Russia - WikiLeaks
Russia 101006
Basic Political Developments
• Cyprus-RF strong relations tested by time—Christofias: A large number of agreements to be signed during President Medvedev's visit are indicative of the ongoing efforts being made by both sides not only to strengthen and improve the legal basis for cooperation, specifically in such fields as finances, investments, judiciary, social welfare, education, and culture, but also to deepen our interaction in healthcare, science, and joint research work.
• Russian president heads to Cyprus - Medvedev, who will be accompanied by a large delegation, will be met at Larnaca Airport by Minister of Foreign Affairs Markos Kyprianou.
• Kremlin chief to court Algeria on Vimpelcom deal - Russian President Medvedev to visit Algeria; Kremlin to seek Algeria's help on Vimpelcom purchase; Russia's TNK-BP seeking to buy BP assets in Algeria
• Luanda: Russia considers Parliament speaker's visit "extremely important" - The Russian Federation regards as “extremely important” the visit the Angolan National Assembly (Parliament) speaker, Paulo Kassoma, is paying as from Wednesday to that European country as it will permit an exchange of views concerning great areas of cooperation.
• Russo-Brazilian business forum opens in Sao Paulo Wed - A joint session of the Russia-Brazil and Brazil-Russia Business Councils will be attended by the CEOs of companies operating in the fields of industry, trade, agriculture, the energy sector, science, innovations, and banking.
• Test launches of Russia's troubled Bulava missile to be held Thursday - Test launches of Russia's troubled Bulava ballistic missile will be held in the White Sea by the end of the week, a source in the administration of the northern Russian town of Severodvinsk said.
• Sukhoi begins flight trials of refurbished Su-33 fighters - The multi-role carrier-based fighters are being refurbished in the Russian Far Eastern city of Komsomolsk-on-Amur under a state defence order in 2010, Sukhoi said.
• US may opt for Russian route for Nato supplies - As the Pakistani authorities have decided to claim approximately $600 million from the US-led Nato/Isaf forces stationed in Afghanistan as compensation charges for using the country’s extensive road network to transport food and military supplies to the war-torn Afghanistan, the Centcom has moved swiftly to open an alternate supply route to Afghanistan via Russia and Central Asia, bypassing the ambush-prone main supply routes through Pakistan.
• U.S. administration seeks soonest ratification of arms treaty with Russia - The U.S. administration has been pressing for the soonest ratification of a new strategic arms reduction deal with Russia, a U.S. assistant secretary of state said in her speech to the First Committee of the UN General Assembly.
• US seeks big vote on Russia nuclear arms pact - Rose Gottemoeller said chances for ratification are good because the administration has thoroughly briefed the Senate about the New START treaty. She also pointed to the 14-4 bipartisan vote in the Senate Foreign Relations Committee in favor of the treaty.
• 4 GOP leaders warn of uranium mine sale - Four leading House Republicans, citing national security concerns, are urging Treasury Secretary Timothy F. Geithner to block the sale of a Wyoming-based uranium mine to an arm of the Russian government's main nuclear agency.
• US venture capital industry takes second high-level trip to Russia - A delegation of several major venture capital investors, executives and government representatives that may include California Governor Arnold Schwarzenegger is going to Russia in order to explore investment and technology collaborations and meet with Russian President Dmitry Medvedev and others, participants told Dow Jones VentureWire.
• Russian Cybercrime Thrives as Soviet-Era Schools Spawn Hackers - “The number of hackers reflects how many good engineers we potentially have in this country,” Vladimir Dolgov, the president of Google Inc. in Russia, said in a Bloomberg Television interview in Moscow. Russians committed more than 17,500 computer-related crimes last year, or 25 percent more than in 2008, according to the Interior Ministry’s latest statistics.
• Russia's defense minister arrives in India - The Defense Minister of the Russian Federation Anatoly Serdyukov, has arrived in India for scheduled talks with the head of the local defense department Arakkaparambilom Kurianom Anthony.
- India, Russia to discuss N-sub lease and Gorshkov refit
- India, Russia to hold annual military cooperation talks - Further expansion of bilateral military ties will be high on the agenda of the 10th annual meeting the India-Russia Inter-Governmental Commission on Military-Technical Cooperation here Thursday, an official said.
- FGFA, nuke sub on discussion table at Indo-Russian talks
- Russia may offer strategic technologies - “Growing international competition for the Indian defence market will push Russia to expand its cooperation with India into new sectors where it has no rivals, such as strategic weapons and technologies,” said Konstantin Makienko of the Centre for Analysis of Strategies and Technologies (CAST) ahead of the 10th session of the India-Russia intergovernmental commission on military-technical cooperation.
• China and Russia strengthen strategic ties - By John Chan
• UPDATE 1-China's CIC wants to bid in Russia privatizations
• Izvestiya/Russia Today: The problem of terrorism and drug trafficking will be tackled by the entire world - A unique two-day event has begun in Sochi. The Security Council of Russia gathered representatives of 44 countries in the future Olympic capital to discuss security issues – starting with international terrorism and ending with natural disasters. The conclusions are unsettling: terrorists are getting closer to obtaining nuclear weapons and natural disasters are becoming more and more unpredictable.
• Russian says Europe needs unified anti-terrorist policies - At the PACE session in Strasbourg the Russian delegation said Europe needs to develop unified anti-terrorist legislation, to avoid double standards and harboring international terrorists.
• Thai premier to have final say in Bout's case
• Russia warns against US meddling in Thailand-Bout case - Foreign Minister Sergei Lavrov also denied any "trade-off" between Washington and Moscow on the Russian national, the so-called "Merchant of Death", whom the United States wants extradited on terrorism charges.
• Russia demands justice in alleged arms dealer's case
• Moscow-Berlin-Paris triangle emerging in Europe - Germany has long been Russia's best friend in western Europe thanks to ex-chancellor Gerhard Schroeder's vision for close ties between Moscow and Berlin, but more recently France has thrown its hat into the ring and Paris is actively chasing Moscow to improve ties - and get a bigger piece of the lucrative Russian consumer and energy businesses.
• Russia To Offer 12-Year "Gas Compromise" To Poland - A decision will be made tomorrow on October 7 at Russian-Polish negotiations on Russia's schedule for delivering gas supplies to Poland, Vslukh reports adding that the bilateral long-term contracts may be trimmed by 12 years.
• Late Polish president's twin snubs memorial event in Russia - Polish opposition party leader Jaroslaw Kaczynski said he would not attend memorial events in western Russia to mark six months since the deadly plane crash claimed the life of his twin brother.
• Lavrov’s Visit to Poland: Is Russia’s Rapprochement with Poland Real?
• Duma to discuss draft resolution on Russian-Belarusian relations - The Russian State Duma on Wednesday entered a resolution on Russian-Belarusian relations, drafted by the Committee for CIS Affairs and Relations with Compatriots, on the agenda in a 349 to 57 vote with one deputy abstaining.
• Russian TV resumes media attack against Lukashenko - Russian state-run TV has resumed a media attack against Belarusian President Alexander Lukashenko, Ekho Moskvy radio station said on Wednesday.
• Russian Navy proposes plan to re-launch logistics base at Port Cam Ranh - source
• Nezavisimaya/Russia Today: Wiretapping in the law - The current Code of Criminal Procedure allows massive rights violations on the part of the law enforcement agencies
Medvedev to receive Moscow mayoral candidates' list Saturday
• Acting Moscow mayor seeks ruling party membership
- Luzhkov Firing Gets Surprise Support From Russians, Poll Shows
- Kommersant/Russia Today: Oleg Mitvol prescribed rest
- First they toppled the Moscow mayor, now they're after his sculptor - By Kathy Lally
- Doing Business Under a New Mayor - By Chris Weafer
• Vladivostok Islamists recruited fighters for the war in Afghanistan - Employees of FSB of Russia eliminated in the Primorsky Territory Islamist group of radical clerics. According to intelligence agencies, its members were engaged in the region looking for recruits for the militant camps in Pakistan and Afghanistan, reports on Wednesday the Vladnews portal
• Two female accomplices of killed gunman detained in Makhachkala
• In a St. Petersburg garage drugs police found 120 kg of hashish
• PRESS DIGEST - Russia - Oct 6
- Russia's envoy to the North Caucasus, Alexander Khloponin, has developed a development plan for the volatile region including a return of Russians who previously lived there as well as boosting employment, the daily writes.
- Russia's Health Ministry is planning a ban on advertising promoting beer which contains more than five percent alcohol, the paper writes.
- Deutsche Post DHL (DPWGn.DE: Quote, Profile, Research) earned more than 300 million euros in 2009 in Russia, the daily writes.
- The chairman of Moscow's arbitrage court will be dismissed before the end of his term as he had a close relationship with sacked Moscow mayor Yuri Luzhkov, the daily says.
- Russian retailer O'key Group SA plans to raise up to $500 million via an initial public offering (IPO) in London before the end of 2010, the daily writes.
- By the existing criminal code procedure in Russia, law enforcement agencies have the right to tap every Russian's phone, the daily writes.
- The paper runs a list of the 50 best companies to work for, according to Universum study.
- Ex-Moscow mayor Yuri Luzhkov has become dean of a Moscow university and will earn 1 rouble ($0.033) a month, the popular daily writes.
• RIA Novosti Press Review for Wednesday, October 6, 2010
• Fugu fish soup leads to mass poisoning in Far East
• Will there be a demand for irradiated agricultural products in Russia? - A dangerous experiment comprised of irradiating food products with gamma radiation now being conducted in the western Russian Republic of Tatarstan could be replicated throughout the country. Andrei Ozharovsky, 05/10-2010 - Translated by Charles Digges
• Russia set to become a leader in standards of living - Russia is set to become a leading nation in terms of key indicators of standards of living. This came in a statement during a meeting of the UN General Assembly Third Committee on Tuesday by the Russian representative Nikolai Rakovsky.
• Russia votes on banning psychic charlatans - Russian lawmakers on Tuesday backed a bill banning the country's faith healers, witches and assorted sorcerers from advertising their services in a potential blow to the booming business.
National Economic Trends
• Putin Offers $3Bln for 'Acute Problems' - An additional 91 billion rubles ($3 billion) will be funneled into the federal budget by year's end to “solve a number of acute problems without waiting until January,” Prime Minister Vladimir Putin said at a Presidium session Tuesday.
• Government Focuses on Capital Investment - The level of Russia's public debt is much lower compared with most developed countries, where the figure has already exceeded “the safety threshold” of 60 percent of gross domestic product, Putin said, adding that Russia's public debt currently stands at only 11 percent of GDP and is not likely to exceed 20 percent.
• Russia May Sell Full Stakes in State Companies: Putin (Update1)
• Russian Economy Will Stagnate on $70-$80 Oil - RBS Tim Ash
• Strategy Monthly - The Impact of Higher Government Spending
• CBR sees $4.2 bln capital outflow in 3Q10, estimates current account surplus at $8.7 bln
• Ulyukayev: A Weak Currency Is Not a Recipe for Growth
• Central Bank comments on September loan growth
Business, Energy or Environmental regulations or discussions
• VTB Capital:
o Russia Calling! Prime Minister Vladimir Putin Speaks
o Presidential Aide Arkady Dvorkovich speaks at the Russia Calling! Investment Forum
o Minister of Finance Alexey Kudrin speaks at the Russia Calling! Investment Forum
o First Deputy Chairman of the CBR Alexey Ulyukaev speaks at the Russia Calling! Investment Forum
• Mechel, Polyus Gold, Rosneft: Russian Equity Market Preview
• Bank Yields Hit Low as VTB Spurs Consolidation: Russia Credit
• Ministry of Energy gives green light for capacity auction
• Mosenergo to get priority over local producer MOEK to load its capacity
• Semenov elected as Svyazinvest CEO
• Russia's Mostotrest to float 25 pct shrs in IPO
• Russia Profile: Public Offering - Up to 113 companies from Russia, Ukraine, Kazakhstan and other CIS countries have announced plans for an IPO since January, according to the IPO-tracker report published by The PBN Company on Monday. It seems Russian firms still harbor plans to flood the domestic and international markets with bonds and share placements after a cash drought during the country's first recession in a decade.
• The cost of Russian roads - Ben Aris in Moscow
• China Investment Corporation, China’s $300 million sovereign wealth fund, would like to bid in privatization auctions of Russian state assets, which are expected to raise $50 billion, a CIC vice president said Tuesday.(Reuters)
• [pic]LUKoil and Vanco Energy are planning to invest an additional $200 million in an exploration program in Ghana next year and in 2012. (Bloomberg)
• [pic]The Central Bank will only raise rates if economic growth is “stable,” bank First Deputy Chairman Alexei Ulyukayev said Tuesday. (Bloomberg)
• [pic]Boydak Holding, a Turkish group with interests in furniture and banking, will build a furniture plant near Moscow in six months. (Bloomberg)
Activity in the Oil and Gas sector (including regulatory)
• Rosneft halts talks with LUKoil on buying Caspian Oil Consortium stake - Russia's largest oil company Rosneft has broken off talks with LUKoil to buy its stake in the Caspian Pipeline Consortium (CPC), LUkoil Vice President Leonid Fedun said on Wednesday.
• Russian Companies Interested in African Reserves - Meeting in Moscow with Ghana energy Minister Joseph Oteng-Adjeem, Russian Energy Minister Sergey Shmatko said Russian companies were interested in African crude reserves. Shmatko said Ghana was a key Russian partner in Africa, the Russian Energy Ministry press office reported in a news release.
• Fedun wants to increase LUKOIL stake to 10 pct
• LUKoil mulls listing on Asian stock exchange in 2011
• LUKOIL Shows Interest in Baku-Tblisi-Ceyhan Pipeline
• LUKOIL to complete own-share buy-up from Conoco by end-Oct, early Nov
• Russia Completes Enlargement of Yasmoveyskoye Field
• Rosneft Kurgannefteproduct paid up the dividends
• Medvedev to sweet talk Algeria for TNK-BP
• TNK-BP Poised to Acquire BP Algerian Assets in Foreign Expansion
• Russian energy companies to spend $6B exploring Turkmenistan’s Caspian shelf
Gazprom
• Putin Says Gazprom Market Value May Rebound Soon (Update1)
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Full Text Articles
Basic Political Developments
Cyprus-RF strong relations tested by time—Christofias
06.10.2010, 00.52
NICOSIA, October 6 (Itar-Tass) - The forthcoming visit by President Dmitry Medvedev of the Russian Federation to the Republic of Cyprus (RC) will not only become an "indisputable symbol of traditional contacts between Cyprus and Russia, but will also serve as a starting point for expansion of cooperation in various fields," Cyprus President Dimitris Christofias has told Itar-Tass in an exclusive interview ahead of the Russian leader's upcoming arrival which is expected on the night from October 6 to 7.
Christofias emphasized, "A large number of agreements to be signed during President Medvedev's visit are indicative of the ongoing efforts being made by both sides not only to strengthen and improve the legal basis for cooperation, specifically in such fields as finances, investments, judiciary, social welfare, education, and culture, but also to deepen our interaction in healthcare, science, and joint research work".
The Republic of Cyprus and the Russian Federation have developed "fine relations based on deep historical and cultural ties that have been linking our peoples for centuries," the RC President went on to say. "Following the declaration of the Republic's independence in 1960, the Soviet Union became one of the first countries, with which Cyprus established diplomatic relations," he recalled. "In the subsequent 50 years, both countries have built strong, versatile and friendly relations in the political, economic and cultural fields, the durability and significance of which have been tested and reaffirmed by time".
On the bilateral plane, Christofias said, "Relations between the two countries flourish in all fields and continue to develop on the solid political and legal foundation which was laid in the past years". "The full-of-energy Russian community that resides in Cyprus is an illustration of the historical and cultural contacts. At the same time it furnishes a basis for the strengthening of bilateral relations," Christofias said.
Russian president heads to Cyprus
|FAMAGUSTA GAZETTE |
|Wed, Oct 06, 2010 |
President of the Russian Federation Dmitry Medvedev arrives tonight in Cyprus for a state visit, during which Nicosia and Moscow will sign a series of bilateral agreements to further develop their relations.
Medvedev, who will be accompanied by a large delegation, will be met at Larnaca Airport by Minister of Foreign Affairs Markos Kyprianou.
The official welcoming ceremony will be held at the Presidential Palace on Thursday.
The President of the Republic of Cyprus Demetris Christofias and the Russian President will have a tete a tete meeting, at the Presidential Palace, followed by official talks and statements to the press.
They will sign the Action Plan, bilateral agreements and memoranda.
The Russian President will also meet President of the House of Representatives Marios Garoyian and the Archbishop of the Church of Cyprus Chrysostomos II.
Medvedev will inaugurate together with President Christofias the Russian Commercial Bank.
The government has described the state visit by the President of the Russian Federation as an historic event that will further enhance existing excellent bilateral relations.
Moreover, Cyprus Police will take all necessary measures to ensure the safety of the Russian President during his visit.
Medvedev will depart on Thursday evening from Larnaca Airport, where the Minister of Foreign Affairs will bid him farewell.
Kremlin chief to court Algeria on Vimpelcom deal
12:15pm IST
(repeats piece issued on Oct 5)
* Russian President Medvedev to visit Algeria
* Kremlin to seek Algeria's help on Vimpelcom purchase
* Russia's TNK-BP seeking to buy BP assets in Algeria
By John Bowker
MOSCOW, Oct 5 (Reuters) - Russian President Dmitry Medvedev faces an uphill battle on Wednesday when he tries to convince Algeria to approve the sale of its biggest mobile telephone operator and BP's Algerian assets to Russian companies.
Medvedev's ability to clinch mega deals for Russian business that are the hallmark of his patron, Vladimir Putin, will be put to the test on the complex transactions that depend on Algerian President Abdelaziz Bouteflika.
Medvedev makes a one-day official visit to Algeria on Oct 6.
Russia's Vimpelcom's (VIP.N: Quote, Profile, Research) bid to become the world's fifth largest mobile phone operator by buying control of Egyptian tycoon Naguib Sawiris's main telecoms assets for $6.6 billion is on the line. [ID:nLDE6930OI]
The jewel in the crown of the proposed deal is Orascom Telecom's (ORTE.CA: Quote, Profile, Research) local Algerian unit Djezzy, its biggest revenue earner, which Algeria's government says it wants to nationalise after a dispute over tax bills.
"The presence of Medvedev is not exactly a coincidence," said Elena Mills, a senior analyst at Alfa Bank in Moscow.
"Now a deal has been announced he can raise the issue of Djezzy. That Russia and Algeria both have oil and gas assets is helpful -- a common ground could be found."
Algerian law gives the government the right to block any sale of the Algerian unit and it has already rejected approaches from Egyptian President Hosni Mubarak and South African President Jacob Zuma to sanction the sale of Djezzy.
TELECOM TALKS
When asked whether Medvedev's trip to Algiers would improve things for Djezzy, Sawiris said: "Yes, definitely"
"I'm sure he's (Medvedev) going to raise the subject and he's going to try and help improve the circumstances under which Djezzy operates," Sawiris said in a phone interview. He also said that the deal had a 90 percent chance of going through.
Vimpelcom CEO Alexander Izosimov, who will travel to Algiers in Medvedev's delegation, said the timing of the acquisition announcement was linked to anticipated talks in Algeria.
Russian billionaire Mikhail Fridman, whose industrial group controls a 40 percent stake in Vimpelcom, will also travel with Medvedev's delegation.
Algeria has given no indication if it will allow a sale to Vimpelcom and on Tuesday said Vimpelcom's plans did not affect the government's plan to buy Djezzy. [ID:nAHM542024]
Medvedev also faces tough talks on getting Russian oil and gas majors more access to Algeria's energy sector.
Algeria says it is considering a request from BP (BP.L: Quote, Profile, Research) to approve the sale of its Algerian assets to TNK-BP (TNBPI.RTS: Quote, Profile, Research), BP's Russian joint venture.
Russia also wants state-controlled gas giant Gazprom (GAZP.MM: Quote, Profile, Research) to increase cooperation with Algeria's Sonatrach and arms sales to Algeria, Russia's biggest purchaser of arms in 2009, will be also be discussed, the Kremlin said.
"The large gas reserves in Algeria underscore the importance of cooperation between Gazprom and Sonatrach," Medvedev's top foreign policy aide, Sergei Prikhodko, told reporters in Moscow. "We are interested in developing cooperation."
Gazprom CEO Alexei Miller will accompany Medvedev to Algeria and though the gas giant did not acquire any fresh acreage in the last oil and gas bid round, it may try to pick up a concession in a licensing round now underway. [ID:nLDE681213] (Additional reporting by Dina Zayed and Alexander Dziadosz in Cairo, Melissa Akin in Moscow and Christian Lowe in London; writing by Guy Faulconbridge; editing by Myra MacDonald)
10/6/10 6:57 AM
Luanda
Russia considers Parliament speaker's visit "extremely important"
Luanda – The Russian Federation regards as “extremely important” the visit the Angolan National Assembly (Parliament) speaker, Paulo Kassoma, is paying as from Wednesday to that European country as it will permit an exchange of views concerning great areas of cooperation.
This was said by the Russian ambassador to Angola, Serguey Nenáchev, who told Angop the two parties will have the opportunity to continue the dialogue that started last year during the visit of the European country’s president to Angola.
"It is very important as it a high level visit that will permit the intensification of relations not only in the parliamentary domain,” he stated.
The diplomat recalled that the latest contacts at parliamentary level occurred in 2005, when a Russian parliamentary delegation visited Angola.
According to him, the relations between the two parliaments focus mainly on concert of position within the Interparliamentary Union.
Serguey Nenáchev on the occasion spoke of the need for an expansion of cooperation between the two world regions, through an exchange of parliamentary delegations from both countries.
To the Russian diplomat, the cooperation between the two countries must reach such other fields as law making and training of personnel.
In Moscow, Paulo Kassoma will meet with members of the local Parliament and travel to Saint Petersburg.
Russo-Brazilian business forum opens in Sao Paulo Wed
06.10.2010, 07.19
SAO PAULO, October 6 (Itar-Tass) - An important Russo-Brazilian business forum opens Wednesday in this city which is reckoned the business and financial capital of Brazil.
A joint session of the Russia-Brazil and Brazil-Russia Business Councils will be attended by the CEOs of companies operating in the fields of industry, trade, agriculture, the energy sector, science, innovations, and banking.
Gilberto Ramos, National Chairman of the Brazilian-Russian Chamber of Commerce and Industry, said in an Itar--Tass interview, "A period has begun in our relations when business content is being actively added to strategic partnership relations". His opinon is that "it has become particularly important in relations between Brazil and Russia to establish joint ventures in high-technology sectors". He pointed out, "Aircraft construction and air transport, the energy sector, infrastructure projects, and medicine are promising and attractive areas for bilateral business cooperation".
"Gazprom's decision to open its mission in Rio de Janeiro is viewed important in Brazil. We also welcome the intentions of Transaero to resume a direct air service between our countries in January next," Ramos emphasized.
The Russia-Brazil and Brazil-Russia Business Councils meet ahead of a session of the bilateral Intergovernmental commission on trade-and-economic, and scientific-and-technical cooperation. The Commission, which is to begin its work in Brasilia, the capital of Brazil, on Thursday, will review the implementation of the interstate agreements, concluded within the scope of strategic partnership relations. They refer to further steps in forming a technological alliance.
A number of joint projects in the field of energy are currently in the stage of elaboration. They refer, specificially, to Russian companies' participation in projects to build hydropower and thermal power stations, and those in aircraft-building, relating to possible establishment in Russia of an assembly plant to turn out EMB-145 aircraft.
Test launches of Russia's troubled Bulava missile to be held Thursday
09:47 06/10/2010
Test launches of Russia's troubled Bulava ballistic missile will be held in the White Sea by the end of the week, a source in the administration of the northern Russian town of Severodvinsk said.
