted on charges of murder conspiracy and illegal weapons trafficking.Estonian investments come in Dagestan , 09:41Makhachkala, September 29, 2011. Administration of Makhachkala and the Estonian companies "Bell BOATS" and "MIRODON" signed a letter of intent. Within several days, the representatives of "Bell BOATS" and "MIRODON" have been examining the opportunities for companies' participation in investment projects in Makhachkala. At the meeting with Makhachkala Mayor Said Amirov the commercial director of the "Bell BOATS" Thomas Lilienbah said his company’s interest to investment projects of Makhachkala appeared after participation in the first Dagestan Economic Forum, where the company’s representatives specially arrived to establish business relationships with business circles and authorities of the republic. Estonian businessman, he says, are interested in joint production of pleasure boats and boats and floating docks. "We are pleased to welcome foreign companies on Dagestan market. This proves we have something to offer for investors" - Amirov said.Shakira to attend Chechen president's birthday bash , 28 September 2011 11:08 Alice BoydPint-sized pop star and media darling Shakira is one of the stars expected to attend the 35th birthday celebrations of Chechen president Ramzon Kadyrov in Chechnya on October 5, according to news source Portafolio.The Colombian singer, recently named "person of the year" at the Latin Grammys, will join other celebs such as Kevin Costner, Eva Mendes and Hilary Swank in celebrating the Chechen president's birthday bash. The stars will also participate in various ceremonies to take place in the Chechen capital on the big day.October 5 has been declared a public holiday in Chechnya in recognition of Kadyrov's birthday.Here's hoping that ongoing accusations of human rights violations by the Chechen administration will not impinge upon the birthday boys festivities, or on Shakira's new title as "person of the year."We recommend Shakira look into what the president has planned for later in the evening, given that he has been engulfed in the past in various embarassing sex scandals involving, among other things, two prostitutes, a sauna, some monkey spanking and a video camera. Berlusconi and his Bunga Bunga parties have nothing on this guy.New clue in Chechen killings, September 28, 2011?ükrü Oktay K?l?? ISTANBUL – RadikalThe same weapon, produced near Moscow, is used in the assassination of all six former Chechen commanders and the recent killing of three Chechens in Istanbul’s Zeytinburnu district, says police sourcesSix former Chechen commanders were all killed in Turkey over the past four years with the same weapon produced by an arms factory near Moscow for the Russian Military Intelligence Service, or GRU, according to Turkish police sources.Production on the 7.62 milimeter MSP Groza (“Thunderstorm”) began at a weapons plant in Tula near Moscow in 1994 for the GRU. The Groza, which can be used either as a long- or short-barreled weapon, can also be used to launch rifle grenades. Night vision equipment, as well as a scope, can also be mounted on the double-barreled weapon. With a maximum range of 700 meters, the Groza is reportedly a favorite with Russian agents due to its versatility.The killing of three Chechens, Musaevi Berkkhazh, Rustam Altemirol and Zavrbek Amriev, in Istanbul’s Zeytinburnu district on Sept. 16 with a silencer arm was also committed with the same weapon, according to daily Radikal.All the Chechens assassinated in Turkey had fought in the Russian-Chechen War and had arrived in Turkey either after they were wounded in battle or after their true identities were revealed. Some were killed in front of their wives and children, while others never returned home after venturing outside.Despite claims that the former Chechen commanders were killed due to personal matters, mafia relations or alleged love affairs, the use of the same weapon in every act indicates another culprit, according to claims.Meanwhile, another Chechen dissident, ?mer ?srailov, 27, was also killed in Vienna on Jan. 13, 2009, in a similar fashion to the compatriots murdered in Turkey. Crime scene investigators there also reportedly recovered an empty 7.62 millimeter shell.Gazhi Edilsultanov was shot dead with two bullets in the head on Sept. 6, 2008, after he ventured out of the Chechen camp in Istanbul’s Fenerbah?e neighborhood. A former colonel in the 1999 Russian-Chechen War, Edilsultanov was wounded heavily in 2001 and arrived in Turkey in 2004.?slam Canibekov, a leading Chechen general who fought against Russian forces for years, settled in Istanbul in 2002. Canibekov was being sought in Russia for allegedly killing 30 people and conducting three bomb attacks. He was shot dead with three bullets in the head on Dec. 9, 2008, while on his way back home with his wife and children.Ali Osaev, the representative of Chechen leader Doku Umarov in Turkey, also settled in Turkey after the 1999 war. He was also killed on Feb. 2, 2009, while entering his flat. He had told a close friend that Ramazan Kadirov had sent three teams to Istanbul to kill him, according to reports.Musaevi had replaced Osaev after the assassination of the latter in 2009. He was killed along with two of his men after Friday prayers on Sept. 16, 2011. Twelve shots were fired from a black automobile during the incident in Zeytinburnu.Caucasus Muslims Office: Interethnic and interfaith understanding to bring happy future in Caucasus September 2011, 11:36Azerbaijan, Baku, Sept. 29 / Trend M. Aliyev /The sole road to a happy future in the Caucasus is through an interethnic and interfaith understanding, cooperation, and preservation of national territorial integrity, the Chairman of the Caucasus Muslims Office Sheik-ul-Islam Haji Allahshukur Pashazade said during the opening of the academic conference "Preventing the spread of extremist ideology in the Caucasus," dedicated to the 20th anniversary of Azerbaijan's independence on Thursday."Caucasus security and welfare are very important for all of us," Pashazade said.He said that one of Azerbaijan's greatest achievements is establishing the stability of religious and spiritual values.The conference has been organized by the Caucasus Muslims Office and the Moscow State Linguistic University. Azerbaijani and Russian religious figures, theologians, and public representatives of civil society will attend the conference.Do you have any feedback? Contact our journalist at trend@trend.azRussia doesn’t blame Muslims as terrorists: CG M AlamKarachi—H E Consul General of the Russian Federation Andrey V. Demidov has said that his country keenly sought friendly relations with the Muslims of Pakistan. “In my country Muslims, the second largest religious community constituting some 20 percent of our population, are not blamed as terrorists only due to their religious affiliation. We consider them as an integral part of our society - they are not migrants”, he further added talking to Pakistan Observer on the occasion of the inauguration of a photo exhibition ‘Muslims in Russia’ here on Tuesday at the Consulate. Speaking about the exposition he said: “It is dedicated to the life of millions of Muslims in the Russian Federation and to the place of Islam in Russia. The vast majority of the population in our multi-religious country is orthodox Christians. But we have many others. You can find religious Jewish people, Buddhists, Animists, Catholics and others. We attach a very serious importance to inter-religious harmony”. The Russian diplomat went on to inform: “The Supreme Mufti of Russia is one of the informal advisors to the President of the Russian Federation. He is a member of the governing body of the ruling party ‘United Russia’. At present a draft law on recognizing Muslim holidays as public holidays in Russia is under consideration in the State Duma - the lower House of our Parliament. “Luckily the relations between religious communities have always been friendly. We never had religious wars in Russia. We have no burka-ban. We seek peaceful co-existence between Russian citizens belonging to different religions. We are quite certain that in the nearest future we all will live and prosper in one great state - the Russian Federation”, H.E. concluded in an optimistic tone. Amongst image aficionados there were Consul General of Germany Dr. Tilo Klinner and Madam Lyubow Kilnner, Consul General of Japan Masaharu Sato and Vice Consul General for Political & Economic Affairs Yuki Ochiai, MNA (Parliamentary Secretary, Ministry of Defence Production) Gul Muhammad Khan Jakhrani, Editor Ibrat Kazi Asad Abid, Editor Pakistan Observer Faisal Zahid Malik and Madam Faisal Zahid Malik, journalist & former interim Minister Agha Masood, Russian-speaking columnist Khan Zafar Afghani, former Ambassador Zia Ispahani and others. Captivating snaps taken in different regions of Russia remarkably portrayed activities of different religious communities. A picture taken by Nikolai Nikitin in Samara shows a Kufic Quran dated 1909 on display; ‘Worshippers offering Eid-ul-Fitr prayers’ is a picture taken by Arkady Kirnos; ‘Man carrying a sheep for Eid-ul-Azha sacrifice’ is another interesting snap by Vasily Alexandrov; Sergei Uzakov’s image captures ‘Models presenting creations of Chechen designers during a fashion show’ ; Viktor Vong’s Madrassah is yet another magnum opus; a number of mosques captured included Samara Mosque by Nikolai Nikitin.29 September 2011, 10:09Church official asks journalists no to turn conversation from attempts to justify pedophilia to discussing novels , September 29, Interfax - The Russian Church official urges not to substitute the problem of justifying pedophilia with the discussion of certain pieces of literature."I would keep it on conscience of those journalists who do it, I mean their efforts to change the talk about some Russian public figures' attempts to justify pedophilia to discussing old novels," Head of the Synodal Department for Church and Society Relations Archpriest Vsevolod Chaplin told Interfax-Religion.Thus he commented reports in some media claiming that Father Vsevolod asked to check if pedophilia is promoted in Lolita (Vladimir Nabokov) and One Hundred Years of Solitude (Gabriel Garcia Marquez).The priest accepted that "these novels romantisize vicious passion that make people unhappy and it's evident that popularization of the novels, for example, in schools doesn't add to moral health of society while future of our society depends on such health."Father Vsevolod explained that he mentioned the novels answering the question on a radio station.According to him, main discussion today should focus on "the attempts to justify pedophilia that take place in modern Russia, however it shouldn't deprive anyone of the right to morally evaluate any pieces of art whether old or new.""Today we need to decisively revise our attitude to public morality, including the problem of lechery. Without such revision Russian society will stop existing in hundred years. For me it's quiet evident," the interviewee of the agency stressed.In this context, he further said, "an attempt to justify pedophilia from which the discussion started is monstrous and cynical and it shouldn't be left without public evaluation".The priest said he refers to the textbook written by a lecturer of the North State Medical University (Arkhangelsk) Gennady Deryagin, where, according to him, the author tries "to impose on the society a thought that relations between adult men and boys are acceptable and normal and boys are interested in such contacts." Russian church wants novels banned Press / September 29, 2011 MOSCOW - A senior Russian Orthodox official said yesterday that novels by Vladimir Nabokov and Gabriel Garcia Marquez justify pedophilia and argued they should be banned in the nation’s high schools.Father Vsevolod Chaplin’s demand that Russia’s government investigate and limit the use of the books was the church’s latest effort to impose religious norms in a nation that once rejected religion.Chaplin, who heads the Moscow Patriarchate’s public relations department, discussed Nabokov’s “Lolita’’ and Garcia Marquez’s “One Hundred Years of Solitude’’ on Echo of Moscow radio, accusing both of “justifying pedophilia.’’The priest later elaborated in comments on Interfax, saying the authors’ works should not be included in high school curriculums because they “romanticize perverted passions that make people unhappy.’’Mikhail Shvydkoi, a Kremlin envoy for international cultural cooperation, disagreed, saying such action by authorities would badly hurt Russia’s image.Nabokov, who left his native Russia shortly after the 1917 Bolshevik Revolution, published “Lolita’’ in English in 1955. The book, which describes a relationship of a middle-aged intellectual with his 12-year-old stepdaughter, was briefly banned in several European countries, Argentina, and South Africa - as well as several library systems and public schools in the United StatesUnlike “Lolita,’’ Garcia Marquez’s “One Hundred Years of Solitude’’ was published in the Soviet era - despite numerous references to incest and sex with minors. The Colombian novelist was awarded the Nobel Prize in Literature in 1982.? Copyright 2011 Globe Newspaper Company.29 September 2011, 10:04Deputy mayor promises not to prolong building of 200 new churches in Moscow "for decades" , September 29, Interfax - First deputy of Moscow mayor Vladimir Resin responsible for building 200 new Orthodox churches in the capital, promises to carry out the project actively."The main goal is not to prolong the construction of these churches for decades, but to do it at least in five years," Resin said on Wednesday at the ceremony of consecrating the foundation of St Stephan Church in South Butovo chaired by Patriarch Kirill of Moscow and All Russia."We're striving to do it (200 churches program - IF) and I'm sure we will do it. Your Holiness, we will soon meet at such ceremonies more than once," Resin said.The church in Butovo is erected in frames of the mentioned Program 200 carried out together by the Mayor Office and the Patriarchate. Patriarch Kirill said that the churches in the capital were erected "to commemorate the destroyed Moscow shrines.""We can't build churches at those places where they used to be as they were long ago replaced by other buildings. However, those great shrines that protected our nation from evil, venerated by previous generations can't be wiped away from people's and church memory," he stressed. The Patriarch thanked Resin for his efforts to realize Program 200 in "new districts of Moscow, where there's lack of such churches," and prefect of the south-west district of Moscow Alexey Chelyshev for his contribution in building the Church of St.Stephan of Perm.The 200 Churches Foundation was set up in Moscow in April 2011. It is chaired by Patriarch Kirill and Moscow mayor Sergey Sobyanin.Program 200 started on April 29, when Patriarch Kirill and Sergey Sobyanin laid the first stone in foundation of the church near theatre center in Dubrovka.09:54?29/09/2011ALL NEWSMoscow housing inspection chief dismissed, September 29 (Itar-Tass) —— Moscow Mayor Sergey Sobyanin has relieved the city's housing inspectorate chief Vladimir Obyedkov of his post. The mayor signed the corresponding resolution, a source at the mayor's office said."Obyedkov is relieved of the position and discharged from the city's civil service on his own initiative as he retires on a pension," the source aid.Obyedkov headed the city housing inspectorate since 2007. Previously he was prefect of Moscow's Northern district.Sobyanin also appointed Oleg Ageyev as deputy head of the department for inter-regional cooperation, ethnic policies and ties with religious organisations and Georgy