Russia
Russia 100104
Basic Political Developments
• Itar-Tass: Dozens of forums, summits and trips waiting for Medvedev in 2010 year
• Reuters: UPDATE 1-Russian oil flowing to Europe - Belarus state firm
• RIA: Belarus's Belneftekhim company denies reports on oil supplies cessation
• RIA: Russia, Belarus to continue oil transit talk on Monday
• Reuters: Russia-Belarus Oil Dispute Threatens Europe’s Supply
• WSJ: Russia, Belarus in Oil Spat
• Reuters: UPDATE 1-Russia says optimistic ahead of U.S. poultry talks - Moscow sees good chance for compromise at Jan 17 talks; Talks to include poultry already on route to Russia
• RIA: U.S. officials to visit Russia for talks on poultry imports
• NY Post: Nets owner hosting pal Putin - Soon-to-be New Jersey Nets owner Mikhail Prokhorov is hosting Russian leader Vladimir Putin at his $30 million French Alps chalet as a thank you for officially clearing his name.
• Russia Today: Russia to chair CIS in 2010
• Russia Today: WTO accession key for Russia - The main reason was the financial crisis, as consumers cut spending. But trade barriers don’t help. If Russia joins the WTO that could remove several obstacles – and help Russia in the process, says Aleksey Portansky, Head of the Information Office for Russia’s WTO bid.
• Rosbalt.ru: Russia will be glad to new members of the Customs Union - Duma Speaker Boris Gryzlov
• .ge: Abkhazia adopts Russian dialling codes
• Global Voices Online: Russian Parliament Start Broadcasting Online
• RBC: New requirements imposed on Russian auditors - Starting January 1, 2010, audit firms and individual auditors are required to become members of self-regulatory organizations.
• BarentsObserver: The electronification of Russian regions
• BarentsObserver: Customs seek control over cash flows - According to a draft law amendment, Russian customs officers will be entitled to confiscate cash from travelers if they suspect that the money comes from criminal activities.
• BarentsObserver: Higher wages for local bureaucrats - In spite of the financial crisis, several local bureaucrats and officials in Murmansk Oblast had pay rises in 2009.
• Itar-Tass: Gasoline station shelled, catches fire in Ingushetia
• Itar-Tass: Trans-Caucasian highway closed because of heavy snowfall
• RIA: Railway traffic restored in Russia's Far East
• RIA: Two passenger jets collide while taxing at Moscow airport
• Telegraph.co.uk: Russia doubles vodka prices to tackle alcoholism - The Russian government has set a minimum price for vodka that more than doubles the cost of the cheapest vodka on the market in an effort to tackle chronic alcoholism.
• BusinessDay: Russia’s security men and spies are shifting back to the shadows - According to Olga Kryshtanovskaya, a University of Moscow sociologist who monitors elite groups, the siloviki — literally “strong guys” — hit their apogee in 2007, when they accounted for two out of every three members of the president’s administration. Since the accession to the presidency of Dmitry Medvedev, they are now down to barely one in two.
• WSJ: Investments Will Remain a Gamble Until Rule of Law Comes to Russia
• Timeslive.co.za: Russian company 'ordered hit' - Three men armed with guns and fake papers purporting to be from Russia's Federal Security Service (FSB) were arrested after attempting to enter Helmer's Moscow office. Helmer, suspicious of the men, called the police.
• RIA Novosti Highlights: Top ten events in Russian economy in 2009
• RIA Novosti choice: The top ten events in the Russian judiciary and legal system in 2009
• Russia Profile Weekly Experts Panel: 2009 – Russia’s Year in Review: This is the last Experts’ Panel of the year. It is already our tradition to try to assess the most important results of the year for Russia’s economic policy, its democratic development, and its position in world affairs. What has Russia accomplished in 2009? How does it fare, compared to other countries, in terms of battling the global economic crisis? Has the country become more open and democratic in 2009? And did President Dmitry Medvedev show in 2009 that he has a realistic plan for Russia?
National Economic Trends
• Prime-Tass: PMI: Russian manufacturing sector further deteriorates in Dec
• Bloomberg: Russia Manufacturing Contraction Deepened in December, VTB Says
Business, Energy or Environmental regulations or discussions
• Khaleej Times: Will the Party in Russian Shares Continue?
• Bloomberg: Rusal Said to Sell Shares 16% Cheaper Than Chalco (Update1)
• Bloomberg: Rusal May Expand Hong Kong IPO by 225 Million Shares, EMail Says
• MarketWatch: Citi among 4 advisers for Russia's Suek IPO: report
• The Independent: Russian miner turns to Citi in $9bn flotation
• WSJ: Russia's Altimo Joins Bidding In Zamtel Privatization
• Reuters: Russia's Profmedia delists Rambler from AIM
• BarentsObserver: Less mineral mining on the Kola Peninsula
Activity in the Oil and Gas sector (including regulatory)
• RBC: Russia hikes wholesale gas prices
• Reuters: UPDATE 1-Russia 2009 oil output hits new high after 2008 blip
• Bloomberg: Russian Oil Output Climbed 1.2 Percent in 2009 (Update1)
• Bloomberg: Venezuela, Russia May Develop More Orinoco Oil, Universal Says
• Bloomberg: Azerbaijan Starts Natural Gas Exports to Russia, Vesti TV Says
• Your Oil and Gas News: Statoil and Lukoil have agreed to adjust the ownership split in West Qurna 2
• BusinessWire: Sistema Sells Controlling Stakes In Four Bashkir Oil Companies To Bashneft
• Itar-Tass: Tatarstan to commission Russia’s biggest petrochemical facility in 2010
• Your Oil and Gas News: VTB Bank granted a credit limit of 26.8 billion Rubles to TNK-BP
• Russia Today: Ecology comes first in Russian Caspian oil search - Vagit Alekperov, the president of Russia's biggest PRIVATE oil company, Lukoil, grew up on the Caspian Sea. He says taking care of its precious ecosystem seems only natural. That's why he personally examined Lukoil's equipment for detecting, and cleaning, oil spills – should they ever happen.
• Your Oil and Gas News: Novatek and First Cargo Company sign a three-year cooperation agreement
• Globalpost: Poles wary of Nord Stream pact - In Poland, claims the "Molotov-Ribbentrop" natural gas pipeline is an attempt to weaken the EU and NATO, much as the Nazis and Soviets did to Poland in WWII.
• MENA : Moscow throws down the gauntlet to OPEC
Gazprom
• BarentsObserver: Gazprom production down 16 percent
• RIA: Gazprom's gas output to decline 16% to 461bln cu m in 2009
• KyivPost: Gazprom cuts gas output to 461 billion cubic meters in 2009 from 549.7 billion cubic meters in 2008
• Reuters: Gazprom says does not fear competition in China
• BarentsObserver: Gazprom orders 4 tankers for Shtokman
• Bloomberg: Gazprom, Turkey Agree on Pricing, Volumes for 2010 Gas Supplies
• Russia Today: South Stream development pushes cut off risk into past - The feasibility study for the underwater section will be launched at the beginning of 2010 with construction scheduled to begin at the end of the year according to Gazprom CEO, Alexei Miller.
• Hurriyet: Gazprom, Turkey agree on pricing, volumes for 2010 gas supplies
• Steel Guru: Slowdown signs - Gazprom to limit dividends for 2009
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Full Text Articles
Basic Political Developments
Itar-Tass: Dozens of forums, summits and trips waiting for Medvedev in 2010 year
03.01.2010, 14.14
MOSCOW, January 3 (Itar-Tass) - There is much work and many trips in store for President Dmitry Medvedev in the present year 2010. Of course, the celebration of May 9, the 65th anniversary of the Victory in the Great Patriotic War, 1941-1945, will be the key date in the chain of state events.
Moscow marked on a large scale the previous 60th anniversary of the Victory. Dozens of heads of state and government came for festivities. The Russian capital expects no less number of foreign guests this time, although no official invitations will be sent out.
Apart from inspecting the V-Day parade, the president will have also to control how his instructions on preparing for the holiday would be fulfilled. The main of them is care for war veterans: provision of flats and cars for them.
Apart from the above, 2010 will be traditionally packed for the head of state.
The “must programme” of domestic affairs for the president this year includes meetings of the State Council (three-four meetings) and its presidium (around ten), other various councils and commissions at the head of state (approximately once a month). Medvedev receives credentials from new ambassadors to Russia several times a year and presents state awards to outstanding fellow countrymen.
The president regularly holds meetings with permanent members of the Russian Security Council and of the federal cabinet, parliamentary parties and businessmen, personal meetings or videoconferences with regional governors. The head of state goes on business trips around the country, as a rule, no less than once a month.
The foreign policy calendar will be also packed. The Russian leader will attend the traditional G8 summit in Canada this year. Canada will stage not only the G8 summit on June 25-27, but also talks enlarged to the G20 format.
The need for this new mechanism of international consultations that emerged in 2009 was necessitated by the world economic crisis. The G20 will continue operating, since all its participants turned to be satisfied with results of the joint work. Apart from the June summit in Canada, its plans include a November summit in South Korea.
The heads of member countries of the Asia-Pacific Economic Cooperation forum (APEC) will have one more multilateral summit meeting in the Japanese city of Yokohama in November.
Reuters: UPDATE 1-Russian oil flowing to Europe - Belarus state firm
Mon Jan 4, 2010 2:16pm IST
* Russian oil flowing in Druzhba pipeline to Europe
* Russia and Belarus fail to clinch deal on oil pricing
(Recasts, adds details)
MINSK, Jan 4 (Reuters) - Russian oil was flowing normally to European Union customers via Belarus on Monday, Belarus's state oil firm said, despite an unresolved oil pricing row between the Kremlin and its former Soviet neighbour.