"The launch of the missile is expected at the end of the week, most likely on Thursday," the source said.
The missile will be launched from Russia's Dmitry Donskoy nuclear submarine.
Bulava test launches were put on hold after a failed launch on December 9, 2009, which was caused by a defective engine nozzle.
The Bulava (SS-NX-30), a three-stage liquid and solid-propellant submarine-launched ballistic missile (SLBM), has officially suffered seven failures in 12 tests.
But some analysts think that in reality the number of failures is considerably higher, with only one of Bulava's 12 test launches being entirely successful.
MOSCOW, October 6 (RIA Novosti)
Sukhoi begins flight trials of refurbished Su-33 fighters
Posted On: Oct 06, 2010
MOSCOW (BNS): Sukhoi has begun ground and flight trials of Russia’s modernised Su-33 naval fighter aircraft.
The multi-role carrier-based fighters are being refurbished in the Russian Far Eastern city of Komsomolsk-on-Amur under a state defence order in 2010, Sukhoi said.
The fourth generation warplanes with horizontal takeoff and landing, and aerial refuelling capability, have been designed to defend naval ships from airborne attacks. The fighters feature folding wings and horizontal tail for hanger storage.
The Su-33s are armed with guided missiles such as the Kh-25MP, Kh-31 and Kh-41. The fighters can be used in both night and day operations at sea.
Sukhoi began producing the Su-33 fighters in the 1980s. Production of the first two prototypes of the warplane was completed in 1986-87. During the factory flight tests on Nov. 1, 1989, the first Su-33 landed on the deck of aircraft carrier ‘Admiral Kuznetsov’.
A modernised variant of the original Su-27K ‘Flanker’, the Su-33 entered service with the Russian Navy in 1994. An air regiment comprising 24 such fighters was formed to operate from Admiral Kuznetsov aircraft carrier.
US may opt for Russian route for Nato supplies
Pakistan bound to provide security to Nato containers’
Wednesday October 06, 2010 (1109 PST)
LAHORE: As the Pakistani authorities have decided to claim approximately $600 million from the US-led Nato/Isaf forces stationed in Afghanistan as compensation charges for using the country’s extensive road network to transport food and military supplies to the war-torn Afghanistan, the Centcom has moved swiftly to open an alternate supply route to Afghanistan via Russia and Central Asia, bypassing the ambush-prone main supply routes through Pakistan.
The decision is set to hurt Pakistan in financial terms as Islamabad currently receives a huge reimbursement of economic and military services and logistic support provided to the United States. The high command of the US-led allied forces stationed in Afghanistan had earlier warned Pakistan that its failure to prevent rising terrorist attacks targeting the Nato/Isaf supply trucks travelling to Afghanistan via Pakistan could force them abandoning Pakistan as a key supply route for transportation of food and military supplies. Since 2002, three-quarters of all the military equipment and food supplies for the US-led allied forces had been reaching Afghanistan via Pakistan. Before Islamabad decided to suspend the Nato/Isaf supplies last week in the wake of the allied forces’ incursions into the country’s tribal belt, almost 75 percent of the ammunition, vehicles, foodstuff and around 50 percent of fuel for the 140,000-strong international forces fighting against the Mulla Mohammad Omar-led Taliban militia in Afganistan were being transported via Pakistan.
Well informed diplomatic sources in Islamabad say the Centcom’s decision to choose an alternate supply route to Afghanistan was prompted by Pakistan’s refusal to give a timeline for the resumption of the Nato supplies, which remain suspended at the country’s Torkham border with Afghanistan for a full week now. The US-led allied forces had earlier apologised to the Pakistani authorities over their Thursday’s cross-border helicopters attack that killed three Pakistani soldiers and injured three others. Reacting sharply, Pakistan blocked the main land route Khyber Pass at Torkham for Nato convoys carrying supplies to Afghanistan.
However, the suspension of the Nato/Isaf supplies was not the only action taken by the Pakistani authorities. According to diplomatic sources, the decision makers in Rawalpindi and Islamabad further decided to claim $600 million from Nato/Isaf forces as compensation charges for causing damage to Pakistan’s extensive road network while transporting food and military supplies to Afghanistan since 2002.
The Pakistani authorities have decided to bill the Americans while maintaining that the country is suffering a huge loss of around $83 million annually due to the Nato/Isaf freight truckloads that have badly damaged the national highways network, for the last seven years. They have further argued that the average damage caused by Nato/Isaf on main routes leading to Afghanistan, was 20 percent of the total expenditure incurred on the repair and maintenance of the road infrastructure by the National Highway Authority.
Nevertheless, while ignoring the Pakistan demand for payment of compensation charges, the Centcom high command has decided to open an alternate supply route to Afghanistan via Russia and central Asia.
The diplomatic sources say the alternate supply route starts in the Latvian port of Riga, the largest all-weather harbour on the Baltic Sea, where container ships offload their cargo onto Russian trains. The shipments roll south through Russia, then southeast around the Caspian Sea through Kazakhstan and finally south through Uzbekistan until they cross the frontier into north Afghanistan. The Russian train-lines were in fact built to supply Russia’s own war in Afghanistan in the 1980’s. It was actually in July 2010 that the Americans had finally convinced the Russians to let them use the said supply route. Previously Russia had only allowed the United States to ship non-lethal military supplies across its territory by train. The diplomatic circles say the development is important because it signals Russian willingness to indirectly support the US-led Nato/Isaf forces stationed in Afghanistan.
Meanwhile, in Islamabad, a spokesman of the US Embassy on Tuesday claimed that Pakistani law enforcing agencies were responsible for providing security to containers and oil tankers of Nato while passing through its territory.
Rejecting the Islamabad Police’s claim that they were not responsible for providing security to the trucks/trailers carrying supplies for Nato forces in Afghanistan within the jurisdiction of the capital city and its adjoining areas, the US Embassy on Tuesday insisted that the Pakistani government was bound by a bilateral agreement to ensure safe passage of the Nato supplies to Afghanistan through its soil.
“How could the Islamabad Police chief exonerate himself from the Nato containers’ security is beyond my understanding. His government has an agreement with our government under which it is binding on them to provide security cover to the supplies passing through the Pakistani territory,” Richard Snelsir, the spokesman for the US Embassy in Islamabad, told our sources over phone.
The Inspector General of Police (IGP), Islamabad, Kaleem Imam, had earlier said that security to the Nato containers was not the job entrusted to the Islamabad Police in accordance with the laid down standard operating procedure (SOP). He, however, said that he had issued instructions to policemen deployed in the city to ensure safe passage of the Nato containers through the ICT limits.
“Nato itself should take measures to protect its convoys on the Pakistani soil,” the Islamabad IGP said. When asked, Snelsir was quick to reject Kaleem Imam’s point of view, saying Washington and Islamabad had an understanding which binds the latter to provide security to the Nato supplies on its soil en route to Afghanistan. He argued as to whose responsibility it would be by the way if a Pakistani truck or container moving on the New York roads faced some trouble.
“Definitely, the responsibility will solely rest with the US authorities,” he said to his own argument.He said he failed to understand how the Islamabad Police chief came up with such a claim.
The embassy’s spokesman also told our sources that under an agreement signed with the US Embassy, some Karachi-based shipping and transportation companies had been insuring all those aboard the vehicles carrying Nato supplies against such deadly attacks. He, however, declined to disclose names of the said companies.
A police official, when approached, told our sources that each trailer/vehicle carrying containers or other supplies, including vehicles as well as oil tankers taking fuel for the Nato forces in Afghanistan, had four people on board. “They include a driver, a helper and two armed guards detailed by a local private security firm,” the police official told our sources.
However, neither in the Sunday night attack nor in a similar attack a few months ago, almost in the same area, no resistance was put up by these armed security guards who were supposed to be aboard all these tankers/trailers and vehicles.
If Islamabad Police official’s assertions are taken as correct, then there should have been at least 40 well- equipped and trained armed security guards who should have put up at least some sort of resistance like shooting a few rounds here and there to ward off the purported Taliban attackers, who came on motorcycles and were said to be only eight in number.
Some police officials even claim that they can smell a rat in this practice of attacking and setting these oil tankers or trailers, carrying containers filled with all sorts of supplies for the Nato forces in Afghanistan, on fire.
“We have not heard even a single incident in which the two well-armed and well trained security guards provided by this private security company engaged by the US Embassy or the Consulate General in Karachi or somebody in the Nato or Isaf itself, have put up any resistance against such attacks. In fact, we have not even seen any of these guards after such incidents,” the police officials said.
“There is something wrong somewhere. When the Nato or the US has entrusted the responsibility of safety and security of these trailers/tankers and the staff on board these vehicles to some private security company, then the first thing they should be doing is that they should be investigating that particular security company as to why they had not deployed the security guards. They are supposed to be trained and believed to be very well equipped and yet they have never offered any resistance to such attacks,” the police officer argued.
“It sounds strange how these eight or so Taliban riding motorbikes managed to break through the security cordon, which these security guards deployed on each and every vehicle under the use of Nato, should have immediately formed wherever they are supposed to be stopping for any short or long period of time,” the police official argued.
“If there is a suspect, then first of all it is the security agencies engaged for providing the well-equipped and trained armed guards and the second are drivers and helpers of these vehicles,” the police officer argued.
End.
U.S. administration seeks soonest ratification of arms treaty with Russia
01:11 06/10/2010
The U.S. administration has been pressing for the soonest ratification of a new strategic arms reduction deal with Russia, a U.S. assistant secretary of state said in her speech to the First Committee of the UN General Assembly.
The U.S. Senate foreign affairs committee approved the treaty for ratification last week, but fears are that it will face opposition when it goes to a vote in the full house.
"On September 16, the Senate Foreign Relations Committee recommended by a vote of 14 to 4 that the full Senate provide its advice and consent to U.S. ratification of the New START Treaty. The Administration seeks this vote as soon as possible," Assistant Secretary of State for the Bureau of Arms Control, Verification and Compliance Rose Gottemoeller said.
She said the new treaty, signed by the Russian and U.S. presidents on April 8 in Prague, would provide transparency and predictability regarding the world's two largest nuclear arsenals while remaining a key element in the national security of the U.S. and its allies.
"The New START Treaty will also set the stage for further progress in fulfilling the goals of the NPT [Non-Proliferation Treaty] and for expanding opportunities for enhancing strategic stability," the U.S. diplomat said.
"We urge all other governments to help strengthen the global nuclear nonproliferation regime, and we hope that the UNGA will join with us in welcoming the significant achievement of New START," she added.
The treaty to replace the START 1 agreement that expired in December 2009 is yet to be ratified by both chambers of the Russian parliament and the U.S. Senate. The Russian and U.S. presidents earlier agreed that the ratification processes should be carried out simultaneously.
U.S. Secretary of State Hillary Clinton urged the Senate last Friday to ratify the treaty after the November 2 mid-term elections.
WASHINGTON, October 6 (RIA Novosti)
US seeks big vote on Russia nuclear arms pact
(AP) – 5 hours ago
UNITED NATIONS — The chief U.S. negotiator says the Obama administration is hoping for an overwhelming Senate vote this year to ratify the new arms control treaty with Russia.
Rose Gottemoeller said chances for ratification are good because the administration has thoroughly briefed the Senate about the New START treaty. She also pointed to the 14-4 bipartisan vote in the Senate Foreign Relations Committee in favor of the treaty.
Gottemoeller said the 1992 START treaty was approved by a vote of 95-0 and the U.S. is "looking for that kind of vote" again.
She told reporters after addressing the General Assembly's disarmament committee Tuesday the U.S. also wants begin negotiations on a treaty to ban production of atomic bomb material and try again to ratify the nuclear test ban treaty.
Copyright © 2010 The Associated Press. All rights reserved.
4 GOP leaders warn of uranium mine sale
Russian agency would take over
By Eli Lake
The Washington Times
8:50 p.m., Tuesday, October 5, 2010
Four leading House Republicans, citing national security concerns, are urging Treasury Secretary Timothy F. Geithner to block the sale of a Wyoming-based uranium mine to an arm of the Russian government's main nuclear agency.
The lawmakers are raising alarm over the proposed sale of a Powder River Basin, Wyoming-based uranium processing facility operated by Uranium One USA, a Canadian-based company, to Atomredmetzoloto, a subsidiary of the Russian government agency Rosatom, according to a letter obtained Tuesday by The Washington Times.
The sale was first announced on Aug. 31, and the lawmakers claim that it could give Moscow control of up to 20 percent of the U.S. national uranium extraction capability and a controlling interest in one of the country's largest uranium mining sites.
The GOP opposition to the business deal is the first major political clash over foreign investment in a sensitive U.S. industry since the fight over Dubai Ports World in 2006. In that clash, bipartisan outrage on Capitol Hill erupted when the George W. Bush administration tentatively approved the purchase of contracts to manage six major U.S. seaports by the company based in the United Arab Emirates.
This time, the proposed sale presents a test for President Obama and Secretary of State Hillary Rodham Clinton of their hopes to "reset" relations with Russia on a wide range of fronts. The administration is also pushing hard for the Senate to ratify a strategic arms treaty negotiated earlier this year between Moscow and Washington.
The letter opposing the sale was sent Tuesday by four Republicans: Reps. Ileana Ros-Lehtinen of Florida, Spencer Bachus of Alabama, Peter T. King of New York and Howard P. "Buck" McKeon of California. Those members are, respectively, the ranking minority members of the House Foreign Affairs Committee, the House Financial Services Committee, the House Homeland Security Committee, and the House Armed Services Committee.
If Republicans win control of the House in the Nov. 2 midterm elections, the four members are in line to be chairmen of committees that would have potential oversight of the sale.
A fact sheet on the website of Uranium One says the company intends to complete the transaction by the end of the year. The Russian concern already owns a 23.1 percent share of Uranium One's common stock and is seeking a controlling 51 percent share in the subsidiary.
The fact sheet notes that the sale still must be approved by the Nuclear Regulatory Commission and the Committee on Foreign Investment in the United States — the federal interagency body that looks at the national security implications of foreign investments. It played a central role in the Dubai Ports World controversy.
A spokeswoman for the Treasury Department did not provide comment by press time. A spokesman for Uranium One also did not return requests for comment by press time.
The fact sheet notes that the sale still must be approved by the Nuclear Regulatory Commission and the Committee on Foreign Investment in the United States — the federal interagency body that looks at the national security implications of foreign investments. It played a central role in the Dubai Ports World controversy.
A spokeswoman for the Treasury Department did not provide comment by press time. A spokesman for Uranium One also did not return requests for comment by press time.
The lawmakers said in their letter that Rosatom, the Russian government nuclear agency, has "shown little if any inclination to effectively address the widespread and continuing corruption within Russia, particularly its energy sector."
They also express concern that Rosatom in the past has been involved in energy deals with Iran, including design work and the training of Iranian scientists for the Bushehr nuclear power plant that went online in August.
Rosatom also has worked closely with Burmese scientists over U.S. objections.
Uranium One USA has dismissed fears that the deal would compromise U.S. security goals or indirectly aid the nuclear programs of regimes hostile to the United States.
Donna Wichers, a senior vice president of Uranium One USA, told the Billings Gazette last month, "I have confirmed with our management that none of the uranium produced in the U.S. will be used by Rosatom to fuel the Iran reactor."
The lawmakers said the deal still raises serious questions.
They wrote: "Although Uranium One USA officials are reportedly skeptical that the transaction would result in the transfer of any mined uranium to Iran, we remain concerned that Iran could receive uranium supplies through direct or secondary proliferation."
Henry Sokolski, executive director of the Nonproliferation Policy Education Center, said the sale to Rosatom could be Russia's opening move to get into the U.S. nuclear power market.
"Why would Russia, which already has plenty of uranium of its own, want to buy more?" Mr. Sokolski asked. "There have been rumors that Rosatom wants to build a large uranium enrichment plant to sell nuclear fuel for U.S. civil power reactors. If so, the company is almost certain to ask for U.S. federal loan guarantees, which the French and Dutch have already done."
Mr. Sokolski added, "In this case, you have got to believe that some of the security concerns raised in the letter, and others as well, could prompt [Congress to impose] conditions for approving such a loan."
US venture capital industry takes second high-level trip to Russia
Dow Jones VentureWire
06 Oct 2010
A delegation of several major venture capital investors, executives and government representatives that may include California Governor Arnold Schwarzenegger is going to Russia in order to explore investment and technology collaborations and meet with Russian President Dmitry Medvedev and others, participants told Dow Jones VentureWire.
This will be the second delegation of US business representatives to Russia this year, following one in May, as well as a visit by President Medvedev to Silicon Valley over the summer.
For the US business community this will be a chance to find out how their companies might benefit from the $10bn (€7.2bn) that state-owned company Russian Corporation of Nanotechnologies, or Rusnano, committed to investing in new technologies. The delegates will also fly to Tatarstan, a region with strong industry, infrastructure and many research centers, which, one of the delegates said, is committing $1bn to investing in new ventures.
More than 20 delegates are scheduled to participate, with most of the meetings taking place on October 11 and 12, said Alexandra Johnson, who is co-organising the trip via the Global Technology Symposium.
"The governor might join us," she said.
Schwarzenegger's press representatives said only that "we haven't made any public announcements about this."
Venture investors on the attendee list, seen by VentureWire, include Donald Dixon of Trident Capital, Dixon Doll of DCM, Tim Draper of Draper Fisher Jurvetson, Mark Gorenberg of Hummer Winblad Venture Partners, Dick Kramlich and Scott Sandell of New Enterprise Associates, and Faysal Sohail of CMEA Capital.
The forthcoming trip is being organised and sponsored on the Russian side by Rusnano, government fund-of-funds Russian Venture Co., and Skolkovo - a project to create an innovation centre on the outskirts of Moscow. Rusnano representatives didn't respond to a request for comment.
The collaboration and co-investment between Russia and the US intensified over the past year, with Siguler Guff & Co. committing to invest $250m in Skolkovo, and Cisco Systems pledging to invest $1bn in Russian technology projects.
Digital Sky Technologies, a Russian investment firm, has also invested in a few of Silicon Valley's hottest Internet companies, including Facebook, Groupon and Zynga Game Network.
However, Russia is still an enigma with arcane regulations that make the venturing business difficult, said Johnson, who is also managing director with DFJ-VTB Aurora, a Moscow-based venture fund affiliated with Draper Fisher Jurvetson. It takes "forever" to open a business, for example, because of bureaucracy, she said. And funds that are based in Russia have to operate under laws that don't jibe with the venture model. Limited partners, for example, can pull out of a fund at any time, and all investment decisions must go through several levels of committees.
In one small example of the turbulent nature of Russian politics, the delegation won't meet with Yuri Luzhkov, the recently ousted mayor of Moscow. "The delegation will still meet with the Mayor of Moscow, we don't know who it'll be," said Johnson.
Despite some political and other uncertainty, US venture investors still see potential in collaborating with Russia. Sandell, a general partner with New Enterprise Associates, said that as far as he understands the Russian government would invest in US companies with the expectation of such companies setting up research and development or production in Russia.
He also said he feels there's an emphasis and special interest on the part of the Russian government in backing companies operating in clean technologies, as part of a way to diversify outside of fossil fuels. Russian Venture recently invested $10m in Oakland, Calif.-based solar thermal power plant developer Brightsource Energy, for example.
Several NEA portfolio companies could benefit from such an arrangement, Sandell said. NEA's Bloom Energy, the maker of fuel-cell based power units, is sending representatives on the trip, according to Johnson.
Bloom could potentially manufacture its units in Russia, Sandell said, and sell to military and other customers that desire to have the security of an in-house power source instead of relying solely on grid power. Russia, of course, has plenty of natural gas that could power Bloom boxes.
Sandell also said Fisker Automotive, the maker of a hybrid electric car, could find a market in Russia.
Besides, there is a large base of highly educated math and technology professionals in Russia, Sandell said, whom US companies could hire.
Sohail, managing director with CMEA Capital, said several of his fund's portfolio companies might benefit, including Solaria, a manufacturer of solar panels that could open manufacturing in Russia to supply customers in Europe.
The VCs may also find that Russia is willing to invest in their funds. Both Rusnano and Russia Venture act as limited partners, Johnson said. Russian Venture invested $50m in the DFJ-VTB fund. Johnson said that Rusnano is considering investing in a new fund that DFJ would also help manage.
For the Russian side the visit will showcase how investors in the West tackle the difficult start-up venturing business.
"There's a lot of wealth in Russia, but not everyone is eager to invest in technology while the returns in oil and such are still high. The goal is to show the ability of investors in the world to make money on high tech," Johnson said.
The Russians may also find that collaborating with US investors would open up the large US market to Russian companies that find it hard to sell their technologies in Russia.
"Venture capital is the last frontier," Johnson said. "I'd be thrilled to have somebody to syndicate deals with."
- By Yuliya Chernova, Dow Jones VentureWire; 212-416-2020
Russian Cybercrime Thrives as Soviet-Era Schools Spawn Hackers
By Anastasia Ustinova
Oct. 6 (Bloomberg) -- The U.S. Department of Justice said it may have been the most sophisticated computer fraud ever. For Viktor Pleshchuk, it was the chance to buy a brand new BMW and an apartment in his hometown of St. Petersburg.
The 29-year-old last month pleaded guilty to participating in a worldwide hacking scheme that led to the illegal withdrawal of more than $9 million from cash machines worldwide operated by RBS WorldPay Inc., the U.S. payment-processing division of Britain’s Royal Bank of Scotland Group Plc.
The conviction shed light on a growing trend from Russia. Just as President Dmitry Medvedev seeks to persuade investors his country is a safe place, more technology graduates are turning to cybercrime. The FBI last week charged 37 suspects from Russia, Ukraine and other eastern European countries of using a computer virus to hack into U.S. bank accounts.
“The number of hackers reflects how many good engineers we potentially have in this country,” Vladimir Dolgov, the president of Google Inc. in Russia, said in a Bloomberg Television interview in Moscow.
Russians committed more than 17,500 computer-related crimes last year, or 25 percent more than in 2008, according to the Interior Ministry’s latest statistics.
‘Childish Prank’
While cybercrime is proliferating, Russian laws against it were written in 1998, when hacking was often perceived as a “childish prank,” Boris Miroshnikov, the head of the ministry’s anti-cybercrime department, said in a report posted on the agency’s website.
A ministry spokeswoman said the department has advised Russian lawmakers to impose stiffer penalties on hackers. She declined to be identified, citing department policy.
“We are working on that, but so far we haven’t moved beyond discussions,” she said.
Businesses around the world lose more than $1 trillion in intellectual property due to data theft and cybercrime annually, according to a report in January 2009 by McAfee Inc., the technology security company based in Santa Clara, California.
Seeking to thwart the attacks, U.S. legislators in March proposed to use trade restrictions to penalize countries that provide safe haven to hackers.
Growing Threat
“The cybercrime threat coming from Russia is significant and growing,” U.S. Senator Kirsten Gillibrand, a New York Democrat who supports the measure, said in an e-mailed response to questions. “It threatens America and undermines the Russians. It is in the best interest of both countries to find a way to cooperate and better control cybercrime.”
The FBI said on Sept. 30 the suspects from eastern Europe stand accused on trying to hack into U.S. bank accounts to steal more than $3 million. In August, French authorities arrested a resident of Moscow who used his Internet network called CarderPlanet to sell stolen credit cards, the U.S. Secret Service said in a statement on its website.
The government in Moscow needs to create jobs to help thwart cyber criminals. Their numbers have swelled since the collapse of the Soviet Union, when scores of Russian computer engineers turned to online crime, Dmitry Zakharov, a spokesman at the Russian Association of Electronic Communications, said.