Chizhenkov as deputy head of the department for foreign economic and international ties. Alexey Ulyanov is re-appointed as deputy head of the department for science, industrial policies and entrepreneurship. Vitaly Dorosh is relieved as deputy head of the housing policy and housing fund department.09:23?29/09/2011ALL NEWSBarracks fire in St Pete brought under control, over 200 evacuated. PETERSBURG, September 29 (Itar-Tass) —— A fire broke out in barracks at a training base of the Kronshtadt garrison overnight.The fire alarm signal was received at 02:30 Moscow time, a source at the Emergencies Ministry’s Petersburg department told Itar-Tass.The attic of the five-storey building was burning. Afire were 2,000 sq m.Twenty crews of firemen fought the blaze. Two hundred and fourteen people were evacuated from the building. Nobody was hurt.The fire was brought under control at 06:40 Moscow time.September 29, 2011 12:17Moscow close to bottom on world list of cities convenient for living. Sept 29 (Interfax) - Russia ranks 70th amongst 80 world cities by the quality of life, head of the city economic policy and development department Marina Ogloblina told a Wednesday press conference at the Interfax main office."Moscow is a city convenient for work and business activity, but it obviously has big problems with living conditions," she said.Ogloblina based her conclusions on data of British and U.S. rating companies, including the Globalization and World Cities Study Group, the analytical unit of the Economist journal and the Chicago Council on Global Affairs. Moscow ranks fourth by the cost of living and 15th by GRP."It ranks 21st as a possibility city, 12th as a global city and 48th as a brand," she said.In the opinion of experts, Moscow ranks in the second half of the top 20 world centers by business activity, Ogloblina said.te jv(Our editorial staff can be reached at eng.editors@interfax.ru)PRESS DIGEST - Russia - SEPT 29 EDTMOSCOW, Sept 29 (Reuters) - The following are some of the leading stories in Russia's newspapers on Thursday. Reuters has not verified these stories and does not vouch for their accuracy. VEDOMOSTI vedomosti.ru - Russian state officials spent more than 4.5 billion roubles ($141 million) in 2007-2009 to acquire expensive executive cars, the daily says citing a research compiled by a parliament deputy. - Russia eyes introducing obligatory Director and Officers Liability Insurance for chairmen of the boards of major state companies. KOMMERSANT kommersant.ru - The European Commission antitrust probe into Gazprom's supplies to its European customers could allow the EU to get more leverage on the company, the daily says. - The first test launch of Russia's fifth generation intercontinental ballistic missile has failed, the daily says. NEZAVISIMAYA GAZETA ng.ru - The earnings of 21.1 million Russians, or 15 percent of the country's population, were below living standards in the first half of 2011, the paper cites official statistics. ROSSIISKAYA GAZETA rg.ru - Prime Minister Vladimir Putin awarded a medal named after Russia's prominent 20th century reformer Pyotr Stolypin to a top Kremlin official Vladislav Surkov. ($1 = 31.746 Russian Roubles) (Writing By Tatiana Ustinova) Russian Press at a Glance, Thursday, September 29, 2011 29/09/2011POLITICSThe Russian parliament's upper house ratified agreements concluded last year with Abkhazia and South Ossetia, under which Moscow will set up military bases in the former Georgian republics(Rossiiskaya Gazeta)Russian Foreign Minister Sergei Lavrov reiterated Russia's readiness to act as a guarantor of non-use of force agreements between Georgia and its breakaway republics of Abkhazia and South Ossetia(Nezavisimaya Gazeta)Russia’s top anti-drug official says that a good way to boost the agricultural sector would be to cultivate plantations of cannabis(The Moscow Times)?ECONOMY & BUSINESSThe European Commission proposed a financial transaction tax expected to take effect from 2014 and raise about 57 billion euros ($78 billion) a year(Vedomosti, Rossiiskaya Gazeta)Russia's finance ministry has no plans to increase taxes in the nearest future, acting Finance Minister Anton Siluanov said(Kommersant)The combined MICEX-RTS stock exchange is expected to grow three times to reach $13.8 billion by 2015, making it the world's third largest bourse by market capitalization, MICEX vice president Sergei Sinkevich(The Moscow Times)?OIL & GASEuropean Commission officials have searched the offices of gas companies in ten European states, including subsidiaries of Russian gas giant Gazprom(Vedomosti, Kommersant, Rossiiskaya Gazeta)Russian Prime Minister Vladimir Putin said he had no business relation with Gennady Timchenko, the owner Gunvor Group, of one of the world's largest oil trading companies(Vedomosti)?DEFENSERussia's Space Forces confirmed the failure of a test-firing of a Yars (RS-24) intercontinental ballistic missile launched from the?Plesetsk space center(Kommersant, Rossiiskaya Gazeta)?WORLDUkrainian state prosecutors insist on a seven-year jail term for the country's ex-premier Yulia Tymoshenko. Prosecutors say she should also pay off $195 million damage that the government lost after her 2009 gas deal with Russia(Rossiiskaya Gazeta)?CRIMELom-Ali Gaitukayev, a former Chechen businessman suspected of organizing the murder of campaigning journalist Anna Politkovskaya in 2006 has been brought to Moscow for questioning(Rossiiskaya Gazeta)A policeman and seven civilians, including an 11-year-old girl, died when a car was blown up in the village of Khajalmakhi in the southern Russian republic of Dagestan(Nezavisimaya Gazeta)?SOCIETYThe number of poverty-stricken Russians has grown by more than 2 million over the past year, the State Statistics Service reported. Almost 15 percent of the population now live below the poverty line(The Moscow Times)?SPORTSRoman Shirokov scored two and made a third for Zenit St. Petersburg in a 3-1 Champions League win over 10-man Porto(Kommersant, Rossiiskaya Gazeta)?For more details on all the news in Russia today, visit our website at : Another reason not to join the Russian army by SHNS on Wed, 09/28/2011 - 17:15 An editorial / By Dale McFeatters, Scripps Howard News ServiceThe Russian army is having a hard time filling its ranks with draftees. About half of all potential recruits never show up for induction. Bribes to obtain medical deferments are common, and there is no real social stigma attached to draft dodging. In fact, it seems more or less expected.The undermanned army is now hoping to lure illegal immigrants into joining with a promise of full Russian citizenship three years into a five-year enlistment.The draftees, if they show up, serve for 12 months, but the new recruits face a vicious brutality, that Human Rights Watch called inhuman, degrading and grossly abusive, at the hands of the "granddads," soldiers serving the final six months of their enlistment. Unsurprisingly, desertion is common.Numerous studies have brought this to the attention of the officer corps and the government with little to no effect.But the Russian army has decided there might be an incentive to join and even to stay for the entire 12 months -- better food.The army is doing away with barley porridge, a staple of the military going back to czarist times and widely described as inedible. It is being replaced by buckwheat porridge, which is described as five times more expensive but does not require the hours and hours of cooking that the barley does.The quicker preparation time means that the army has been able to fire a large number of civilian cooks, who are not too happy about it. Maybe we could hire a few of them to cook for death row inmates like the one in Texas who ordered a huge last meal then refused to touch it. At least with barley that's been boiled all day, he'd have an excuse.(Distributed by Scripps Howard News Service, )Putin's intended return as president unleashes open rebellion within the KremlinHigh quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ to buy additional rights. was supposed to be the stitch-up to end all stitch-ups. On Saturday Vladimir Putin, Russian prime minister, and Dmitry Medvedev, president since 2008, announced in front of a loudly cheering audience of the ruling United Russia party that they were once more switching jobs next year.“I want to say directly: an agreement over what to do in the future was reached between us several years ago,” Mr Putin told the crowd, while Mr Medvedev too said the pact had been agreed back in 2007 when he was prime minister and Mr Putin backed him as his successor for the presidency. “We actually discussed this variant of events while we were first forming our comradely alliance,” proclaimed Mr Medvedev.It was the epitome of politics by conspiracy perfected by Mr Putin in more than a decade in power, intended both to end three-and-a-half years of intrigue that had gripped Russia about Mr Putin’s political plans and to demonstrate that the omnipotent Kremlin political machine was impervious to rivalry, jealousy, competition and scandal.But what happened next proved precisely the opposite: since the weekend, Russia has been gripped by a political crisis after a number of government officials in effect mutinied, refusing to play along to the script that had been presented to them as a fait accompli. What they aired was a feeling of betrayal by the backroom deal of which they had not been informed.Monday’s sacking as finance minister of Alexei Kudrin, who had served 12 years in the post and is one of Mr Putin’s oldest friends from St Petersburg, was the first and possibly not the last head to roll in what has become a hefty political brawl. On learning of the deal, Mr Kudrin had questioned Mr Medvedev’s competence in economic matters and summarily announced his refusal to serve in his cabinet – probably because he had had his own eye on the prime ministership.On Tuesday, the rogue ex-minister aired his grievances in a way deeply unhelpful to the central bank, which has spent at least $6bn in the past week propping up the rouble in the midst of global market turmoil. As he lashed out at the pressure from above, which, he said, had forced him to approve increases in state spending, particularly on the military – budgetary miscalculations would “inevitably spread to the entire national economy”, he warned – the political infighting only exacerbated the pressure on the currency.It was an unheard-of public brawl between two members of Mr Putin’s famously tight-lipped political team, who have long kept their internal fights to themselves. In 2007, for example, Mr Kudrin said almost nothing in public when Sergei Storchak, his deputy, was arrested and charged with embezzlement in a heavily politicised case. This case, according to a consensus within the government, was ordered by a rival Kremlin official, also from the Putin circle. But the matter was settled behind closed doors and the charges against Mr Storchak were dropped this year.Such opacity has become typical under the Kremlin’s rules of managed democracy. Political parties are invented; television stations censored (Mr Kudrin’s face has not been seen on national TV since Saturday); decisions are taken by fiat but then legitimised by an army of pollsters, spin-doctors and broadcasters who sell these as democratic choices.Russians have become consumers of politics in the same way that they are consumers of cosmetics or electronic goods – their opinions registered through tireless market research and sales data but with no formal way to influence the process through a meaningful vote. The Kremlin has used such “political technology” for more than a decade to provide a veneer of democracy for an authoritarian system.But this week’s fireworks indicate that conspiracy as a governing tool is becoming untenable. Despite the Kremlin’s efforts to drain all the spontaneity and competition from public politics, it just as stubbornly refuses to go away.“The system of management of politics is exhausted, it’s morally worn out. The situation has changed and it doesn’t work any more,” says Gleb Pavlovksy, who heads the Fund for Effective Politics, a Moscow think-tank, and is a former political consultant to the Kremlin.Mr Kudrin was not the only rebel. Igor Yurgens, a Medvedev economic adviser, told the Financial Times he was “disappointed” by the decision. Arkady Dvorkovich, a key aide to Mr Medvedev on the economy, also registered his displeasure in a mild way, posting on Twitter that “there is no cause for celebration” in the announcement that Mr Putin was to return to the top job. He later tweeted that Luzhniki stadium, where the speech was held, “is better used for playing hockey”.The disgust of the Medvedev team with the voluntary humiliation of their patron by Mr Putin was palpable. “There are two teams: Medvedev’s team and Putin’s team,” says Vladimir Pribylovsky, editor of the political website , retelling a variation of a joke that has made the rounds in Moscow. “But it’s not clear whose team Medvedev is on.“Well, we found out that he is actually on Putin’s team.”Political transitions in Russia have in some sense always been conspiracies – some more successful than others. The death of communism happened amid the foul-ups of the failed 1991 coup by hardline generals; the upset 1996 presidential re-election win by Boris Yeltsin was stage-managed by seven oligarchs. Most successful was the rise of Mr Putin himself to replace Yeltsin in 1999. Indeed, the man who wrote Yeltsin’s resignation speech on New Year’s eve 1999, who wishes to remain anonymous, says only six or seven people knew at the time.Mr Medvedev’s entire presidency (Mr Putin was constitutionally prohibited from a third successive term) now appears to have been an elaborately constructed play, whose final act was the return of the former KGB colonel to his job next March.But in its refusal to swallow yet another fait accompli, Russia’s political aristocracy is demonstrating that its patience for paternalistic rule is ebbing – and, simultaneously, the Kremlin appears to be losing its touch.For instance, the deal presented by both Mr Putin and Mr Medvedev as having been agreed “years ago” may have instead been recent and hastily constructed. According to one official, it was pushed for by Mr Medvedev, while Mr Putin wanted it delayed until after parliamentary elections. “It wasn’t great politically – now how are we going to get anyone to vote in the parliamentary elections if we’ve told them we’ve already decided everything?” he adds.Another official speculates that Mr Kudrin’s prime ministerial ambitions were well known at the time and Mr Medvedev wanted to make clear he had been tapped for the post before Mr Putin could back out of the deal they had made. According to a consensus of officials and analysts, the two men decided on the succession not in 2007 but just this August.The presentation of the plan was botched. The speeches “sounded like they were written in the car on the way over”, says one government official. Telling the nation that the pact had been made long ago was a big mistake, says a former high-ranking Kremlin official. “It is a very bad explanation because, first of all, it’s a lie. And second of all, it doesn’t explain anything.”Whatever the background, the announcement clearly did not go down well except among the party faithful at Saturday’s rally. Nor was the displeasure confined to those in the Medvedev and Putin political teams. On Monday, Moskovsky Komsomolets, a popular and largely apolitical Moscow tabloid, took aim at the “tandem” in an editorial. “Russia consists not only of government bureaucrats, not only of those who have a pass to Luzhniki stadium,” the article read. “And everyone whose consciousness has not been demolished by