Russia halted oil supplies to Belarussian refineries after talks between the former Soviet states broke down on New Year's Eve, two traders from major Russian oil firms told Reuters on Sunday.
That has raised the spectre of another winter supply disruption for energy consumers in the European Union, though talks between Belarussian and Russian negotiators were continuing in Moscow on Monday.
Belarus state oil company Belneftekhim said Russian oil was flowing normally through the Druzhba pipeline to European Union customers.
"Oil is flowing to Belarus," a spokeswoman for the company said, adding the Druzhba oil pipeline -- which connects Russian fields in West Siberia to customers in the European Union -- was working normally.
Traders said two affected Belarussian refineries -- Naftan and Mozyr -- had enough stockpiled crude to continue operations for around a week.
The spokeswoman for Belneftekhim said the refineries were working normally.
Russia, the world's largest oil and gas producer, says it is switching to market terms after subsidising the economies of former Soviet neighbours with cheap energy for years.
A fifth of Europe's gas comes from Russia via Ukraine and Belarus. Large volumes of Russian oil also go through pipelines that traverse the two ex-Soviet states. (Writing by Guy Faulconbridge; editing by James Jukwey)
RIA: Belarus's Belneftekhim company denies reports on oil supplies cessation
11:2404/01/2010
The Belarusian Belneftekhim oil concern denied on Monday reports by some media outlets on the cessation of oil supplies from Russia.
"The information [on the cessation of oil supplies] is false, oil is being supplied to Belarus both for transit and processing," a Belneftekhim spokeswoman said.
She said difficulties which took place during talks between Russia and Belarus over the supply and transit of oil in 2010 did not affect the country's refineries, which, she said, "continue operating in the same regime."
The two countries failed to sign an agreement on oil supplies in 2010 before the end of 2009. Russian officials have said that until an agreement is reached, Belarus will have to pay the full duty on oil it receives.
The dispute between Russia and Belarus has raised fears in Germany and Poland that supplies may be affected, as they were during a similar dispute in 2007.
Mikhail Barkov, vice-president of Russia's Transneft oil pipeline monopoly, said on Sunday that oil transit via Belarus would not be reduced under any circumstances, but oil deliveries to the former Soviet republic depended on Minsk's position.
An aide to Russia's energy minister said on Sunday Russia and Belarus would continue discussions on the issue on Monday.
Belarus benefited from significant discounts on Russian oil imports in 2009, and is seeking a similar deal this year. Russia says it is willing to eliminate all duties on oil supplied to Belarus for domestic consumption, but wants oil bound for European markets to be subject to duty.
A Belarusian government source said on Saturday that Russia's position at negotiations on a 2010 agreement for oil deliveries to Belarus is seriously undermining the new Customs Union between Belarus, Russia and Kazakhstan.
MINSK, January 4 (RIA Novosti)
RIA: Russia, Belarus to continue oil transit talk on Monday
23:1503/01/2010
Russia and Belarus will continue discussions on Monday as they attempt to resolve differences over the supply and transit of oil in 2010, an aide to Russia's energy minister said on Sunday.
"The negotiation process is not finished. Negotiations will continue tomorrow," Irina Yesipova told RIA Novosti.
The dispute has raised fears in Germany and Poland that supplies may be affected, as they were during a similar dispute in 2007, but Yesipova earlier said that deliveries via Belarus were continuing without disruption while the negotiations were ongoing.
Mikhail Barkov, vice-president of Russia's Transneft oil pipeline monopoly, said on Sunday that oil transit via Belarus would not be reduced under any circumstances, but oil deliveries to the former Soviet republic depended on Minsk's position.
Belarus benefited from significant discounts on Russian oil imports in 2009, and is seeking a similar deal this year. Russia says it is willing to eliminate all duties on oil supplied to Belarus for domestic consumption, but wants oil bound for European markets to be subject to duty.
A Belarusian government source said on Saturday that Russia's position at negotiations on a 2010 agreement for oil deliveries to Belarus is seriously undermining the new Customs Union between Belarus, Russia and Kazakhstan.
Russian officials have said that until an agreement is reached, Belarus will have to pay the full duty on oil it receives.
MOSCOW, January 3 (RIA Novosti)
January 4, 2010
Reuters: Russia-Belarus Oil Dispute Threatens Europe’s Supply
By ANDREW E. KRAMER
MOSCOW — Russia and Belarus have failed to renew an agreement on crude oil export tariffs that expired on New Year’s Eve, raising the prospect that yet another otherwise unremarkable energy pricing dispute between Russia and a neighbor could unravel into a midwinter fuel shut-off on the Continent.
Just a year ago, Europeans shivered through a politically tinged dispute that went on for weeks between Russia and Ukraine over natural gas prices and transit fees.
This year, the crude oil pipeline that is the focus of disagreement is integral to exports of Siberian petroleum to Western Europe as part of the Soviet-era Druzhba pipeline system.
As is the case with natural gas pipelines in Ukraine, about 1.3 million barrels of oil per day shipped along the Belarussian spur of the Druzhba pipeline supply both the internal market in Belarus and the more lucrative markets in the European Union, like Germany and Poland.
On Sunday, Reuters cited two oil traders as saying that Russia had begun curbing supplies to the domestic market by cutting the flows to two refineries, Naftan and Mozyr. In Ukraine last January, that was a first step toward a more general shutdown.
Russian officials took pains to emphasize that the export volumes would continue to flow, while either refusing to confirm or denying the report of a local shut-off in Belarus.
A Russian Ministry of Energy spokeswoman, Irina F. Yesipova, said the transit flow en route to Western markets, a supply big enough that its disruption could raise global oil prices, had not been and would not be halted. She declined to comment on the domestic supplies in Belarus.
A senior official at Transneft, Russia’s state oil transport company, said in a telephone interview that the company continued to supply both the internal Belarussian market and export markets at full volume.
“We have not stopped pumping, not to Belarus, not for export,” said the official, who was not authorized to speak publicly.
A duty officer at the Belarussian Foreign Ministry referred questions to the Ministry of Energy, whose phones were not answered on Sunday.
Belarus is one-half of a loose confederation with Russia that was supposed to eventually lead to a common currency and customs zone. Yet in the oil business, so vital to Russia’s economy, Belarus was treated with privilege but as less than a fully integrated partner.
Refineries in Belarus paid a fraction — 35.6 percent — of Russia’s standard crude oil export tariff. The Belarussians, though, were able to re-export the gasoline, diesel, bitumen and other products to Europe at a healthy profit. This trade helped prop up the government of Aleksandr G. Lukashenko, the Belarussian president, at Russia’s expense.
The oil agreement with Moscow expired Dec. 31. Russia’s deputy prime minister for energy, Igor I. Sechin, had said that lacking a new deal, Belarus should pay the full export tariff on Russian crude, the Russian state RIA news agency reported.
Belarussian officials responded that their country should pay no tariff because it had renewed its commitment to a customs union with Russia just last year, according to a statement posted on the government’s Web site.
Before the New Year, the Belarussian delegation left Moscow, and the government in Belarus posted a statement saying that they had been subjected to “unprecedented pressure” to acquiesce to Russia’s demands. Both sides, however, said Sunday that negotiations were continuing.
Last January, the Russian natural gas monopoly Gazprom first tried to halt supplies to Ukraine’s domestic market in a pricing dispute. It then shut down the pipeline entirely, accusing the Ukrainians of continuing to supply their own needs by siphoning gas intended for export.
JANUARY 4, 2010
WSJ: Russia, Belarus in Oil Spat
A WSJ NEWS ROUNDUP
MOSCOW -- Russia is continuing to negotiate with Belarus over 2010 oil shipments, with officials saying Russia won't shut off oil bound for Europe under any foreseeable circumstances, even as it halted shipments to Belarus refineries, according to news-agency reports.
"The transit of oil across Belarus won't be cut under any circumstances," Transneft Vice President Mikhail Barkov said, adding he had hopes of a possible solution Sunday, according to Russian state newswire RIA Novosti. The two countries failed to come to an agreement Dec. 31 about Russia's oil supplies to Belarus. Russia insisted Belarus must pay a higher price including export duties for oil sent onward to Europe, while Belarus sought to charge higher fees for transit across its territory.
Oil has stopped flowing to Belarus refineries, but the Naftan and Mozyr refineries have enough crude to continue for about a week without new supplies, Reuters reported Sunday, citing oil traders.
The spat between Moscow and Belarus threatens a nascent customs union among Russia, Belarus and Kazakhstan that was to be used to help the countries accelerate membership in the World Trade Organization, Interfax reported Saturday. Russia is the main ally and sponsor of Belarus, but relations between the two ex-Soviet neighbors have been increasingly strained by financial arguments.
The Belarussian cabinet said Sunday that the two failed to agree on terms for oil exports and that Moscow's demand that Belarus pay a higher tax on the bulk of Russian oil shipments contradicted an agreement on customs union signed late last year.
It also said that Russian officials put "unprecedented pressure" on the Belarussian delegation at Sunday's talks and that this was "totally unacceptable."
Reuters: UPDATE 1-Russia says optimistic ahead of U.S. poultry talks
Mon Jan 4, 2010 1:20am IST
* Moscow sees good chance for compromise at Jan 17 talks
* Talks to include poultry already on route to Russia
(Adds more quotes, details, byline)
By Dmitry Zhdannikov
MOSCOW, Jan 3 (Reuters) - Russia and the United States will hold talks in mid-January to solve a dispute over U.S. poultry imports, a top Russian official said on Sunday, adding that the stance of U.S. administration was inspiring optimism.