“Hackers are not gangsters with knives, but young and talented kids from suburbs who don’t have any other options to make a living,” said Zakharov, a trade group that promotes Internet security in Russia. “If the government will create jobs for them, many will follow the lead.”
Shy Hacker
Medvedev, 45, who has a video blog and a Twitter account, has said he wants to stop the Russian brain drain and turn the economy away from energy exports toward one based on technology.
The president asked billionaire Viktor Vekselberg in March to oversee plans to create a hub for the development and marketing of new technologies in the Moscow suburb of Skolkovo, where tax breaks and other incentives would be offered to lure investment. Companies including Siemens AG, Cisco Systems Inc. and Nokia Oyj have agreed to participate in the project.
Pleshchuk was a “positive and shy” student who “worked hard,” Sergey Sharangovich, head of the department that educated him, said in a statement on the website of Tomsk State University of Control Systems and Radio Electronics.
After graduating, he moved to St. Petersburg and opened an e-commerce company before he got in touch with a group of international hackers who asked him to help crack WorldPay’s database, Russian investigators said.
‘Sophisticated’
The U.S. Justice Department last year indicted Pleshchuk and seven other hackers in Russia and elsewhere in eastern Europe, saying the group stole the data encryption that was used by RBS WorldPay to protect debit cards, it said on its website.
The cards were used to withdraw money from 2,100 cash machines in 280 cities in less than 12 hours, in what U.S. prosecutors called “perhaps the most sophisticated and organized computer-fraud attack ever conducted.”
“We take fraud extremely seriously and have stringent security processes in place to protect our customers, which we constantly review,” Michael Strachan, a spokesman at RBS in London, said in an e-mailed statement.
Pleshchuk got a reduced sentence, including four years probation, after he agreed to provide information about his accomplices, his lawyer, Yuriy Novolodsky, said in an interview in St. Petersburg last month. He was ordered to give up his assets, including the BMW and the apartment, to help pay the $9 million back to WorldPay.
“On the one hand, it’s flattering,” Sharangovich at Tomsk University said. “On the other hand, Pleshchuk didn’t apply his knowledge the right way.”
To contact the reporter on this story: Anastasia Ustinova in St. Petersburg at austinova@.
To contact the editor responsible for this story: James M. Gomez in Prague jagomez@
Last Updated: October 5, 2010 16:01 EDT
Russia's defense minister arrives in India
Oct 6, 2010 05:11 Moscow Time
The Defense Minister of the Russian Federation Anatoly Serdyukov, has arrived in India for scheduled talks with the head of the local defense department Arakkaparambilom Kurianom Anthony. As expected, the two sides will discuss a wide range of issues concerning bilateral interaction. Serdyukov will also meet with the chiefs of staff of the land, air and naval forces. The main item on the agenda of the Russian Minister’s visit to India will be a meeting of the bilateral intergovernmental commission. At the meeting the ides will discuss topical problems surrounding military-technical cooperation. As strategic partners, India and Russia have been actively cooperating in the military field for more than four decades. About 70 percent of weapons and military equipment with which the Indian Army is equipped are of Soviet or Russian origin.
India, Russia to discuss N-sub lease and Gorshkov refit
TNN, Oct 6, 2010, 03.37am IST
NEW DELHI: The impending 10-year lease of K-152 Nerpa nuclear submarine, the over $25 billion project to acquire 250 fifth-generation fighter aircraft and the ongoing $2.33 billion refit of aircraft carrier Admiral Gorshkov will figure prominently in the defence meet between India and Russia this week.
Defence minister A K Antony and his Russian counterpart Anatoly Serdyukov will lead their respective delegations during the 10th India-Russia Inter-Governmental Commission on Military Technical Cooperation ( IRIGC-MTC) on Thursday. "The two defence ministers are also expected to discuss regional and global security issues," an official said.
Cash-strapped Russia is still by far India's largest defence supplier but acrimonious negotiations over the huge cost escalation in Gorshkov's refit have led to some bitterness over the last few years, which has also been fuelled by Russia's propensity to delay deliveries, raise costs midway and not provide proper product support.
India, Russia to hold annual military cooperation talks
2010-10-05 18:50:00
CG TPM CRM Russia
New Delhi, Oct 5 (IANS) Further expansion of bilateral military ties will be high on the agenda of the 10th annual meeting the India-Russia Inter-Governmental Commission on Military-Technical Cooperation here Thursday, an official said.
The meeting will be jointly chaired by Defence Minister A.K. Antony and his Russian counterpart Anatoly Serdyukov, and the focus will be on extending the existing bilateral agreement on military-technical cooperation, the official said Tuesday.
Serdyukov, who is arriving in India Wednesday, will be accompanied 'by a large delegation of Russian defence ministry and industry representatives', said the official.
The commission's sessions are held annually and alternate between New Delhi and Moscow.
The two leaders are also expected to discuss regional and global security issues, according to the official.
Since the establishment of the India-Russia strategic partnership in 2000, the two nations have steadily developed and strengthened bilateral cooperation covering a range of areas, of which defence forms a significant component.
They share a multifaceted military technical cooperation that includes not only supply of defence equipment and systems but also collaboration in research and development and production.
The two countries, at the last meeting of the commission in Moscow, committed to military cooperation until 2020 which comprises about 200 joint projects, including the modernisation of the Admiral Gorshkov aircraft carrier that the Indian Navy has purchased, the transfer of technology for the licensed production of T-90 tanks in India, the production of BrahMos missiles and the purchase of Smerch MLRS by India.
FGFA, nuke sub on discussion table at Indo-Russian talks
PTI | 06:10 PM,Oct 05,2010
New Delhi, Oct 5 (PTI) Fifth Generation Fighter Aircraft (FGFA) deal worth USD 25 billion and leasing of Akula-II nuclear submarine are likely to top the agenda when India and Russia hold their annual talks on defence cooperation here on Thursday. Defence Minister A K Antony and his Russian counterpart Anatoly Serdyukov will meet here for the 10th India-Russia Inter-Governmental Commission on Military Technical Cooperation (IRIGC-MTC) to discuss a range of issues. Serdyukov, who will be co-chairing the Commission along with Antony, will arrive here tomorrow accompanied by a large delegation of Russian defence ministry and industry representatives. The IRIGC-MTC, headed by the Defence Ministers of the two countries, was instituted in the year 2000 with an objective to further the bilateral defence cooperation. Nine meetings of the Commission have been held so far, in New Delhi and Moscow, every alternate year. The two Defence Ministers are also expected to discuss regional and global security issues. "Since the establishment of a strategic partnership between the two countries in the year 2000, the two governments have steadily developed and strengthened bilateral cooperation covering a range of areas, of which defence forms a significant component," a Defence ministry statement here said. The two countries share a vibrant and a multifaceted military technical cooperation which includes not only supply of defence equipment and systems, but also collaboration in Research and Development and production. As far as FGFA was concerned, India plans to get 250 of the fighter jets for the Air Force, while the nuclear submarine will be leased by the Navy for 10 years to train its personnel before INS Arihant indigenous submarine joins the fleet. Among other issues that is expected to come up during the talks include co-development of a hypersonic BrahMos missile, a joint venture between the two countries. The two countries have already developed a BrahMos supersonic cruise missile for the Army, Air Force and Navy. The two sides also have agreements for India to produce T-90 tanks for its army under licensing. India would be having 1,640 T-90s in service by 2020. Recently, India's HAL signed a contract with the Russian Rosoboronexport for joint development of multi-role transport aircraft.
Russia may offer strategic technologies
Vladimir Radyuhin
MOSCOW, October 6, 2010
Russia may offer India strategic defence technologies to retain dominant position in the Indian crowded weapons market, said a Russian expert.
“Growing international competition for the Indian defence market will push Russia to expand its cooperation with India into new sectors where it has no rivals, such as strategic weapons and technologies,” said Konstantin Makienko of the Centre for Analysis of Strategies and Technologies (CAST) ahead of the 10th session of the India-Russia intergovernmental commission on military-technical cooperation.
The IGC commission will meet in New Delhi on October 7 under co-chair of Defence Minister A. K. Antony and his Russian counterpart, Anatoly Serdyukov.
The Russian expert suggested that the two countries could diversify their defence ties into nuclear submarine technologies despite continuing international restrictions against India.
“India's de-facto joining of the nuclear club makes such restrictions rather pointless.”
In fact, Russia is already helping India acquire nuclear submarine capability. Next March, Russia will hand over an Akula-class attack submarine, Nerpa, to India on a 10-year lease.
Its design has been largely incorporated in India's first indigenously built nuclear submarine, INS Arihant, launched last year.
Cooperation in strategic weapons will be in line with Russia's long-time policy of offering India advanced defence technologies.
“Russia is interested in strengthening India's defence potential without any limitations,” said Mr. Makienko, adding Russia was not prepared to supply China high-end weapons systems that India received.
The fifth-generation fighter aircraft (FGFA), which India will build jointly with Russia, is one example of this policy.
“The FGFA programme will enable India to join the exclusive club of nations who have such weapon systems,” he said. “It will give India an overkill capability over China, not to mention Pakistan.”
The FGFA project marks a further shift in Indo-Russian defence ties from a buyer-seller relationship to joint design and construction of new weapons systems.
Top destination
In coming years India will remain number one destination for Russian defence sales, according to the Russian Centre for Analysis of International Weapons Trade (CAIWT). “In 2010-2013 India will account for 54.4 percent of Russian weapons exports estimated at over $15 billion,” the CAIWT said.
China and Russia strengthen strategic ties
By John Chan
6 October 2010
Russian President Dmitry Medvedev’s visit to China on September 25-27 is a further sign that Moscow and Beijing are consolidating their ties in order to counter the US and its main ally in North East Asia, Japan.
Medvedev and Chinese President Hu Jintao issued a joint statement that called for “comprehensively deepening strategic cooperation,” amid mounting threats and challenges in the Asian Pacific region. The statement emphasised mutual support for each other’s core interests—Russian support for Beijing’s sovereignty over Taiwan, Tibet and Xinjiang, and Chinese support for Moscow’s “efforts to promote peace and stability throughout the Caucasian region and the Commonwealth of Independent States”.
While not naming the US, the statement was clearly directed against Washington. In 2008, Russia waged a war with the US-backed Georgian regime to support the independence of two Georgian provinces. In Asia, US-China tensions have sharpened during the past year as the Obama administration has intervened aggressively in the region over a range of issues—from selling arms to Taiwan to backing South East Asian nations in their territorial disputes with China in the South China Sea.
Just as significant was a second joint statement marking the 65th anniversary of the end of World War II. The two countries condemned attempts “to glorify Nazis, militarists and their accomplices, and to tarnish the image of liberators”. The statement was aimed not only at Western criticisms of the Soviet occupation of Eastern Europe, but also right-wing nationalist politicians in Japan who whitewash the crimes of the wartime militarist regime.
“The fascists and militarists schemed to conquer and enslave us two nations, other countries and the whole [Eurasian] continent. China and Russia will never forget the feat of those who checked the two forces,” the statement declared. It went to proclaim that the “glorious history” of Soviet-Chinese wartime cooperation against Japan “has laid a sound foundation for today’s strategic partnership of coordination between China and Russia”.
The statement was directed against Japan in particular. It came during a bitter diplomatic row between China and Japan over the disputed Diaoyu islets (known as Senkaku in Japan) in the East China Sea, triggered by Japan’s detention of a Chinese trawler captain.
Medvedev began his trip by visiting the northeastern Chinese city of Dalian, where he paid his respects to Soviet soldiers who died fighting to expel the Japanese army from Manchuria in August 1945. Significantly, he also paid tribute to Russian soldiers killed in the 1904-05 war between Tsarist Russia and Imperial Japan—a conflict between two imperialist powers.
Following Medvedev’s visit, China’s official Xinhua news agency accused Washington of “protecting large numbers of militarist war criminals in Asia”, especially in Japan, after the end of World War II. The comment also accused the US of betraying the post-war agreements among the Allies, which included China. Xinhua highlighted the fact that under the 1945 Potsdam agreement, Japan had to return all territories annexed during and prior to the war. However in 1971, the US unilaterally handed the Diaoyu Islands back to Japan, despite China’s objections.
In Japan, the joint statements by Russia and China have been interpreted as a common front against Japan. Russia and Japan also have a longstanding territorial disagreement over four of the Kuril Islands closest to the northern Japanese island of Hokkaido. The Yomiuri Shimbun warned last week that China and Russia were “presenting a united front in their claims over Japanese territories”.
Medvedev originally planned to visit the Kuril Islands on his way home—the first Russian leader ever to do so. Tokyo responded by summoning the Russia ambassador and warning that a visit to the Kurils would “seriously hinder” Russo-Japanese relations. Moscow responded by declaring that “no approval” was needed for the Russian president or any citizen to visit the islands. While the trip was postponed due to “bad weather,” Medvedev announced that he would visit the islands in the near future.
In July, Russia conducted “Vostok 2010”—its largest military exercise in the Far East since the collapse of the Soviet Union in 1991. The naval manoeuvres took place around the Kuril Islands, provoking protests from Japan. The exercise, together with ambitious plans to expand the Russian Pacific fleet over the next decade, indicate that Moscow is determined to reestablish a strong presence in the Pacific.
Moscow and Beijing are already cooperating in countering US influence in Central Asia through the Shanghai Cooperation Organisation (SCO) formed in 2001 with four Central Asia republics—Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Last month, the SCO held a major 16-day joint military exercise, “Peace Mission 2010,” in Kazakhstan. While the official scenario was “counter-terrorism,” the scale of the exercise, which included around 5,000 troops, tanks and war planes, suggested a joint drill in conventional warfare.
The Russian-Chinese “strategic partnership” is also based on expanding economic ties. Medvedev’s visit marked the completion of an oil pipeline from East Siberia to the Chinese city of Daqing that will deliver 15 million tonnes of oil to China annually for 20 years. The pipeline is part of a $US25 billion “loans for oil” agreement that China signed last year with Russia’s state-owned energy giants.
By securing oil via land, China lessens its reliance on sea routes to the Middle East and Africa that are currently under the control of the US navy. Russia is also seeking to reduce its dependence on the European energy market by building pipelines to supply not only China, but also Japan and other Asian countries.
Russian Deputy Prime Minister Igor Sechin accompanied Medvedev to Tianjin for a groundbreaking ceremony to initiate a $5 billion oil refinery to be jointly developed by Russia and China. Sechin told his Chinese hosts that Russia was “ready to meet China’s full demand in gas” as well. Disputes over prices have stalled a 2006 agreement to deliver 60 billion cubic metres of gas annually to China from 2011. The latest talks agreed that gas supplies would start in 2015 for the ensuing 30 years.
Medvedev called on China to invest in Russia on a large-scale to modernise his country’s decaying industrial base. During Medvedev’s trip, a joint venture was planned between China’s FAW Group and the Russian GAZ Group to manufacture heavy trucks in the Urals. China now makes half of the world’s trucks and is starting to export vehicles. In the past decade, trade between Russia and China increased 12-fold, allowing China to overtake Germany as Russia’s largest trading partner.
The closer strategic and economic ties between China and Russia are a reaction to the Obama administration’s efforts over the past year to forge closer ties with Japan and other Asian countries to undermine Chinese influence in the region. All these steps heighten tensions in Asia and the potential risk of conflict.
UPDATE 1-China's CIC wants to bid in Russia privatizations
Tue, Oct 5 2010
* Western markets heavily regulated, growth shaky - CIC VP
* Looking at emerging markets in Europe, Asia, Africa
* Interested in investing in agriculture
* Targets dividends in Russia, says 5-6 percent of profit OK
(Combines series, adds quotes, background on privatisation)
By Gleb Bryanski
MOSCOW, Oct 5 (Reuters) - China Investment Corp would like to bid for Russian state assets in a sale that is expected to raise $50 billion, as the fund shifts focus to emerging markets, a CIC vice president said on Tuesday.
"We would like to take part in privatisation," Jesse Wang, executive vice president at the $300 billion sovereign wealth fund, said on a visit to Moscow.
Finance Minister Alexei Kudrin told the Reuters Russia Investment Summit last month that Russia was preparing to sell $10 billion worth of assets per year for approximately five years. Some of Russia's top blue chips will go under the hammer. [ID:nLDE68E1UF]
The government is currently holding active discussions with potential bidders. Wang said that apart from the energy sector the fund was interested in agriculture and the financial and power sectors.
"We think that in the long run agriculture is a good business for investment," Wang said, citing an international shortage of land and climate change as reasons. "We are thinking about this as our emphasis."
The state agricultural machinery leasing firm Rosagrolizing is the only firm from the sector on the privatisation list. Wang said CIC was "open" to looking at any company from the list.
Wang said sovereign wealth funds were playing a more active role. He said SWFs assets will reach $12 trillion in 10 years, eclipsing the value of hedge funds and private equity funds.
He added that the CIC found developed markets too heavily regulated and was steering investment towards emerging markets.
"We have so far held a larger portion of our investments in Western countries, but we have found out that there are a lot of restrictions and their economies are struggling," Wang said.
"Therefore we are considering being more active in emerging markets including Russia, Eastern Europe, Africa, and Asia."
In Russia it is looking at companies which pay 5-6 percent of their net profit as dividends, a vice president said on Tuesday, complaining that many Russian companies did not pay dividends.
"Five-six percent is OK if it is a stable company with little risk," Jasse Wang said, adding it could achieve 10-15 percent in higher-margin sectors.
Wang said the fund was a passive investor and did not seek a role in corporate management but it needed to ensure that Russia had a good investment climate and was ready to protect the rights of minority shareholders.
"We have no geopolitical goals or strategic purposes. However, we are profit-driven," Wang said. (Reporting by Gleb Bryanski; writing by Melissa Akin; Editing by Hugh Lawson)
Izvestiya/Russia Today: The problem of terrorism and drug trafficking will be tackled by the entire world
A unique two-day event has begun in Sochi. The Security Council of Russia gathered representatives of 44 countries in the future Olympic capital to discuss security issues – starting with international terrorism and ending with natural disasters. The conclusions are unsettling: terrorists are getting closer to obtaining nuclear weapons and natural disasters are becoming more and more unpredictable.
By Dmitry Evstifeev (Sochi)
For several days, Sochi became a platform for one of the largest international meetings in recent years. On Monday, 250 delegates from 44 countries gathered in the “Rus” resort from morning until evening. Officially, the event was listed as “a meeting of high-ranking representatives, in charge of security issues”. In the welcoming statement of UN Secretary General Ban Ki-moon, which was delivered by his deputy Yury Fedotov, new items appeared on the list of the long-standing threats of terrorism including drug trafficking, transnational crime and the spread of nuclear weapons – which were cybercrime and global climate change. Moreover, the older problems were presented in a new light.
Read more
“The actions of terrorists are becoming more sophisticated and violent,” said Secretary of the Security Council of Russia, Nikolay Patrushev, whose statement became a key report. “According to the UN statistics, 11,000 acts of terrorism were committed in 2009. Fifteen thousand people were killed, at least 32,000 injured, and more than 10,500 kidnapped. The terrorists are cooperating with pirate groups and planning acts of sabotage on sea lanes, onshore infrastructures, and in areas of hydrocarbon production. Some of the priority areas include: the Gibraltar, Hormuz, and Bab-el-Mandeb Straits, as well as the Suez Canal. It should be noted that they are striving to get to facilities and technologies of chemical and biological weapons, radioactive and toxic agents and biologic formations.”
According to Nikolay Patrushev, the achievement of positive results in the fight against international terrorism is hindered by “double standards” in the various countries’ assessments of this phenomenon. The increased threat of terrorism makes it important to improve the coordination within the international community on a long term basis.
Nikolay Patrushev had also touched on the problem of drug abuse, citing a shocking statistic: every 20th person in the world is a drug user.
“As was reported by the UN, the number of drug users is increasing by an average of 15 million persons per year, ranging from 155 to 250 million,” said Nikolay Patrushev. “This is 3-5% of the entire population aged 15 to 60 years. We consider it necessary to improve international efforts in the fight against the Afghan drug threat, including by strengthening the ‘security belts’ around Afghanistan, suppressing the illegal supply of precursors to the country, arresting the so-called drug lords, and including them in the sanction lists of the UN Security Council.”
The subject of natural disasters was touched upon in the meeting. The phrase “Russian fires” sounded just as frequently, if not more, than “terrorism” and “drug trafficking”.
“Natural disasters cannot be explained with the human factor alone,” Nikolay Laverov, chairman of the Expert Commission on Ecological Safety of the Russian Security Council, told Izvestia. “A single volcanic eruption has a stronger influence of the greenhouse effect than a year of life of all mankind. But, natural disasters are cyclical and can be forecasted if we all work together. Then, we will be able to overcome the catastrophes, such as the summer fires, for which the country was simply unprepared, with fewer victims."
Russian says Europe needs unified anti-terrorist policies
Oct 6, 2010 02:11 Moscow Time
At the PACE session in Strasbourg the Russian delegation said Europe needs to develop unified anti-terrorist legislation, to avoid double standards and harboring international terrorists.
Extremists are using the territory of some European countries to conduct propaganda operations and plan violence in other countries, said the deputy of the Russian delegation to PACE, Leonid Slutsky.
As an example he cited the Chechen separatist emissary Akhmed Zakayev, for whom an international arrest warrant was issued in 2001, on charges of terrorism.
Evidence links Zakaev to 7 terrorist acts, including the killing of policemen. However, Zakayev lives freely in Britain, where he received political asylum and has been politically active.
Thai premier to have final say in Bout's case
|Oct 6, 2010 11:48 Moscow Time |
Russia is dissatisfied over a Thai court’s rulings for alleged arms dealer Viktor Bout, who was arrested two and a half years ago at the request of the United States. The Thai Prime Minister Abhisit Vejjajiva made this announcement after talks in Brussels with the Russian Foreign Minister Sergei Lavrov. Lavrov said the issue had to be settled on a legitimate basis without any pressure from the outside. The United States accuses Bout of illegal arms trade and he will face life in prison if extradited to the US. The Thai prime minister, who is to have the last say on whether to extradite Bout, stated that he will consult his ministers before taking a final decision.
Russia warns against US meddling in Thailand-Bout case
Posted: 06 October 2010 1137 hrs [pic]
MOSCOW: Russia said it was counting on the Thai judiciary to handle alleged arms dealer Viktor Bout's US extradition objectively, and warned Washington against meddling in the case.
Foreign Minister Sergei Lavrov also denied any "trade-off" between Washington and Moscow on the Russian national, the so-called "Merchant of Death", whom the United States wants extradited on terrorism charges.
"We have no intention of interfering in the affairs of (Thai) justice and we are counting on the fact that others will not try to influence it," Russian news agencies late Tuesday quoted Lavrov as saying.
Thailand's Criminal Court, citing insufficient evidence, Tuesday dismissed proceedings surrounding new charges against Bout for alleged money-laundering and fraud. That removed a major obstacle to his US extradition.
Welcoming the ruling, US State Department spokesman Philip Crowley said: "We look forward to having Viktor Bout in a prison near us very soon."
Lavrov said he hoped that US messages to Thai Prime Minister Abhisit Vejjajiva, who could have a final say on whether to send him to the United States, would not influence Bout's fate.
He also rejected any deal between Russia and the United States on Bout, who is said to have inspired the Hollywood film "Lord of War" starring Nicolas Cage.
"The idea that Russia and the United States have reached some sort of agreement is outside the pale of the system of justice," he said.
Bout, a 43-year-old former Soviet air force pilot, was arrested in 2008 after a sting operation in Bangkok involving undercover US agents posing as rebels from Colombia's FARC rebels, considered a terrorist group by Washington.
He has repeatedly denied suggestions that he was a former KGB agent and maintains that he ran a legitimate air cargo business.
He faces a maximum sentence of life in prison if convicted in the United States on charges including conspiracy to kill US nationals and providing material support or resources to a foreign terrorist organisation.