ecstatic glee [over Mr Putin’s return] has understood that you have lied to us for four years.” Russia, it continued, “has just received a lesson in unbridled cynicism”.In a country where resignations and reshuffles are usually choreographed with care, Mr Kudrin’s abrupt departure was already the second political scandal to erupt in a month. On September 15, Right Cause – a pro-Kremlin party of economic liberals and democrats aimed at emerging middle-class voters – self-destructed after Mikhail Prokhorov, the third-richest man in Russia and the party’s leader, was expelled in a furious public row.Brought in to lead what was widely thought to be a Kremlin project, Mr Prokhorov blamed his expulsion on a row with Vladislav Surkov, chief of the Kremlin’s domestic political operations, whom he labelled a “puppet master”.However, the ensuing scandal made it clear that patience with such managed democracy is running out. Mr Prokhorov himself said on his blog on Tuesday, commenting on the week’s upheavals: “I think that we stand on the verge of a very important – possibly tectonic – shift in the consciousness of the elite, including the ruling elite. There is polarisation. It will inevitably bring to the surface new ideologies, new conceptions of development and new people.”Few reckon Mr Putin is in any political danger but the scandals this month, according to some analysts, indicated that he may be under considerable pressure to liberalise – which was formerly a no-go area for the stern ex-KGB colonel. In power, Mr Putin has shown himself to be (mainly) an economic liberal but a political autocrat, who strangled the media and clearly feared giving up the state’s implicit veto over the political process.But the Russia he will take over in 2012 is not the same Russia, sick of the chaos of democratic transition, that welcomed a strong hand in 2000 when he first came to power. Today the country is richer, more middle-class and less patient than it was a decade ago, according to an increasing amount of sociological research.Few can predict what Mr Putin’s third term as president will bring. But if he is wise, says one former senior official, he will have to “show everyone that he is not what they think he is”........................................................................The middle class: a potential headache for Putin Vedomosti, a Russian newspaper part-owned by the Financial Times, recently ran an online quiz that was an instant hit. It was called “Are you middle class?” Respondents were judged by their ability to identify pieces of Ikea furniture, the stamp on a Schengen visa used in parts of the European Union, an iPhone and various types of sushi – all de rigueur accoutrements of a middle-class Moscow lifestyle.In many ways, this constituency is the most important for Vladimir Putin if he wishes to have an untroubled third or fourth term in power as president. But the group’s political loyalties are famously hard to read – and fickle.The middle class is a comparatively new phenomenon in post-communist Russia, created during Mr Putin’s first presidency (2000-08) as economic growth soared and real incomes doubled.Alongside their greater wealth, they crave more of a voice – and are chafing against the authoritarian culture of the Kremlin that excludes them from politics. They could prove to be a headache for Mr Putin if he wishes to rule once again as an unchallenged autocrat.The Kremlin has recently been keen to build bridges. It backed Right Cause, a liberal-leaning party headed by billionaire Mikhail Prokhorov that sought to mobilise the 15 per cent of voters reckoned to be middle class. The venture flopped, falling apart this month amid scandal.For Mikhail Dmitriev of the Centre for Strategic Research, a Moscow think-tank, the middle class comprises 40 per cent of the population of Moscow and 20-30 per cent of other urban centres. He says it forms the core of a potential opposition to the Kremlin, which he reckons will soon find itself in a “crisis of legitimacy” if it does not reform.Other sociologists are less alarmist, saying that divining a coherent middle class is practically impossible. Some work for the state, some are in the private sector; many are intensely nationalistic, others are democrats.“There is very little you can say about this group as a whole,” argues Larisa Kosova of Moscow’s Higher School of Economics, who believes that even the term itself is something of a misnomer. She says the title refers mainly to the category of people whose lifestyles most closely mirror the western middle class. “It consists of the top two deciles of Russian society,” she said. “So in what way is this ‘middle’ class?”Copyright The Financial Times Limited 2011. You may share using our article tools.Please don't cut articles from and redistribute by email or post to the web. Yet Another Example of The Economist's Awful Russia Coverage 28, 2011bne: We have been asked a lot recently about the "Russia: Time to Shove off" piece that ran in the Economist earlier this month. Basically it says that the Russians are so fed up with their leaders and where the country is going that they want to leave. While the writer gets the mood right - I too have noticed that many people, especially the young and the elite, are visibly frustrated and talking about leaving - typically for the Economist it gets all the facts wrong - or rather leaves important ones out. The desire to emigrate from Russia is no higher than in other countries. This piece was a classic hatchet job where the journalist has selectively chosen facts that support a preconception that has more to do with the correspondent's bias than with what is going on. Put another way: a normal Economist piece. More seriously this is in the vanguard of the "Russia stagnates" line that we think will now take over in the Economist (and everywhere else) from the "Russia about collapse" line it took in the second half of the naughties (it boomed). More recently the line has been "Russia is corrupt" but the Economist studiously ignores the president's anti-corruption campaign (which it has failed to report completely) and the fact that policemen, generals and now even former regional governors are being thrown in jail on a weekly basis - albeit a very flawed and slow moving campaign. (see Corruption in Russia: All bets are off for an example.)Even Elena Panfilova, who runs Transparency International in Russia, told us that she is optimistic and believes the campaign will work; the Economist quotes her figures ad nauseum, but hasn't actually interviewed her about the (plentiful) flaws in the president's campaign as far as we know. And she is the only independent authority on Russian corruption out there. Now don't get us wrong - there is a lot wrong with Russia and we were very disappointed by Prime Minister Vladimir Putin's decision to take his old job back. As one friend put it: "The Russian optimists will be disappointed, but for the Russian pessimists - ie almost everyone - nothing has changed." Which is true. We don't normally run pieces from other publications unless they cause a lot of comment so here is an excellent rebuttal from Forbes. Why does the Economist have such a good reputation? It doesn't deserve it, at least when it comes to reporting Russia. (Credit to David Johnson who ran this piece first in the JRL). ENDYet Another Example of The Economist's Awful Russia Coverage Mark AdomanisSeptember 12, 2011The other day I noted an especially overdrawn article titled "Time to Shove Off" that had recently appeared in The Economist. The article's thesis was basically the following: Russia is again stagnating and all of its most talented and successful people are preparing to leave, a development which will eventual cripple the country. I briefly noted that I thought this was a load of rubbish and that the article omitted a huge number of relevant facts that contradicted its analysis.One of the truly great things about the internet and the rapid spread of information it enables is that the groups analyzed by the "experts" in the Western media are not simply mute observers. They can actually engage in the conversation, point out mistakes and factual errors, or simply suggest alternate explanations that are more deeply informed by knowledge of the local culture.Thanks to Kevin Rothrock, who runs the outstanding Russia-focused blog A Good Treaty, I came upon a particularly excellent example of this at the Russian-language news site Slon.ru. Stepan Opalev wrote a pithy, and, at least judging from the evidence he assembled, rather scathing response to The Economist.I'll translate from the Russian since the relevant text isn't too long:"The article's author, it's true, didn't try to compare the number of those wanting to leave Russia with those wanting to leave other countries. In fact people from other countries are getting ready to "shove off" not in smaller but in much larger numbers. For example, in 2008 when a Gallup poll showed that about 17% of Russians were preparing to emigrate, in Great Britain and Germany the same poll showed the figure was almost two times higher at 27% of their respective populations. In 2010 another Gallup poll showed that the number of people wanting to leave Russia decreased to 11% of the population. In Great Britain, where The Economist is published, the number of potential emigrants increased to 33% of the population."The growing desire to leave Russia, by all appearnces, isn't being converted into corresponding action: if you believe Rosstat, the number of people leaving the country is steadily decreasing. In other words the number of Russians wanting to leave isn't growing _ we just complain more about life." The author also provides a nifty little chart titled "The percent of people who want to permanently leave the country, 2008." With data taken from Gallup, the chart shows that in 2008 the following countries had a higher percentage of people who wanted to permanently emigrate than Russia did in that recent Levada poll (the one which sent The Economist into such a tizzy): Moldova, Azerbaijan, Great Britain, South Korea, Germany, Georgia, Ukraine, Egypt, and Armenia.As is quite obvious from even a cursory glance at the data, the recent Levada poll shows that Russians' desire to emigrate is utterly unexceptional. Indeed, apart from South Korea, Great Britain and Germany, there is at least one other well-managed liberal democracy whose citizens are much more eager to leave the country than the despondent citizens of Putin's stagnating autocracy. Don't believe me? Look at this Gallup poll from early 2008 which asked the following question: "Ideally, if you had the opportunity, would like to move permanently to another country, or would you prefer to continue living in this country." 35% of Chileans said that they would like to move to another country, far higher than equivalent figures for Argentina (20%) or Venezuela (12%).Chile is, and has long been, one of The Economist's favorite success stories, a country far more thoroughly liberalized, both politically and economically, than Russia is ever likely to be. Yet despite its liberalism, capitalism, and democracy more than a third of its citizens said they would prefer to emigrate. Chile's figure was far higher than the corresponding figures for the far less economically liberal Argentina and Venezuela, or even a famously unequal and polarized society such as Brazil. Does this mean that Chile's president is evil or that its basic political and economic structures are fundamentally broken? Does it mean that it should adopt the "Bolivarian" model which apparently is far better at retaining the basic loyalty of citizens? I suspect not, but then I have no interest in either tendentiously trying to prove Chile's failure or convincing it of a specific course of action.The Economist is not written by foolish or stupid people. Indeed I know at least one person who writes for it and I feel pretty safe in saying that their intellectual capabilities comfortably surpass my own. But The Economist does have a quite nasty habit of excluding evidence and limiting perspective when it serves its own interests, and the publication has long made clear that it considers Mr. Putin to be a figure of extreme, if not unique, malevolence. There's nothing wrong with attacking Putin's record as leader, in fact it's a very easy thing to do. But doing so in such a hackneyed and myopic manner (in a manner that is so easily rebutted with a few basic Google searches and some elementary research into opinion polls) helps no one, least of all The Economist's readers who were very badly misled into believing that Russians' desire to emigrate is unique or noteworthy when precisely the opposite is the case.If you wanted to make the argument that the Kremlin needs to more aggressively court its own economic elite, which really does seem to threaten to run off to London at a moment's notice, that's one thing. I'd probably agree with that. But implying that Russians are preparing to "shove off" en-masse, or that this desire to emigrate is dramatic proof that "Putinism" is a comprehensive failure, is just wrong. Not wrong in some vague moral sense, but wrong as in "demonstrably and provably wrong."National Economic TrendsInflation continues to decelerate in September CapitalSeptember 29, 2011According to Rosstat, Russia's weekly consumer inflation was 0% last week (19-23 September), after shrinking by 0.1% since the beginning of September; YtD inflation amounted to 4.6%. This suggests to us that September inflation could be around 7.2-7.3% YoY. While we maintain our view that the Central Bank of Russia will leave rates unchanged until the end of the year, we think the deceleration of inflation coupled with strengthening global headwinds could create a slight policy bias towards easing. The rouble's recent depreciation might increase inflationary pressures, but, as we have argued before, we think that the deflationary nature of the economic backdrop is likely to offset the effect of a weakening rouble, as occurred during the 2009 crisis when inflation continued to decelerate. We think MoM inflation will stop decelerating in the coming months, and will start to increase due to the increased level of government spending at the end of the year. Nevertheless, the price level at the end of last year was relatively high after food prices were impacted by drought conditions; therefore, we don't expect an inflation hike, and we forecast an inflation rate of 6.9% YoY at the end of 2011. Natalia Suseeva Russia Macro View - That Sinking Feeling 29, 2011We are cutting our 2012 GDP growth forecast for Russia further to 2.5% - from our forecast of 3.5% in August and 4% before that. We believe global financial turbulence and political uncertainty will weigh on investment and consumer expectations in Russia. We hope this will be the end of the revisions, but the global outlook remains uncertain. We keep our Brent forecast unchanged at US$86pb in 2012 and lower our global GDP growth forecast to 2.9% - from 3.2% last month and 3.7% two months ago. We still do not expect a global recession for 2011 or 2012 as a whole, but QoQ industrial country growth probably will be close to zero in the next few quarters and is likely to stay well below average to at least end-2012E (Global Economic Outlook, September). In Russia appetite for systemic reform is limited - The decision for a reverse of the current Putin/Medvedev 'tandem', rather than the introduction a new figure to the leadership structure, suggests that appetite for systemic reform is limited (Political Implications of the Reverse Tandem , 28 September). Weaker Ministry of Finance suggests higher debt - The administration's main hawk, Minister Kudrin, has been recently replaced by a 