Russia effectively blocked U.S. poultry imports beginning Jan. 1 with a new law prohibiting chlorine as an anti-microbial treatment in poultry production.
Washington said the measure would have a "devastating impact" on the U.S. poultry industry and trade, and raise the costs of poultry products for Russian consumers [nN31191342].
Russia's chief sanitary official Gennady Onishchenko said he hoped a compromise would be found at talks in Moscow, which he agreed to hold after telephone talks with James Miller, the USDA's undersecretary for Farm and Foreign Agricultural Services.
"An American delegation will arrive here on January 17 to solve the problem on an expert level," he told Ekho Moskvy radio station.
"A one hour and a half conversation with Mr Miller has inspired me with emotional optimism.
"We have tried to find common points during this hour and a half. It is a special thing of today's U.S. administration. Before it was just 'No' and full stop," Onishchenko said.
Russia and the United States have announced a resetting of political relations after U.S. President Barack Obama took office.
The two nations have yet to overcome all obstacles to reaching a key deal on reducing Cold War arsenals of nuclear weapons [nLDE5BS04J], which will be seen as real evidence of a new era in relations.
Analysts have said large U.S. poultry imports to Russia have often become hostage of chilly political relations between the two countries.
The United States supplies more than one-sixth of Russian poultry consumption, or 600,000 tonnes, Onishchenko said, adding that Washington knew about Russian plans to proceed with new regulations since 1994.
"What is chlorine? Chlorine is a poisonous substance for combats," he said.
The United States believes Russia's new regulation is unjustified because of "overwhelming scientific evidence" showing chlorine is safe and effective disinfectant for use in poultry.
Onishchenko said the Jan. 17 talks would involve shipments of U.S. poultry, which is already en route to Russian ports on the Baltic Sea.
"If it is a reasonable amount -- not accounting to semi-annual or annual stockpiles -- then of course (we will clear their imports)," Onishchenko said.
U.S. officials have said there might be some 30,000 tonnes of poultry already en route to Russia.
(Reporting by Dmitry Zhdannikov, Editing by Maureen Bavdek)
((dmitri.zhdannikov@, +7 495 775 12 42, Reuters Messaging: dmitri.zhdannikov.@)) Keywords: POULTRY USA/RUSSIA
RIA: U.S. officials to visit Russia for talks on poultry imports
23:5803/01/2010
A U.S. delegation will arrive in Moscow this month for discussions on poultry imports from the United States after Russia tightened its regulations, Russia's chief sanitary official said on Sunday.
Russia introduced a law on January 1 strictly limiting the amount of chlorine that can be used in the processing of poultry, effectively banning all imports from the United States.
The head of consumer watchdog Rospotrebnadzor, Gennady Onishchenko, said on Ekho Moskvy radio that the U.S. delegation would arrive on January 17.
"At approximately 19:30 on December 31, I concluded a telephone conversation with. James Miller, deputy agriculture secretary of the United States. We agreed that the U.S. delegation will arrive here on January 17, and we will resolve this problem," Onishchenko said.
The new requirements, which apply to both imports and meat processed in Russia, state that the amount of chlorine in the solution used for the processing of poultry meat should not exceed the level set for drinking water, 0.3-0.5 milligrams per liter.
They also require that the fluid that separates when defrosting the meat should not exceed 4% of the total weight of the bird.
Experts say the new regulations first and foremost affect imports from the United States, where chlorine has been used as the primary anti-microbial treatment for a quarter of a century.
Reuters reported that Russia is U.S. poultry producers' top export market, worth $801 million in 2008.
MOSCOW, January 3 (RIA Novosti)
NY Post: Nets owner hosting pal Putin
Last Updated: 3:26 AM, January 4, 2010
Posted: 1:59 AM, January 4, 2010
Soon-to-be New Jersey Nets owner Mikhail Prokhorov is hosting Russian leader Vladimir Putin at his $30 million French Alps chalet as a thank you for officially clearing his name.
The billionaire Russian invited Putin to stay at his chalet in Courchevel after the Russian prime minister secured an apology from French authorities for dragging Prokhorov's name into a prostitution scandal.
Now Prokhorov -- Russia's richest man -- and Putin have returned to celebrate in the same resort where the false claims were made, and to ski on mountains that will be closed to the public amid tight security.
A source told Page Six: "Putin arrived on Saturday with an entourage of 100 people. He is staying at Prokhorov's chalet, which is surrounded by a ring of tight security.
"Prokhorov invited him as a thank you for officially clearing his name. It is intended to be a very secret and private visit."
Our source continued: "Putin is also a very keen skier, and entire runs and lifts will be closed for him. He and Prokhorov are so close that Putin is rumored to be lining him up for a political role. At the very least, we expect to be seeing Putin on the sidelines at a Nets game."
Prokhorov, worth about $9.5 billion, was arrested in January 2007 in Courchevel as he celebrated the new year with friends and some beautiful young women. He was held in a Lyon jail for four days over allegations that he hired Russian hookers for his guests.
He was cleared of all charges and blasted the "ludicrous accusations which damaged my reputation." He later launched a lawsuit against the French government and demanded an apology, which came last month during a meeting between French and Russian officials, led by Putin.
Last month, Prokhorov signed formal contracts to buy a controlling stake in the Nets, a move to be voted on by the NBA board of governors early this year. A rep for Prokhorov could not be reached.
Russia Today: Russia to chair CIS in 2010
01 January, 2010, 17:05
Starting January 1, Russia is heading the Commonwealth of the Independent States, taking its turn after Moldova.
According to Russia’s Foreign Minister, Sergey Lavrov, science and innovation will be the core of the Russian chairmanship.
”As CIS chair for the next year, Russia has prepared a concept for its chairmanship and a plan for its realization,” Vesti TV Channel quoted Lavrov as saying. “In the center there will be science and innovation. They will be the main theme of the next year,” he added.
During its chairmanship, Russia hopes to create a number of innovation projects, which will help develop a joint scientific and educational base in the CIS space. The countries comprising the commonwealth plan to set up the innovation center on nanotechnology and develop collaboration in applied and fundamental sciences.
Special attention will also be paid to the economic side of collaboration, as countries will need a joint effort to overcome the fallout from the world economic crisis.
The Russian Foreign Minister earlier pointed out that the year 2010 will be devoted to veterans of WWII living in the CIS. With the 65th anniversary of the victory over Nazi Germany coming in May, a military parade featuring war veterans from all the commonwealth countries will be held in Moscow, with an informal summit of the leaders to follow.
One of the two CIS summits will be devoted to the 65th anniversary of the war. Another meeting will have a broader agenda and will take place in December, 2010 in Moscow.
Russia Today: WTO accession key for Russia
04 January, 2010, 11:06
As Russia remains the largest economy not in the WTO, further development of trade relations hinges on whether Russia becomes a member.
Desirable but hard to get is how global producers see the Russian consumer. And with the country still not yet a member of the World Trade Organisation, some countries are even seeing sales to Russia falling.
The EU is Russia's main trading partner, accounting for just over half its overall trade turnover.
Trade with the US trails far behind – except for food and even that is under pressure. Volumes of US food exports fell 29% in 2009, wiping out three years of growth.
The main reason was the financial crisis, as consumers cut spending. But trade barriers don’t help. If Russia joins the WTO that could remove several obstacles – and help Russia in the process, says Aleksey Portansky, Head of the Information Office for Russia’s WTO bid.
“First of all – avoiding discrimination on the international markets. Today our business, our economy is discriminated on international markets. For example, metallurgy, fertilizers and some other products."
Russia is the only major international economy outside the WTO. It’s been seeking membership since June 1993. Sixteen years of talks took a surprising twist last June when Russia announced a plan to join the WTO as a Custom Union together with Belarus and Kazakhstan. This move even raised doubts about the seriousness of Russia’s intentions.
“Accession by the Custom Union is not possible. The Legal framework of the WTO doesn’t give the possibility to accede the organization as a Custom Union,” Portansky said.
Russia is yet to decide either it wants to proceed as a Custom Union or pursue WTO membership on its own. But even in case of joining separately, it will seek to join WTO simultaneously with Belarus and Kazakhstan and on equal terms. The negotiations are due to restart at the beginning of 2010.
Rosbalt.ru: Russia will be glad to new members of the Customs Union - Duma Speaker Boris Gryzlov
/GOOGLE TRANSLATION/
MOSCOW, January 4. Moscow would welcome the accession of other countries to the CIS Customs Union (CU) of Russia, Belarus and Kazakhstan as their willingness to do so. This was declared by the Duma Speaker Boris Gryzlov, commenting on the beginning of a new regional association, ITAR-TASS.
"Start the real work of the Customs Union in 2010 - the most visible and tangible step towards the integration of our countries", - said the Speaker, expressing confidence that "it is beneficial both Russia and its partners."
"The planned elimination of the" internal economic borders between our countries, free movement of goods will greatly facilitate the establishment of cooperative chains, - he continued. - Will increase competition and therefore - and the quality of products, and demand for innovation. "
"Finally, the appearance of TS - in fact, a single market with 170 million consumers - will be the most direct way to stimulate investment in new and upgrading existing plants", - considers the head of the lower house of Parliament, as quoted by the Duma Office of Public Relations and cooperation with media.
Referring to the estimates of specialists, Gryzlov said that "all this can give our country a very tangible effect: the additional growth of GDP by 2015 will amount to 14-15%, which is trillions of rubles."