The case has put Thailand in a difficult diplomatic spot between key ally the United States and Russia, which has strongly opposed extradition.
A furious Moscow previously said the extradition attempt was politically motivated and vowed "to do everything necessary" to bring Bout home, sparking speculation that Bout may have knowledge of sensitive information. - AFP/fa
Russia demands justice in alleged arms dealer's case
02:49 06/10/2010
Russia called on Thai authorities to show an "unbiased approach" to the case of alleged Russian arms dealer Viktor Bout, whom the United States wants extradited and Moscow wants repatriated.
The second set of U.S. charges against the Russian national was dropped on Tuesday. The decision brings the so-called Merchant of Death one step closer to extradition on an earlier U.S. request.
Russian Foreign Minister Sergei Lavrov said late on Tuesday that a decision on Bout's extradition should be in line with the country's legislation and evidence submitted to the court.
"Bout's lawyers have closely studied the documents; we are also familiar with their contents and consider the evidence [against Bout] absolutely inappropriate," he said.
The Russian minister earlier slammed the previous court ruling, which ordered Bout's extradition to the United States, as "unlawful," having been made "under outside pressure."
Russian Foreign ministry spokesman Andrei Nesterenko said in a statement on Tuesday evening that the Bout case was "paradoxical."
"The Thai authorities keep in prison the Russian national, who in fact was twice found not guilty by a Thai court. Bout still faces extradition to the United States," he said.
"There are no legal norms to justify such moves by Thai authorities," the statement reads. "This blatant injustice is explained by outside pressure being exerted on Bangkok officials."
A spokesman for the U.S. State Department said the U.S. was looking forward "to having Viktor Bout in a prison near us very soon."
"I believe, actually, there is a mandatory kind of waiting period," State Department spokesman Philip Crowley told a daily press briefing. "But we believe after this mandatory period under Thai law, we look forward to a speedy extradition of Viktor Bout to the United States."
"The Thai Government is very well aware of our views on this case," he added.
Bout, 44, was arrested in March 2008 at the request of the United States. Bout claims he has never been involved in the arms trade and that there was no evidence of his involvement in the business.
The Bangkok Criminal Court refused last August to extradite him to the United States, where he is facing four terrorism-related charges and a possible life sentence.
The court explained that the U.S. request was turned down due to a lack of evidence and because the case was politically motivated. However, the United States appealed the ruling denying the extradition and filed new charges against him.
Bout's extradition to the United States was ordered by the Thai appeals court, which has a supreme authority on the issue, on August 20.
Sirisak Tiyapan, executive director of the Office of the Attorney-General's (OAG) International Affairs department said on the national TV that if the U.S. does not appeal the court ruling, Bout's extradition may take place "very soon."
"The prosecutors lost the second case. However, there are currently no obstacles for Bout's extradition to the U.S. We will do our best to speed up the process," he said.
Bout's Thai lawyer, Lak Nitivat, said he would appeal the court decision, which turns down the second U.S. extradition request.
"I will protest against the wording in the court ruling," he said. "I will seek to review the case... The present court ruling infringes my defendant's interests," the lawyer added.
Experts say the move is to stall Bout's extradition, which must be carried out within three months after the announcement of the sentence. The deadline is November 20.
BANGKOK, October 6 (RIA Novosti)
Moscow-Berlin-Paris triangle emerging in Europe
bne
October 6, 2010
Germany has long been Russia's best friend in western Europe thanks to ex-chancellor Gerhard Schroeder's vision for close ties between Moscow and Berlin, but more recently France has thrown its hat into the ring and Paris is actively chasing Moscow to improve ties - and get a bigger piece of the lucrative Russian consumer and energy businesses.
French finance minister, the impressive Christine Lagarde, was in Moscow on Tuesday to speak at the second VTB Capital investment conference. Indeed, she comes to every party the Russians throw these days: she was also a speaker at the Kremlin's St Petersburg summit in the summer, as well as the Troika Dialog annual investment shindig in February.
More importantly, yesterday she not only sang Russia's praises, but offered French support for something Russia would love to have and can't get on its own - more weight in the international organisations.
Thanks to the Cold War, Russia, along with France, is already a veto-wielding member of the elite inner circle of the UN's Security Council, but it punches well under its weight in the more important post-Cold War economic bodies like the IMF, the G8, the ILO and especially the WTO where it is the only major economy in the world not a member.
The Kremlin feels snubbed by its junior role, after all, all rising powers have thin skins when it comes to recognition by the international establishment of their new found power.
Lagarde offered both China and Russia gifts at the VTB event saying: "there is a new monetary policy in the world... It is not unilateral, not bilateral, but multilateral - we need to be multilateral in all areas. It is not appropriate that China is never involved in currency discussions [at things like IMF meetings] or that [Russian Deputy Prime Minister and Finance Minister Alexei] Kudrin can only enter the room at certain sessions of the G7 and G8 session meetings."
Both Russia and China have been pushing hard for a change in global politics away from the unilateral view (the American hegemony of the last 60 years) to a multilateral view so this bit was music to the Kremlin's ears.
And even more encouraging, these comments are not empty rhetoric as France will take over from South Korea as chairman of the G7 and G8 in November and can actually make these changes.
Still, Lagarde kept a few cards in reserve. She explicitly said that she was not putting concrete reforms to the G's on the table, but that France intended to put the issue on the table for discussion.
It is clear why France is becoming so keen on Russia too. "I understand that French investment into Russia has just overtaken American investment this year," Lagarde told delegates.
While overall foreign direct investment is still way below the pre-crisis peak of $75bn and Kudrin said at the event that FDI should come in at $40bn this year - still a pretty decent result. Moreover, anecdotal evidence suggest strategic investors - particularly large international retail companies -- have been accelerating their plans as they attempt to position themselves to grab a share of a market that is rebooting following the collapse of the consumer economy during the recent meltdown.
Prominent amongst the more recent investments was L'Oriel's decision to build a €26m cosmetics factory in the Kaluga region, a few hundred kilometres from Moscow, that opened two weeks ago.
Russia now has two friends in Europe as German firms have been even faster than the French to race into Russia (see bne's up coming cover story in November). The odd couple of Berlin-Paris that was prominent last decade in European politics looks like it will become a threesome.
06.10.2010
Russia To Offer 12-Year "Gas Compromise" To Poland
A decision will be made tomorrow on October 7 at Russian-Polish negotiations on Russia's schedule for delivering gas supplies to Poland, Vslukh reports adding that the bilateral long-term contracts may be trimmed by 12 years.
The Polish side wants the agreement with Russia to be in effect until 2025 rather than until 2037, and according to a report in the Polish newspaper Rzeczpospolitа, Russia will not object.
Earlier, Warsaw and Moscow discussed inking gas agreement to lat until 2037 which envisioned increasing volumes to 10.3 billion cubic meters of gas a year. The Polish state company PGNiG agreement with Gazprom to buy 9 billion cubic meters of gas in 2010 and about 9.3 billion cubic meters of gas in 2011 and as much as 10.270 billion cubic meters of gas in 2012.
But the European commission believes that the agreement does not met the requirements of the union agreement since the operator transporting the fuel on the Yamal-1 pipeline is supposed to be independent and guarantee all market players equal access to the infrastructure.
Polish Prime Minister Donald Tusk earlier stated that the gas agreement with Moscow could be trimmed if it became clear that a portion of the country's needs could be met with shale gas.
Copyright 2010, Vslukh. All rights reserved.
Late Polish president's twin snubs memorial event in Russia
04:35 06/10/2010
Polish opposition party leader Jaroslaw Kaczynski said he would not attend memorial events in western Russia to mark six months since the deadly plane crash claimed the life of his twin brother.
Kaczynski, who fiercely criticized how Russian and Polish officials handled the investigation into the tragedy, said he would take part only in events which are "related to revealing the truth about the tragedy near Smolensk, but not in those aimed at concealing it."
"I will not go to Smolensk. On this day, I will take part in a mourning service in Poland," Kaczynski told a news conference in Prague.
The losing candidate in Poland's recent presidential elections, who heads the conservative Law and Justice party, earlier called on the Polish and Russian governments to assume full responsibility for the "completely abandoning" the investigation into the air disaster.
He also urged Prime Minister Donald Tusk and President Bronislaw Komorowski to step down.
The worn-out Tu-154 with then Polish President Lech Kaczynski and other senior Polish officials onboard crashed near the western Russian city of Smolensk, killing all 96 people onboard. The high-ranking delegation was on its way to a commemoration ceremony of the 1940 Katyn massacre, in which more than 20,000 Poles were executed by Soviet forces.
Some 50 families of those killed in the crash are expected to attend the site of the tragedy on October 10.
WARSAW, October 6 (RIA Novosti)
Lavrov’s Visit to Poland: Is Russia’s Rapprochement with Poland Real?
October 05, 2010
Stephen Blank
In the last couple of years, Russia has engaged in a rapprochement policy with Poland preceding the death of Poland’s President, Lech Kaczynski and many leading members of the government in a fatal air crash on April 10, outside Smolensk.
However, this policy certainly received a tremendous impetus from that event as demonstrated by Russia’s seemingly openly emotional response to the tragedy. Russian foreign policy has in fact gradually shifted, expressed in a leaked foreign policy document, towards improved relations with Europe (Russky Newsweek, May 11). Foreign Minister, Sergei Lavrov’s recent visit to Poland intended to carry that process even further.
Lavrov’s talks with Polish Foreign Minister, Radoslaw Sikorski, and Prime Minister, Donald Tusk, covered issues of European security, Moscow’s perspectives as expounded in its draft treaty on the subject, future relations between Russia and the EU as Poland will be the EU president in 2011, as well as visa-free travel for Russians to EU member countries. They also discussed Kaliningrad, the progress of the commission to investigate troubled events in Russo-Polish history, and energy relations. Lavrov used the occasion to bring up the prospects for the Russian-EU Partnership for Modernization (Ministry of Foreign Affairs of the Russian Federation, mid.ru, September 3). He then delivered a speech to a gathering of Polish ambassadors. Both before and after the talks, Lavrov expressed general happiness with recent trends in bilateral relations and noted that several agreements with Poland are being drafted (mid.ru, August 30, mid.ru, September 5). At the same time the discussions, particularly with Poland’s ambassadorial corps, were “detailed and frank,” suggesting points of disagreement, particularly as regards the Partnership for Modernization. Equally, both sides apparently strove to enhance bilateral relations and move in the direction of a more genuine partnership. In that context, Warsaw expressed its desire for a “demilitarization” of the perennially troubled bilateral relationship (mid.ru, September 3; , September 3).
The good feelings expressed here certainly tally with the Tusk government’s efforts to establish a lasting demilitarized relationship and genuine partnership with Moscow. Thus, an energy agreement was also recently concluded between the two states. From the Polish government’s standpoint, this agreement will ensure the continuation of direct gas supplies from Russia to Poland for the long term. Specifically, this contract between Gazprom and the Polish Gas and Oil Company (PGNiG) increases their previous contract for gas exports from Russia, extending its duration from 2022 to 2037 and writing off Gazprom’s debts from 2008-09. Gazprom will also acquire a monopoly through the Yamal pipeline across Poland until 2045 (even as it is undermining that pipeline by building North Stream pipeline to Germany) along with very low gas transit fees. Not surprisingly, the EU initially opposed this deal (Gazeta Wyborcza, September 6). Yet, on September 14 the EU retracted its opposition to the deal that had been generated by the European Commission’s doubts about the operator of the Yamal pipeline supplying gas directly to Poland and through to Europe. An independent operator must supervise the gas deliveries to Poland in conformity with EU requirements, so that all market dealers have equal access to the infrastructure. Evidently those concerns were satisfactorily resolved by September 14 (ITAR-TASS, September 21).
Warsaw’s concerns about being bypassed for gas supplies due to the forthcoming operation of the Nord Stream pipeline clearly provided Russia with favorable terms. Nord Stream allowed Moscow to expand its power over recipients of its energy. Nevertheless, a more cynical interpretation of this deal and of the incentive for the rapprochement with Poland as part of the general turn to the West should be looked at. would cite not only the ongoing economic crisis in which Russia and Europe find themselves but also the potential that Poland might contain huge deposits of shale gas that would eliminate any need for Russian gas at least in large quantities (Gazeta Wyborcza, September 6).
Indeed, critics of this deal and of the policy of rapprochement stepped up their attacks. They noted that Lavrov’s annual speech to the Moscow State Institute of International Relations (MGIMO) on European relations omitted any mention of Poland (mid.ru, September 1). Thus, Marcin Kaczmarski of the Center for Eastern Studies (osw.waw.pl) charged that the new moves in Russian foreign policy merely represent efforts to find more efficient ways to implement old strategic goals. Certainly, despite rhetoric to this end, there have been no signs of genuine modernization or domestic reform. Therefore in foreign policy the changes are similarly atmospheric rather than substantive (Center for Eastern Studies, September 1). This criticism radically diverges from the more welcoming responses to Russian diplomacy pursued by the government and recommended by such veterans as Adam Rotfeld (Eastern Approaches, blogs, September 6). Ultimately, only time will tell who is correct, but from the practical standpoint, Gazprom, using Nord Stream has secured extraordinarily generous terms in Poland tangible benefits for Poland remain unclear.
Source:
October 06, 2010 10:56
Duma to discuss draft resolution on Russian-Belarusian relations
MOSCOW. Oct 6 (Interfax) - The Russian State Duma on Wednesday entered a resolution on Russian-Belarusian relations, drafted by the Committee for CIS Affairs and Relations with Compatriots, on the agenda in a 349 to 57 vote with one deputy abstaining.
The Communist Party faction was categorically against the resolution. "Political documents must never be tossed in in such haste," faction representative Nikolai Kolomeitsev said.
His colleague in the Communist Party faction Viktor Ilyukhin earlier expressed his opposition to entering this draft resolution on the agenda, saying that a hasty discussion of the issue may have a negative effect on Russian-Belarusian relations.
Duma Speaker Boris Gryzlov said meanwhile that he is familiar with the contents of the resolution. "This statement precisely aims to strengthen these relations," he said.
sd mj
Russian TV resumes media attack against Lukashenko
10:21 06/10/2010
Russian state-run TV has resumed a media attack against Belarusian President Alexander Lukashenko, Ekho Moskvy radio station said on Wednesday.
In July, the NTV channel broadcast a three-part documentary called "The Godfather," revealing disappearances of Belarusian opposition politicians and human rights violations in the country.
The channel is now showing a repeat of the documentary in response to recent disputes between Lukashenko and Russian President Dmitry Medvedev, Ekho Moskvy said.
Medvedev criticized Lukashenko in his video blog on Sunday for using his pre-election campaign for the Belarusian presidential elections on December 19 to make damning remarks about Russia.
On Monday the Kremlin press service said Russian-Belarusian relations had reached a deadlock, but Russia would maintain political contacts with Belarus.
Tensions between Russia and Belarus have reached an all-time high in recent months following an energy dispute and Minsk's refusal to recognize the former Georgian republics of South Ossetia and Abkhazia, which Russia has supported since a five-day war with Georgia in 2008.
Accordingly, there has been speculation that Russia, which has traditionally backed incumbent Belarusian President Lukashenko, may lend its support to an opposition candidate ahead of the elections.
The media attack echoes this summer's TV smear campaign against former Russian mayor Yury Luzhkov, who was sacked on September 28 after a series of disputes with Medvedev.
MOSCOW, October 6 (RIA Novosti)
09:22
Russian Navy proposes plan to re-launch logistics base at Port Cam Ranh - source
Nezavisimaya/Russia Today: Wiretapping in the law
The current Code of Criminal Procedure allows massive rights violations on the part of the law enforcement agencies
By Ivan Rodin, Aleksandra Samarina
By a presidential decree, the head of the Investigation Committee under the Prosecutor General’s Office, Aleksandr Bastrykin, has been named the acting chairman of the Investigation Committee – an independent law enforcement structure. At practically the same time as the appointment was made, a new draft law, specifying many norms of the Criminal Procedure Code, appeared in the State Duma. The bill has been introduced by the deputies, but was clearly initiated from the outside. As was reported by Nezavisimaya Gazeta (NG), the Code of Criminal Procedures is currently being managed from all directions, and it is not always a coordinated process. Meanwhile, NG experts indicate that there are certain gaps in the Code, about which not many speak out loud, but which directly infringe on the rights of the citizens. For example, the powers of law enforcement agents are prescribed in such a way that allows them to legally monitor the conversations of almost any Russian citizen.
Read more
The position of the acting head of the Investigation Committee of the RF, which is currently being established, was assigned by Dmitry Medvedev to Aleksandr Batrykin, head of the Investigation Committee under the Prosecution General’s Office, which is in the process of being eliminated. According to Viktor Ilyukhin, deputy chairman of the State Duma Committee on Constitutional Law and member of the Communist Party faction, the “acting” status is most likely an exclusively formal title. “It is simply because he continues to be the first deputy of the prosecutor general, and the new body – the Investigation Committee – is only being created. That is why Bastrykin has been appointed the ‘acting’ head.” However, Ilyukhin did not exclude the possibility that there may be room for intrigue. According to him, speculation that the Investigation Committee may be headed by the Justice Minister, Aleksandr Konovalov, are still relevant. “After all, Bastrykin will not be accepted in the government or its apparatus – these are the options that, according to rumors, are being discussed,” noted the deputy.
Recall that Bastrykin’s positions are not particularly strong. For example, he was not afraid to publicly propose to increase the number of Articles in the Criminal Code, under which it will be possible to prosecute businessmen. Meanwhile, everyone knows that the head of state is insisting that businessmen, as well as ordinary persons, are jailed less. The draft laws on this subject have either already been introduced in the State Duma or will appear shortly. Meanwhile, a new bill, dealing with the adjustment of the Code of Criminal Procedure, has appeared in the legislative framework of the State Duma. It was signed by the same United Russia deputies who had once suggested forming the Investigation Committee under the Prosecutor General’s Office. Thus, one could assume that the current initiative came from the same department. The bill is said to be technical, as it fixes the problems and shortcomings of the current Code of Criminal Procedure, as well as aimed at strengthening the protection of rights of suspects and the accused – mainly through the refinement of various procedures which limit the discretionary powers of the investigators and judges. At the same time, NG learned from practicing lawyers that the Code of Criminal Procedure has more serious violations that are not being corrected.
The bill left the legal community perplexed. Representatives of the Guild of Russian Lawyers informed NG that the document is entirely non-binding in nature. For example, authors of the bill are proposing to increase the initial term of arrest from two to three months.
This amendment is senseless, explains lawyer Vladimir Samarin: “First, it does not change the maximum term of arrest during an investigation – it continues to be 18 months. Second, investigators are able to prolong the arrest every two months. And that it logical: some cases are so complex that the expert examination alone takes one month to complete”.
Instead of working on this nonsense, the deputies should work on resolving more pressing issues, argues NG’s interlocutor. Samarin points out one important gap in the current legislation, which affects practically every Russian. He explains why, today, law enforcement agencies are able to monitor citizens’ conversations with impunity – and not only the conversations of those who violated the law.
There has always been a single copy of the judicial decree on wiretapping, says Samarin, and it has always been in the hands of the operatives. There are no copies in the court, and the Code of Criminal Procedure simply does not have a corresponding provision. This situation is dangerous by the fact that the circle of people whose conversations are wiretapped is unlimited, says Valery Talalaiko, a lawyer: “When a crime is not proven and the case is closed, you will never see the documents from the case. But, when the monitoring takes place, it can apply to anyone – and the results can be used, not in the case that has been closed, but in others – in which no permission for wiretapping was granted. This is a threat to not only the violator of the law, but to the lawyer as well”.
The Commission for the Protection of Lawyers’ Rights under the Guild of Russian Lawyers insists on the introduction of amendments that will oblige the court to keep a record of the issued wiretapping warrants, as well as to strictly limit the circle of people whose telephones are wiretapped. “Today, not only the communications of the defendants are wiretapped, but so are those of everyone who dials their number – and this does not require a warrant,” complains Samarin. It seems that the deputies do not share the lawyers’ concerns, however, and believe that the investigators must use all means, including the similar loopholes in the law.
Samarin explains another gap in the law, which calls for the parliamentarians’ efforts: “The verdict is issued, you write a complaint and address it to the same court where the verdict was issued. After receiving it, the judge prepares the necessary documents and sends them to a court of appellate jurisdiction for an examination of the merits of the case. There, the appeal must be reviewed within a month after its receipt. But, the law does not stipulate how soon the trial judge needs to send these documents to the second court. In one of my cases, it took the judge eight months to forward the documents! Meanwhile, the person was in prison”. The lawyer believes that a norm must be introduced in the Criminal Procedure Code, which establishes a deadline for sending documents to the court of appellate jurisdiction.
“While ignoring the truly important things, the deputies are only imitating active work,” says Samarin. Meanwhile, Talalaiko noted: “At the time when the president decided to pursue a policy of liberalization of commercial articles of the current legislation, the Criminal Procedure Code lacks the norms able to protect commercial confidentiality. After all, lawyers are not the only ones who suffer from the arbitrary behavior of the wiretapping operatives, but so do all other citizens”.
Read the article on the newspaper's website (in Russian)
Medvedev to receive Moscow mayoral candidates' list Sat
06.10.2010, 00.08
MOSCOW, October 6 (Itar-Tass) - Moscow's acting Mayor Vladimir Resin on Tuesday filed an application for the United Russia party (URP) membership, the URP press service announced.
URP members, who constitute a parliamentary majority in the Moscow City Duma legislature, currently hold consultations about candidates for the position of mayor.
A list of mayoral candidates is to be presented to President Dmitry Medvedev on Saturday, October 9.
Acting Moscow mayor seeks ruling party membership
03:34 06/10/2010
Acting Moscow Mayor Vladimir Resin is seeking membership of the ruling United Russia party, the party's press service said.
"Acting Moscow Mayor Vladimir Resin filed a request to join the United Russia on Tuesday," the statement reads.
However, according to the party's charter, Resin should be listed as one of the party's "supporters" for six months before being granted membership.
Resin's move is widely seen as a bid to become the Moscow Mayor. The 74-year-old acting mayor filed his request shortly after a meeting with Russian Prime Minister Vladimir Putin on Tuesday.
Dmitry Peskov, a spokesman for the Russian premier, told the Gazeta.ru news portal that the future mayor's candidacy was not the key issue discussed during the meeting.
"Probably, it [the discussion] was not [about the process of nominating the future Moscow mayor]. But I cannot rule out that some elements of this process were discussed," Peskov said.
United Russia will present a list of candidates for Moscow mayor to President Dmitry Medvedev on Saturday. The party's general committee will convene on Friday night or Saturday morning to agree a final list of three or four hopefuls.
A dozen senior officials have been tipped for one of the top jobs in Russia.
Resin was appointed acting Moscow mayor after Yuri Luzhkov, who had headed Moscow since 1992, was fired by the Russian president last week after weeks of speculation that he would either step down or be sacked amid his worsening relations with the Kremlin.
MOSCOW, October 6 (RIA Novosti)
Luzhkov Firing Gets Surprise Support From Russians, Poll Shows
October 05, 2010, 5:22 PM EDT
By Ilya Arkhipov
Oct. 6 (Bloomberg) -- President Dmitry Medvedev’s firing of Moscow Mayor Yury Luzhkov was backed by 66 percent of Russians, demonstrating the success of a media campaign waged against the man who ran the city for 18 years, a public opinion poll shows.
Sixty-five percent of those surveyed said the capital needed a new mayor, according to the poll by the All-Russian Center for the Study of Public Opinion, or VTsIOM. About 13 percent said it would have been better if Luzhkov remained mayor, VTsIOM said in an e-mailed statement to Bloomberg.