'tandem' of the First Prime Minister Shuvalov and a skilled technocrat among the Deputy Ministers of Finance. Higher pre-election spending should prop up consumption - We expect consumption to remain a driver of GDP, rising by more than 5% YoY in 2011, but decelerating to 3% in 2012. We see social spending and reduced saving propping up consumer demand, but this likely 'leaking' through higher imports and capital outflows. We believe the ruble basket at 37-38 with Brent at US$86 is fairly valued - Global contagion has recently pushed the ruble lower than seems warranted by oil and rates. However, pressure could intensify if the CBR gives banks ammunition to bet against the ruble.Ruble Weakens Third Day This Week Against Dollar, Euro at Open Torrey Clark - Sep 29, 2011 8:05 AM GMT+0200 The ruble weakened for the third day this week against the dollar, retreating 0.3 percent to 31.8498 at the start of trading in Moscow. The Russian currency slumped 0.4 percent at 43.3972 against the euro, pushing it down 0.4 percent to 37.0509 versus the central bank’s target basket. To contact the editor responsible for this story: Torrey Clark at tclark8@ SEPTEMBER 29, 2011Kremlin Moves Rumble the Ruble ANDREW PEAPLE Russian voters weren't consulted on the deal whereby President Dmitry Medvedev agreed to stand aside for Vladimir Putin in next year's presidential elections. But the markets are having their say.The Central Bank of Russia this week was forced into its biggest intervention in the currency markets since 2009, as the ruble threatened to fall below its official trading band of 32.50 rubles to 37.50 rubles ($1.03 to $1.18) to a basket of euros and dollars. That could be a sign of things to come.True, politics isn't the only thing destabilizing the ruble. The recent falls in oil and gas prices have exerted downward pressure, as they have on other resource-rich country currencies, as these commodities make up two-thirds of Russia's exports. When oil prices tanked during the global financial crisis so did the ruble; the central bank spent more than $200 billion in 2008 defending the currency and was forced to raise interest rates. Since then, the central bank has been reducing its interventions in the currency markets, while widening the trading band. Such moves had encouraged hopes of Russia moving toward a free-floating currency. That, in turn, would give it scope to run a more independent monetary policy, setting interest rates to suit domestic financial conditions.But the political uncertainty has put those ambitions on hold. Net capital outflows in the first half of this year reached more than $30 billion. This week's sacking of Finance Minister Alexei Kudrin has fueled investor concerns; capital outflows could accelerate to $25 billion to $30 billion in the fourth quarter alone, ING forecasts. If Russian households start switching deposits into foreign currency, as they did in 2008, pressure on the ruble will increase. The central bank now has decided to freeze the trading band, a setback for its liberalizing ambitions. Unless oil prices recover, or the political outlook suddenly improves, it faces digging into its reserves again to hold the ruble line.05:34?29/09/2011ALL NEWSRussia strengthens positions at world grain markets, southern Russia, September 29 (Itar-Tass) – Russia is strengthening its positions in the world market. The president of the National Union of Grain Producers, Pavel Skurikhin, says that the Grain Russia-2011 international conference, which is taking place these days, provides a convincing proof of that."More than 250 delegates from 20 countries are attending the conference, an unprecedented number for this kind of event. Turkey has sent 80 people to the conference. Its plans are ambitious. Turkey wants to triple flour production in the next few years and counts mainly on Russian grain,” Skurikhin went on to say.He said the participants in the conference had come to Rostov-on-Don with specific tasks. “We saw how representatives of grain producers, grain processors and consumers were actively engaged in talks. Even if they haven’t struck any deals on the sidelines of the conference, they are definitely going to do that after all the details of the deals have been finalized,” Skurikhin explained.He emphasized that grain exports remained an important income item and a source of currency revenues for the Russian state budget. Skurikhin called for consolidation of Russian positions in world grain markets.The president of the National Union of Grain Producers said his task was to create cooperative marketing associations of consumers for the purpose of streamlining the sales of grain, including exports, to put big and small producers in an equal position and to be able to pursue a common grain policy.Russia Grain, Pulses Harvest at 86.4 Million Tons, Ministry Says Marina Sysoyeva - Sep 29, 2011 10:25 AM GMT+0200 Russian farmers harvested 86.4 million metric tons of grains and pulses as of yesterday, about 46 percent more than a year earlier, the Agriculture Ministry said. The crop was gathered from 85 percent of the planted area, or 37.3 million hectares (92.1 million acres), the ministry said on its website. The wheat crop reached 53.5 million tons after 86 percent of the sown area was harvested, the ministry said. The barley harvest was 16.8 million tons from 92 percent of the planted area. About 20.7 million tons of grains were collected in the Southern federal district; 21.2 million tons in the Volga area; 16.4 million tons in the Central federal district; 13.3 million tons in the Siberian region; and 9 million tons in the North- Caucasus district, the ministry said. The oilseeds crop included 2.6 million tons of sunflower seeds, 534,000 tons of soybeans, and 797,000 tons of rapeseeds, according to the report. Prime Minister Vladimir Putin said on Sept. 27 the grains crop is expected to reach 90 million tons this year. That will meet domestic demand and reinstate Russia as one of the largest grain exporters, he said. The government plans to increase agricultural subsidies to 170 billion rubles ($5.3 billion) in 2012 from 163 billion rubles this year, Putin said. Russia’s crops were damaged last year by the country’s worst drought in a half century. The figures for grains and oilseeds are in bunker weight, which is the weight before drying and cleaning. To contact the reporter on this story: Marina Sysoyeva in Moscow at msysoyeva@ To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@ Russia resumes sugar exports for first time since 1999 September 29 2011An official at the Russian Sugar Producers Association said that the country will export sugar to the world market for the first time in more than a decade as the first contracts to export to Tajikistan and Kyrgyzstan were signed at the end of August, adding that the sweetener may also find its way to Ukraine, Moldova and other Central Asian countries with prices at their current levels.The official added that the government has put together a working group to help support exporters.Central Bank may ease requirements for two major banks , 29.09.2011, Moscow 11:26:49.The Central bank of Russia (CBR) may refrain from introducing sanctions against Sberbank and the Bank of Moscow for infringing the law on the national payment system by introducing a temporary moratorium for the two financial institutions, RBC Daily reports today.??????As several provisions of this law become effective today, in order to accept household utility payments banks are supposed to enter into direct contracts with housing and utilities infrastructure operators. The banks will now be limited to receiving payments and transferring them to service suppliers, bypassing intermediaries.??????Sberbank and the Bank of Moscow, the two major players in the segment of utility payments, failed to renew their contracts and asked CBR to impose a temporary moratorium on the law. COMMENT: Russian banks - Late to the party Nangle of Renaissance Capital September 29, 2011In this note, we formally put on paper what we have been debating rigorously with clients over the past few weeks while marketing. We reduce our growth, earnings and TPs for Russian banks while, with our crisis hats firmly back on, we stress everything in the system that can and did go wrong back in 2008 to see where we stand today. Russian banks are a bit late to the crisis party and it remains to be seen if they can just squeeze in last orders or really get involved. We stress test the banks, focusing on the following: 1. Sector liquidity. We see signs of tightening, and while banks and authorities are on guard and better equipped, we assume the endgame will be fine but getting there could be messy. 2. Currency risk. As a key risk, the recent rouble weakness has the potential to affect depositor confidence, to the detriment of banking sector stability. 3. Wholesale funding. Once again, a scarce commodity, and it has negative implications for growth, but much lower risk of default as Russian banks are less leveraged now than they were in 2008. System LDR is 90%. 4. Slowdown of loan growth. This is now our logical base-case, in line with a falling GDP outlook and confidence on both the demand and supply side. Credit growth of 12% is now forecast for 2012 (previously 20%). 5. Asset quality. Step one, we assume write backs stop, step two banks start to accumulate provisions again in 2012. NPLs are unlikely to return to 2009-2010 peaks, but we have to start stress testing the restructured loan books. 6. Trading losses. In our view the most obvious, yet least quantifiable, effect of the 3Q11 market turmoil is on the banks' P&Ls. EPS forecast cuts, but margins a positive buffer. In our forecasts for 2012E, we cut loan growth from 16-22% to 10-13% and we up the cost of risk, moving from a write-back scenario to one with normalised provisioning at 1-1.5% of gross loans. Rising NIMs (predominantly) and some cost control, as was the case in 2009, should mitigate this. This results in 2012E EPS cuts of 2-11% for the banks under our coverage. To sanity check, it is important to note that in 2H08-YE09, pre-provision profit actually rose in Russian banks - it was asset quality which killed the bottom line. We remain underweight banks and short-term Russian banks can underperform. We cut our TPs and ratings across the board on EPS cuts and upped cost of equity. Russian banks are no place to hide in a crisis and, at best, our lower growth scenario plays out or, at worst, we get some real sector instability. We stick to fundamentals with our TPs and ratings and in that world, Sberbank of the liquids and Nomos from the mid-cap space are our picks. Two additional points: 1) owning Sberbank DR over the common share is entirely logical while we noticed that in the last crisis, VTB outperformed Sberbank on the way down, irrespective if the difference in fundamentals. We intend to remain fluid with our views in this environment. Stress test summary In this note, we formally put on paper what we have been debating rigorously with clients over the past few weeks whilst marketing. We reduce our growth, earnings and TPs for Russian banks while, with our crisis hats firmly back on, we stress everything in the system that can and did go wrong back in 2008 to see where we stand today. Russian banks are a bit late to the crisis party and it remains to be seen if they can just squeeze in last orders or really get involved. Our aim is to be realistic, balanced and not dramatic in what is becoming a very real situation, again. In this note we compare and contrast the current positioning of Russian banks with their situation in 2H08, and we also stress test the banks for the key downside risks that we are currently seeing. Specifically, we focus on the following aspects: 1. Liquidity: The 2008 crisis in Russia started with a liquidity crisis in the interbank market in September 2008, which caused several small and medium-sized banks to fail and called for government intervention to provide liquidity to the system. This August-September we also see signs of liquidity tightening, although the good news is that authorities are now better prepared to deal with the situation. We expect a bumpy road to a positive end game. 2. Currency risk: With Russian banks generally holding no or small open currency positions, the worst-case scenario is that we see some instability in the local banking market via the local proxy for risk, the Russian rouble. Instability in general and retail deposit instability in particular, is clearly the biggest risk for Russian banking stocks. 3. Funding. 2008 saw an effective closure of international capital markets for Russian banks, calling into question their ability to meet/refinance their debt. Once again, we expect that it will be very difficult to source funding internally or externally for most Russian banks, ex. the state champions. Hence debt rollovers will likely have to be funded from existing resources. On a positive note sector LDR is below 100% and there are no serious maturities coming up for listed banks. 4. Slowdown of growth. The previous crisis was marked by quite a sharp slowdown of both the Russian economic and lending growth. This time around, slower lending growth also appears to be a logical outcome: 1) the global economy should see a slowdown (with read-across for Russia); 2) market turbulence results in lower business confidence (and hence loan demand); 3) funding (both debt and equity) becomes less easily available for banks and affects credit supply; 4) as liquidity becomes scarce, banks get less willing to lend. We downgrade our loan growth forecasts for 2012E from 16-22% to 10- 13%. 5. Asset quality: The 2008-2009 crisis was marked by significant asset quality deterioration, driving banks' annual cost of risk as high as 5-7%. We do not currently forecast such a dramatic meltdown of asset quality this time around since, in the past two years, loan growth has been slower and lending standards generally tighter than in 2005-2007. Our base-case scenario factors in a logical halt to write backs and an immediate return to normalised provisioning charges of 1-1.5% in 2012E - up from our abnormally low assumption of 0.4-1% before. This is a top up scenario to an already left-over aggressive buffer from the last crisis. 