"Moreover: the creation of the TC becomes a crucial step towards an even more ambitious goal - the formation of single economic space", - he said.
"Of course, to solve many problems - recognized by the speaker. - A case in point is the strengthening and equipping the "Foreign Economic Frontier" Union ".
Recall the Customs Union of Russia, Belarus and Kazakhstan became operational on January 1. The decision about the leaders of the three states have adopted 27 November 2009 at the summit of the Eurasian Economic Community (EEC) in Minsk.
This single customs territory will be operational only from July 1, 2010, after the participating countries will agree on all the general tariff rates.
On establishment of the Customs Union of the leaders of Russia, Belarus and Kazakhstan announced at the EurAsEC summit in Sochi in 2006. Then the parties agreed to apply the Common Customs Tariff (ETT) in trade with third countries in 2011. In subsequent years, experts from three countries were preparing the necessary documents, and now, when all the necessary documents agreed upon, the union begins to function, even a year earlier.
January 1, import prices in the States Party to the Agreement will be held the same customs procedures, and after registration in one country are guaranteed the free circulation of goods in all three states.
.ge: Abkhazia adopts Russian dialling codes
By Mzia Kupunia
Monday, January 4
Georgia’s breakaway region of Abkhazia has switched to Russian international phone codes from January 1, 2010, news agency Interfax has reported. “For a month and a half Russian codes were being used parallel to the Georgian ones as a trial, but from New Year the republic has transferred to the exclusive use of Russian dialling codes,” the de facto General Director of Abkhazsvyaz, Eduard Pilia, has told Interfax.
The de facto republic partly switched to Russian codes on November 16. The decision to adopt Russian phone codes was taken on September 28 2009, after the signing of a memorandum of cooperation between Russia and Georgia’s breakaway region. Under the terms of this document Abkhazia received an 840 dialing code for landlines and a 940 code for mobile phones. After signing the memorandum the head of the de facto Abkhaz Communications and Information Department Kristian Bzhania expressed hope that “in time the International Postal Union will give the republic its own international code.”
The International Postal Union has not recognised the Russian codes in the de facto Abkhazia. The Georgian National Communication Commission has told Interfax that the IPU has sent a letter to the Georgian side stating that the organisation cannot interfere in a dispute between two sovereign states (Georgia and Russia) but it recognises Georgia’s territorial integrity and in the annual code book it issues Abkhazia will have the same Georgian codes as previously.
The Georgian Foreign Ministry called the adoption of Russian dialling codes a violation of international norms. In a statement released on September 30 the Ministry said that Russia’s decision to grant Russian dialing codes to Georgia’s breakaway region contradicted the standards set by the International Union of Telecommunications and the United Nations. “The Georgian side will appeal to the relevant structures of the UN to stop the illegal actions of the Russian side,” the statement reads.
Vice Speaker of the Georgian Parliament Paata Davitaia has said that private companies using Russian codes to make calls to Abkhazia will be fined, and state institutions supervising the international communication agencies will deprive offenders of their licences.
Global Voices Online: Russian Parliament Start Broadcasting Online
Saturday, January 2nd, 2010 @ 00:52 UTC
by Alexey Sidorenko
The Russian parliament starts broadcasting its sessions online from January 1, 2010, Gzt.ru reports [RUS]. It's believed that these initiatives would increase transparency of political processes in Russia.
RBC: New requirements imposed on Russian auditors
RBC, 04.01.2010, Moscow 11:49:43.Starting January 1, 2010, audit firms and individual auditors are required to become members of self-regulatory organizations. Under the law on auditing, those who fail to do so by January 1, 2010, will forfeit their right to hold audits and provide related services, that is, their licenses for auditing activities will become invalid. At this point, Russia's state register has six self-regulatory audit organizations registered in October-December 2009. Apart from these, six more applications for registration had been filed, five of which were rejected and one withdrawn.
BarentsObserver: The electronification of Russian regions
2010-01-04
All state services in the Russian regions are to be made available electronically by 2015, President Dmitry Medvedev underlined in a recent State Council session.
The meeting, which was devoted to the development of information technologies, was attended by the governors and a number of cabinet ministers and high-ranking officials. It took place on 23 December.
The governors who do not cope with the mission will be dismissed, the president threatened in his speech, newspaper Kommersant reports.
According to Minister of Communication Igor Shchegolev, Russian small businesses today spend ten percent of their turnover on overcoming red tape and the Russian population altogether spend up to 25 million days per year on getting public services.
There are a total of about 1500 public services which will be made electronic by 2015, newspaper Kommersant writes.
Read more about the meeting at Kremlin.ru
BarentsObserver: Customs seek control over cash flows
2010-01-04
According to a draft law amendment, Russian customs officers will be entitled to confiscate cash from travelers if they suspect that the money comes from criminal activities.
If the proposed amendments to the customs code will be approved, the customs officers will be allowed to confiscate the money for five days, newspaper Vedomosti reports. The money - both roubles, foreign currency and checks – can be confiscated if the traveler refuses to inform about the origin of the money.
Currently, the Customs service is entitled only to control that sums up to 3000 USD is declared in line with regulations.
According to the customs service, the new regulation will help the authorities fight money laundering.
BarentsObserver: Higher wages for local bureaucrats
2010-01-04
In spite of the financial crisis, several local bureaucrats and officials in Murmansk Oblast had pay rises in 2009.
According to Murmansk Regional Ministry for Finances, even in municipalities receiving more than 70 percent of their budget income from the regional budget, the local officials and delegates received a five percent pay rise in 2009, web site Murman.ru reports.
Also in municipalities receiving between 30 and 70 percent of their budget income from the regional budget, local officials’ paychecks got bigger. In the border towns Nikel and Zapolyarny the pay rise was 7.5 percent.
In August 2009, Prime Minister Vladimir Putin criticized the country’s governors for spending too much and urged them to avoid increased expenses on regional government. As BarentsObserver reported, Mr. Putin mentioned Murmansk Oblast as one of the regions with an unacceptable rise in administration expenses.
Itar-Tass: Gasoline station shelled, catches fire in Ingushetia
03.01.2010, 22.26
NAZRAN, January 3 (Itar-Tass) -- A gasoline station located by the Caucasus federal highway in Gazi-Yurt of Ingushetia’s Nazran district was put under gunfire at about 9:45 p.m. Moscow time on Sunday.
The station is ablaze.
According to the preliminary information, one grenade launcher shot was fired at the station. No one was hurt. Firemen are putting down the blaze. The search for the assailants is underway, the Ingush Interior Ministry said.
Itar-Tass: Trans-Caucasian highway closed because of heavy snowfall
04.01.2010, 09.00
VLADIKAVKAZ, January 4 (Itar-Tass) - The Trans-Caucasian highway connecting Russia with Transcaucasia was once again closed on Monday because of heavy snowfalls, a spokeswoman for the North Ossetian emergencies ministry told Tass.
The highway was also closed on Sunday. According to Yulia Starchenko, apart from heavy snowfalls, it was closed for fear of possible avalanches, as over 30 centimetres of snow have already fallen in the mountains.
As soon as it clears up in the mountains, road services will begin clearing the highway and will possibly artificially trigger avalanches. Meanwhile, visibility is zero in the mountains.
RIA: Railway traffic restored in Russia's Far East
07:1304/01/2010
Railway traffic, which was disrupted by heavy snowfalls in Russia's Pacific island of Sakhalin for four days, has been restored, a spokesman for the local railway service said.
The snowstorms struck the island on Thursday blocking a rail line, with an avalanche engulfing a diesel locomotive and snowplow. Two railroad workers were missing, with rescuers forced to work carefully due to the threat of further avalanches.
More than 300 rail workers, along with as many as 200 soldiers, were working to clear the line and restore rail service.
The snowfalls also stranded about 60 cars on the main highway of the island. More than 30 special-purpose vehicles were dispatched to clear the snow, but were only able to advance about 5 kilometers (3 miles) an hour.
YUZHNO-SAKHALINSK, January 4 (RIA Novosti)
RIA: Two passenger jets collide while taxing at Moscow airport
02:3704/01/2010
A passenger airliner bumped into another one as it was taxing at the Vnukovo airport in the west of Moscow, no one was hurt in the incident, one of the passengers told RIA Novosti.
Flight 460 of Vladavia airlines en route from Moscow to Vladivostok hitched a tail of another airliner as it was taxing out for the take off.
A spokesperson for Vladavia airlines has confirmed the incident saying that half of the Flight 460 passengers will be able to leave the Vnukovo airport for Vladivostok in the next few hours.
The spokesperson added that the other half of the passengers will be accommodated at the nearest hotel at the expense of Vladavia and will leave for Vladivostok on Monday morning.
MOSCOW, January 4 (RIA Novosti)
Telegraph.co.uk: Russia doubles vodka prices to tackle alcoholism
The Russian government has set a minimum price for vodka that more than doubles the cost of the cheapest vodka on the market in an effort to tackle chronic alcoholism.
Published: 5:02PM GMT 01 Jan 2010
The measure is aimed also at reducing the extraordinary number of deaths caused by drinking in Russia.
A half litre of vodka will cost a minimum of 89 rubles (£1.80) from Friday, the start of the 12-day New Year's and Orthodox Christmas holiday, when alcohol consumption is at its highest.
President Dmitry Medvedev has publicly decried Russia's drinking problem and its effect on the nation's wellbeing.