“We didn’t expect the approval to be so high,” said Valery Fedorov, general director of VTsIOM, in a phone interview. “For Medvedev, it is a very good result -- four times more people agree with his decision then not. The survey shows that people in Russia like their leader to be strong.”
Medvedev cited a “loss of confidence” as his reason for firing Luzhkov on Sept. 28 after a series of programs on state- controlled television accused the mayor of corruption and favoritism toward his wife, billionaire developer Yelena Baturina. The poll of 1,600 people across Russia was conducted Oct. 2-3 and had a margin of error of 3.4 percentage points.
“This poll shows that people agree with what they’ve been shown on television, because they see authority as corrupted,” Fedorov said. “This poll shows approval for the president but disapproval for the authorities in general, especially local ones. The paradox in Russia is that people tend to have more trust for those in power who are less close to them.”
--Editors: Willy Morris
To contact the reporter on this story: Ilya Arkhipov in Moscow at iarkhipov@
To contact the editor responsible for this story: Willy Morris at wmorris@
Kommersant/Russia Today: Oleg Mitvol prescribed rest
The prefect of the Northern Administrative District has been dismissed following medical leave
Aleksandr Voronov
Yesterday, Acting Mayor Vladimir Resin continued clearing the Mayor’s Office following Yury Luzhkov’s resignation, by dismissing one of the most outspoken members of the Moscow government – Prefect of the Northern Administrative District (NAD), Oleg Mitvol. According to Mr. Resin, his work methods “were not supported by the population of the district”. Mr. Mitvol thought ahead: earlier, he took medical leave – a time during which dismissals are prohibited under the Labor Code of the RF – and then declared his dismissal to be illegal.
Read more
Yesterday, representatives of the city’s administration announced that Vladimir Resin had signed Decree Number 85, dismissing the Prefect of the NAD, Oleg Mitvol, who had been appointed to the post in July, 2009. The decree was signed on October 4. In the morning, city officials had initially announced that Oleg Mitvol was offered to write a letter of resignation himself. However, after the official denied this information, the issuance of the abovementioned decree became known. Although its text had not been published yesterday, a name plate with the prefect’s name was missing at the Moscow government session. Mr. Resin explained this by saying that “the work methods [of the prefect of the NAD – Kommersant] did not find support among the population of the district.”
Another reason for Oleg Mitvol’s dismissal was cited in the city’s administration as being his excessive talkativeness. Remember that following Yury Luzhkov’s resignation, Mr. Mitvol was the first to announce the ex-mayor’s desire to continue to be politically active and fight for the return of gubernatorial elections. Further, Oleg Mitvol, unlike other members of the Moscow government, had quite eagerly commented on Yury Luzhkov’s resignation. Mr. Mitvol, himself, is linking the decree of his dismissal to the principled position of the prefecture, which refuses to put to use the unfinished buildings in the region.
Experience shows that firing Mr. Mitvol is not an easy task. At his previous job, while serving as the deputy head of Rosprirodnadzor, Oleg Mitvol was remembered for litigation proceedings initiated against his employer for his dismissal. In 2004, the first head of Rosprirodnadzor, Sergey Sai, had wanted to fire him, but the head of Minprirody, Yury Trutnev, had sided with Mitvol and Sai ended up losing his position instead. The succeeding head of the ministry, Vladimir Kirillov, was trying to get rid of the deputy throughout the entire year of 2007 by either approving a new staff schedule (in which there was no place for Oleg Mitvol), or laying him off – but to no avail. Mr. Mitvol filed claims in court against his employer, and demanded an investigation be held, verifying his qualifications, while at the same time constantly appealing to the Labor Code of the Russian Federation. In the end, Rosprirodnadzor was able to part with the official only after he had resigned of his own accord.
Oleg Mitvol has a chance to dispute his dismissal from the post of prefect of the NAD as well. On October 4, on the day when the decree was signed by Vladimir Resin, he took sick leave (Kommersant reported on this yesterday), after citing high blood pressure and flu. Article 81 of the Labor Code of the RF directly prohibits the firing of citizens while they have a valid certificate attesting to their inability to work. Mr. Mitvol has already published a copy of his sick-leave certificate on his blog, and called his dismissal “absolutely illegal”. The official was prescribed medical leave until October 8, and Mr. Mitvol is hoping that a decision, related to his career, will be made by a new head of the city.
Among other things, the official linked his deteriorated health to agitation by Nashi activists. On the morning of October 4, unidentified individuals had posted flyers displaying a Nashi logo and Oleg Mitvol’s image in a straitjacket in the area around the prefecture of the NAD. The pro-Kremlin movement had denied playing any role in the authorship of the flyers though, earlier, did not deny that they had organized a campaign against the prefect.
Oleg Mitvol was one of the most outspoken members of Yury Luzhkov’s government, with whom the ex-mayor had connected at the time when the former worked in Rosprirodnadzor. The prefect’s dismissal is another step in Vladimir Resin’s removal of the former mayor’s legacy. Earlier, Mr. Resin allowed Moscow’s gays to hold a public protest, stopped the construction of a museum depository on Borovitskaya Square and, just recently, ordered to move the monument to Peter the Great (see yesterday’s issue of Kommersant).
General Director of the Center for Political Information, Aleksey Mukhin, believes that Vladimir Resin “is, on one hand, acting extremely compliantly by allowing gays to hold public protests and moving the monument. He is making sensational acts with one hand, while with the other, quickly making staffing decisions and closing projects, which could cause him big problems unless they are not eliminated,” says the analyst.
First they toppled the Moscow mayor, now they're after his sculptor
By Kathy Lally
Washington Post Foreign Service
Tuesday, October 5, 2010; 10:58 PM
IN MOSCOW Just a week after Mayor Yuri Luzhkov was unceremoniously dethroned here, new intrigues are afoot, including an attempt to airbrush his court sculptor from history.
Luzhkov pal Zurab Tsereteli, who enjoyed mayoral patronage for years, has altered the city skyline with enormous installations, the most reviled of which is a 15-story statue of Peter the Great.
Peter started out as an idea for a statue of Christopher Columbus that Tsereteli pitched to U.S. cities in 1992 in remembrance of the great voyage 500 years earlier. Over the years, Baltimore, New York and others - even Columbus, Ohio - turned him down, and Tsereteli eventually persuaded Puerto Rico to accept his model. Meanwhile, he busied himself designing Peter, who looked very much like Columbus, but with a different head.
Luzhkov, fired by President Dmitry Medvedev after a public spat, was barely gone - although he was still showing up at City Hall as if no mere president could dismiss him - when Moscow officials began talking about moving Peter, one of many works of public art created by Tsereteli during Luzhkov's 18-year reign.
Word leaked out Tuesday that acting Mayor Vladimir Resin had broached the move in a meeting Monday. No one has denied those reports, even though it will take more than an airbrush to get rid of Peter, who since 1997 has brooded over the Moscow River not far from the Kremlin, where Luzhkov placed him in homage to the Russian navy, which the czar created 300 years earlier.
Moving the 1,000-ton behemoth could cost as much as $32.7 million, Mikhail Moskvin-Tarkanov, chair of a city government development committee, told the RIA Novosti news agency. That would be nearly half what it cost to build it.
The idea of spending money to move the statue has some Muscovites just as horrified as they are at its mystifying symbols - flags, galleons, scrolls, robes tossed here and there - and its site on a plinth in the river, where it looks like a shipwreck caught at low tide.
"It's ugly," said Natalia Samover, a member of an architectural preservation group. "And it's an insult to the city. It started out as Columbus, and he didn't even bother to create a new statue. This was a long-awaited decision."
Samover then listed buildings that are slowly deteriorating, including a 17th-century merchant's home that has been roofless for a year and a modernist masterpiece open to the skies. Don't worry about Peter, she said - save Moscow's storied past.
Other Muscovites feel the same way, and radio Ekho Moskvy has bristled with calls.
"If removing it is going to be very expensive, maybe just explode it. That is what should be done to this monster," one caller said.
Dmitri Trenin, director of the Carnegie Moscow Center, called the statue a monument to the first 18 years of post-Soviet history.
"I'm not an admirer of it," he said, "but it's like the Lenin Mausoleum. It's one of the markers of history. Let it be."
Even though she dislikes its invasion of the skyline, Natalya Dushkina, a professor at the Moscow Institute of Architecture, agreed, saying she fears officials will use Peter to deflect attention from the crumbling and bulldozing in Moscow's historic heart.
"We need a plan to protect the city's core," she said. "That's what we need to be thinking of."
As for Peter, where would he go, anyway? Perhaps to St. Petersburg, the city he built to outshine Moscow. Send him there, Dushkina said, and put him on an undeveloped shore of the Gulf of Finland, out of sight of the historic city he loved.
She quoted the first lines of Alexander Pushkin's "The Bronze Horseman," a poem every Russian schoolchild has learned by heart. It captures Peter the Great as he dreamed of his new city:
On a deserted, wave-swept shore,
He stood - in his mind great thoughts grew -
And gazed afar.
Doing Business Under a New Mayor
06 October 2010
By Chris Weafer
There is nothing intuitive in saying that former Mayor Yury Luzhkov’s successor will have much better relations with the federal government than he or his administration had. That is because the next mayor will be appointed by the president and will have the support of the prime minister’s office and key ministries. In practical terms, that should mean that the federal government may ease its previous intransigence toward providing funding for projects in the capital and should more proactively help the city advance its goal of becoming a more important business and financial center.
While that optimism is somewhat justified, the harsher reality is that the Finance Ministry doesn’t have much spare cash to give. For Moscow to achieve the status of a greater financial center, there will have to be much greater progress in reforms at a national level.
That said, the hope, widely expressed last week, is that the new mayor will be able to leverage off a better relationship with the Kremlin and White House and will be better placed to end current reported inefficiencies in the way the city conducts its business. There is a good chance that changes in the Mayor’s Office will act as a catalyst for stronger regional economic growth. There is no question that Luzhkov and his team had almost full control of the main economic drivers in Moscow and tightly controlled the city’s development. That was precisely the problem. Luzhkov and his team had an entirely different set of business relationships and economic priorities. Skirmishes with the federal government, particularly over infrastructure and real estate developments, were frequent, and those disputes undoubtedly held back the pace of growth in the city’s economy.
As recently as August, city administrators put forward a 4 trillion ruble ($130 billion) plan to help improve Moscow’s transportation infrastructure. The city had previously allocated 300 billion rubles to the project from its own resources and indicated that it was prepared to raise this to 1 trillion rubles. The rest had to come from the federal budget. Not surprisingly, the Finance Ministry rejected the proposal out of hand. But while the Finance Ministry is focused on capping spending plans everywhere, a better relationship between City Hall and the government would surely have resulted in a compromise deal rather than an outright rejection. Few would deny that the city needs the additional 365 kilometers of railroads and the 120 kilometers of metro lines that the plan envisaged.
But while Finance Minister Alexei Kudrin’s priority is to keep the budget deficit as low as possible over the next three years and to have major developments funded with project finance and via public-private partnerships, political proprieties will play an important role next year. United Russia is determined to defend its dominant position in the 2011 State Duma elections, and whoever is Moscow mayor will play a key role. Luzhkov had always delivered well on bringing out United Russia votes among Muscovites, but the problem is that even if he were allowed to complete his term in office, which would have expired in July, there would have been a five-month gap between next July and the Duma elections in December, assuming, of course, that he wouldn’t have been reappointed to another term. Although five months is too short to cultivate a new mayor for one of his most important functions — canvassing votes for United Russia in Duma and regional elections — one year is much better. That is one reason why President Dmitry Medvedev and Prime Minister Vladimir Putin decided to fire Luzhkov now — to have enough time to groom the next mayor for the 2011 Duma vote.
No less important, it is crucial for the Kremlin and White House to ensure that the most favorable economic backdrop is in place for the 2011 and 2012 presidential elections. That will most likely mean a more favorable response to funding requests from the new city administrators than the response that Luzhkov received. The government will want to be visibly seen to be supporting the city’s development and avoid the risk of being accused of blocking it.
But while the change in the Mayor’s Office and the improved relations with the federal government will have a positive impact on some projects in the city, of itself, it will not make a huge difference to Moscow’s ambition to become a more important financial and business center. This, of course, is not just an ambition of the city administrators but is an important part of Medvedev’s plan for modernizing Russia.
Sorting out the city’s notorious traffic problems and providing a greater number of affordable hotel rooms is important. What is even more important is to improve the perception of Russia as a place to do business and in which to invest. Right now, that perception among international portfolio investors and strategic business investors is very poor. The discounted valuation of the Russia stock market relative to other major emerging market stock markets is near a historic high. If you don’t count investment in extractive industries and in offshore centers, such as Cyprus, the amount of real foreign direct investment is negligible. If Russia were to get the same foreign direct investment relative to gross domestic product as other big developing economies, the annual investment would be close to $75 billion. This is more than enough to accelerate the diversification of the economy. For that to happen, though, risk-adverse companies, such as Wal-Mart, need to see an improvement in the investment and business climate in Russia. Investors’ perceptions about Russia are shaped more by the negative (although accurate) stories they read in the media than the overpriced hotels and horrible traffic jams.
At the same time, however, there is much progress being made. Medvedev’s repeated calls for modernization are seen as a pragmatic and credible change of priorities within the government. Some reforms have already taken place — for example, Russia will soon have a much-needed law against insider dealing — and many more laws that will help improve the business environment are making their way through the legislative process. Finally, it also seems that Russia is getting serious about World Trade Organization entry in 2011. That will have a big positive impact on perception. In any case, Russia has decisively started down the road to improve the investment and business climate in Russia — and Moscow in particular. The change of mayors in Moscow is an important part of this process.
Chris Weafer is chief strategist at UralSib Capital.
GOOGLE TRANSLATION
Vladivostok Islamists recruited fighters for the war in Afghanistan
Vladivostok, October 6.
Employees of FSB of Russia eliminated in the Primorsky Territory Islamist group of radical clerics. According to intelligence agencies, its members were engaged in the region looking for recruits for the militant camps in Pakistan and Afghanistan, reports on Wednesday portal Vladnews.
As the spokesman of the FSB in the Primorsky Territory, during the operation was established in 2008 in Primorye from Central Asia have been illegally sent emissaries to promote the youth of Muslim community of radical Islam and a set of recruits.
However, the "guests" have attracted the attention of the FSB. It took a while to get hard evidence that they engaged in illegal activities. In this case, a representative security agency did not specify a date for surgery.
In the field of view of state security "Islamists" were almost since its inception in the region about two years ago. However, the collection of evidence of participation in extremist and terrorist activities - a process complicated and tedious. It is only in action movies the problem is solved missile air-to-earth ", the reality is more complicated, and therefore the catch and detain suspects became possible only now.
Checking the operational information that in Vladivostok launched vigorous activity of religious extremist who advocate the ideas of radical Islam, the employees of FSB have established so-called "spiritual leader". It appeared to be a Abdulhamid, a native of Uzbekistan, which sought to extend its influence in the coastal Muslim community and even to become an imam prayer house of Vladivostok. At the congregation gave the impression of his excellent knowledge of the Koran and outstanding preaching abilities.
The leader of the group held meetings in the house of prayer of Muslims in Vladivostok, thus managed to become an influential man in the Muslim community of the city. As the "new politics", he invited all six members of Primorye "Hanabadskogo Jamaat - a radical Islamic group suspected of extremist activities in the territory of Uzbekistan.
Representatives of the regional FSB office reported that the leaders of groups have already appeared in court in Uzbekistan.
Two female accomplices of killed gunman detained in Makhachkala
06.10.2010, 10.03
MOSCOW, October 6 (Itar-Tass) - Two female accomplices of the killed gunman were detained in Makhachkala, a source in the republican law enforcement agencies told Itar-Tass on Wednesday.
On Tuesday, FSB and police agents blocked in a house a gunman Yerlan Yusupov, a Kazakh citizen, who put up armed resistance.
The security forces sustained no casualties. Yusupov was killed in the retaliatory fire. “Another two female accomplices of the gunman, namely a resident of the Lak district and a resident of Mozdok, were detained,” the source said.
The detectives have found a Kalashnikov assault rifle and 35 cartridges at the clash site.
The National Anti-Terrorist Committee (NAC) reported that killed Yerlan Yusupov was wanted for several attempts on life and murders of law enforcers. “Yusupov was a mastermind and a participant of the murder of chief of the inter-district department of the Dagestani anti-extremism center Ramazan Radzhabov, his deputy Omarov and two civilians in the city of Izberbash on September 28,” the NAC reported earlier.
Since early 2009 Yusupov has been an accomplice of the earlier killed warlord Vagabov and has been a member of the so-called Sergokala gang headed by Turkish citizen Abdu-Salam. Alongside, the law enforcement agencies reported that Yusupov has been the perpetrator of several terrorist acts at power supply facilities and at the mobile communication tower in the Sergokala and Karabudakhkent districts of Dagestan.
GOOGLE TRANSLATION
In a St. Petersburg garage drugs police found 120 kg of hashish
In the Primorsky district of St. Petersburg drugs police during a search of the garage found and seized 130 kg of drugs. According to the press service of the Office of the Federal Service for Drug Control (UFSKN) in St. Petersburg and Leningrad region, in a garage on the street Optikov kept more than 120 kilograms of hashish, more than 8 kg of amphetamine and 1,5 kg of MDMA tablets.
The search was conducted in a criminal case, the previously initiated on Part 1 of Article 30 and paragraph "g" st.228.1 Part 3 of the Criminal Code (attempted illegal purchase, storage, transportation, manufacturing and processing of narcotic drugs, psychotropic substances or their analogues).
As explained in the Regional Office of Federal Drug Control Service in 2009, was arrested one member of a criminal gang engaged in wholesale supply of various drugs in other regions of Russia, including Moscow. In the course of further operational measures have been installed small wholesale distributors of illicit substances and organizers of criminal business. In particular, managed to detain and arrest twice convicted of the active member of organized crime groups involved in the drug trafficking. According to intelligence data, he established a distribution network of wholesale cocaine, cannabis, amphetamine and MDMA in several regions of Russia.
Are ongoing investigative and operational measures, aimed at identifying other members of the criminal group.
PRESS DIGEST - Russia - Oct 6
12:54pm IST
MOSCOW, Oct 6 (Reuters) - The following are some of the leading stories in Russia's newspapers on Wednesday. Reuters has not verified these stories and does not vouch for their accuracy.
KOMMERSANT
kommersant.ru
- Russia's envoy to the North Caucasus, Alexander Khloponin, has developed a development plan for the volatile region including a return of Russians who previously lived there as well as boosting employment, the daily writes.
- Russia's Health Ministry is planning a ban on advertising promoting beer which contains more than five percent alcohol, the paper writes.
- Deutsche Post DHL (DPWGn.DE: Quote, Profile, Research) earned more than 300 million euros in 2009 in Russia, the daily writes.
VEDOMOSTI
vedomosti.ru
- The chairman of Moscow's arbitrage court will be dismissed before the end of his term as he had a close relationship with sacked Moscow mayor Yuri Luzhkov, the daily says.
- Russian retailer O'key Group SA plans to raise up to $500 million via an initial public offering (IPO) in London before the end of 2010, the daily writes.
NEZAVISIMAYA GAZETA
ng.ru
- By the existing criminal code procedure in Russia, law enforcement agencies have the right to tap every Russian's phone, the daily writes.
TRUD
trud.ru
- The paper runs a list of the 50 best companies to work for, according to Universum study.
KOMSOMOLSKAYA PRAVDA
kp.ru
- Ex-Moscow mayor Yuri Luzhkov has become dean of a Moscow university and will earn 1 rouble ($0.033) a month, the popular daily writes.
RIA Novosti Press Review for Wednesday, October 6, 2010
08:43 06/10/2010
A brief look at what is in the Russian papers today
POLITICS
The Moscow City Duma and the opposition A Just Russia party demanded the cancellation of the results of the October 2009 elections, in which Muscovites voted on their city’s legislature. A Just Russia, the only party in the legislature except for the ruling United Russia, suspects that sacked Moscow Mayor Yury Luzhkov, then also a leading United Russia member, influenced the results of the vote with his “immense authority.” (Vremya Novostei, Kommersant, Nezavisimaya Gazeta)
Russian President Dmitry Medvedev has suggested compiling a list of criteria to determine how efficiently a municipal or regional head performs his or her duties. He told an extended session of the council for municipal development on Tuesday that "someone must be responsible for making every piece of land better." (Vremya Novostei, Kommersant, Nezavisimaya Gazeta, Rossiiskaya Gazeta)
ECONOMY
State-owned bank VTB ran an investment forum to discuss how to encourage investors to return to the Russian market. Russian Prime Minister Vladimir Putin, who took part in the forum, reiterated the government's aim to create a system of tax preferences. But investors were reluctant, demanding better legislation and guarantees from the state. (Kommersant, Vremya Novostei, Nezavisimaya Gazeta, Rossiiskaya Gazeta)
Russia's top WTO negotiator Maxim Medvedvkov expressed uncertainty about when Russia would join the global trade body, but guaranteed that Russians would not be affected by the accession process as the transition period would take from five to seven years. (Rossiiskaya Gazeta)
METALS & MINING
As the bodies of more victims are being recovered from southwest Siberia's Raspadskaya coalmine, hit by a deadly blast in early May, the trade union of Russian miners convenes for an emergency session. The trade union's head, Alexander Sergeyev, accused mine owners of "sabotaging" the instructions given by the Russian government after the tragedy. (Vremya Novostei)
Alrosa, the world's largest diamond-mining company valued by JPMorgan from $7.3 billion to $9 billion, could float an IPO next year. (Vedomosti)
OIL & GAS
Russian Prime Minister Vladimir Putin will hold a visiting government session in the town of Novy Urengoy to discuss Russia's gas industry development plan for the next 20 years. (Vremya Novostei, Kommersant)
TELECOMS & IT
The chairman of Russia's state-owned telecommunications holding Svyazinvest, Yevgeny Yurchenko was relieved of his duties a month earlier than expected. Yurchenko said his dismissal was illegal. (Kommersant, Vedomosti)
BANKING & FINANCE
The Russian Central Bank revoked the license of the International Industrial Bank, a leading privately-owned Russian banking institution. The bank, which is controlled by Sergei Pugachyov, a wealthy industrialist and Federation Council senator from the Tuva republic, is the first top-30 bank to be closed in several years. (The Moscow Times, Vremya Novostei, Kommersant, Vedomosti, Rossiiskaya Gazeta)
SOCIETY
Authorities in the North Caucasus Federal District name the return of ethnic Russians to the region as one of the strategic for development. The strategy, published on the Russian government's website on October 4, also suggests relocating unemployed people in the North Caucasus to areas of Russia in need of workers. Experts are convinced that such methods are doomed to failure. (Kommersant)
SCIENCE
Two Russian-born scientists, Andre Geim and Konstantin Novoselov, have won the 2010 Nobel Prize for Physics, for "groundbreaking experiments regarding the two-dimensional material grapheme." (Vremya Novostei, Kommersant, Nezavisimaya Gazeta)
Fugu fish soup leads to mass poisoning in Far East
06 October, 2010, 02:14
Hospitals in Russia's far-eastern city of Vladivostok have seen an influx of patients with a rare form of fish poisoning. Several people have died.
The culprit is the fugu fish – a traditional and popular Japanese delicacy.
The catch is you have to cook it very carefully because just one fish contains a poison capable of killing over 30 people. In Japan, only very experienced, specially trained cooks are allowed to dress fugu.
Fugu fish are not usually found off Vladivostok, but the warm summer saw their numbers grow.
Hungry anglers took it upon themselves to make what they thought would be a tasty fish soup.
There are more than 20 types of fugu, but it takes an expert eye to know which ones will not leave you clutching your stomach, or even worse.
Will there be a demand for irradiated agricultural products in Russia?