6. Securities portfolios and trading losses: These factors hit the banks' P&Ls severely in 2H08, and clearly represent the most obvious near-term downside risk to our 2011 forecasts, which is not straightforward to quantify. We expect banks to post losses from trading securities in 2H11 and FY11, while continuing to earn positive profits on FX and precious metals. Sector liquidity In September-October 2008 the banking crisis officially started in Russia with a liquidity squeeze in the interbank market around the Lehmans failure. Once again we have started to see liquidity in the system somewhat deteriorate over the past few weeks. We are not yet alarmist about it, moreover, we think the Russian banking system is now better positioned to sustain the stress, with the Central Bank of Russia's (CBR's) policy being supportive and preventive (as opposed to reactive as in 2008). Hence our current view is that end game will be fine but getting there could be rocky. Liquidity indicators are sending negative signals, in our view: _ Balances on the banks' correspondent accounts and deposits with the CBR are on a downward track and are now at YtD lows. This is partly a seasonal phenomenon (September-October tend to be tight in terms of liquidity because of tax payments), but it also means that at this time of the year banks are particularly vulnerable (remember 2008?). - The banking system's liquidity position net of borrowing from the CBR and Minfin is around zero. - Interbank rates are on the rise: The Mosprime rate (3M) has inched up from 4- 4.5% to 5%+ - a negative trend from a very low base; not yet anywhere near the 2008-highs (a near 28% peak). _ MinFin deposits auctions: Demand exceeds supply (i.e. banks queue up for MinFin money), and in mid-September the rate touched 6.17% (vs below 5% for most of 2011). - Anecdotal evidence suggests that smaller banks (number 50+) are having some difficulty accessing liquidity from the interbank market. They are not cut off, but have to pay up for funds and therefore increasingly turn to the CBR, instead of commercial banks, for liquidity. ? What are the key downside risks, should the liquidity situation deteriorate - recent history is the guide for the worst-case scenario If the view in the system is that the rouble is going to weaken further, this can place more pressure on bank liquidity, as banks seeking to take net long positions in the foreign currency queue up for rouble liquidity, with a view towards buying dollars or euros for roubles. - Pressure on fixed income asset prices, as Russian banks unwind positions, some of which are leveraged (anecdotal evidence from our fixed income traders suggests that some [smaller] banks may have significant leverage via repo 'pyramids' [buy OFZ bonds - repo them at 3%, or even 0% at times, discount - buy OFZ bonds again - repo them again etc.]). Either way Russian banks are large holders of Russian local currency and dollar debt. - Failure of small-to medium-sized banks most leveraged to the repo market facing margin calls (a la KIT Finance, Svyazbank in 2008). _ A deposit run on a smaller bank being blown out of proportion by local media and turned into a crisis that it isn't. ? What is different/better versus 2008 is policy response The CBR's actions (both in terms of FX and rates policy) immediately prior to the 2008 (Lehman) crisis were counterproductive in our view, exacerbating the impact of the global credit crisis: the CBR was still increasing the policy rates in August 2008, with a focus on curbing inflation. It was only after the liquidity crunch happened that the CBR reacted - with what was, in fairness, a very quick and efficient intervention (see Appendix for details). Now the situation is different in that the CBR is trying to take preventive steps (e.g. it cut the one-day direct repo rate from 5.5% to 5.25% in mid-September), its FX policy is much more flexible, it is equipped with the entire set of liquidity enhancement measures first introduced in 2008 (uncollateralised lending, extended Lombard list etc), and the system overall looks to us much better prepared for any turmoil. ? Feedback from our economists' recent meeting with the CBR- the regulator is alert and on guard Banking system liquidity issues have recently come to the fore as liquidity has been steadily declining since the beginning of 2011 from a peak of RUB1.7trn at the start of the year to around RUB800bn at the end of August and . The situation has been exacerbated by recent declines in oil prices, which have led to more limited inflows into the Russian market. Consequently, interbank rates have spiked, raising concerns about the stability of the Russian banking sector. _ The CBR is well aware of the situation. It indicated that two main factors have contributed to the decline in liquidity: 1) larger-than-expected budget surpluses so far in the year; and 2) the discontinuation of FX interventions to prevent the rouble from strengthening too much. According to the CBR, it is the latter that has served as the main avenue for providing liquidity in the system and since the rouble has been under depreciation pressure recently, the CBR has almost stopped buying dollars and euros with roubles. The CBR thinks that the expected intensification of budget spending in November/December 2011 will significantly alleviate liquidity issues, although this leaves September/October as two months where interbank rates could still remain at elevated levels. The CBR also feels comfortable with interbank rates that move within the boundary set by the overnight deposit rate (3.75%) and the repo rate (5.25%), as long as market rates fluctuate within this range the CBR is unlikely to get too worried about the situation. Still, the CBR argued that it will defend the 5.25% rate, implying that it stands ready to provide enough liquidity to the banks at the current repo rate. We also understand that having cut the direct REPO once the CBR will probably cut even further, should global economic conditions continue to disappoint. This also implies, as the CBR argued, that we are very unlikely to see a repeat of the 2008 crisis, when interbank rates rose by a considerable amount as the CBR is now much more concerned about smoothing interest rate volatility than it was back then. Feedback from banks' management: We are not seeing deposit outflows, but some nervousness is being felt as the rouble starts to move. With that in mind banks have become more conservative in preparation for volatile markets and are thinking of the possible conversion of rouble deposits into FX, therefore they have started increasing their rouble-liquidity positions. Bottom line: The authorities do seem very aware of the risks and liquidity is being supplied directly to the system as currently being seen. We expect a volatile month on this front, while we have yet to see much negative impact from the weakening rouble. Although the authorities are far better placed to handle the situation vs 2008 and we are comfortable about the end game from here, the path to that end game is what concerns us. We expect volatility of banking sector newsflow around liquidity, funding availability and deposit stability. All of which is negative for Russian banks asset prices, in our opinion. Currency risk With the rouble having come under intensifying pressure in August-September, further currency weakness is clearly a focus for investors at the moment, as Russian banks are effectively a pure(ish) rouble play. To recap, late 2008-early 2009 saw a 36% depreciation of the rouble against the dollar, despite an aggressive defence by the CBR. This time around, the CBR is being openly more flexible in its FX rate policy, with the rouble weakening within a broader band and allowed to move more with market forces than before. Business, Energy or Environmental regulations or discussionsSeptember 29, 2011 10:21Russian shares down, indexes lose 0.9%-1%. Sept 29 (Interfax) - Russian share prices started Thursday with losses following last night's drop on Wall Street triggered by mounting discord in Europe over how to tackle the debt problem.The MICEX stock index was down 0.98% to 1364.4 and the RTS was off 0.88% in the first minute of trading. Benchmark stocks fell up to 1.9%, however MMC Norilsk Nickel (RTS: GMKN) continued to rise, up 1%, after launching its share buyback on Wednesday, as did gold miner Polyus Gold (RTS: PLZL).Pr(Our editorial staff can be reached at eng.editors@interfax.ru) Globaltrans to shell out $1.2bn on M&A, 29.09.2011, Moscow 10:53:55.Russian rail freight operator Globaltrans has set aside $1.2bn for mergers and acquisitions (M&A) before the end of this year, the company's CEO Sergey Maltsev told RBC late Wednesday.??????Globaltrans, which dropped its plan to participate in an auction for a 75% minus two shares stake in Freight One, could take part in an auction for container shipping company TransContainer, he said.??????The refusal to bid for Freight One was attributed to reluctance to contract a huge debt in order to finance this acquisition amid market volatility. According to earlier reports, Globaltrans had planned to borrow over $5bn. September 29, 2011 12:05Aeroflot flies 23% more passengers in 8 mths. Sept 29 (Interfax) - Aeroflot (RTS: AFLT) flew 9.177 million passengers in January-August, 23% more than in the same period of last year, the airline said.Passenger turnover grew 20.3% to 27.577 billion passenger-km.Pr(Our editorial staff can be reached at eng.editors@interfax.ru) Billionaire Potanin May Seek Norilsk Control Yuliya Fedorinova - Sep 29, 2011 7:40 AM GMT+0200 Billionaire Vladimir Potanin’s Interros Holding Co. may seek control of OAO GMK Norilsk Nickel after a $4.5 billion buyback and stock cancellation, gaining the upper hand in a shareholder dispute with United Co. Rusal. Interros will tender its entire stake of about 30 percent in the buyback, Potanin said yesterday in an interview in Moscow. The company will then ask Norilsk to cancel stock covered by the repurchase, he said. Interros and Oleg Deripaska’s Rusal, which holds 25 percent of Norilsk, have been locked in a dispute over influence on the board and use of the company’s cash since 2008. Rusal said Sept. 13 the buyback is solely in the interest of Interros, which aims to take full control of Norilsk using the company’s own balance sheet. Potanin said the principal reason for the buyback is to bolster Norilsk’s shares in an “unstable” market. Norilsk Nickel Investments Ltd. began a monthlong program yesterday to repurchase 7.71 percent of the mining company’s stock for as much as $306 a share, or $30.60 a depositary receipt. Norilsk will buy stock on a pro-rata basis, which means at least 30 percent of the offer will be allocated to Interros, Kirill Chuyko, a UBS AG analyst, said by telephone from Moscow. Raise Stake Norilsk shares rose 7.35 percent yesterday to 6,998 rubles ($219.80), the biggest gain since January, as the company’s buyback program started. That is 10 percent lower than this year’s high in April. Norilsk is accepting bids until Oct. 28. Norilsk plans to finance the buyback offer using its own funds and existing credit lines from banks, Potanin said. Given that Rusal and some minority investors won’t participate in the program, the shares sold by Interros may amount to about $3 billion, with the balance bought back in the market, Alexander Pukhaev, co-head of research at VTB Capital, said by phone. After a share cancellation, Interros’s stake would exceed 30 percent, Potanin said. Interros would then ask the Russian government for permission to raise this to a controlling interest, he said, adding that “we haven’t decided yet whether we will increase it or not.” Cancellation Rejected Crossing the 30 percent threshold as a result of a share cancellation doesn’t trigger the mandatory general offer usually required under Russian rules. Interros may already control about 32 percent of Norilsk to ensure it will have at least 30 percent after the cancellation, UBS’s Chuyko said. Otherwise, the company may have to buy some stock on the market, he said. To proceed with a cancellation, Norilsk Nickel Investments would need to transfer shares to the parent company, and the cancellation itself will need to be approved by Rusal. If Rusal blocks the share cancellation, Norilsk may sell the repurchased shares to the market, Potanin said. “I hope Rusal won’t block the share cancellation as this is a logical deal and it is in the interests of all shareholders,” Potanin said. Rusal’s press office declined to immediately comment. Rusal has snubbed several buyout offers from Norilsk. This latest buyback program was announced after the aluminum producer rejected a proposal to sell a 15 percent stake back to Norilsk for $8.75 billion. Rusal Chairman Viktor Vekselberg aims to broker a deal with Rusal shareholders that if Norilsk offers about $18 billion they will agree to sell their stock, people with knowledge of the matter said Sept. 20, declining to be identified because the talks are confidential. “Norilsk shouldn’t make a new buyout offer to Rusal in the current unstable market situation, as it will cause an increase in the company’s debt,” Potanin said yesterday. A possible deal with Rusal may be discussed only if the price is appropriate. To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@ To contact the editor responsible for this story: John Viljoen at jviljoen@ Norilsk May Borrow $4 Billion for Buyback, Vedomosti Says Stephen Bierman - Sep 29, 2011 6:18 AM GMT+0200OAO GMK Norilsk Nickel may borrow more than $4 billion to fund a share buyback, Vedomosti reported, citing two unidentified bankers. The credit under discussion would be at the London interbank offered rate, or Libor, plus 1.5 percent, Vedomosti said, citing the same people. To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@. To contact the editor responsible for this story: Will Kennedy at wkennedy3@. TMK considering USD 3 billion in investments in US Russia and Romania, 29 Sep 2011It is reported that in order to maintain an industry leader in the oil and gas markets, Russian energy tubulars manufacturing giant OAO TMK plans to spend up to USD 3 billion over the next 10 years at its Russian, Romanian and US operations.About one quarter to one third of the investments are expected to be geared toward its US operations, TMK IPSCO. Specifically in US, the focus will be on the company premium connection seamless pipes business which is used in offshore drilling projects.(Sourced from Bloomberg)Activity in the Oil and Gas sector (including regulatory)09/29 10:28 ? Lukoil to start supplying lubricants to Afghanistan Watchdog Wants Oil Refiners Spun Off, Kommersant Says Stephen Bierman - Sep 29, 2011 6:06 AM GMT+0200 Russia’s Anti-Monopoly Service proposed splitting oil companies into production, refining and retail businesses to defend independent retailers, Kommersant reported, citing Igor Artemyev, head of the body. To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@. To contact the editor responsible for this story: Will Kennedy at wkennedy3@. 