The average Russian consumes about 18 litres (32 pints) of pure alcohol each year - one of the highest rates in the world. A study published last year in The Lancet medical journal said drinking has caused more than half of deaths among Russians aged 15 to 54 since the 1991 Soviet collapse.
BusinessDay: Russia’s security men and spies are shifting back to the shadows
Charles Clover
Published: 2010/01/04 06:35:44 AM
THE Russian aphorism that “the Kremlin has many towers” is a comment not just on its architecture but on the rivalries that pervade the regime that sits within it — maintaining an outward veneer of autocratic rigidity but roiling nonetheless with bureaucratic turf battles.
Since the start of the decade, the tallest tower has belonged to the so-called siloviki, the former officers who have flooded into state structures on the coat tails of Vladimir Putin, former KGB officer, two-term president and now prime minister.
With the end of the Putin presidency last year, however, the siloviki have retreated. Their representation in top government ranks has ebbed for the first time in 20 years, putting a question mark over their future.
According to Olga Kryshtanovskaya, a University of Moscow sociologist who monitors elite groups, the siloviki — literally “strong guys” — hit their apogee in 2007, when they accounted for two out of every three members of the president’s administration. Since the accession to the presidency of Dmitry Medvedev, they are now down to barely one in two.
Kryshtanovskaya is among those who believe this shift may foretell a gradual move towards civilian government and a more liberal zeitgeist among the elite. “Under Putin the people from the special services went into first position, but for them it was unusual, nonstandard ,” she says. “They were not used to the limelight. And now they have all gone back to the shadows, become number two.”
Igor Yurgens, an adviser to Medvedev, also sees a gradual “thaw” with the steady withdrawal of the siloviki. “Civil society is now occupying a more visible role than it did during 2000-08…. I would say that the siloviki’s influence is weakening.”
Much will depend on Putin’s own intentions, which are difficult to read. In spite of giving up the presidency, he remains unanimously regarded as the most powerful figure in Russian politics. While he, more than anyone, was responsible for the influx of security officers into government, his choice of Medvedev as successor indicates that he may have seen the siloviki as usurping too much power and wanted to trim their influence.
Medvedev, meanwhile, appears increasingly confident and, at least in public, projects the aura of an impending political thaw — he has championed modest electoral reforms and harshly criticised the hegemonic United Russia political party, headed by Putin, for rigging local elections.
The president’s position gives him great constitutional authority, though Putin has far more backroom influence than his protege.
Kryshtanovskaya likens the situation to another saying popular in Soviet times: “The commissar stands alongside the commander.” Its meaning was that a boss’s deputy was not necessarily the less powerful of the two. “Every commander had a deputy from the KGB whose job was to spy on them. This seems to be the model still.”
But Aleksei Kondaurov, a former KGB general, says that while the numbers of the siloviki in the top echelons of state clearly grew in recent years, that does not mean they form a united front. “I wouldn’t say the siloviki have a united world view. Some of them went into business. Some got religion. Some became kleptocrats. There is not much to distinguish them from other groups in government,” he says. One former senior Kremlin official says: “ They spend as much or more time fighting each other as they do other groups.”
Nevertheless, the Putin siloviki have left a considerable imprint on the political development of Russia. Their efforts to secure power are likened by some analysts to a “soft coup d’etat” that has transformed Russia from an emerging democracy into a state again based on hierarchy and paternalism.
The roll-back of democracy has been accompanied by a conservative ideological programme reminiscent of Tsar Alexander III. He made “autocracy, Orthodox Christianity and nationality” the three pillars of his reign in the second half of the 19th century.
Putin has presided over a resurgence of patriotism and Orthodox Christianity, and is said to be deeply religious himself. His circle of siloviki is referred to as the “Orthodox Chekists” and in 2002 many contributed money to restore a church next to the Lubyanka, the headquarters of the KGB and now of the Federal Security Service, its successor. Putin and other top siloviki regularly meet Archimandrite Tikhon Shevkunova, a conservative monk.
But in a modern world of diffuse power centres and mass media, the methods of the siloviki may not be as effective as they once were in a closed totalitarian state such as the USSR — the Russian elite has long since understood that the governing of a modern, outward-looking nation state cannot be done far from the limelight. The days when a quiet word to the right person could control the affairs of government are gone — and while Putin is a natural showman with an instinct for television, there are few KGB men who are as gifted a public figure as he.
Putin’s choice to step down and become prime minister has been mirrored in the less influential roles given to some of his top lieutenants. Igor Sechin, thought to be a former intelligence officer who was a military translator in Mozambique and Angola during the 1980s, was first deputy chief of Putin’s presidential administration but is now a mere deputy prime minister.
Viktor Ivanov, also thought to have been a KGB officer, was an aide to Putin responsible for virtually all personnel decisions in government but has since moved to comparative obscurity at the head of the federal narcotics control.
Though both continue to be influential behind the scenes, according to a former senior Kremlin official, the source of their power was their daily access to Putin and that has waned. “That was their basic resource, and it is less now,” he says.
The large number of security men in power is a reversal of the status quo during the USSR — the Soviet government had made civilian control over the security ministries a priority and up to 40% of the posts in the upper echelons of the KGB during its last years were occupied by civilians, all Communist Party figures.
Thus the siloviki were beneficiaries of the end of communism, which opened the door to the reaches of executive power. Kryshtanovskaya has painstakingly tracked this trend: in 1988, under the USSR, only 5,4% of government positions were occupied by military and KGB men. In 1993, that rose to 11%; by 1999 their representation had doubled again to 22%; and by the middle of Putin’s first term, the proportion was 32%.
Few know what to make of the long term. The current thaw notwithstanding, many doubt the siloviki are going to leave any time soon. “They have stolen too much. There is no question of them giving up power — it is too risky,” Pribylovsky says.
The thaw itself may be temporary, as the regime tries to put on a more attractive face amid difficulties resulting from the financial crisis. Many think Putin is destined to return as president in the 2012 elections, when Medvedev would stand down. Others see something more permanent in the changes taking place, however. Just as military juntas in countries such as Turkey and Argentina were convinced eventually to hand over to civilian governments after chaos in society had been brought under control, the same may be happening in Russia.
Yurgens says the influx of former officers was inevitable following the economic chaos of the 1990s, when organised crime groups grabbed privatised assets and political power, and federal forces all but lost the disastrous first war in Chechnya.
But the end of the second Chechen war, re-establishing federal control over the Caucasus, and the gradual stabilisation of the Russian economy formed the turning point for the siloviki, he says. “Now, their mission is largely finished.” © Financial Times
‘Under Putin, people from the special services went into first position, but for them it was unusual, nonstandard — they were not used to the limelight’
JANUARY 3, 2010, 5:59 P.M. ET
WSJ: Investments Will Remain a Gamble Until Rule of Law Comes to Russia
By IRWIN STELZER
The Russian economy is as much a riddle, wrapped in a mystery, inside an enigma as Winston Churchill found its foreign policy to be in the days of Joseph Stalin.
What we do know from the World Bank is that the Russian economy is going through hard times. This is an economy rich in resources but with a per capita GDP less than that of most of its former satellites and one-third that of, say, Italy. Output and employment are declining more rapidly than authorities had expected, and, reports a team led by economist Zeljko Bogetic, there is "a sharp rise in poverty." Despite the general improvement in the world economy and higher oil prices following the Nigerian terrorist's attempt to blow up an airliner—Nigeria is America's largest supplier of light, sweet crude—the World Bank is guessing Russia's GDP will return to precrisis levels only late in 2012.
Russia's problems are similar to those faced in Europe, America and other Western countries: too many bad loans on the banks' books, too little credit available to small businesses, and weak domestic demand.
Similar, but not identical. Available evidence suggests economies can't reach their full potential in the absence of the rule of law. Harvard professor Robert Barro analyzed data from some 100 countries and concluded that "an expansion of the rule of law would raise economic growth and lead over time to higher standards of living and, hence, to more democracy." So to forecast the future of the Russian economy, one must make a guess at its progress toward becoming a nation under law.
On present evidence, that doesn't seem to be in Russia's immediate future. This past November, a cross-party group of 130 MEPs urged President Dimitri Medvedev to establish the rule of law in Russia. Mr. Medvedev has several times expressed a desire to do just that, in good part to encourage much needed inward investment—to little effect, unless you count President Medvedev's as-yet-untested New Year's promise that first-time tax evaders won't face jail time. Whether the resourceful Russian prosecutors will see this as an invitation to using multiple charges to get around Mr. Medvedev's reform remains to be seen. Few businessmen want to become the test case.
Mikhail Khodorkovsky, a political opponent of Vladimir Putin, had his Yukos oil company confiscated on what many believe are trumped-up tax-evasion charges. He is now finishing one term in a Siberian jail only to face charges for other crimes. Don't bet on seeing him stroll down the streets of Moscow anytime soon. Indeed, he will be fortunate to avoid the fate of Sergei Magnitsky, attorney for William Browder's Hermitage Capital, a fund confiscated by Russian authorities and, it is alleged, its assets acquired by officials in a process known as reiderstvo, or raiding. Mr. Magnitsky died in jail awaiting trial after being denied medical treatment for an extraordinarily painful ailment.
There is an irony there: Mr. Browder, who was suddenly denied a visa to re-enter Russia and then had his fund confiscated, is the grandson of Earl Browder, one of the founders of the American Communist Party. The younger Mr. Browder, a one-time Putin-booster, now makes his headquarters in London because, he says, "I like the rule of law."
Reiderstvo, of course, has as its crucial component charging the legitimate owners of the business with some crime to get them out of the way. So Mr. Browder should consider himself lucky that he has been denied a re-entry visa and avoided becoming a neighbor of poor Mr. Khodorkovsky.