Part of: Nuclear Russia
MOSCOW – A dangerous experiment comprised of irradiating food products with gamma radiation now being conducted in the western Russian Republic of Tatarstan could be replicated throughout the country. Andrei Ozharovsky, 05/10-2010 - Translated by Charles Digges
Russia’s nuclear industry is convinced of the safety of gamma radiation, where independent scientists object. If the experiment continues, thousands of containers of caesium will be sent to Russia’s agricultural regions.
Some 120 tons of planting seeds irradiated
In 2001, experiments with irradiating agriculture products with gamma radiation has been carried out seven regions of Tatarstan. The experiment is being carried out by OAO Izotop, a division of Russia’s state nuclear corporation Rosatom via a protocol signed between Tatarstan’s administration and the nuclear corporation, according to a report by the RIA Novosti Russian newswire.
Izotop’s general director, Andrei Silkin, told the news wire that, “in Tatarstan in 2010, we irradiated 120 tons field seeing materials - wheat, barley, sowed these 120 tons, and gathered the harvest. And we can definitely say that in the conditions of contemporary agriculture in Tatarstan, the germinating power of the seed irradiated by us was more than in the control group. If we talk about it in percent, then you can say we saw a 20 percent improvement on germinating power.”
Izotop is also planning on irradiating grain prior to storage.
“In the spring, we will evaluate the viability,” said Silkin. “We are sure that grain that has been processed before storage will provide completely different parameters for viability. We will definitely achieve the 10 percent viability announced by the rest of the world,:” he said.
Though no official results of the trials have been made public, the experiment will continue. Izotop is intends to implement the construction of gamma installations and to deliver radioactive products to irradiate grain and other food products. “We plan to spread this experience in all the republics of Tatarstan – and as a result, to come out with a federal programme for gamma sterilization in agriculture,” said Silkin.
Caesium used for irradiation
In order to irradiate agricultural products, a chloride of the radioactive isotope caesium – 137 is used – a radionuclide made famous by Chernobyl. It half life is 30 years and it remains dangerous to all organic products for 300 years.
The idea of spreading dangerous radioactive particles in agricultural regions would seem strange to many – but not Izotop, which is operating on state orders. Izotop’s Russian language web site gives information about the readiness to use radiation technology in agriculture. They point to the pre-sowing processing of agricultural seeds for raising crop yields; to the radiological disinfection of grain, groat, and legume seed cultures of parasites, pests, and their larvae; the processing of root vegetables to prevent their premature germination; the sterilization of food products with the goal of eliminating the sustenance of dangerous micro-organisms.
Izotop is indeed ready to irradiate the gamut – wheat, potatoes, peas…if not for the financing. But this particular subdivision of Rosatom rarely has problems with that. However, as Silkin noted, Russia has no standards for gamma sterilization and no one oversees the irradiation.
“The essence of the method is that for the processing of food products they use ionizing radiation of such low energy that it does not stimulate residually induced radiation,” Izotop’s web site says. “But it destroys harmful micro-organisms that hasten the rot of food products.”
If the food products showed a notable induced activity, then they would become radioactive waste. But the irradiation of living seeds and food products could result in complex and small irradiation processes for both agricultural production and consumers.
Safety of the method leaves doubts
The developers of the foodstuffs irradiation method are sure of its safety, but scientists don’t share their optimism. Ivan Nikitchenko, a professor and a doctor of biological and agricultural sciences, as well as a member of the Belarusian Academy of Sciences told Bellona Web that “the ionizing radiation is fatal to all living things, and a seed is a living thing.”
Nikitchenko continued to say that, “I am sure that gamma radiation is dangerous without exception to all organisms. And if one irradiates seeds and roots vegetables with gamma radiation, then, without fail, changes at the molecular level will occur. A natural particle under the impact of gamma radiation denaturalizes because so called free radical and ties are punched out of it.”
Hormesis
Heightened germinating ability of seed after irradiation is an established fact. But it appears that its mechanism is similar to that which is at work during heightened birth rates during epidemics, wars and other catastrophes: Stress mobilizes defensive strength for a short period of time. And the effects of irradiation can be far from harmless
The heightened germination of seeds after irradiation can be brought about by the so-called process of hormesis. The well know effect shows that small doses of radiation stimulate a number of organic functions. In the “ECRR 2003 Recommendations of the European Committee on Radiation Risk The Health Effects of Ionising Radiation Exposure at Low Doses for Radiation Protection Purposes” report (Brussels 2003) it is noted the that the effect of hormesis can be explained by the destruction of sensitive cells, a fortified process of DNA reparation, and a fortification for a short period of other defence mechanisms. However, the report notes that the observation of short lived positive effects after small doses of radiation, long term negative effects are entirely possible. The European Committee’s conclusion is that the long term effect of hormesis is most likely harmful.
As such, in order to speak about success with the irradiation of seed material is impossible without at least a year or two’s worth of experimentation. For the evaluation of probable negative results of small doses of radiation, comprehensive research of a few generations of plants is necessary. As is established in fruit flies, the negative effects are expressed in only every fifth generation of irradiated insects. This phenomenon is called the “fifth generation crisis” and is widely discussed in scientific circles. If such an effect would appear in wheat, potatoes and other agricultural products is still unclear.
The ‘Gamma Spike’ revisited?
During the Soviet period when information about radiation catastrophes remained hidden, and nuclear energy seemed to be the solution to all problems, similar experiments were conducted. But as a result of the collapse of the country, their results remain un-researched or consolidated.
In the early 1970s, radiation sources were placed in a number of Soviet republics in order to study the effects of radiation on plant life in a programme called the “Gamma Spike.” The chosen radiation source was caesium-137.
“Despite significant amounts of research, all work in the USSR on the introduction of new methods in this sphere were halted in 1986 on the wave of ‘radiophobia’ following the Chernobyl accident,” Izotop’s web site said
How not to lose a source of radiation?
The problem, however, is not “radiophobia.” The fact is that control over many radiation sources was lost with the collapse of the Soviet Union. If a radioactive mixture is dispersed, its container turned into metal, then this could lead to the contamination of land districts or in the metallurgy field. If caesium were to fall into the hands of terrorists, then it could be dispersed in cities, on public transport and subways. This is a very real threat.
The “Gamma Spike” situation became a matter of concern for the United States, and they began financing projects to find and secure sources of “agricultural radiation.” According to the Washington Post, government officials are worried that if the sources of radiation fall into the hands of terrorists, they would be far worse than dirty bombs: They are small, easy to transport, and contain caesium chloride in the form of granules or powder.
“It is like talcum powder, and spreads very easily,” Abel Gonzales, the director of the radiation and safe storage of radioactive waste division of the International Atomic Energy Association, was quoted by the paper as saying. “You don’t even need a bomb, all you need to do is open the container and people start dying.”
IAEA experts, with the support of the US Department of Energy (DOE), located five canisters of caesium-137 in the former Soviet Republic of Georgia, and another four were founds in Moldova. In the Central Asian republics, matters are far worse, as in some countries, no records pertaining to “Gamma Spike” were kept and it is unknown how many caesium canisters may be on their territories.
Is there a need to continue the experiment?
If Rosatom and its subdivision OAO Izotop can still lobby for the continuation of the experiment and the caesium canisters go first to new regions in Tatarstan and, further, to other republics and regions of Russia, then the country will again find itself in a position were its citizens are forced to take part in an experiment by buying irradiated groceries, and hundreds of thousands of canisters of dangerous radionuclides will appear in far flung corners of the country.
Russia set to become a leader in standards of living
Oct 6, 2010 09:38 Moscow Time
Russia is set to become a leading nation in terms of key indicators of standards of living. This came in a statement during a meeting of the UN General Assembly Third Committee on Tuesday by the Russian representative Nikolai Rakovsky.
Despite the fact that Russia has, just as other nations, been affected by the world crisis, the Russian leaders have succeeded in maintaining social support for the population at an appropriate level. Russia continues implementing in full its national large-scale projects for the social sector, Rakovsky said.
He emphasized that support for the families, as well as the socially vulnerable groups of citizens remains Russia’s unquestioned priority.
Russia votes on banning psychic charlatans
(AFP) – 18 hours ago
MOSCOW — Russian lawmakers on Tuesday backed a bill banning the country's faith healers, witches and assorted sorcerers from advertising their services in a potential blow to the booming business.
Faith healers and the like cause "moral and physical harm to the people and economic harm to the country," wrote lawmakers proposing the bill, which was passed in an initial reading.
Russians often turn to folk healers and fortune-tellers to solve problems and tabloid newspapers fill pages with ads for "psychics", who promise to return cheating husbands, cure alcoholism and bring business success.
Advertising of esoteric services in the mass media means that "charlatans attract a lot of clients without giving any guarantees, and sometimes engage in fraud," the bill's authors said.
The Duma needs to vote for a draft in three readings before it is signed by the president and becomes law.
Esoteric healers outnumber doctors in Russia, and the annual turnover of the business is close to two billion dollars, said Duma deputy Tatyana Yakovleva, who sits on the parliamentary health committee.
"The number of healers has reached 800,000 people, while there are only 620,000 medical doctors," Yakovleva said in a statement, calling claims by some to cure cancer and AIDS 'criminal'."
"It's ridiculous to treat toothache by dangling a rat's tail near your cheek," she said.
A survey carried out by Levada independent polling agency in August found that 20 percent of Russians have visited alternative healers for their problems and only 10 percent have ever seen a psychotherapist.
Televised psychic sessions were prevalent in Russia in the 1990s, with some of the more popular psychics even running for legislative offices around the country.
One of Russia's national channels, TNT, runs a popular Friday primetime show "Battle of the Psychics" where contestants use alleged psychic abilities to solve various puzzles.
National Economic Trends
Putin Offers $3Bln for 'Acute Problems'
06 October 2010
By Olga Razumovskaya
An additional 91 billion rubles ($3 billion) will be funneled into the federal budget by year's end to “solve a number of acute problems without waiting until January,” Prime Minister Vladimir Putin said at a Presidium session Tuesday.
Putin, who made the announcement after consultations with Finance Minister Alexei Kudrin shortly before the session, ordered the government to adjust spending accordingly so the money would go directly to support a housing program, Russian Railways and economic zones.
He also promised state guarantees to kick-start investment projects in Chechnya.
While a combination of anti-crisis measures and savings has brought in additional money, government spending has increased by 44 billion rubles this year, leaving the budget in the red.
Still, government officials seem optimistic about reducing the budget deficit and keeping inflation at bay.
Earlier Tuesday, Putin told a VTB investment forum that Russia was on course to start slowly reducing the budget deficit, currently at 5.3 percent of gross domestic product, or 2.38 trillion rubles ($79.2 billion), and to bring it down to zero over the next five years.
“We are now living through a historical moment with the lowest inflation since the beginning of 1990s,” Kudrin said at the forum.
A jump in inflation over the past two months is something the government considers a one-off phenomenon, Kudrin said, sticking firmly to his forecast to curb both inflation and the budget deficit.
Among the projects that the government considers its top priorities, Putin singled out the following:
• A total of 25 billion rubles for the Housing and Public Utilities Assistance Fund to help relocate those living in rundown housing. The funds come shortly after President Dmitry Medvedev visited Kamchatka, in the Far East, and told the governor to “wind up” local bureaucrats to speed up the relocation process.
• Russian Railways will receive 40 billion rubles for its investments plans. The tariffs on freight rail transportation have increased by 10 percent, Putin said Tuesday. The growth was prompted by a need to stimulate the national economy but give the state-run rail monopoly “the right to count on state support in the development and reconstruction of its infrastructure,” Putin explained.
• The government also will allocate 11 billion rubles to create special economic zones, including one in Tolyatti in the Samara region.
Putin also spoke about new investment projects in Chechnya, saying the republic would receive 3.8 billion rubles' worth of state guarantees for loans for the projects.
The announcement came on Chechen President Ramzan Kadyrov's 34th birthday.
“Today is Ramzan Akhmatovich’s birthday," Putin said at the Presidium session. "The fact that billions in subsidies are being allocated today is a coincidence but pleasant for the republic."
Kudrin told reporters after the presidium session that Kadyrov had approached the government for help with investment projects two years ago, and the federal government promised to assist by taking on certain market risks and selecting projects. Once the state guarantees are approved, some investment projects will get under way this year.
“Currently we have selected 15 billion rubles' worth of projects," Kudrin said. "The first [ones] for a total of 3.8 billion [rubles] are at the highest stage of readiness. It is now an issue of state guarantees."
Government Focuses on Capital Investment
06 October 2010
By Irina Filatova
Prime Minister Vladimir Putin said Tuesday that Russia, unlike many developed countries, wouldn't face stagnation after the government winds down its anti-crisis program.
“I think that the Russian economy can avoid a repeat of the negative scenario that is under way on many European markets — we can see it now — when a long stagnation period follows a winding-down of state programs,” he said at VTB Capital's investment forum.
The level of Russia's public debt is much lower compared with most developed countries, where the figure has already exceeded “the safety threshold” of 60 percent of gross domestic product, Putin said, adding that Russia's public debt currently stands at only 11 percent of GDP and is not likely to exceed 20 percent.
Putin also reiterated the government's commitment to increase the attractiveness of the Russian market for foreign investors by creating a system of tax preferences.
A number of bills aimed at stimulating foreign investments to modernize the economy have already been sent to the State Duma, and another one will be sent in the coming days, he said.
The new bill cancels the profit tax for investors selling securities that are not publicly traded and have been held for at least five years.
“We appreciate the fact that even more investors choose Russia's economy and its stocks … to invest capital,” Putin said, adding that foreign direct investment has reached $25 billion so far this year.
Forum participants praised Putin's speech and his commitment to modernize Russia's economy and attract investments.
“Excellent!” said Dominique Cerutti, deputy head of NYSE Euronext. He told The Moscow Times that he was “positively impressed by the personal commitment of the prime minister” to turn Moscow into an international financial center.
“I think the understanding of the need of diversification of the economy is one of the main parameters that stand out here," said HYPERLINK ""Telenor chief executive Jon Fredrik Baksaas. "Any moves in this direction will be welcomed by the investment community.”
Projects with Skolkovo as “an engine of innovation” will be one of the three pillars of the future growth of country's economy, presidential economic aide Arkady Dvorkovich said.
Privatization of state-owned companies, the second driver of the growth, will also boost investments as the government sells stakes of up to 50 percent in order to raise the companies' competitiveness, Dvorkovich said.
But investment activity is not keeping pace with current economic growth. “Investments aren't growing yet the way we want them to grow," Dvorkovich said, adding that the government's economic growth forecast was unlikely to be reached without increasing investments in the coming months.
The third factor influencing the economy's growth is capital inflow, he said.
Some of the negative aspects of economic growth were also touched upon. During the question and answer session, investors brought up the issue of fighting corruption. “In general … I think that the fight against corruption is the main evil,” Finance Minister Alexei Kudrin said, causing the audience to burst into laughter. He quickly added that he had said this by mistake.
When asked about Mikhail Khordokovsky, Putin said, "Yukos is a special case; it is a criminal case," and added that it should be considered outside the framework of the investment climate, since it involved acts like murder.
Dvorkovich said he doesn't like the tone of the term "recovery," and told the forum that the government's foremost task was “renovation of the economy and creation of the basis for the new economy, which could grow sustainably over many years."
Putin concurred, saying, “Healthy and qualitative growth of the economy” will be the main driver in reducing the budget deficit.
As a result, Russia will see a budget deficit of 3.6 percent of GDP next year. The figure will drop to 3 percent in 2012, and by 2015 there will be no budget deficit.
The prime minister pointed out that in the three-year budget plan sent to the Duma last month, there is no anti-crisis package. He said the country won't need “a reserve cushion” to cope with possible problems.
“We'll be able to react effectively to any force majeure in the framework of the standard budget rules,” he said.
Russia May Sell Full Stakes in State Companies: Putin (Update1)
By Artyom Danielyan and Maria Levitov
Oct. 5 (Bloomberg) -- Prime Minister Vladimir Putin said the government may become a minority shareholder or sell its entire stake in some state assets, possibly including VTB Group, Russia’s second-largest lender.
“Is it possible that the state will become a minority shareholder in such assets or exit altogether? It’s possible,” Putin said today at a Moscow investment forum organized by VTB.
“This would take time,” he said. “Necessary changes in the economy and the social sphere would be needed. These are important assets for us. But on the whole, it’s entirely possible.”
Putin’s comments came after VTB Chief Executive Officer Andrei Kostin spoke about the sale of a 10 percent government stake in the lender. On Oct. 1, Kostin said VTB “definitely” plans to conclude the stake sale by mid-2011.
“We’re talking to strategic investors and evaluating the market,” Kostin said today. “The government will have the final word.” The lender’s main goal is to “increase capitalization,” he said.
Kostin proposed that representatives of investors who buy into VTB should be included on its supervisory board.
To contact the reporters on this story: Artyom Danielyan in Moscow at adanielyan@; Maria Levitov in Moscow at mlevitov@
To contact the editor responsible for this story: Mark Sweetman at msweetman@
Last Updated: October 5, 2010 08:14 EDT
Russian Economy Will Stagnate on $70-$80 Oil
RBS Tim Ash
October 6, 2010
"Russia's economy will "face stagnation" similar to that experienced during the reign of Leonid Brezhnev should oil prices remain around $70 to $80 a barrel, Aleh Tsyvinski, a Yale economics professor, told a conference in Moscow today." Bloomberg
Maybe the comparable to the Brezhnev era is stretching it a bit, but he does have a point, and it is something that I have noted in recent publications...Russia's performance thru the global crisis has been very, very disappointing; e.g. deep recession in 2009, and tepic recovery in 2010. With oil still at comparatively high levels, by historical (real and nominal) standards, the Russian economy should be doing much better than it is at present; and Russia remains the big BRIC underperformer. Policy makers, finally, need to prick up their ears and use this as a clarion call for substantive and far reaching structural reform. The economy needs to be opened up to FDI, the business environment and institutional environment around business and credit needs to be totally overhauled. The mood music from Putin/Medvedev is more encouraging of late, but we have heard it all before, and implementation is that much more difficult in practice, given existing inertia.
Strategy Monthly - The Impact of Higher Government Spending
Troika Dialog
October 6, 2010
_ The new normal. For the first time since the chaotic1990s, the Russian government is planning to run a significant and long•lasting budget deficit, in the region of $60 bln per annum for 2011•13. We consider the implications of this, both positive and negative; banks, retailers, defense and infrastructure stocks are the main beneficiaries, while exporters and companies with a high ruble debt burden are the main losers.
_ The fiscal breakeven will remain at over $100/bbl. The oil price required for the budget to balance is now over $100/bbl and will remain so for the next three years. This clearly increases the systemic risk inherent in the market and makes it harder to break from the oil price.
_ Domestic borrowers will be crowded out.The government plans net borrowing of $40•50 bln per year on the domestic market, having never raised more than $30 bln net. This is likely to increase the domestic cost of money for companies such as Rostelecom, PIK Group and Sollers.
_ The disinflation trade is over. After falling steadily for over a year, inflation has picked up, and we expect it to move back toward 9%. This reduces the attractiveness of the market overall, as rates will likely follow and GDP growth and the ruble will be slightly weaker.
_ Threat of tax increases. The government is liable to continue looking for higher levels of tax, most notably in the commodity sector; we expect more increases, with the metals and mining sector most at risk.
_ Margin growth for banks. The banking sector will be a beneficiary of higher spending, as it should be able to increase margins and growth, and has shown itself to be resilient to increases in inflation. We like Sberbank and VTB.
_ More money for consumers. The main beneficiaries of government spending, in the run•up to the election, are of course poorer consumers, who will enjoy government largesse and a 9% increase in pensions in 2011. We expect an attractive growth environment for producers of domestic staples, and we highlight MTS, X5 Retail Group and Rosinter.
_ More money for defense and infrastructure. We expect defense spending to increase by over 50% from this year to 2013, creating good growth opportunities for companies like United Aircraft Corporation and Rostvertol. Elsewhere, more infrastructure spending should benefit Globaltrans and Aeroflot.
_ More receptive to foreign capital.Unlike the glory days of the mid•2000s,when it could do as it pleased, Russia will have to ask foreigners for money. This is likely to lead to continuing rapprochement with the West and a lower risk premium placed on the market. We expect further good news on WTO accession to encourage a re•rating for cheap stocks like Gazprom.
Kingsmill Bond
CBR sees $4.2 bln capital outflow in 3Q10, estimates current account surplus at $8.7 bln
Alfa Bank
October 6, 2010
Yesterday, the CBR released its first estimate of Russia's 3Q10 balance of payments: the current account surplus decreased to $8.7 bln in 3Q10 from $18.8 bln in 2Q10, and capital outflow totaled $4.2 bln vs. a $3.1 bln inflow in 2Q10. At the same time, officials expect to see capital inflow in 4Q10 in the range of $4-16 bln.
A decrease in the current account surplus to $8.6 bln is very close to the $7 bln we expected for the quarter, as imports accelerated to 40% y/y in 3Q10 vs. 33% y/y in 2Q10. The shrinking of the current account surplus reduces the fundamental attractiveness of ruble assets, making private capital flows more dependent on speculative factors. We see this as a reason for the capital outflow in the 3Q10 and believe that most of this outflow occurred in September, when, after series of one-off transactions, the ruble came under pressure and deviated substantially from the oil price performance. While we do not rule out that in the short term the ruble may perform strongly, fundamentally we do not see any reason to expect capital inflows in 4Q10, as we believe that the current account will decrease to $3 bln. Therefore, we consider official expectations of a capital inflow in 4Q10 as very optimistic, which can only be possible in the event of an inflow of highly volatile hot money.
Natalia Orlova
Ulyukayev: A Weak Currency Is Not a Recipe for Growth
Aton
October 6, 2010
A weak currency does not create a good foundation for growth, First Deputy Chairman of the CBR Alexei Ulyukayev said yesterday (5 Oct). He added that an unstable and weakening currency will undermine foreign investments. His comments came after the central banks of Japan and Brazil took measures to limit currency appreciation and after Guido Mantega, Brazil's finance minister, talked about the emergence of a currency war.
We are fully in agreement with Ulyukayev, particularly when it comes to Russia.
While a devaluation would benefit growth by stimulating exports, it is important to note that for Russia, as an exporter of natural resources (much of which is governed by world market prices), such benefits will be less obvious compared to nations that export mainly manufactured goods.
Another argument is that a weaker rouble would benefit the Russian budget given that a large share of revenue is linked to the dollar. Since budget revenues are set in roubles, a weaker currency means more roubles per dollar and hence aids revenue collection.
That said, we believe the two major negatives for Russia from a weaker currency are first, as Ulyukayev stated, the negative impact on hard-currency-based investors, which is likely to negatively impact the inflow of both foreign direct and portfolio investments (the Russian stock market remains highly correlated to the exchange rate).
Second, the catch phrase of the Russian leadership is "modernization", a vital component for sustainable growth and for which imports of machinery and equipment, technology and know-how remain crucial. A weaker currency is the equivalent of more expensive imports and hence could threaten a key government policy. In addition, given that the Russian population saves mainly in currencies, a weaker rouble would push savings back into hard currency.
Central Bank comments on September loan growth
Troika Dialog
October 6, 2010
Central Bank Deputy Chairman Alexei Ulyukaev yesterday commented on September loan growth data, naming a YTD figure of 6.1%, though he did not specify what loan categories his number includes. Assuming that he is talking about retail and corporate loans (excluding interbank) and given the 8m10 figure of 5.8%, his number implies 0.3% loan growth in September versus 1.4% growth in August - making for a very weak month. The Central Bank guides 10.0% loan growth for the full year and says that so far, private banks have increased their loan books faster (8.3% YTD) than state banks.