06:43?29/09/2011ALL NEWSInternational conference on Arctic shelf opens in Murmansk, September 29 (Itar-Tass) — The fourth international conference “The Arctic Shelf Exploration: Step-by-Step” is opening in Murmansk in the Russian north on Thursday.The delegates to the forum include representatives of Gazprom, Statoil Russia, Total Prospecting Development Russia, Shtokman Development AG, The Oil and Gas Institute of the Russian Academy of Sciences as well as other companies and research institutes.The conference will discuss the participation of Russian and foreign companies in the development of the Shtokman deposit and other fields harbouring hydrocarbon resources, the development of the production basis and coastal infrastructure as well as gasification of the Arctic shelf, the Ministry of Economic Development of the Murmansk region told Itar-Tass.The region’s governor, Dmitry Dmitriyenko, believes that his region will play the leading role in the development of Russian Arctic.The Association of Oil and Gas Suppliers, the government and Duma of the Murmansk region and the Russian Gas Society have organized the conference.11:24?29/09/2011ALL NEWSKamchatka gasoline stations owners agree to lower fuel prices, September 29 (Itar-Tass) — The Kamchatka regional government has concluded an agreement with local fuel traders to lower gasoline prices.On October 1, the prices for AI-92 and AI-95 will be reduced by 50 and 40 kopecks to 32.9 and 34.5 roubles, the government press service told Itar-Tass on Thursday.The regional authorities have taken the level of retail automobile fuel prices on the peninsula under special control, the press service noted.Their talks with the major fuel supplier -- Kamchatnefteproduct -- and the Kamchatka Fuel Union, which unites owners of gasoline stations, resulted in the agreement to reduce the prices in two stages. The first was in mid-September.The prices will go down 50 kopecks to one rouble on the average for gasoline and only 20 kopecks for diesel, Governor Vladimir Ilyukhin said, commenting on the situation. According to him, local filling stations reduce the prices at their expense by lowering their incomes.Though the Russian suppliers' wholesale prices rose one rouble over the past month alone, the Kamchatka enterprises have found a possibility not only to hold in check but even lower retail prices, Ilyukhin noted.The governor said the territory's government would raise the issue for the federal government’s consideration to have the wholesale fuel prices reduced for the region. The main wholesale supplier for Kamchatka is NK-Rosneft, which accounts for about 70 percent of the supplies for Kamchatka companies."We have already asked Russian Deputy Prime Minister Igor Sechin to set a fixed price for fuel for the peninsula," he said."Kamchatka is a remote region with a complex energy system, and a sharp rise of fuel prices has a very negative impact on the entire process of the region's social and economic development. So, we will insist on settlement of the issue, and there is confidence that we will find understanding on the federal level," he added.TNK-BP Says It Paid $1 Billion to Partner With HRT in Amazon 28, 2011, 8:28 PM EDTBy Nathan Crooks and Peter Millard (Updates with TNK-BP comment in third paragraph and comment on Venezuela expansion plans in seventh paragraph.)Sept. 28 (Bloomberg) -- TNK-BP, Russia’s third-largest oil producer, signed a contract to pay about $1 billion to become a partner with Brazil’s HRT Participacoes em Petroleo SA in an oil project in the Brazilian Amazon, an official at TNK-BP said.The transaction with HRT will be completed in two to three weeks and HRT will remain the operator, said Sergey Funygin, head of TNK-BP’s Venezuela division, today at an oil conference in Puerto la Cruz, Venezuela. The deal will give TNK-BP a 45 percent stake in exploration blocks in the Solimoes Basin where HRT recently found signs of oil, he said.The companies signed a “definitive agreement” for TNK-BP to join the project, Funygin said. HRT will be the operator for at least two years and the companies have the option to change the agreements’ conditions, he said without offering further details.TNK-BP is looking for opportunities in Brazil, Africa, the Middle East and Latin America to diversify operations, Funygin said.Brazil expects to more than double oil production over the next 10 years as it develops the largest discoveries in the Americas in more than three decades.TNK-BP is buying the stake from Petra Energia SA, HRT’s original partner in the blocks, through an arrangement where HRT has rights to buy Petra’s stake. HRT didn’t return two telephone calls to its Rio de Janeiro office today seeking comments about the deal with TNK-BP.Venezuela ExpansionTNK-BP, which has stakes in four joint ventures with Petroleos de Venezuela SA, is looking to produce more oil in the South American country and may increase its interests in current ventures or buy new assets, said Funygin. The Russian company has a 16.7 percent interest in the Petromonagas heavy crude venture that was nationalized from Exxon Mobil Corp. in 2007.Exxon is currently pursuing arbitration with PDVSA, as the Caracas-based company is called, and seeking around $7 billion in compensation in the venture formally known as Cerro Negro.“We’re waiting for the issue to be resolved with Exxon Mobil, and then we are willing, if the Venezuelan government and PDVSA consider us, to increase our interest in the venture,” said Funygin. “We’ve already told PDVSA that we are ready to sit down and talk about it.”TNK-BP’s share of production from its joint ventures in Venezuela is around 25,000 barrels of oil a day, said Funygin. Petromonagas, which upgrades about 120,000 barrels a day of heavy crude, will be stopped for a month next year in March or April for programmed maintenance, Funygin said.--Editors: Robin Saponar, Jonathan RoederTo contact the reporter on this story: Nathan Crooks in Puerto La Cruz at ncrooks@; Peter Millard in Rio de Janeiro at pmillard1@To contact the editor responsible for this story: Robin Saponar at rsaponar@BP to stay in Russia despite lawsuit and raids 29, 2011Igor VyuzhnyBP’s Moscow offices were raided after its Arctic exploration deal with state oil giant Rosneft collapsed. But other British companies have not been deterred. The latest developments surrounding the abortive deal between BP and Rosneft have left the British company facing an enormous damages claim and pondering its future in Russia.On August 31, the day after it was announced that American firm ExxonMobil would be developing the Arctic shelf instead of BP, a search was carried out at the BP Exploration Operating Company office in Moscow. The search warrant was issued by a Tyumen court and was based on a submission by the Siberian minority shareholders in TNK-BP, the third biggest oil producer in Russia, owned on a 50-50 basis by BP and Alpha Access Renova (AAR), a consortium of Russian shareholders. The confidential documents removed during the search concerned the Rosneft-BP deal. The claimants want compensation for opportunities lost because of the failed TNK-BP partnership with Rosneft. They say it was the British shareholders that wrecked the deal, which would have increased TNK-BP’s capitalisation. The minority shareholders initially put their damages at 87.12bn roubles (about ?1.75bn), but almost doubled their claim to 154.284bn roubles (?3.1bn) at a trial in Tyumen on ?September 21. The claims are addressed to the British BP plc and BP Russian Investments Limited.The chances of the lawsuit succeeding are slim, according to experts. They believe the minority shareholders will find it hard to secure compensation from BP because the deal with Rosneft cannot be deemed effective. But even if they win, the money will go not to the plaintiffs but to TNK-BP.After the searches, BP declared that its business had come under unreasonable pressure, while Exxon merely expressed its surprise at the searches. The US company, which has not previously worked in Russia, may get a juicy plum. Rosneft and Exxon are to explore three Arctic areas in the Kara Sea with combined resources put at some 5 billion tons of oil and 10 trillion cubic metres of gas. No precise figures are yet available for reserves. Exxon will also join the Tuapse Trough project in the Black Sea. The reserves in the Trough may be as much as 1bn tons, but that is a tentative assessment. The American company will get 33.3pc stakes in both the Arctic and the Black Sea projects, with the remaining 66.7pc to be owned by Rosneft. In return, Exxon offers Rosneft participation in American and Canadian projects, notably the Hibernia petroliferous province in Canada’s territorial waters nearly 200 miles south-east of Newfoundland and Labrador islands. Its reserves are estimated at 1-1.3 billion barrels (136-178 million tons) of oil. Exxon has a 33.1pc stake in the project. On September 13, Rosneft president Eduard Khudainatov announced that the companies would have a detailed plan in place for the joint projects before the end of the year. That same day, the Tyumen state arbitration court, on a petition from Rosneft, revoked its ruling authorising the removal of documents from BP’s Moscow office. This happened the day after the British Prime Minister David Cameron and a delegation of British businessmen, including BP’s chief executive Robert Dudley, visited Moscow. The raids were raised by David Cameron at a meeting with Russian President Dmitry Medvedev, but no conclusions on the matter were reached.This latest setback triggered rumours that BP might pull out of Russia. Yet this is ?an unlikely and highly undesirable scenario for the company: TNK-BP accounts for a quarter of the British giant’s production, a fifth of its reserves and a tenth of ?its earnings. Having invested $9bn in setting up TNK-BP in 2003, the British had ?received $16bn in dividends by 2011. Other British companies, undeterred by BP’s setbacks, are anxious to enter the Russian commodity market. According to unofficial Kommersant data, the British Empire Special Situations investment fund, controlled by the Rockefeller family, is trying to gain access to two gas fields in Urengoy in Siberia.28.09.2011?17:46Lukoil’s Lawsuit against Customs Agency Postponed should have completed the technical expertise on the case November 9AUTHOR: publics.bgThe lawsuit of Lukoil against the Bulgarian Customs Agency was postponed by the Administrative Court in Sofia, on experts’ demand, BNR reported. The legal claim comes in response to the cancelling of the Lukoil refinery licenses by the Agency two months ago. It led to the almost full halt of fuel production in the technological complex and customs warehouse in Burgas.?The lawsuit will be restored November 9, when experts should have completed the technical expertise on the case.September 27, 2011 18:24Gas imports from Russia are expected to reach USD 545/1000 cubic meters price of gas imports from Russia is expected to reach USD 545 for 1000 cubic meters this October, according to Agerpres newswire. This statement was made by Hilmar Kroat-Reder, member of the Petrom directorate and responsible for the natural gas market, during a conference on energy.In the first trimester of 2011, the price of gas imports was USD 400 dollars for 1000 cubic meters. However, the price for natural gas from the local production stood at USD 155.Kroat-Reder mentioned that the price of natural gas from the local production hasn't suffered any adjustment, not even with the medium inflation rate of 6 to 8 percent, in the last three years. In July, the local production of natural gas represented 83 percent of all sources, with Romgaz and Petrom covering over 95 percent from this source.The Petrom representative added that the Romanian natural gas market is not attractive for investors, due to a lack of connectivity to regional markets. The liberalization of the natural gas market should contribute to an increase in investments and reduced tariffs for this market. Ovidiu PosircaGazpromGazprom to be offered several Belarusian assets 29, 2011Russian state giant Gazprom may get its hands on several major Belarusian assets, Alexander Surikov, Russian ambassador to Belarus, claimed to Prime on Wednesday, as Belarus insisted it expects no delay to the next tranche of the Russian-led bail out programme.The diplomat told reporters that Minsk may offer the gas giant a role in the privatization of petrochemical company Grodno Azot - which is a major gas consumer - as well as power companies and other chemicals concerns. The claim follows a call from President Alexander Lukshenko for Gazprom to expand its role in the privatization of Belarusian assets from its planned purchase of pipeline operator Beltransgaz. Minsk and Moscow have been arguing over the price of Belarusian state assets for months, with Russia expecting to receive favourable valuations in return for the $3bn EurAsEC bail out agreed in the summer. However, in classic style, Lukashenko appears to have changed tack once the first tranche of the loan was received, resisting Russian pressure to sell the assets and turning his attention to attempts to get a bail out from the IMF.That has led to suggestions that the second $400m tranche of the EurAsEC loan - due in November - could be delayed. However, Belarusian vice premier Sergei Rumas claimed on Wednesday that the cash will arrive, reports Interfax. "We joined the program to comply with every requirement and get all tranches of the loan," he said, insisting that his country is complying with all necessary requirements.Romania - UPDATE 1-Factors to watch on Sept 29 Romania's top oil and gas company Petrom , controlled by Austria's OMV , is in talks to sell about 130 petrol stations it holds in Romania, almost a quarter of its total gas stations, to Serbian oil firm NIS, majority owned by Russia's Gazprom Neft , market sources said. Ziarul Financiar, Page 1 Gazprom Seeking Short-Term Debt Amid Market Rout: Russia Credit Anna Shiryaevskaya and Denis Maternovsky - Sep 28, 2011 10:00 PM GMT+0200 OAO Gazprom is seeking to raise short-term funds outside Russia for the first time in almost a year after the worst month for emerging-market debt since 2008. The world’s biggest natural-gas producer will meet investors in Switzerland from Oct. 3 and may sell dollar- denominated euro commercial paper, according to a person with knowledge of the plans. Moscow-based Gazprom’s July 2013 dollar bonds yielded 5.3276 percent on Sept. 27, the highest level since June 2010. They traded at the biggest premium to Petroleo Brasileiro SA (PETR4) debt in 15 months the previous day, data compiled by Bloomberg show. Gazprom is looking at shorter-term paper as concern the world is headed for recession sent average yields on corporate debt in developing nations up 80 basis points this month, the biggest jump since October 2008, according to JPMorgan Chase & Co.’s Corporate EMBI Index. The government canceled an auction of 10 billion rubles of four-year bonds this week, the second debt sale it’s pulled in a row, after yields soared to a record. “Even though I like the company, I see more risk for deterioration of global growth conditions,” Sergey Dergachev, who helps manage $8.5 billion of emerging-market debt at Union Investment Privatfonds in Frankfurt, said in e-mailed comments on Sept. 28. Bonds like Gazprom’s “will be punished first across the curve, and it does not matter whether these names have strong fundamentals or not.” New Debt Dergachev said he cut back his holdings of Gazprom bonds this week, along with debt of OAO Sberbank, Russia’s biggest lender, partly because Finance Minister Alexei Kudrin’s dismissal on Sept. 26 raised concerns about a loosening of the country’s budget and monetary policy. Gazprom is boosting its borrowing program this year by 67 percent more than planned after the company raised its 2011 investments by 56 percent while building pipelines in Russia’s Far East and to Europe, the biggest consumer of Gazprom gas. The producer aims to keep its debt to earnings before interest, taxes, depreciation and amortization ratio at about 0.8. The ratio for Rio de Janeiro-based Petrobras, Brazil’s state-run oil producer, was 1.1 in 2010, data compiled by Bloomberg show. “One should borrow now because it may get worse later,” Petr Grishin, a senior credit analyst at VTB Capital, the investment banking arm of Russia’s second-largest lender, said by phone in Moscow. “Euro commercial paper will help them do so fast, easy and cheap.” Negative Flow Three-month Euribor -- the rate banks say that they pay for three-month loans in euros -- has remained above 1.5 percent this month, compared with an average 1.36 percent this year. One-week Euribor increased to 1.228 percent on Sept. 28, the highest level since Aug. 9. Gazprom registered $4 billion of euro commercial paper two years ago, saying the funds would help the Moscow-based company manage short-term cash flows. A debut $600 million of three- month paper was sold at a 3.4 percent annual yield in September 2009. While Gazprom had record earnings in the first quarter, the last time that it reported, the producer’s free cash flow swung to negative from 278 billion rubles ($8.8 billion) a year earlier as capital expenditures rose. The increase in the investment program this year as well as rising mineral extraction taxes mean Gazprom is in need of financing now, said VTB Capital’s Grishin. The producer also faces a six-month delay in higher domestic fees, after the government pushed back an increase in regulated gas and transportation prices to July 1, he said. Record Earnings Gazprom’s 2013 bond yields narrowed yesterday, trimming the increase since the beginning of August to 213 basis points, or 2.13 percentage points, data compiled by Bloomberg show. Similar-maturity notes of Petrobras, Brazil’s state-controlled oil company, yielded 2.73 percent on Sept. 28, up 117 basis points in the same period. Officials