Raiding isn't Russia's only problem. As President Medvedev acknowledges, the economy is too undiversified, too dependent on oil and other raw materials, too short of inward investment. To which Russian expert Leon Aron, a scholar at the American Enterprise Institute, adds, too dependent on the "monotowns" that house one-quarter of Russia's urban population and are dominated by a single, often clapped-out company.
Foreign investors in Russia are playing a game that Nathan Detroit, the host in "Guys and Dolls" of "the oldest established permanent floating crap game in New York," found unwinnable. On a losing streak, the gun-toting thug, Big Julie from Chicago, forced use of his own dice— which had no spots ("I know where they are," Big Julie assured the players)—and proceeded to roll only winners.
The modern version of Lenin's famous prediction that "the capitalists will sell us the rope with which to hang them," might be that they will provide the capital to develop Russia's natural resources so the regime can dominate its "near-abroad" and increase Western Europe's dependence on it for supplies of natural gas. But investing in a nation in which there is no established rule of law is to shoot craps with Big Vladimir of Leningrad.
Write to Irwin Stelzer at irwin.stelzer@
Timeslive.co.za: Russian company 'ordered hit'
Jan 2, 2010 10:40 PM | By JIM JONES
On Monday Moscow officials thwarted an apparent attempt on the life of John Helmer, SA Business Day's Moscow correspondent, amid the alleged dirty dealings of a Russian mining group.
Three men armed with guns and fake papers purporting to be from Russia's Federal Security Service (FSB) were arrested after attempting to enter Helmer's Moscow office. Helmer, suspicious of the men, called the police.
Under interrogation, the men allegedly told police they were from a detective agency owned and hired by aluminium group Rusal and its controlling shareholder, Oleg Deripaska.
Helmer, who has reported from Moscow for 20 years, has written extensively on the aluminium group's business activities in Russia, South Africa, Guinea and Nigeria. His latest articles have focused on Rusal's parlous financial state and Deripaska's attempts to avoid litigation over his alleged defrauding of a Rusal co-founder.
Rusal itself is chaired by Viktor Vekselberg, an oligarch who sits on South Africa's Presidential International Investment Council.
In South Africa, Vekselberg and his company Renova have interests in United Manganese of Kalahari and Transalloys as well as links with the ANC's Chancellor House investment arm.
Shortly before Christmas, Helmer had been warned by the Australian Foreign Ministry in Canberra that his personal security was under threat.
Helmer took the information to the police who, along with the FSB, provided him and his wife with covert protection.
When the three would-be attackers were arrested, police found them carrying plans of Helmer's offices, photographs of his wife, of his home and office as well as documents allegedly linking the gang and its agency directly to Rusal.
The men claimed that they had been hired to check on the Helmers' whereabouts. They were employed by Alfa-Inform, a Moscow detective agency.
Helmer has been reporting on alleged racketeering by Vekselberg and into the business practices that have stymied Deripaska's attempts to gain stock exchange listings and raise funds for Rusal in London and Hong Kong.
Rusal is the largest Russian investor in sub-Saharan Africa but has recently fallen foul of the governments of Guinea and of Nigeria.
Before the economic crisis, while Rusal's African and Russian aluminium interests were booming, Deripaska had been tagged as the world's ninth-richest man.
RIA Novosti Highlights: Top ten events in Russian economy in 2009
10:2903/01/2010
RIA Novosti presents the ten most significant events of 2009 in the Russian economy.
AvtoVAZ: suitcase without a handle
The Russian auto industry suffered more than car manufacturers in other countries, and reduced demand for cars dealt the harshest blow at AvtoVAZ, Russia’s flagship of passenger cars. According to AvtoVAZ estimates, the company’s liabilities could reach 75 billion rubles ($2.5 bln) by the end of 2009.
Russian authorities have said again and again that they will not allow the auto giant to go bankrupt, backing these statements with unprecedented state support. In spring 2009, the government allocated 25 billion rubles to AvtoVAZ, but the company quickly went through it and asked for more. The authorities called on the auto giant’s shareholders, including the Renault-Nissan alliance [Renault owns 25% of AvtoVAZ – Ed.], to share the burden of responsibility, threatening to dilute their stakes otherwise.
How much will it cost to save AvtoVAZ?
AvtoVAZ’s partners agreed, and a contract was signed in November to restructure the company and allocate 50 billion rubles in state support, as well as 300 million euros in the form of technology from Renault-Nissan. Job cuts had to be made because of financial problems; AvtoVAZ management estimates that approximately one-fifth of the workforce was made redundant. Around five billion rubles were allocated to keep the people employed and special terms for their employment are being established.
2009 budget: the first deficit budget in some time
In 2009, the federal budget ran at a deficit for the first time in eight years. The deficit was planned at 8.3% of GDP, and by the end of the year, the Ministry of Finance announced that the results would be better than expected, amounting to 6.9% or 7.3% of GDP accounting for quasi-fiscal measures (subordinated loans disbursed from the sovereign wealth fund).
Kremlin pool, budget deficit: how long can we hold out?
The main reason for the deficit is a sustained high level of government spending amid falling oil prices and tax revenues. Total spending in 2009 was approximately 10 trillion rubles, which included 1.1 trillion rubles in government injections into the economy, such as subsidies and state guarantees for loans, as well as contributions to the charter capital of companies fully or partially owned by the state. Financial authorities also actively contributed to liquidity – during peak demand for financing, the maximum gross amount of new lending from the Central Bank to the banking sector reached four trillion rubles. The level of social spending was unprecedented.
2009 budget: how much will be spend on national projects?
The Ministry of Finance was forced to “loosen the purse strings” on the “rainy day fund,” from which around 2.7 trillion rubles were allocated to cover the budget deficit. The fund shrank to 2.2 trillion rubles by December 1. In 2010, the money will run out, said Deputy Prime Minister and Deputy Finance Minister Alexei Kudrin.
Ruble: volatility after devaluation
The controlled devaluation of the ruble, which started in November 2008, finished in January. In order to maintain financial stability, the Russian Central Bank avoided landslide devaluation by gradually lowering the exchange rate. This still entailed massive losses. Russia’s international reserves fell by more than 200 billion rubles ($6.7 bln) from August 2008 to March 2009, but the time lag allowed Russians to convert their savings into hard currency.
During the controlled devaluation period, the ruble fell 35% in relation to the dollar-euro basket (0.55 of the dollar and 0.45 of the euro). As of February, amid rising oil prices and the gradual recovery of the global economy, the ruble grew again, but in the summer it fell again for a short time based on rumors of a second wave of devaluation.
Changes in exchange rates during 2008-2009
At the end of the year, real prerequisites for a new devaluation appeared – a steep rise in budgetary spending, Russian companies’ increased foreign debt payments, etc. Given these conditions, the ruble fell slightly, but in the absence of serious disturbances on foreign markets, experts did not expect any sharp drops on the Russian foreign exchange market.
Opel: the deal of the year falls through
The deal to sell ailing automaker Opel, the European subsidiary of U.S. auto giant General Motors, to a consortium of the Austrian-Canadian firm Magna and Russia’s Sberbank would have been one of the main events of the year – if it had actually happened. However, the event of the year was that GM unexpectedly backed out.
Negotiations on the deal started in May. There were two main contenders – the Austrian-Canadian-Russian consortium and the Belgian investment fund RHJ. The German authorities favored the consortium, which promised to minimize job cuts and proposed what was in their view an optimum development strategy for the company. GM, on its part, was afraid that its intellectual property would “fall into the hands of the Russians.”
Mass protests by Opel employees in Germany>>
The negotiations proceeded normally, as the contenders sweetened their offers and GM vacillated. By mid-September, GM had “agreed” to a deal with the consortium, but suddenly reversed the decision in November, having decided to restructure the company with GM’s own resources.
The Russian side stated that it did not suffer because of this; however, it had learned an important lesson. The Russian government was subsequently forced to reconsider its development strategy for the Russian auto industry – the authorities will now court other foreign partners.
Inflation: a hair’s breadth from a record
The inflation figure for the past year could beat a three-year old record (in 2006, inflation peaked at 9%), confirming the adage that the darkest hour is before dawn: prices froze because of a sharp fall in purchasing power during the crisis. The government expects a slowdown in price growth of 8.8%-9.0% in 2009.
Russia's economy to reach pre-crisis level by late 2012>>
Record low inflation has enabled the Bank of Russia to lower the refinancing rate nine times by a total of four percentage points to the historical minimum of 9%. The regulator does not rule out a tenth lowering of the rate in the last week of the year. Monetary authorities are not fazed that the refinancing rate could turn out to be lower than the year’s inflation. They have explained that it is actually an indicator of inflationary expectations.
The Central Bank, having implemented a rather intrepid interest rate policy, is counting on an easing of lending that will stimulate economic activity and consumer demand.
ESPO: oil flows to the east
In late December, the first stage of the Eastern Siberia–Pacific Ocean oil pipeline (ESPO) will be commissioned. Transneft is already actually using this pipeline, which was built to transport Russian oil to the markets of the Asia-Pacific region.
The project will be implemented in two stages. The first stage runs from Taishet (Irkutsk Region) to Skovorodino (Amur Region). The second stage will then connect Skovorodino with the oil terminal Kozmino in Primorye. After both stages are on stream, the pipeline’s capacity will be 80 million metric tons per year. Rosneft and TNK-BP will provide the pipeline's first oil consignments.