Following the release of 1H10 results and conference calls with banks, it has become clear that while a lending recovery is coming through, sustainable loan growth is more a 2011 story. State banks guided slow credit growth in 2H10 (albeit VTB less persuasively, given that it enjoyed a strong 1H10), while Bank of St Petersburg sounded the most upbeat (5-6% in 3Q10 and acceleration in 4Q10), Vozrozhdenie Bank said that it expects a mild slowdown, and MDM Bank is targeting a gradual recovery (5% for 2H10). We expect acceleration next year on the back of growth in budget expenditures and a partial reallocation of borrowing appetite from wholesale markets to the credit market.
Ulyukaev also said that were Basel III requirements to be introduced in Russia today, 99% of the country's banks would meet the Tier 1 capital ratio and leverage requirements, and 92% of Russian banks would meet the total capital adequacy requirements.
Russian banks are highly capitalized, with total CAR of 19% and core capital of 13%. The increase in capitalization was not only due to capital injections, but also thanks to the de-risking of balance sheets - the sector's loans/assets ratio declined from 65% in August 2008 to 55% in August 2010. Lending expansion will gradually reduce CAR, but the system is well capitalized to grow in 2011.
Andrew Keeley
Business, Energy or Environmental regulations or discussions
Russia Calling! Prime Minister Vladimir Putin Speaks
VTB Capital
October 6, 2010
Russian Prime Minister Vladimir Putin spoke at the Russia Calling! Investment Forum yesterday. The key takeaways from his prepared remarks and the subsequent Q&A session are as follows.
Prepared remarks
Putin's prepared remarks were focused on outlining Russia's fiscal strategy, reiterating macro sustainability and the investment environment in the context of the Moscow International Financial Centre (Moscow IFC) initiative.
Spending. The plans for 2011 no longer have the special anti-crisis reserve cushion, which was pencilled into the 2009-10 budget as a buffer against the second leg of the crisis. Still, some of the measures put forward during the crisis will be carried out. Specifically, Putin singled out the cash-for-clunkers programme and the overall support of the auto industry, as well as support for the construction sector. However, he emphasised that in the latter case, as household demand for real estate returns and credit is unfrozen, the government's focus will shift away from the outright purchase of residential properties to measures to amplify the private sector demand (apparently, this mainly means subsidising mortgages for certain categories of the population). In order to prevent a real estate price bubble, the government will work on stimulating supply by, among others, simplifying land plot acquisition and making investments in communal infrastructure. He said that the government's objective for 2016 was 100 million square metres of residential construction (up from 60 million square metres now). Otherwise, fiscal spending efficiency remains a key priority; the current strategy centres on new, more transparent and more tightly monitored procurement procedures (again, this is something that Kudrin addressed in his remarks as well, so it looks as if this is indeed an important project for the administration at the moment).
Taxes. Personal tax is to "remain flat" and profit tax will "remain low". Together with the separate statement by Kudrin during the Q&A session that Russia cannot afford large scale tax cuts in the next 3-4 years (in contrast to Ukraine's current fiscal strategy), this amounts to a "taxes broadly unchanged" baseline for the time being. Putin, however, highlighted the tax stimulus for modernisation, as well as the government being on the verge of submitting amendments eliminating capital gains tax for sales of stakes in non-public companies held for more than three years. The latter was presented as an important measure to facilitate venture capital investments.
Investment climate backdrop. Improvement reflected in trebling of stock indices and significant expansion of FDI over the past 18 months. New legislation on the market infrastructure (a centralised clearing house and a central depository were specifically mentioned) is essential for the success of the Moscow IFC project. Putin did not elaborate on the latter too much; we look ahead to Alexander Voloshin speaking at the dedicated panel later today for more colour.
Q&A Session
Much longer than last year, with some pointed questions about minority investors' rights and even reminiscences about the Yukos affair.
Question: What is the government's position on some companies and vested interests using the strategic enterprises legislation to facilitate court decisions allowing to them renege on major transactions (this specifically refers to TGK 2 where, after a change of control, minorities did not receive the mandatory tender offer)?
Putin: The government is not in position to influence courts. However, we have identified this problem and have discussed such situations at the commission on foreign investments in strategic industries; we shall sort this out.
(Putin's answer was followed by an exchange with Ukraine's Deputy Prime Minister Sergey Tigipko, during which Tigipko said that Ukrainian companies had not experienced many problems while investing into Russia, and Putin urged his Ukrainian counterpart to be more active in considering investments and/or joint ventures in construction, aerospace, shipbuilding. The conference floor was turned into a platform for intergovernment negotiations for a change)
Question: What are the government's plans for privatising key companies and what interest would minority investors have in participating?
Putin: Privatisation has a mixed track record in Russia, therefore the government is approaching it carefully (which is a more reserved starting point than was conveyed by Kudrin's prepared remarks). It is important to improve the efficiency of state-controlled corporations, and we believe that the state's participation will shrink. But the process will be gradual. Ensuring that the interests of minority investors are protected is a key component of the privatisation strategy. (On this note, Putin gave the floor to VTB Chairman and President Andrey Kostin to elaborate on how exactly those protections might be realised).
Kostin: Russian legislation protecting minority investors is one of the more advanced in the world. Management has a clearly defined priority to increase the market capitalisation of companies. Also, a more material representation of minorities on the boards of state-controlled companies would help ensure that their interests were more thoroughly taken into consideration.
Putin: To conclude on this subject, it is possible that the state could eventually choose to become a minority shareholder or completely exit the capital of some of these strategic companies. (Although this remark does not imply any well- defined timeframe, and only refers to an eventual possibility, this sounds like the most definitive vote of confidence in the merits of privatisation we have ever heard from Putin. It is quite remarkable that this was an unsolicited comment).
Question: Gazprom's earnings quadrupled since 2006, but dividends did not improve much, while the share price actually dropped. Would the government consider a materially higher dividend as a means of making Gazprom shares more attractive for investors?
Putin: The government does not interfere in such matters as dividend payments, that is management's call. Gazprom's market capitalisation suffered a setback due to the severe adversity in the [European] natural gas market. We believe that the market fundamentals will improve sooner rather than later. However, that is secondary to the company's long-term development strategy, which is the key value driver for this story. Also, domestic gas price rebalancing to netback parity will benefit Gazprom a lot. Ergo, Gazprom's market capitalisation will inevitably go higher. As for dividends, you need to speak to management, but be mindful that dividends should not undermine the viability of capex plans.
Question: Could you please comment on the NCSP situation. What can be done so that minorities are not scared when a state-controlled entity enters the capital of a private company?
Putin: Selling the NCSP stake was the choice of the company's principal private owners. I tried to talk the owners out of it, but they insisted that they wanted to cash out to reinvest the proceeds in other ventures. Transneft is a natural buyer, since this asset fits its expansion strategy nicely. Transneft will direct more business to NCSP, will facilitate investment in capacity expansion and, hence, this change of control is net positive and should be welcomed by investors.
A follow up question: So we need not fear that Yukos will be repeated?
Putin: Yukos case was (is?) unique and totally different. There are not only tax evasion/fraud matters, but criminal charges of homicide upheld by the courts. It cannot be compared to anything, let alone NCSP, which is nowhere even close to parallels being drawn.
Question: Ukraine's policy agenda, as presented by Deputy PM Tigipko, is much more impressive than Russia's. Do you not think that a major revision of/boost to Russia's policy effort is needed?
Putin: We are very focused on the modernisation agenda put forward last autumn and are working hard to deliver on it. Over the past few years, Ukraine has fallen behind, so now they are catching up. (Passed the floor to Kudrin to elaborate on this).
Kudrin: Yes, we are in a more advanced phase of the institutional reform than Ukraine. Ukraine is now dealing with things similar to those we had on our plate ten years ago (when we were also drawing down IMF aid and following their advice). And we are helping them to make this transition. Indeed, Ukraine's tax reduction plans are commendable, but it will take a lot of execution success on the fiscal front to make them attainable. In Russia, unfortunately, in the next 3-4 years broad tax cuts are problematic because of social commitments.
Presidential Aide Arkady Dvorkovich speaks at the Russia Calling! Investment Forum
VTB Capital
October 6, 2010
News: Yesterday, Aide to the President of the Russian Federation Arkady Dvorkovich spoke at our Russia Calling! Investment Forum. The key takeaways from what he said are as follows.
The Russian economy needs to be renovated and modernised (rather than simply recovering) as it is now necessary to change its structure in order to put growth onto a more sustainable footing. This year, growth is sluggish and there has only been a slow increase in investments.
An investment boom needs to be triggered on the basis of increased activity in the private sector: indeed, the main idea behind privatisation is NOT to attract budget revenues but to increase the efficiency and competitiveness of the Russian economy.
Skolkovo is a window of innovation, an open project in which foreign investors are welcome to participate and an example of a partnership between the government and the private sector. The international financial centre in Moscow should also serve as a tool to attract long-term capital into Russia.
According to Dvorkovich, Russia needs both to buy technology and push innovations in order to be competitive. However, projects must be socially oriented so that the population feels the benefits.
The budget policy must be responsible, including any future tax cuts.
Minister of Finance Alexey Kudrin speaks at the Russia Calling! Investment Forum
VTB Capital
October 6, 2010
News: Yesterday, Minister of Finance Alexey Kudrin spoke at our Russia Calling! Investment Forum. The key takeaways from what he said are as follows.
The government expects Russian GDP to grow 4.5% YoY in 2010 and about 4% YoY over the subsequent three years. However, the drivers of this growth will be different from in the past. Inflation is seen at about 8% this year, with the government aiming to lower it to 5.5% in three years' time.
The authorities expect the current account to stay in surplus. This year, Russia will have a marginal capital outflow (it is likely to be close to zero) and FDI might reach about USD 40bn (possibly growing to USD 50bn next year). The share of investments in GDP will climb to 20%. The government recognises that such a level is low and will focus on creating new tools for investment.
A programme to increase the efficiency of budget expenditures has already been approved by the government, with every kopek in the budget to have its own use and its own target (this will help to fight corruption). The government expects the budget deficit to moderate to 3.6% next year, with low government debt the cornerstone of Russia's stability.
Privatisation receipts are expected at about USD 10bn a year over the next five years. The government plans to start with 50%+1 share stakes in sectors such as telecoms (Rostelecom), transportation and aircraft building.
The crisis tested the Russian financial sector but government measures (which included providing subordinated loans, refinancing external debt and supporting strategic companies) helped to support it. Since 1 January 2008, banking assets have increased 53.8%. The authorities continue to monitor the banking sector.
The government has decided to go ahead with the creation of an international financial centre in Moscow. This should be a competitive centre offering a wide range of products and services, and which is able to facilitate the modernisation of the economy. A more precise plan is being developed and most infrastructure will be created within the next two years.
First Deputy Chairman of the CBR Alexey Ulyukaev speaks at the Russia Calling! Investment Forum
VTB Capital
October 6, 2010
News: Yesterday, First Deputy Chairman of the CBR Alexey Ulyukaev spoke at our Russia Calling! Investment Forum. The key takeaways from what he said are as follows.
The CBR is satisfied by Russia's economic growth. Reserve purchases have made it possible to re-monetise the economy and this has allowed banks' credit portfolios to grow. Banks are also generally positive in their assessment, as evidenced by the growth in their credit books and the rapid accumulation of corporate bonds on their balance sheets.
The CBR will continue to apply strict measures to unstable banks and the withdrawal of a large bank's licence is proof of the CBR's determination to rid the system of those banks which abuse the trust of their depositors and clients.
Interest rates are at a 'comfortable level' and inflation is the result of a supply- side shock, which will disappear completely in 6-9 months. There are certainly risks of a spill-over effect, but for now the CBR thinks that the situation is under control. The CBR has cut rates to an all-time minimum. It is important that the money markets rate is within the CBR's deposit and REPO rates. This only became possible thanks to the implementation of a policy of targeting inflation.
The CBR is gradually conducting its exit policy by cancelling long-term refinancing facilities and re-installing pre-crisis reserve requirements. Banks are net-long a small amount of foreign exchange (about USD 20bn), which is adequate. Russian banks already almost entirely fulfil the Basel 3 requirements.
The CBR's participation on the market has become 'marginal', selling USD 1.3bn in September (in early 2010, interventions averaged USD 10+bn per month). At the start of this month, the CBR's FX reserves exceeded USD 490bn.
Mechel, Polyus Gold, Rosneft: Russian Equity Market Preview
By Denis Maternovsky
Oct. 6 (Bloomberg) -- The following companies may be active in Russian trading. Stock symbols are in parentheses and share prices are from the previous close of trading in Moscow.
The 30-stock Micex Index added 0.6 percent to 1,474.03. The dollar-denominated RTS Index rose 1.7 percent to 1,568.86.
OAO Mechel (MTLR RX): Russia’s largest producer of coal for steelmaking lowered its production target this year to 28.5 million metric tons from 30 million metric tons of coal, and may cut its 2010 capital expenditure program from $1.4 billion to $1 billion, Chief Executive Officer Stanislav Ploschenko said on a conference call after trading closed in Moscow. Company shares fell 2.4 percent to 751.96 rubles.
OAO Polyus Gold (PLZL RX): Gold futures jumped to a record $1,342.60 an ounce as the dollar sagged, boosting demand for precious metals as alternative assets. Company shares added 0.6 percent to 1,412.03 rubles.
OAO Rosneft (ROSN RX): Crude oil rose to the highest level in eight weeks, touching $82.99 a barrel, on speculation that central banks will keep stoking economic growth as the Bank of Japan pledged asset purchases and the dollar fell against the euro. Russia’s biggest oil company added 0.6 percent to 214.45 rubles.
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@
To contact the editor responsible for this story: Gavin Serkin at gserkin@
Last Updated: October 5, 2010 22:00 EDT
Bank Yields Hit Low as VTB Spurs Consolidation: Russia Credit
October 05, 2010, 5:39 PM EDT
By Jason Corcoran and Denis Maternovsky
Oct. 6 (Bloomberg) -- Russian bank debt is beating sovereign and non-financial bonds by the most since before the credit crisis as VTB Group’s purchase of OAO TransCreditBank and International Industrial Bank’s failure spur consolidation.
Yields on TransCredit dollar notes due in 2011 were at 3.56 percent yesterday, four basis points from the lowest since their sale in 2008 after VTB said it plans to buy control. Gains in Alfa Bank’s 2013 dollar bonds cut the extra yield over OAO Gazprom, Russia’s biggest company, to 173 basis points, the lowest since their 2008 sale, data compiled by Bloomberg show.
Russia lags behind Brazil, India and China for bank mergers, with $174 million spent on takeovers in 2010 versus $16 billion in China, according to data compiled by Bloomberg. Finance Minister Alexei Kudrin said yesterday Russia may revoke licenses in “coming days” from the weakest lenders as the government sets tougher capital requirements. Bonds rose even as IIB became the biggest bank to collapse in at last two years.
“The consolidation story will revolve more around smaller banks that will have to either grow somehow or be taken over or closed down,” said Dmitry Dudkin, a fixed-income analyst at UralSib Financial Corp. in Moscow. Kudrin’s comments “suggest that in the future the central bank may shift to consolidation and restructuring in order to make the banking system stronger,” he said.
The number of Russian lenders shrank to 1,036 from 1,126 two years ago, central bank data show. The number will halve to 500, Kudrin said in a November conference in Moscow last year.
VTB Purchase
VTB, the country’s second-largest lender, plans to buy a controlling stake of TransCredit from Russian Railways and minority shareholders by the end of the year and will pay no more than 2.2 times TransCredit’s adjusted tier-one capital as of the end of 2010, according to the statement from VTB yesterday. The Moscow-based bank had initially considered buying a 20 percent stake, an official at the bank who declined to be identified because the negotiations were confidential said in July.
The yield on VTB’s 2012 dollar bonds fell 16 basis points, or 0.16 percentage point, to 3.73 percent, a record low. Standard & Poor’s raised VTB’s rating yesterday to “stable” from “negative,” saying problem loans had peaked and liquidity had improved. TransCredit shares advanced 3.1 percent in Moscow yesterday to 19.47 rubles. VTB climbed 2.9 percent to its highest in four months.
‘High-Risk’
Russia’s central bank revoked the license yesterday of ZAO International Industrial Bank, the lender controlled by lawmaker Sergei Pugachyov, three months after it defaulted on foreign currency bonds. “The credit institution followed a high-risk credit policy and didn’t create adequate provisions for possible loan losses,” Bank Rossii said in an e-mailed statement.
IIB’s collapse won’t have any “spill-over” to other banks, Maxim Raskosnov, a banking analyst at VTB Capital, said in an emailed report yesterday. Dmitry Morochenko, a Moscow spokesman for IIB, didn’t answer his mobile phone when Bloomberg News called yesterday.
The last time a Russian bank defaulted on international bonds was the year after the government’s 1998 debt crisis that triggered the collapse of Long Term-Capital Management LP. SBS Agro Bank, once Russia’s largest private bank, defaulted on $250 million in July 1999, according to data compiled by Bloomberg.
Financial Support
President Dmitry Medvedev averted defaults by banks and companies during the credit crisis by pledging more than $200 billion in support as the collapse of New York-based Lehman Brothers Holdings Inc. caused a global freeze in debt markets in 2008. The central bank cut its benchmark refinancing rate 14 times since April 2009 to 7.75 percent to help boost lending.
China has led the way this year in financial company mergers. TPG Capital’s Asia unit sold the remainder of its stake in Ping An Insurance (Group), China’s second-biggest insurer, on Sept. 2 for HK$9.1bn ($1.2 billion). Allianz AG of Munich, Europe’s biggest insurer, said it earned 500 million euros ($641 million) in May by cutting its stake in Beijing-based Industrial & Commercial Bank of China Ltd., the nation’s largest lender. India had four deals worth $855 million and Brazil had eight deals worth $1.92, data compiled by Bloomberg show.
The rally in bank bonds lowered the yield on Moscow-based Nomos Bank’s 8.75 percent notes due 2015 to 435 basis points above similar-maturity sovereign bonds, from 485 when they were sold in April and 560 in June, data compiled by Bloomberg show. The yield difference between Russian Standard Bank dollar bonds due in May 2011 and OAO Sberbank dollar notes due November 2011 narrowed to 339 basis points, the lowest since July 2007, the data show.
‘Opportunity’
State-owned VTB’s purchase of TransCredit isn’t a signal that the government is pushing to consolidate the banking industry, said Rustam Botashev, deputy head of research at UniCredit Spa in Moscow.
“These are individual cases driven by need and opportunity,” Botashev said in a phone interview from Moscow. “TransCreditBank needed capital to grow and VTB wanted to expand its network and loan book.”
Consolidation may be a negative for competition within the banking industry as the biggest 30 banks could gain more market share, said Richard Hainsworth, head of RusRating, an independent bank-rating company in Moscow.
“The top 30 banks control about 70 percent of business and a shrinking of the market may lead to market leaders winning even more business,” Hainsworth said in a phone interview.
Ruble Gains
The ruble gained 1.2 percent to 30.0900 per dollar yesterday, its strongest level since Aug. 10. Non-deliverable forwards, or NDFs, which provide a guide to expectations of currency movements and interest rate differentials and allow companies to hedge against currency movements, show the ruble at 30.2400 per dollar in three months.
The yield on Russia’s dollar bonds due in 2020 fell 11 basis points to 4.375 percent, the lowest level since they were sold in April. The country’s ruble notes due August 2016 rose, pushing the yield 10 basis points lower to 7.18 percent.
The cost of protecting Russian debt against non-payment for five years using credit-default swaps was little changed at 157 on Oct. 4, according to data provider CMA. 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.
Default Swaps
Credit-default swaps for Russia, rated Baa1 by Moody’s Investors Service, its third-lowest investment grade rating, cost the same as contracts for Turkey, which is rated four levels lower at Ba2. Russia swaps cost as much as 40 basis points less on April 20.
The extra yield investors demand to hold Russian debt rather than U.S. Treasuries fell 7 basis points to 224, according to JPMorgan EMBI+ indexes. The difference compares with 153 for debt of similarly rated Mexico and 204 for Brazil, which is rated two steps lower at Baa3 by Moody’s.
The yield spread on Russian bonds is 47 basis points below the average for emerging markets, down from a 15-month high of 105 in February, according to JPMorgan indexes.
Sberbank, the country’s largest lender, is seeking to buy a one third stake of Troika Dialog, the country’s oldest investment bank, for $500 million, RBC Daily reported on October 1, citing people it didn’t identify.
MDM Bank, Russia’s second-largest lender, completed its merger with Ursa Bank in August in a deal that created the second-largest private bank in Russia. Otkritie Financial Corp., the brokerage 20 percent owned by VTB, said in July it is seeking to raise as much as $375 million in an initial public offering to fund further acquisitions.
--With assistance from Michael Patterson in London. Editor: Gavin Serkin
To contact the reporter on this story: Jason Corcoran at Jcorcoran13@
To contact the editor responsible for this story: Gavin Serkin at gserkin@
Ministry of Energy gives green light for capacity auction
VTB Capital
October 6, 2010
News: The Ministry of Energy has approved the documents required for the capacity auction, Interfax reported yesterday. It includes the methodology for determining electricity demand in price zones (of which there are 29) and reserve coefficients. This gives the green light for the capacity auction and the new timeline suggests that the regulator will start collecting bids from the companies twenty days before 4November (i.e., on 15October) and then publish the results one month later.
Our View: We welcome the fact that the relevant documents have been approved (despite the delay from the initial plans), as it shows that the slight holdup was indeed purely technical. With the launch of the capacity market in January 2011, the most efficient gencos will be able to grab additional profits, in our view, and work under a more efficient regulatory framework. We are reiterating our preferences among gencos in favour of those with the lowest costs, i.e. OGK 4, TGK 1 and OGK 2.
Dmitry Skryabin
Mosenergo to get priority over local producer MOEK to load its capacity
VTB Capital
October 6, 2010
News: Mosenergo is to get priority over MOEK to load its capacity during the winter months, Interfax reported yesterday citing Yuri Roslyak, the Acting Deputy Mayor of Moscow. The reason is that the company generates electricity and heat more efficiently (it produces them in combined-cycle mode) and hence would save on gas consumption in Moscow.
Our View: The news is supportive for Mosenergo, since it will allow the company to achieve higher utilisation rates and regain market share from its main rival on the Moscow heat market, MOEK. It also signals that the Moscow City Government has started to agree with Mosenergo (that it is more efficient and therefore should get priority in terms of heat generation). There have previously been disputes between Mosenergo and the Moscow City government (which owns MOEK) when the latter loaded its capacity to the detriment of Mosenergo. We highlighted in our The Mayor of Moscow's Dismissal: the Bareheaded Future, of 28 September that, following the change in local government, Mosenergo might enhance its position in Moscow. We see this development as an indication that the company's influence is indeed increasing.
Semenov elected as Svyazinvest CEO
Aton
October 6, 2010
According to Vedomosti (5 Oct), Svyazinvest shareholders held an EGM to select a new CEO candidate on 1 Oct, instead of the planned 3 Nov. Vadim Semenov was named for the post, replacing Yevgeny Yurchenko.
In our view, Svyazinvest's new CEO could potentially counterbalance the conflicting parties in the company - indeed, the conflict drove Yurchenko's resignation. Selection of a new CEO was largely expected, however, so the news is neutral for the shares in the mid term, in our opinion.
Russia's Mostotrest to float 25 pct shrs in IPO
10:36am IST
MOSCOW, Oct 6 (Reuters) - Russian construction firm Mostotrest is planning to float around 25 percent of its shares in an initial public offering (IPO), it said in a statement on Wednesday.
The firm said JP Morgan, Deutsche Bank (DBKGn.DE) and Troika Dialog have been appointed to organise the placement.
Marc O'Polo Investments Ltd. holds 50.3 percent in Mostotrest, which last year generated 33.2 billion roubles ($1.07 billion) in revenues according to Russian Accounting Standards.