at Gazprom’s press service declined to comment on the company’s borrowing plans when contacted by Bloomberg News. In June, Andrey Kruglov, the chief financial officer, said Gazprom has no “great need” to boost debt levels and “won’t borrow just for the sake of it.” The producer expects record earnings in 2011 as demand recovers from the global economic crisis and oil gains push gas prices higher, Chief Executive Officer Alexei Miller said in June. Urals crude, Russia’s benchmark export blend, has slumped 14 percent from its 2011-high of $122.88 a barrel in northwest Europe in April. Oil is the country’s biggest revenue earner and Urals traded at $104.85 yesterday, below the $109 level the government needs it to average to balance its budget this year. Weakening Ruble The ruble weakened 0.1 percent to 31.75 per dollar yesterday, after rebounding on Sept. 27 from its weakest level since August 2009. The currency has tumbled 14 percent from its strongest price in 2011. Non-deliverable forwards, or NDFs, which provide a guide to expectations of currency movements and interest-rate differentials, showed the ruble at 32.2183 per dollar in three months. Russia’s ruble notes due in August 2016 rose yesterday, sending the yield 30 basis points lower to 8.17 percent. The yield hit 8.74 percent on Sept. 26, the highest level since the notes were sold in August 2010. The yield on Russia’s ruble Eurobond due in 2018 rose two basis points to 8.194 percent. Russia’s dollar bonds due in 2020 climbed, pushing the yield eight basis points lower to 5.139 percent. The cost of protecting Russian debt against non-payment for five years using credit-default swaps jumped six basis points to 297 basis points, up from as low as 122 on April 6, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Yield Premium The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. The extra yield investors demand to hold Russian debt rather than U.S. Treasuries rose one basis point to 391, according to JPMorgan EMBIG indexes. The difference compares with 254 for debt of Mexico -- rated the same level as Russia at Baa1 by Moody’s Investors Service, the third-lowest investment grade -- and 256 for Brazil, rated one step lower at Baa2 by Moody’s. The yield spread on Russian bonds is 56 basis points below the average for emerging markets, down from a 15-month high of 105 in February 2010, according to JPMorgan Indexes. Gazprom is raising investments to 1.28 trillion rubles as it builds domestic pipelines and the Nord Stream network, the company’s first direct link to Europe. The pipeline bypasses Ukraine, where pricing disputes have disrupted Gazprom’s winter supplies to Europe at least twice since 2006. Cash Squeeze Borrowing options at home declined this month with a surge in bond yields and a decline in funds available to banks. The central bank provided the biggest cash injection to lenders in two years on Sept. 16, and cut the interest rate charged on repurchase loans two days earlier in a bid to bolster money supply. The three-month MosPrime rate, the average rate banks say they are charging to lend to each other, climbed two basis points to 6.66 percent on Sept. 27, the highest level since December 2009, data compiled by Bloomberg show. Gazprom has 300 billion rubles of bonds registered, and none of them were sold in the first half of the year, according to CFO Kruglov. Since Standard & Poor’s cut the U.S.’ top credit rating on Aug. 5, 15.7 billion rubles of debt has been sold in Russia, down 91 percent from the same period last year, according to data compiled by Bloomberg.That is the lowest amount sold in that period since 2007. ‘State Coffers’ The company may find it easier to borrow for shorter terms than to issue longer-maturity debt in the current market, said Sergei Goncharov, a fixed income analyst at Troika Dialog. The $10 billion Nord Stream project is designed to carry 27.5 billion cubic meters (971 billion cubic feet) of gas a year under the Baltic Sea to Germany. Gazprom plans to double the amount of gas conveyed by the end of 2012. “Nord Stream is a very good project, very much needed for our partners, for Gazprom, for the Russian economy,” Prime Minister Vladimir Putin said on Sept. 6, after the first gas was pumped into the link. “It’s a big, significant source of export revenue for the state coffers, for Gazprom’s earnings so it can develop its production.” Oil and gas account for 17 percent of Russia’s gross domestic product, compared with less than 10 percent of Brazilian GDP, government data show. Energy sales contribute as much as 40 percent of budget revenue. Arctic Yamal Putin has pushed Gazprom at home to build gas distribution networks to help develop the economy of the Far East, which is closer to Beijing than Moscow, as well as pipelines to allow the development of the Arctic Yamal Peninsula, one of Russia’s biggest sources of untapped gas. Including the projects from these regions, Russia may boost natural-gas output to 1 trillion cubic meters a year from about 650 billion cubic meters now, Putin said in October 2010, while discussing the country’s 20-year gas development program. “Gazprom standalone credit quality is extremely strong and six-month risk could be very well placed,” Union Investment’s Dergachev said. “In Switzerland, commercial papers are very welcome.” To contact the reporters on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@; Denis Maternovsky in Moscow at dmaternovsky@ To contact the editors responsible for this story: Gavin Serkin at gserkin@; Will Kennedy at wkennedy3@ UPDATE 2-Europe's fear of Russian gas behind Gazprom raids, Sep 28 2011* EU launches investigation into Gazprom's subsidiaries* Raids linked to EU efforts to cut dependence on Russian gas* EU, Russia compete for sources of gas* Gazprom eyes bigger EU gas market share (Adds details, comments, background) By Vladimir Soldatkin MOSCOW, Sept 28 (Reuters) - Russian gas exporter Gazprom said it would cooperate with an EU competition probe of its units, while sources on both sides said on Wednesday the real source of tension was Europe's fear of its growing reliance on Russian gas. A European Commission official said raids on the units this week were part of efforts to cut dependence on Russian gas, and Gazprom sources suggested the EU was acting out of worry over progress on Russia's pipeline projects that would increase Moscow's share of European energy markets. Officials from the executive Commission launched the raids in central and eastern European states to investigate firms involved in the supply, transmission and storage of natural gas. The Commission has said the raids were linked to suspicions about anti-competitive practices. A Commission official, who declined to be named, told Reuters the raids were part of the EU's efforts to wean itself off reliance on Russian gas and concerns about Gazprom's power as a state-controlled entity. "The Commission has been much concerned about Gazprom for quite a while. There have been a number of informal discussions between the Commission with EU governments and companies about Gazprom," said the official. Gazprom is Russia's biggest company and the world's largest gas producer. President Dmitry Medvedev is a former chairman, and some critics have accused Prime Minister Vladimir Putin of using energy exports as a lever in geopolitical maneuvering. Gazprom sources suggested the probe was linked to progress on its South Stream pipeline project, a rival to the EU-backed Nabucco link that would bring Caspian region to Europe while bypassing Russia. "My guess is that it comes as Russia is speeding up its projects, including the South Stream underwater link," one of Gazprom sources said. The raids were carried out as rivalry between Russia and the EU over Caspian hydrocarbon resources heats up and a pricing row with Ukraine, a transit country for Russian gas supplies to Europe, persists. Gazprom, Russia's largest company with capitalisation of $113 billion, is looking to increase its gas supplies to Europe this year by 12 percent to 155 billion cubic metres. It also eyeing a 30 percent share of the European gas market, up from around 25 percent now, in coming years. In a statement published on Wednesday the company said that the Commission had not informed it of any claims and the raids did not amount to accusations it had broken competition law. Gazprom added that it was ready to fully cooperate over the probe with the EU authorities. The raids were carried out in Gazprom's subsidiaries including Gazprom Germania and the Czech Republic's Vemex, which earlier this month bought a controlling stake in Czech energy retailer RSP Energy. A Commission spokeswoman said regulators had just begun their investigation and had not yet drawn any conclusions. "We're at the beginning of the investigation, we have our suspicions and we have to see whether these are confirmed on the basis of the evidence we find and our analysis," spokeswoman Amelia Torres told a daily news briefing in Brussels. THIRD ENERGY PACKAGE The EU is working on implementation of the so-called Third Energy Package, which imposes limits on the ownership of EU pipeline infrastructure by gas suppliers and calls for the "unbundling" of over-concentrated ownership. Under the rules, Russia could be forced to sell off parts of its pipeline network in the EU, which has sought to liberalise the gas and power markets in recent years. Wielding its antitrust tools and the threat of fines up to 10 percent of a company's global turnover, the EU executive has in recent years forced E.ON (EONGn.DE: Quote, Profile, Research), RWE and ENI to open up or sell their pipelines to rivals. E.ON and GDF had also to dismantle their market-sharing deals. A group of experts from European regulators is expected to meet Russian colleagues in Moscow on Oct. 6-7 to discuss the package among other issues. Vladimir Feigin, president of the Energy and Finance Institute in Moscow and a member of the Russian delegation, said the European Commission was taking a "dangerous path" with the raids. "It's not a simple demonstration of muscles.... There are lots of issues, which are highly politicised, including Gazprom's long-term contracts," he said. These contracts have been the subject of heated debates with the Russian company's clients, including Germany's E.ON (EONGn.DE: Quote, Profile, Research), which call for a spot price mechanism as a way to obtain cheaper gas. Gazprom sources told Reuters that it may take years for the European Union's competition authority to analyse the results of its raids and draw any conclusions. (Additional reporting by Melissa Akin in Yuzhno-Sakhalinsk and Charlie Dunmore and Foo Yun Chee in Brussels; Editing by Douglas Busvine, Steve Gutterman and Anthony Barker) Gazprom Gas Supply Contracts Are Focus of EU’s Antitrust Probe 28, 2011, 8:23 PM EDTBy Aoife White and Anna Shiryaevskaya Sept. 29 (Bloomberg) -- OAO Gazprom’s natural gas contracts are the focus of European Union antitrust investigators’ raids across central and eastern Europe that sought to uncover information on prices and supplies to customers.The probe is looking at companies with long-term natural gas supply contracts with Gazprom and was “a way to circumvent confidentiality clauses” that prevent regulators from getting data on capacity, Bulgaria Energy Minister Traicho Traikov told reporters in Sofia.Gazprom, which supplies about a quarter of European gas needs, has been looking to further expand in Europe, its biggest market by revenue. At the same time, Europe’s dependence on Russia’s state-owned gas monopoly has spurred the EU to try to diversify energy supplies and trade more gas within its borders by opening up markets and pipelines.“We are on the verge of a battle between the cartel of consumers and the cartel of suppliers,” Alexander Rahr, an analyst at the Berlin-based German Council on Foreign Relations, said by phone yesterday. “The EU did a bit of muscle-flexing, as Gazprom is trying to reach separate agreements with companies behind Brussels’ back.”Companies found to violate EU competition rules can be fined as much as 10 percent of annual revenue. Earlier EU probes led RWE AG to sell its gas-transmission network and E.ON AG to shed its German power grid in settlements that helped them avoid large penalties.Watching Probe ‘Closely’Gazprom said Sept. 27 that EU officials visited its German and Czech units to study documents and that the company was cooperating with regulators. The raid doesn’t mean that Gazprom breached any antitrust rules, both Gazprom and the EU said.RWE AG, E.ON AG AG’s Ruhrgas and Hungary units, OMV AG and Poland’s Polskie Gornictwo Naftowe I Gazownictwo SA said Sept. 27 that they were also raided by the European Commission. As many as seven other companies in Bulgaria, Latvia, Estonia and Slovakia also said they were raided.Russia expects the EU investigation to respect the rights of Russian investors and gas suppliers, the country’s energy ministry said in an e-mailed statement. Russia is watching the probe “closely,” Prime Minister Vladimir Putin’s spokesman Dmitry Peskov said by telephone.Destination ClausesEU regulators are likely to focus on so-called destination clauses in Gazprom contracts signed in the 1980s and 1990s that forbid customers from selling gas outside one country and now contravene EU rules that encourage gas to be sold across the 27- nation bloc, said Chris Rogers, an analyst at Bloomberg Industries.“One of the problems with gas contracts is that they’re super-secret,” Rogers said in a telephone interview. The only way for regulators to secure information on gas prices or volumes “is if they go and grab them for themselves.”A lengthy EU investigation “makes life more complex” and may slow down negotiations on new contracts between Gazprom and two of its biggest European customers RWE and E.ON, Rogers said.Gazprom has been in arbitration with RWE, its main partner for supplying the Czech Republic, and E.ON, Germany’s biggest utility, about prices for gas under long-term contracts. E.ON and RWE are seeking to weaken the link between gas and oil prices in Gazprom’s supply contracts as oil costs surged. The companies lost hundreds of millions of dollars in the past year as they sold gas to customers at less than it cost to source.Selective DiscountsThe raids may pressure Gazprom to provide the same pricing to all European gas customers, Valery Nesterov, an oil and gas analyst at Troika Dialog in Moscow, said by phone. Gazprom has “selectively” provided discounts to some partners, he said.While the raids are the first time Gazprom has been targeted by EU antitrust regulators, the company in June said that the European Commission set “unacceptable conditions” for the company’s planned purchase of a stake in Central European Gas Hub AG in Austria.“Europe doesn’t want to give away control of the market to Gazprom fearing it may take roots there,” Rahr said. “The EU is making its position tougher while Gazprom just wants to make money in the EU.”The EU approved legislation in 2009 to spur more competition and investment in the energy industry that would separate companies’ control over energy infrastructure and energy supplies. The EU separately plans to oversee energy contracts between European nations and suppliers such as Gazprom to make sure they respect competition rules.Lithuania’s government in January asked the EU to investigate Gazprom for refusing to cut gas prices after it announced it would split ownership of gas sales and transmission. Overgas, Bulgaria’s biggest private natural gas distributor which is partly owned by Gazprom, also complained to the EU in November after state-owned Bulgartransgaz AD blocked access to a high-pressure pipeline, Overgas spokeswoman Nerry Terzieva said in a phone interview.