Putin launches Pacific oil pipeline>>
In order to stimulate development of oil fields along the pipeline route, authorities have nullified the export duty on oil from 13 Eastern Siberian fields and the nullification of the duty on five more fields is under discussion.
Superjet is ever closer to clients
Another significant event in 2009 was the public demonstration of the capabilities of the Russian short-haul airplane Sukhoi Superjet 100, developed by Sukhoi Civil Aircraft Company and Boeing. Parts are supplied by well-known Russian and foreign companies. For example, the French firm Snecma was involved in developing the plane’s engines.
The Superjet 100 was unveiled in June at the Paris Le Bourget Airshow in France and in August at the MAKS 2009 Airshow in Zhukovsky. The public could not only see the plane in action but also sit in its cockpit.
The Superjet 100 is not only an impressive new product that the Russian aviation industry needs, but a commercially viable product. There are already 122 confirmed orders for this plane, including orders from the largest Russian airline Aeroflot and the Armenian company Armavia. Nevertheless, due to delays in deliveries of engines for the Superjet, companies will receive the plane no earlier than the start of the second half of 2010, experts say.
FAS puts pressure on oil companies
The Federal Antimonopoly Service (FAS) has been fining oil companies for years, but it set a record in fall 2009 for the number of claims. FAS demanded a total of 21 billion rubles ($706.5 mln) in fines for fuel price gouging from Gazprom Neft, Lukoil, Rosneft and TNK-BP.
Experts say that such fines are significant even for the oil companies with their sizable earnings. Furthermore, companies are forced to rectify prices in line with FAS directives. Consequently, Lukoil estimated its losses at $100 million to $120 million due to FAS actions. Oil companies have contested FAS decisions in court, but with varied success: Lukoil lost, but Gazprom Neft and TNK-BP were able to have some of their fines rescinded.
Both sides have had enough and sat down at the negotiating table in fall 2009 in order to come up with a formula to calculate competitive fuel prices. The sides had planned to reach an agreement on the main points by the New Year, but have so far been unable.
Trade to be cleaned up
In December, the State Duma finally passed a draft law on state regulation of commerce in the Russian Federation. The law had been languishing in development hell for several years due to disagreements among various government agencies. The law is expected to be passed before the end of the year and it will come into force on February 1, 2010.
Not only manufacturers and retailers clashed over the bill, but also various branches of federal agencies. Proponents of the bill say that strengthened state regulation will eliminate the imbalances that bring retail chains more than half of their profits. The law stipulates stiff antimonopoly measures; for example, infrastructure limitations will be imposed on companies already holding a 25% share of a local market. In a number of cases, authorities can hold down prices on food products for up to 90 days.
In turn, retail companies are criticizing a number of regulations and say the law needs to be amended. They do not rule out the risk of higher prices on food products and shrinkage of assortment of goods in Russia after the law comes into force.
Vodka mixer
The Russian alcohol market has finally made the transition from the jurisdiction of the Ministry of Agriculture to the Federal Alcohol Market Regulation Service (Rosalkogolregulirovaniye), which was established at the end of 2008.
In 2008, the authorities also stripped the Ministry of Agriculture of “fishing rights,” putting the Federal Fishery Agency (Rosrybolovstvo) under the direct control of the government.
The Federal Alcohol Market Regulation Service’s first coup was the introduction of a minimum retail price for vodka – 89 rubles ($3) for a half-liter bottle – as of January 1, 2010. This measure is meant to decrease the circulation of illegally-produced alcohol and decrease alcohol consumption.
The service has also developed a draft concept to bring alcohol consumption down by the year 2020 and has introduced a draft law on licensing the transportation of alcohol. The service is discussing the timeframe for introducing a single excise rate on alcohol to be paid on delivery from the distiller.
MOSCOW, January 3 (RIA Novosti)
RIA Novosti choice: The top ten events in the Russian judiciary and legal system in 2009
09:3904/01/2010
Every year, the Russian judicial system hands down a number of unexpected rulings and dramatic judgments on interesting issues and cases, and 2009 was no exception. The death penalty was de facto abolished and individuals involved in several high-profile cases were released from prison, one of the country’s senior investigators was indicted, the investigation into the murder of journalist Anna Politkovskaya was halted and a second case against former Yukos heads Mikhail Khodorkovsky and Platon Lebedev was opened.
The death penalty resolution
On November 20, the Russian Federation’s Constitutional Court finally abolished the death penalty in Russia. The court explained that Russia is bound by international agreements prohibiting this exceptional measure of punishment; therefore, even if jury courts start operating in all regions on January 1, 2010, this will not allow the reinstatement of the death penalty.
Surveys show that 41% of Russians are in favor of reinstating the death penalty and another 12% support reinstating it and expanding its application. A number of public figures and government officials spoke out in favor of reinstating the death penalty from January 1. Experts linked Russia’s resolution of the death penalty issue with the country’s choice of direction for its long-term development.
Repeat tax inspections are rescinded
On March 17, the Constitutional Court prohibited tax authorities from carrying out repeat inspections of taxpayers where a court ruling on the results of a previous inspection is in force. Consequently, the Constitutional Court declared Paragraph 10, Article 89 of the Tax code, which allowed repeat inspections, to be unconstitutional.
The Constitutional Court had already specified that repeat tax inspections must be carried out only where necessary, that they must be justified and lawful, thus ensuring they are not used to suppress economic independence or limit the freedom to conduct business and exert property rights. The legal problem that the Constitutional Court resolved consisted of whether the tax authorities could adopt a different resolution from that already confirmed by the court.
Khodorkovsky and Lebedev: Part 2
The trial in the second criminal case involving the former heads of Yukos and Menatep, Mikhail Khodorkovsky and Platon Lebedev, started in spring 2009 in Moscow’s Hamovnichesky Court. Khodorkovsky and Lebedev had already been sentenced in 2005 under seven articles of the Russian Federation Criminal Code to eight years in prison. This time, the two ex-businessmen were accused of embezzling securities belonging to the state, and of the theft of 350 metric tons of oil.
The court is currently hearing evidence related to the charges and a sentence is expected no earlier than spring 2010. And exactly one week before the New Year, the Presidium of the Supreme Court of the Russian Federation handed down a ruling, the legal consequences of which cannot be foreseen: that Lebedev was arrested illegally in the first criminal case. This ruling was made following the response from the European Court of Human Rights to one of the petitions filed by Lebedev, which Khodorkovsky also filed.
The ruling is unprecedented in Russian legal practice.
Mikhail Khodorkovsky in Moscow’s Khamovniki District Court
The Politkovskaya affair: court case, acquittal, supplementary examination
In February 2009, the Moscow District Military Court (MOVS) handed down a verdict of “not guilty” in the sensational case of the murder of Novaya Gazeta correspondent Anna Politkovskaya, and in September, on a directive from the Supreme Court, MOVS returned materials to investigators. Now the investigators intend to merge the case of Ibragim and Dzhabrail Makhmudov and Sergei Khadzhikurbanov with that of the alleged hitman Rustam Makhmudov and “other unidentified persons.”
Public interest in the Politkovskaya affair is linked to her tireless journalistic activity and the position she took on many issues. Interest in the trial was also spurred on by the presence among the accused of ethnic Chechens and former employees of the Russian secret services: in the light of the fact that Politkovskaya investigated human rights violations in the North Caucasus.
The condemned investigator
Investigator Dmitry Dovgy, who was investigating the Yukos and Khodorkovsky cases, has himself been imprisoned.
On the basis of a jury verdict in June 2009, the Moscow City Court found Dmitry Dovgy, the former head of the Main Investigative Directorate of the Investigative Committee at the Russian Federation Public Prosecutor’s Office, guilty of accepting a 750,000-euro bribe and abusing his authority.
Now the former investigator faces nine years in a maximum security prison if, of course, the Russian Supreme Court does not hand down a different ruling on Dovgy’s petition in the trial, which has been postponed until mid-January.
It was intriguing that Dovgy’s crimes were uncovered right after he gave an interview to State Duma Deputy Alexander Khinstein for the newspaper Moskovsky Komsomolets, in which he said that in his opinion, Investigative Committee employees are engaged in the unlawful persecution of certain citizens. Dovgy gave the interview as a former employee of the agency and he was detained one day prior to the Moscow City Court hearing on his reinstatement claim. Two days later, Moscow’s Basmanny Court authorized his arrest. The Moscow City Court denied Dovgy’s request that he be reinstated to his former post and refused to collect 100,000 in punitive damages on his behalf.
In addition to Dovgy, a former employee of the Head Military Prosecutor’s Office, Andrei Sagura, was sentenced to seven years imprisonment in the case.
Overstayed
Alexander Bulbov, a lieutenant general in the Russian Federal Service for Drug Control (FSKN – Russian acronym), who had been under arrest for over 25 months, was released in November from Lefortovo remand prison on his own recognizance not to leave the country.
Despite the fact that his post in the FSKN has been abolished, Bulbov remains at the agency and intends to return to service right after he spends the vacation time he has earned over four years of service, i.e. on June 1, 2010.
The former Yukos lawyer Svetlana Bakhmina has been freed. She was arrested in 2004 and sentenced in 2006 to six and a half years imprisonment. In spring 2009, in accordance with the ruling by Moscow’s Preobrazhensky Court, Bakhmina was paroled. This was Bakhmina’s fourth attempt to get parole, her petitions to her local courts yielded no results and it was only the court in Moscow that ruled she has served enough of her sentence.