(Reporting by Olga Popova, writing by Amie Ferris-Rotman, editing by Guy Faulconbridge)
October 5, 2010
Public Offering
By Tai Adelaja
Russia Profile
Russian Companies are Poised to Storm Stock Exchanges Abroad as Cash-Starved Companies Look for Ways to Raise Capital and Privatize Government Shares Through Initial Public Offerings
Up to 113 companies from Russia, Ukraine, Kazakhstan and other CIS countries have announced plans for an IPO since January, according to the IPO-tracker report published by The PBN Company on Monday. It seems Russian firms still harbor plans to flood the domestic and international markets with bonds and share placements after a cash drought during the country's first recession in a decade.
Analysts say Russian IPOs could exceed $20 billion this year alone, as cash-starved Russian companies have forayed into stock markets in places like London, Hong Kong and Paris. RusAl, the world's biggest aluminum producer, raised $2.2 billion in a January Hong Kong listing, followed by $400 million by drugs distributor Protek and $90 million by seafood firm Russian Sea. However, traditional extractive industries have continued to dominate Russia’s prospective IPO landscape, despite government efforts to diversify the economy.
Russia's largest steelmaker Severstal said Monday that it will push ahead with an Initial Public Offering of its gold division in London this year, in a deal expected to value the business at about $4 billion. Analysts have valued Severstal, majority owned by Alexei Mordashov, at $3.6 billion, but one of the bankers taking part in the deal said the price could rise to four to five billion dollars. The company's gold division consolidates several mines in Russia and Kazakhstan as well as faraway places like Burkina Faso and Guinea. The miner plans to raise its annual gold output to one million ounces by 2013, and produce about 640,000 to 670,000 ounces in 2010.
Another market leader, Petropavlovsk, formerly known as Peter Hambro Mining, said last month that it will proceed with a Hong Kong listing of its non-precious metals division in October, in another sign that domestic market conditions in the extractive industry are improving. The miner planned to raise about $500 million to $600 million in the IPO, according to two sources close to the deal cited by Reuters. The miner’s iron ore assets were originally demerged from the company as London listed Aricom in 2003, with Jay Hambro as CEO. However, the implosion in financial markets after the credit crisis caused the shares to crash and the company was taken back into Petropavlovsk last year. Analysts said that the iron ore unit, under new subsidiary IRC, will list in Hong Kong during October 2010, in a move expected to bring the division, which includes Petropavlovsk's iron ore operations, closer to its booming Asian client base. But some Russian firms are finding their issuance plans marred by global market volatility, which has rocked the market since 2008. Of the 113 reports of potential IPOs listed by PBN, 102 IPOs are still pending and only eight have been completed. Three IPOs have so far been cancelled, including those planned by UralChem and Rusagro. Agricultural group Rusagro announced the decision to postpone its $300 million public share offering in May, as global market jitters cast further doubts over Russian firms' plans to raise billions of dollars via IPOs this year. This followed a similar step by fertilizer maker UralChem to delay its $642 million IPO. Rusagro, controlled by lawmaker Vadim Moshkovich, had plans to raise about $300 million through the listing, with around half the proceeds to go to the owner and another half to be reinvested in the firm. Rusagro accounted for 18 percent of Russian sugar production last year, according to the company. It has seven plants that can process either 30,000 metric tons of raw sugar beet or 5,350 tons of raw sugar cane a day. Coking coal and steel producer Mechel raised only $229 million in Hong Kong in May in a delayed share placement, less than half as much as hoped. At the initial size and price guidance, Mechel's placement had been expected to raise $524 million to $689 million for the Justice family shareholders.
In its quarterly research issued in July, The PBN Company said only seven out of the 79 CIS companies that have declared plans to issue IPOs during the first six months of 2010 actually completed listings. “There’s a whole lot of smoke but very little fire when it comes to IPOs from this part of the world,” PBN CEO Peter Necarsulmer said. The number of companies planning IPOs continues to grow, while actual flotations remain few and far between. Necarsulmer said that despite difficult market conditions and only a handful of flotations so far, there is no shortage of listing announcements, rumors and speculation. In the past three months, 62 companies have added their names to the list of Russian, Ukrainian, Kazakhstani and CIS companies planning to go public. At the beginning of 2010, only 17 companies had indicated they were planning IPOs. It is unclear, however, how many are real IPO candidates, Necarsulmer said, adding: “Only a small percentage will actually go forward with their plans. Unfortunately, some companies may be using IPO rumors only to raise their profile and gain name recognition rather than having genuine intentions to go to market.”Such whiffs of pessimism notwithstanding, some Russian banks, including VTB Capital and Renaissance Capital, have positioned themselves to reap a likely windfall from a surge in IPO debuts. VTB Capital CEO Yury Solovyev announced plans in early June to triple its Asian presence in three years by setting up operations in Hong Kong and venturing into new business areas such as equity capital raisings, trading and mergers and acquisitions. VTB Capital might also move trading desks to Asia to help provide liquidity for equity and debt issues sold by the Russian bank to Asian investors, Solovyev told Reuters in an interview. He added that several Russian firms were keen to list shares in Asia, and VTB Capital was working on two offerings in Hong Kong that it hopes to launch this year. VTB Capital was a bookrunner for aluminum producer RusAl's initial public offering in Hong Kong earlier this year, the first such offering made by a Russian company in Asia.
In late June, Renaissance Capital announced the opening of a new Hong Kong branch, where it aims to build a base for Russian and CIS countries attempting to raise capital in Asia. The office will employ securities traders and specialists in the metals sector and will give Asian institutional investors access to Russian stocks and consulting expertise, the company said. "We are seeing a rapid growth of the number of merger and acquisition deals between Asia and other developing markets, so we are expanding our presence in Asia," said RenCap CEO Stephen Jennings, The Moscow Times reported. "Hong Kong will become the global hub for resource and energy" in the near future, and access to Chinese capital was the chief reason for choosing Hong Kong over Singapore, another location considered for the Asian office, said Jeremy Sparrow, who will head the new office. "[There are] a number of deals in the pipeline of companies from Russia, the CIS and Africa to begin trading in Hong Kong. For such companies, it would be easier to deal with an agent at a local office rather than 'parachuting into Asia’," he said.
The cost of Russian roads
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Ben Aris in Moscow
October 6, 2010
Ria Novosti ran a comparison of how much it costs to build a road in Moscow, Russia, the EU, the US and China. The differences are pretty stark.
China has the cheapest cost at $2.2m per kilometre, with the US and the EU coming in about the same at between $6m and $7m respectively. However, the cost of building a road in Russia is amongst the highest in Europe, with a kilometre of road coming in at $17.6m in Russia and a massive $51.7m in Moscow, according to an official at the Russian Transport Ministry.
Prime Minister Vladimir Putin told delegates at a United Russia party congress in the middle of September that the state intends to build 14,000 km over the next five years and that all federally controlled roads would be repaired and upgraded to modern standards by 2020.
So why is road building in Russia so expensive? The short answer is that adding to Russia's infrastructure is still beleaguered by the legacy of the Soviet Union: while construction companies in the West are often given a clean piece of land and simply have to put down gravel and asphalt to make a road, the Russian companies have to obtain the land in the first place, clean off everything that is on the land (including what is under it) and then often reconstruct some of the buildings elsewhere. And that's not to mention the time and bureaucratic nightmare much of this involves – especially if you are in Moscow. "Much of the cost issue reflects the historic approach used from Soviet times," says Maxim Bakshinsky, deputy general director for development for Mostotrest. "In the West, they calculate the cost on the cost of the materials and labour that actually goes into building the road, but in Russia the cost includes things like buying the land, rebuilding any infrastructure or utilities items that are on that land – you have to rebuild or move these by law."
The clients that want a new road built – in Moscow this is usually the city government – hire a contractor not only to do the actual building, but pay them sort this mess out on a "turnkey" basis, says Bakshinsky. "The contract value includes costs of land, buildings, courts, utilities, infrastructure. We had a contract to build part of fourth ring [road in Moscow] just 10 km from the Kremlin. The general contractor, according to the contract, has to not only make the construction works, but also fully prepare the site for construction: to carry out land buyout, relocation of various communications – sewage, telephone lines and the rest. All this involves huge costs as we speak about the construction in the centre of Moscow where the land value is high. And all these costs, in accordance with the Russian practice, are included in the contract value. There were dozens of owners, buildings, private garage boxes, complicated utilities, and sewage, gas and telephone lines 20 metres under the ground. The cost was RUB66bn ($2.2bn) for five kilometres of road – and sometimes those who don't understand the industry specifics compare these costs to Hadron collider value."
Long talks
The process is long drawn out and difficult. The first job is to get hold of the land over which the road will run. Moscow is a huge city, but as many of the buildings are protected and as all construction is heavily regulated by the city government, there is a dearth of modern office and apartment space in what is the biggest city in Europe. Real estate prices took off in about 2003, rising to make Moscow one of the top three most expensive cities in the world (although it has since slipped back to number 56, according to Swiss bank UBS).
While the city government will support the contractor to keep land purchase prices reasonable, the contractor still has to do the negotiations with the owner as well as the Kafkaesque paperwork associated with transfers of ownership to City Hall. Then there is the job of clearing off everything that is standing on the land. By law, any infrastructure or utility objects have to be removed and rebuilt elsewhere (including buying more land to put it on), which is included in the price. But maybe the most complicated problem is dealing with what is under the land. Moscow has changed out of all recognition over the last 20 years and much of the growth has not been planned, but buildings and their supporting infrastructure have been added piecemeal as money became available. The upshot is the city is a tangle of pipes, power lines and telephone lines, most of which have different owners.
The land itself could be privately owned; the sewage pipes belong to the municipal government; and if you are unlucky, then there might be a federally owned telephone line (like those connecting the Kremlin to the other government buildings dotted around town) in which case the contractor has to apply to the Federal Security Service (FSB) for permission to move the lines – even if it is only a few metres. Russia's bureaucracy is never easy to manage even for the most simple projects – and it doesn't get much complicated than this.
The contractor's job is to wade through this morass and the faster it can get the work down the more the company earns. "If you compare the actual cost of just building the roads in Russia, then this cost is about the same as in Germany," says Bakshinsky. "Our labour costs are lower, but we have been investing heavily into state-of-the-art equipment to improve our productivity."
For the Record
06 October 2010
China Investment Corporation, China’s $300 million sovereign wealth fund, would like to bid in privatization auctions of Russian state assets, which are expected to raise $50 billion, a CIC vice president said Tuesday.(Reuters)
[pic]LUKoil and Vanco Energy are planning to invest an additional $200 million in an exploration program in Ghana next year and in 2012. (Bloomberg)
[pic]The Central Bank will only raise rates if economic growth is “stable,” bank First Deputy Chairman Alexei Ulyukayev said Tuesday. (Bloomberg)
[pic]Boydak Holding, a Turkish group with interests in furniture and banking, will build a furniture plant near Moscow in six months. (Bloomberg)
Activity in the Oil and Gas sector (including regulatory)
Rosneft halts talks with LUKoil on buying Caspian Oil Consortium stake
11:38 06/10/2010
Russia's largest oil company Rosneft has broken off talks with LUKoil to buy its stake in the Caspian Pipeline Consortium (CPC), LUkoil Vice President Leonid Fedun said on Wednesday.
Rosneft, which currently controls 3.83 percent of CPC via Rosneft-Shell Caspian Ventures Limited, a joint venture with Shell, previously said it was holding negotiations with LUKoil on the acquisition of 5.6 percent in CPC.
Rosneft and LUKoil signed an agreement on Rosneft's possible acquisition of a 46 percent stake in Lukarco company, which holds 12.5 percent of CPC and is wholly owned by LUKoil, Russian business newspaper Kommersant said In June, quoting a source familiar with the document.
The Caspian Pipeline Consortium whose 1,500 km-long oil pipeline links west Kazakhstan's deposits with Russia's Black Sea coast is the largest oil transportation route from the Caspian region to world markets.
MOSCOW, October 6 (RIA Novosti)
06.10.2010
Russian Companies Interested in African Reserves
Meeting in Moscow with Ghana energy Minister Joseph Oteng-Adjeem, Russian Energy Minister Sergey Shmatko said Russian companies were interested in African crude reserves. Shmatko said Ghana was a key Russian partner in Africa, the Russian Energy Ministry press office reported in a news release.
The minister also noted that co-operation with Ghana was mutually advantageous given Ghana's significant reserves of hydrocarbons and Russian companies' experience in energy and their use of modern technologies.
Copyright 2010, Vslukh. All rights reserved.
Fedun wants to increase LUKOIL stake to 10 pct
10:59am IST
MOSCOW, Oct 6 (Reuters) - Lukoil's (LKOH.MM: Quote, Profile, Research) vice president, Leonid Fedun, said on Wednesday he wanted to increase his holdings in Russia's No. 2 oil producer to 10 percent from 9.27 percent previously.
Speaking on the sidelines of a VTB Capital forum, Fedun also told reporters that LUKOIL would increase dividends in future, without giving details. (Reporting by Katya Golubkova; Writing by Toni Vorobyova; Editing by Clarence Fernandez)
LUKoil mulls listing on Asian stock exchange in 2011
11:06 06/10/2010
MOSCOW, October 6 (RIA Novosti) - Russia's largest independent oil producer LUKoil is considering listing on the Hong Kong or Singapore stock exchange in 2011, LUKoil Vice-President Leonid Fedun said on Wednesday.
"We intend to enter the Hong Kong or Singapore stock exchange. Our task is to expand possibilities for shareholders," Fedun said at a business forum in Moscow.
06.10.2010
LUKOIL Shows Interest in Baku-Tblisi-Ceyhan Pipeline
LUKOIL has shown an interest in the Baku-Tblisi-Ceyhan pipeline, 1 news.az reports noting that the Russian major is inducting negotiations with the project operator on transport tariffs.
The Baku-Tblisi-Ceyhan pipeline is currently not filled to capacity and could take on additional volume, RusEnergy consultant Mikhail Krutikhin said. He noted that since the pipeline has two tariffs – one for members of the consortium and one for non-members, LUKOIL would find it to its advantage to join the consortium.
Copyright 2010, Oil and Gas Information Agency. All rights reserved.
06.10.2010
October 06, 2010 11:16
LUKOIL to complete own-share buy-up from Conoco by end-Oct, early Nov
MOSCOW. Oct 6 (Interfax) - Russian oil major LUKOIL (RTS: LKOH) will finish buying back its own shares from ConocoPhillips in late October or early November, company Vice President Leonid Fedun told the press.
"At the end of October, or the beginning of November, the deal will be closed," Fedun said.
Cf
06.10.2010
Russia Completes Enlargement of Yasmoveyskoye Field
Work to enlarge the Yasmoveyskoye field on the Yamal peninsula in the Nadym and Purov districts has been completed, Neft Rossii reports. This will allow make it possible to produce 1.25 billion cubic meters more of gas a year.
The project was ordered by Gazprom dobycha Nadym. Stroygazmontzh was chosen as general contractor.
Copyright 2010, Vslukh. All rights reserved.
Rosneft Kurgannefteproduct paid up the dividends
Wednesday, 06 Oct 2010
It is reported that Rosneft Kurannefte product paid up the 2009 dividends on preferred stocks at RUB 1.92 per pcs.
The dividends are paid in full but for the holders failing to provide proper information.
The Company is a sub of Rosneft. In 2006 it had 83.32% under control including 90.33% common. It provides the petroleum products sale in Kurgansky region.
The share capital is worth RUB 8.293 million split in 6219692 common and 2073202 perferred stocks of RUB 1 par. In 2009 the net profit reached RUB 159.556 million.
(Sourced from AK&M)
Medvedev to sweet talk Algeria for TNK-BP
Russian President Dmitry Medvedev faces an uphill battle as he tries to convince Algeria to approve the sale of its biggest mobile telephone operator and BP's Algerian assets to Russian companies.
News wires 05 October 2010 19:15 GMT
Medvedev's ability to clinch mega deals for Russian business that are the hallmark of his patron, Vladimir Putin, will be put to the test on the complex transactions that depend on Algerian President Abdelaziz Bouteflika.
Medvedev makes a one-day official visit to Algeria tomorrow.
Algeria says it is considering a request from BP to approve the sale of its Algerian assets to TNK-BP , BP's Russian joint venture, according to a Reuters report.
Russia also wants state-controlled gas giant Gazprom to increase cooperation with Algeria's Sonatrach and arms sales to Algeria will be also be discussed, the Kremlin said.
"The large gas reserves in Algeria underscore the importance of cooperation between Gazprom and Sonatrach," Medvedev's top foreign policy aide, Sergei Prikhodko, told reporters in Moscow.
"We are interested in developing cooperation."
Gazprom boss Alexei Miller will accompany Medvedev to Algeria and though the gas giant did not acquire any fresh acreage in the last oil and gas bid round, it may try to pick up a concession in a licensing round now underway.
Published: 05 October 2010 19:15 GMT | Last updated: 05 October 2010 19:15 GMT
TNK-BP Poised to Acquire BP Algerian Assets in Foreign Expansion
By Brian Swint and Torrey Clark
Oct. 6 (Bloomberg) -- TNK-BP, the venture between BP Plc and Russian billionaires, will look to acquire the London-based company’s Algerian fields to accelerate overseas expansion.
“As soon as BP receives Algeria’s permission to transfer the assets to TNK-BP, TNK-BP will take a serious look at these assets,” said Stan Polovets, chief executive officer of the Russian billionaires’ holding company AAR. “By being an international oil company, we will be able to achieve much higher multiples on our earnings.”
TNK-BP Chairman and AAR shareholder Mikhail Fridman aims to build foreign operations so that least half of the company’s production comes from outside of Russia. The company has already said it will bid for BP assets in Vietnam and Venezuela. Expanding overseas will allow TNK-BP to raise its value per barrel of reserves to about $8 from $4 today, Polovets said.
BP is the largest foreign investor in Algeria, according to the company’s website. In addition to exploration acreage, it operates two gas fields, Salah Gas in the Sahara Desert and Amenas in the southeast of the country, and is a partner the Rhourde El Baguel oil field. Spokesman David Nicholas declined to comment on whether BP will sell the assets.
Fridman is scheduled to accompany Russian President Dmitry Medvedev on a visit to Algeria today. Discussions between BP and Algerian state oil company Sonatrach on the transfer of assets are currently taking place, Polovets said in an e-mailed response to questions.
Algerian assets would provide “a launchpad for further expansion on the African continent, particularly in North Africa,” he said.
Board Approval
TNK-BP, owned 50-50 by BP and Russian investors, last week received board approval to negotiate for the Nam Con Son gas block, pipeline and facilities in Vietnam and oil assets in Venezuela. Tony Hayward, who stepped down as BP CEO on Oct. 1, has taken a seat on the board of TNK-BP after pledging in July to sell as much as $30 billion of BP assets to pay for the Gulf of Mexico oil spill, the worst in U.S. history.
“Integration of BP’s assets in Venezuela aligns well with strong political Venezuela-Russia ties,” Polovets said. A final decision on the assets will likely be made “within a few weeks,” he said.
TNK-BP, Russia’s third-largest oil producer behind state- owned OAO Rosneft and OAO Lukoil, accounts for about a quarter of BP’s output and a fifth of reserves. TNK-BP produces about 1.9 million barrels of oil equivalent a day.
Fridman, the interim CEO until Maxim Barsky takes over next year, said in a Bloomberg interview last month that TNK-BP should “expand broadly in the world.” The push will be supported by Russian President Medvedev and Prime Minister Vladimir Putin, Polovets said.
Moscow’s Position
“Moscow’s position is simple: if Russian companies become stronger, Russia as a country becomes stronger,” Polovets said. “The Russian leadership knows that by entering new markets, TNK-BP and other Russian companies will gain new experience and expertise that can then be applied to projects in Russia.”
The acquisitions may impact TNK-BP dividends, though the total payout this year will be around $3 billion, Polovets said.
While TNK-BP has paid out as much as 60 percent of net income in dividends in the past, “this ratio could be slightly lower in 2010 if a number of large asset transactions is completed before year end,” Polovets said. “But nobody expects it to fall below the minimum 40 percent.”
Polovets declined to say how much BP’s assets in Vietnam, Venezuela and Algeria may be worth.
“TNK-BP has sufficient cash flow and ample debt capacity to pay for these assets. Finding the cash for these assets is not going to be a problem,” Polovets said.
To contact the reporters on this story: Brian Swint in London at bswint@; Torrey Clark in Moscow at tclark8@.
To contact the editor responsible for this story: Will Kennedy at wkennedy3@
Last Updated: October 5, 2010 16:01 EDT
Russian energy companies to spend $6B exploring Turkmenistan’s Caspian shelf
Tuesday, October 05, 2010 - Two Russian companies have signed a deal with Turkmenistan under which they will spend $6 billion exploring and developing gas and oil fields in Turkmen’s Caspian holdings.
Gas producer Itera and oil company Zarubezhneft announced the deal on Monday, the Russian news agency RIA Novosti reported on the same day.
All work is scheduled to be completed next year, RIA Novosti reported Itera Board Chairman Igor Makarov as saying on Monday.
“We will carry out geographical exploration together with Zarubezhneft at the 21stblock located on the Caspian Sea shelf,” RIA Novosti reported Makarov as saying in Gazprom’s company magazine.
“This year, we will draw up the block’s geochemical scheme and start 2D and 3D seismic operation work, which we will finish in 2011. All the work will be organized on the lines of an open international tender.”
Makarov estimated that the block contains 219 million tons of oil and 92 billion cubic meters (bcm) of associated gas.
Once the reserves are verified, the companies intend to jointly build a nitrogen fertilizer plant.
The companies hope “to produce 650,000 tons of urea per year,” Makarov said.
Another joint venture between the two companies holds other exploration licenses on Turkmen Caspian Sea properties, but the licenses for the 29th, 30th and 31st blocks are still frozen.
Gazprom
Putin Says Gazprom Market Value May Rebound Soon (Update1)
By Artyom Danielyan and Anna Shiryaevskaya
Oct. 5 (Bloomberg) -- Russian Prime Minister Vladimir Putin said the market value of companies such as OAO Gazprom may rebound “in the near future” as the world’s biggest gas producer invests in new fields and increases prices at home.
The prices of oil and gas are rising, Putin told an investment forum in Moscow today. “But that’s not the most important thing. Gazprom has a big, I’d even say impressive, development plan.”
The Russian gas export monopoly plans to spend 905.2 billion rubles ($30 billion) this year, a 13 percent increase from the original plan, to cover “key” transportation projects and developments in Russia’s east, it said last month. The Russian government is raising traditionally lower domestic prices in 2014 to make local sales as profitable as exports.
Gazprom Chief Executive Officer Alexei Miller in 2008 said market value will reach $1 trillion within a decade. Exxon Mobil Corp., the largest publicly traded company, is valued at $320.8 billion today.
The Moscow-based gas producer is trading more than 55 percent below its May 2008 intraday high of 369.50 rubles, which gave it a market value of 8.7 trillion rubles or about $370 billion at the time. Gazprom closed at 162.47 rubles in Moscow today, bringing its market value to 3.85 trillion rubles, nearly as much as that of BP Plc, which lost much of its capitalization following the Gulf of Mexico oil spill in late April.
“To raise capitalization for Gazprom, the government is likely to additionally increase prices for domestic consumers and cut taxes and gas export duties,” Mikhail Korchemkin, director of East European Gas Analysis, said in an e-mail today.
To contact the reporter on this story: Artyom Danielyan in Moscow at adanielyan@ To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@ To contact the editor responsible for this story: Will Kennedy at wkennedy3@ To contact the editor responsible for this story: Mark Sweetman at msweetman@
Last Updated: October 5, 2010 13:09 EDT
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