--With assistance from Elizabeth Konstantinova in Sofia, Ilya Arkhipov in Moscow, Milda Seputyte in Vilnius, Ilya Arkhipov in Moscow, Aaron Eglitis in Riga, Edith Balazs in Budapest, Ott Ummelas in Tallinn, Radoslav Tomek in Bratislava, Stefan Nicola in Berlin, Zoe Schneeweiss in Fuschl am See and Ben Farey in London. Editors: Anthony Aarons, Will KennedyTo contact the reporters on this story: Aoife White in Brussels at awhite62@. Anna Shiryaevskaya in Moscow at ashiryaevska@To contact the editor responsible for this story: Anthony Aarons at aaarons@.The Empire Strikes Back: European Energy and the Return of Gazprom , 28 September 2011 00:00 Matthew Hulbert and Dr. Christian Brutsch Compared to the Eurozone’s public finances, European energy policy looks decidedly bright. Capacity margins are high, prices are low, even emissions have dropped of late. The EU's 'Third Package' of gas and power market reforms, which took effect in March, is set to further enhance supply security, increase competition and improve consumer choice and services. It all sounds very good, but the problem is that such 'policy hits' are grounded in weak fundamentals–not silver bullet policy making.??Shale gas developments have turned LNG markets on their head, while deep seated financial frailties and economic slumps have kept fundamentals weak and growth anemic across EU27 states. That's making energy policy look good, and political populism all too easy. But with growth showing tentative signs of recovery and climate policies still placing a premium on natural gas over coal, complacency and energy populism will come with costs. Nowhere more so than on natural gas – and the 158 billion cubic meters (bcm) of Russian supply that the EU will gobble up this year. After dipping to 2002 levels in 2009, EU gas consumption has surged by 7.2% in 2010, with most analysts expecting that by 2013, demand should have rebounded to pre-crisis levels. Increased LNG shipments to Asia have already added upward pressure on prices, and Germany’s snap decision to decommission its last nuclear power plants in 2022 will sustain demand growth for the foreseeable future. The European Commission, meanwhile, has taken its eyes off the Asian ball and remains undecided how it should deal with Russia, its single largest supplier. If RWE, Germany's second largest electricity producer, and Gazprom, the world's biggest gas firm, implement their recently announced Memorandum of Understanding (MoU) and establish a joint venture to manage coal and gas plants across Germany, the UK and the Benelux countries, the EU's Third Package might well follow Germany’s 2011 decision to toss nuclear power into the dustbin of history.? ?Thanks to European politicking, Moscow holds the energy aces. Berlin's accelerated nuclear phase out may be popular, but it is likely to add as much as 20bcm/year to German gas imports alone. The French ban on shale gas drilling is hardly going to help reduce energy dependency, while Europe's renewed commitment to democracy and good governance in its neighborhood may chime with European values, but has done little to reassure the authoritarian rulers who control alternative upstream sources in Central Asia and the Middle East that Europe is a credible energy supply bet. Any European state that follows Germany's nuclear example, emulates France's disdain for fracking,? or thinks it can 'play nice' and win with suspect neighbors will simply strengthen Russia’s hand.Missing the point? Overly dramatic? Perhaps. Conventional wisdom in Europe holds that Gazprom is in deep trouble.? The main reason for this relates to cheap spot markets that have been growing in liquidity. Oil indexed gas from Russia is deemed too expensive for European consumers to bear, with independent benchmarks on Western European hubs the preferred option. Move over or lose market share is the clarion call from consumers: current price spreads clearly point towards this way of thinking between UK wholesale hub and oil-indexed Russo-German border prices. Unsurprisingly, producers have been screaming murder. In 2010 Gazprom reportedly agreed to cut oil indexation levels in some long-term contracts to 85%, but insisted that the three years exemption would not change its long-term contract system. Algeria went a little further and called for the formation of a fully fledged gas cartel. So far, it was only really Norway that took price corrections on the chin by rapidly revising contractual relations to retain its stake in European supplies.You’d think that with Gazprom on the ropes and shale gas starting to blossom beyond US shores that European capitals would not offer Russia an opportunity to regroup. Not so. In June, the German government shocked utilities, already out of the money on oil-indexed prices and burdened with an onerous nuclear fuel tax, when it reversed the October 2010 amendment that had extend the lifespan of nuclear plants by an average of 12 years in exchange for an annual €2.3bn ‘fuel rod tax’. Faced with a massive capital expenditure program, ratings downgrades and a negative outlook, RWE went cap in hand to Gazprom to offer the Russian company a major downstream stake in a rare and combustible blend of commercial and political mercially, RWE’s gamble might pay off if Gazprom’s entry into the downstream game made it more amenable to price discounts that would narrow the gap between term prices and lower hub-based spreads. A more flexible Russian partner might also add pressure on E.On, RWE’s main competitor in Germany, whose supply contracts expire in 2012 having voiced its preference for '100% spot'. But the fact that Alexey Miller, chairman of Gazprom, has been talking with both RWE and E.On about prospective tie-ups suggests that he is far more likely to pitch the utilities against each other rather than to make concessions. If discounts are offered, they will be given on the strict understanding that oil indexation will remain the basis of Russian supply pricing in any long term take-or-pay contract. In short, Gazprom intends to use RWE and E.On as 'sledge hammers' to crack the European spot market 'nut' before it really takes off. That would be a shame. Spot markets can obviously play out any which way in terms of price, but moves towards independent gas benchmarks would have been in everyone's long term market interests – at least within the European context. To that extent, German politics has given Gazprom an unnecessary eleventh hour reprieve to retain European market share and a Russian 'market price'. Politicians will no doubt blame RWE for using Gazprom as collateral in its fight to overturn Berlin's nuclear ban. But they should keep in mind that the power utility has lost roughly 20% of its market capitalization since the German parliament decided to accelerate the nuclear phase out and wipe out roughly 30% of RWE’s installed capacity. The policy message is thus very clear. Chancellor Merkel must rethink the nuclear turn or RWE will hand Gazprom the keys to European downstream doors. A classic double catch: RWE is using Gazprom to salvage its nuclear position, just as much as Gazprom is using RWE (and potentially E.On) to maintain its pricing policy.Eventually something has to give. If the German government doesn't budge on nuclear, RWE might find that its brinkmanship leaves it little choice but to turn the MoU with Gazprom into a contractual commitment. In the interests of consumers, industry and tax payers, things arguably shouldn’t get that far; if German courts agree that the government violated the utilities' property rights, or if Berlin comes to its senses and reinstates the October 2010 consensus that stretched the phase out until 2036, they probably won’t. But as the Eurozone debt crisis has shown, German politicians can be stubborn defenders of voters’ preferences, no matter the costs. And energy populism has a price. Even if Berlin keeps some nuclear generation capacity online, Germany will still have to look to gas to fill most of its gaps. This is exactly what Gazprom is banking on. Germany's nuclear window has offered the Russia a perfect opportunity to keep exports high and prices firm. If it all goes to plan, Russia will be able to feed Europe with discounted gas—on its own joint venture terms. Russian hugsGiven the complexity of the games underway, it’s impossible to say how the RWE-Gazprom MoU will or won't play out. But the simple fact that utilities are considering the comforts of a Russian bear hug has set alarm bells ringing in Brussels and beyond. And with good reason: German brinkmanship has exposed the deep rooted frailties that pervade European Energy Policy on pricing, supply diversification and unbundling. Besides threatening a return to the oil-indexed dark ages, an RWE-Gazprom tie-up could deal the final blow to one of the few supply side measures among the EU’s 2020 energy infrastructure priorities: the Nabucco pipeline.? RWE has long been the driving utility force behind Nabucco, and it does not take a clairvoyant to see the 'synergies' created from a tie up would ensure RWE tucked in behind Gazprom's South Stream initiative, not to fight the Russian giant tooth and nail for strategic control of the 'Southern Corridor'. No matter how much Brussels has invested branding the likes of TAP, AGRI or ITGI as 'European' projects, it is highly unlikely that any other pipeline will see the light of day besides South Stream. Today's spread bets on South Stream and Nabucco from countries and utilities involved, displays just how little credence 'projects of European interest' have among those who understand that to be commercially viable, one, and only one, pipeline project can prevail.This hits on a deeper European problem. Even if Nabucco were to succeed, and even if Azerbaijan were to bet on the EU, rather than Russia, Gazprom would still have a downstream say. It already controls 20% of the German gas market through linkages with BASF, Wintershall and Wingas, and looks determined to use North Stream take offs to increase its stake in the Netherlands, France and the UK. More importantly, Gazprom also holds a 50% stake in OMV's Baumgarten transmission hub that is designated to connect Nabucco to European pipelines. Last but not least, the Russian firm has ramped up storage-capacity across multiple markets including Austria, Hungary and Netherlands, with a view to expanding facilities in Serbia, France, Belgium and Britain.This underpins why the RWE-Gazprom tie up is so crucial. Although the deal would have to overcome political opposition in Germany and to conform to the growing body of legislation that envelops the Third Energy Package, it will be hard to close the 'vertical integration' flood gates once Gazprom claims a major stake in German production and distribution. The Russian company is already talking with France’s GDF-Suez (a Nord Stream partner) and Italy is no doubt on the list. As Central and Eastern European states will be left to fend for themselves, the Third Package might well be remembered as a lore of 'legal niceties'.? Russo-German political and commercial realities will hold sway. As the fine print of European legislation points out, national regulators should take the 'utmost account' of the European Commission’s terms and opinions. But this won't cut much ice with utilities whose profits and survival depend on swap agreements with Gazprom, or with Moscow once Gazprom has a say on downstream rents.From regional supplier to global playerVertical control is of course exactly what any ambitious producer state dreams of. And the bad news for Europe is that things might get worse. While the EU has been caught up in increasingly parochial squabbles over energy efficiency, renewables, smart grids and the control of transmission systems, Gazprom has turned to the East, and is reportedly close to signing a 68bcm/y deal with China. True, we've been there before. Gazprom and CNPC struck a similar gas MoU in 2006 only to see it flounder on pricing problems. But the rationale of linking one of the world's largest energy consumers to one of the world’s biggest gas reserves remains as compelling as ever, and Beijing has already moved the debate on by offering prospective advanced payments of $25-40bn in return for 30bcm/y of discounted gas. Although Gazprom will haggle to raise the current (alleged) $300/million cubic meters (mcm) target price, Moscow knows that it needs Chinese cash to consolidate its Eastern Gas Program and that spare funds could enable it to upgrade the integrated gas production, transportation and supply system that connects Eastern Siberia and the Far East. Gazprom also knows that while China may not be prepared to pay European gas prices, it is likely to agree to some kind of oil index link. Beijing is too cautions to buy into a buyers' market, not the least because both Sakhalin and Shtokman have been earmarked for LNG development and might produce as much as 62 million tons a year by 2030. Even before the Fukushima meltdown boosted Japanese demand, Gazprom had been discussing prospective LNG deals with the likes of South Korea, India, Vietnam, Thailand and Singapore down the line to secure market presence and market share well beyond traditional Western European hunting grounds. ?There is no point in pretending that European politicians have woken up to these developments, let alone contemplated a 'doomsday' scenario in which Russia links its East Siberian reserves to the Unified Gas Supply System in a way that would allow it to switch between LNG or pipeline exports and route supplies to either the Atlantic or the Pacific basin at a mouse click. Even if the engineering and financial strains mean that Yamal will feed the EU for some time to come, Europe needs to understand that as the gravitational pull of supplies is shifting eastwards, Gazprom's—and Russia's—strategic focus will be on arbitrage not compromise.?RealignmentGazprom's return thus highlights a number of bad moves the EU made while it was lulled by a soft gas market. Investment in storage capacity has been low, reforms to reduce pricing pressures have been meek and grid integration has been treated as a regional, if not local problem. More recently, the EU's plans for upstream diversification have been debunked by its blatant failure to project military power across the Middle East and North Africa, and Germany's decision to phase out its nuclear assets just as tighter markets were heralding the golden age of gas has been reckless at best; no matter what showings in local elections will prove, voter 'preferences' in Germany will not eclipse rising Asian demand, the energy needs of a European recovery, or potential supply side constraints as the downside risks of fracking and cracking unconventional gas become more apparent.?? ?European posturing has not only placed supply side eggs into predominantly Russian baskets, it has also encouraged Gazprom to renew its efforts to move downstream across the European value chain. If Russia manages to cement supplies to the East and enhance internationalization strategies across North African and Central Asian markets to boot, the prospects for European energy will be incredibly bleak, and even more so when markets will tighten.? Who knows, we might be truly grateful to retain an oil-indexed link by that stage to keep a lid on spiraling gas prices, and applaud those who turned a policy failure into a 'crowning success'. But like with the Eurozone debt crisis, we will still wonder whether the price to appease the German voter is worth paying. ? Contributor Matthew Hulbert is the Lead Columnist for the European Energy Review based in Amsterdam and Dr.Christian Brutsch is?Senior Lecturer, University of Zurich ................
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