In addition, investigators released the former head of Arbat Prestizh Vladimir Nekrasov and the businessman Sergei Schneider (Semyon Mogilevich) from Matrosskaya Tishina remand prison. The two men were accused of tax evasion. The trial in the case is currently underway in Moscow’s Tushinsky Court and the sentence is expected in the spring of 2010. Regardless of the verdict, Nekrasov intends to return to the cosmetics business, so even if Arbat Prestizh is not resurrected, another perfume giant could emerge.
They will answer for medicines
The former management of the Federal Compulsory Medical Insurance Fund (FFOMS) was sentenced to a total of 47 years for accepting bribes and performing illegal operations with regard to supply of crucial medicines. Seven of the 11 high-ranking officials in the case were found guilty by a jury.
The corrupt nature of the business, the high rank of those involved, and to a large extent, the area in which the illegal activity involving the provision of vital medicines was carried out sustained public interest in this case.
Maximum punishment for child killers
A married couple in Moscow region, Vladimir Grechushkin and Irene-Sofia Baskaya were found guilty of the cruel and unusual punishment and torture of their adopted children, as well as the murder of one of them. In mid-December, Grechushkin was sentenced to life in prison and Baskaya to 16 years in a minimum security prison. The criminal case, which aroused intense public interest, was opened in January 2009 after the body of a three-year boy, who was one of the Grechushkin’s adopted children, was found under a bridge in the Lubertsy area of the Moscow Region.
Berezovsky’s next sentence
In 2009, the fugitive oligarch Boris Berezovsky, who resides in the U.K., was tried for one more of over ten criminal cases against him. This past summer, the Krasnogorsky City Court of Moscow Region sentenced Berezovsky in absentia to 13 years in prison for the embezzlement of 58 million rubles from LogoVAZ.
Russian authorities have repeatedly tried to have Berezovsky extradited, but have so far been unsuccessful.
The Russian media has named Berezovsky the “Disgraced Oligarch” and along with Khodorkovsky, considers him one of the most irreconcilable opponents of the Russian authorities.
RAPSI as the forerunner of openness in the courts
Svetlana Mironyuk, editor-in-chief of the Russian News and Information Agency RIA Novosti, announced on December 2 that the Russian Agency for Legal and Judicial Information (RAPSI) had started work. Supreme Court Chairman Vyacheslav Lebedev, Higher Arbitration Court Chairman Anton Ivanov and Constitutional Court Chairman Valery Zorkin took part in media presentation and the press conference held at RIA Novosti news agency.
The Russian Agency of Legal and Court Information (RAPSI) is a project established by the Constitutional, Supreme and Higher Arbitration Courts of Russia and RIA Novosti in February 2009 to provide prompt and objective coverage of the Russian judiciary and the legal system in general.
MOSCOW, January 4 (RIA Novosti)
December 31, 2009
Russia Profile Weekly Experts Panel: 2009 – Russia’s Year in Review
Introduced by Vladimir Frolov
Russia Profile
Contributors: Vladimir Belaeff, Stephen Blank, Ethan S. Burger, Edward Lozansky
This is the last Experts’ Panel of the year. It is already our tradition to try to assess the most important results of the year for Russia’s economic policy, its democratic development, and its position in world affairs. What has Russia accomplished in 2009? How does it fare, compared to other countries, in terms of battling the global economic crisis? Has the country become more open and democratic in 2009? And did President Dmitry Medvedev show in 2009 that he has a realistic plan for Russia?
2009 has been a hard, but not entirely bleak, year for Russia. The global economic crisis destroyed several years of economic and social progress, but growth has resumed and is likely to continue gaining speed in 2010.
Russia’s GDP plunged nearly nine percent, one of the deepest economic declines in the world and certainly the worst performance among the BRIC nations (causing some analysts to suggest dropping “R” from the term).
The Russian stock market plunged right into the stone age of 1998, declining nearly 400 percent, but has since recovered at least half of the losses in one of the best performances in emerging markets.
The ruble was devalued by nearly 40 percent, but had significantly strengthened both against the dollar and the euro by the year’s end. Russia’s Central bank blew nearly $200 billion in reserves in a “controlled devaluation,” but had begun hoarding cash again by the end of the year to stave off a precipitous strengthening of the ruble.
The Government injected several hundred billions of dollars into the economy to save the banking system from collapse and bail out some of the biggest Russian companies about to default on their foreign loans.
Wages froze, living standards dropped, unemployment is about to explode to dangerous levels, but inflation has abated and is likely to remain in single digits in 2009 and 2010.
In international affairs Moscow rushed to implement the reset in U.S.-Russian relations offered by the Obama administration. Talks on a new Strategic Arms Reduction Treaty (START) were launched, and a new arms accord had all but been finished by the end of the year. Russia agreed to U.S. military over flights to deliver supplies into Afghanistan and the overall atmosphere between Moscow and Washington has cleared.
In the former Soviet space Russia has not suffered any major setbacks, although strategic gains have been equally elusive. Not a single country of importance, including Belarus, agreed to recognize the independence of Abkhazia and South Ossetia, while President Mikheil Saakashvili in Georgia together with President Victor Yushchenko in Ukraine continued to ruffle Russia’s feathers. Moscow will take solace early next year when either Victor Yanukovich or Yulia Timoshenko, both of whom enjoy sizable Russian support, will become the next president of Ukraine.
On the domestic front, President Dmitry Medvedev launched his much touted “modernization platform,” calling upon the nation to wean itself away from oil dependency and start building a “smart, innovative economy.” His liberal rhetoric and hard-nosed assessment of Russia’s problems have won over even some of the government’s harshest critics, and helped Medvedev carve up a political identity distinct from Putin’s. However, a glaring lack of follow-up and implementation of the needed changes has begun to make Medvedev’s message sound tired and empty, raising fears of a “Gorbachev-redux.”
Yet, some important changes in Russia’s political style are visible.
Bad officials are being fired by the president in droves, including members of the military top brass.
The Interior Ministry and the police are going to be reformed, in pretty much the same way the Russian army has been downsized and operationally restructured.
Electoral fraud is being investigated and some election results are being overturned by courts after loud opposition complaints.
Opposition parties are being more consulted with, while United Russia is being told to “modernize” or face the consequences.
What has Russia accomplished in 2009? How does it fare, compared to other countries, in terms of battling the global economic crisis? Has it put the crisis behind it? Where is Medvedev’s “modernization” heading? Has the country become more open and democratic in 2009? What have been Russia’s most important gains and losses in foreign policy? Has Medvedev improved Russia’s standing and image abroad? Did Medvedev show in 2009 that he has a realistic plan for Russia?
Ethan S. Burger, Adjunct Professor, Georgetown University Law Center, Washington, D.C.:
2009 represents a harbinger of future events for the Russian population, particularly if significant changes in the state system are not implemented. Economically, 2010 should be better but that is not saying much - a negative nine percent growth rate makes for a low threshold. Economic performance, the functioning of the political system, and the existence of the rule of law in Russia are closely intertwined.
The social safety net, which the people crave, economic diversification, which will make the economy less vulnerable to developments in the energy sector, and infrastructure projects, which are essentially not merely if the country wants to produce goods that can compete in the world market but also if it is to prevent major demographic problems, cannot be funded without a tax increase on the wealthiest segments of the population.
Many members of the Russian elite seem to understand what needs to be done, yet their ability and willingness to sweep aside the relics of the past seem limited. Russia has qualified doctors to treat the patient and the medicines are on the shelves (or can be purchased abroad), but the cabinets are presently locked and the leadership will not give up the keys. I regret that there is no Russian citizen alive (or living abroad) who deserves to be named Russian of the year. There could have been scores of genuine candidates – President Dmitry Medvedev, Chairman of the Accounts Chamber Sergei Stepashin, Deputy Prime Minister Dmitry Kozak, the numerous talented individuals who work at research institutes and within academia, and even some of the senior members of the judiciary - but none of them want to make waves.
Sadly, there are several people who may now have a more positive impact on Russian society as a result of their deaths, than they could accomplish in their lives (I will not name them all here). This passing highlights what plagues the country. This is indeed a tragic situation.
In my view, Natalia Estemirova and Sergei Magnitsky deserve to be named Russia’s persons of the year. I hope their deaths have not been in vain and their lives will inspire governmental officials, the Russian electorate and Russian youth to build a country consistent with their highest ideals.
Estemirova was a respected researcher for the Memorial Human Rights Center. She was murdered in Ingushetia in July 2009, apparently for seeking to publicize on-going human right violations. Shortly after Estemirova’s murder, Zarema Sadulayeva, the head of the Russian charity Let's Save the Children, which helps children affected by the violence in Chechnya, was killed. Her organization works closely with the UN Children's Fund, UNICEF.
In late 2008, Memorial’s St Petersburg office was raided by Russian law enforcement agencies, who confiscated 12 computer hard disks containing the entire digital archives of the atrocities committed under Stalin. In March 2009, a Russian court ruled that the raid was illegal. But will those responsible be brought to justice? Recently, Memorial received the Sakharov Prize for Freedom of Thought, an award established by the European Parliament to honor individuals and organizations who have dedicated their lives to the defense of human rights.
Sergei Magnitsky a 37-year-old lawyer, should be honored as well. He died of toxic shock and heart failure while in a Moscow prison, having been illegally detained for more than a year. Magnitsky was apparently denied medical treatment for a health condition by the Russian authorities.
Testifying before the Russian Audit Chamber Aleksandr Smirnov, assistant director of the Federal Prison Service, initially stated that Magnititsky was held in very respectable conditions for the first eight months of his detention, before being transferred to the Butyrskaya Prison, where he remained for four months until his death.
President Medvedev has called for a high-level investigation into his death, but this is an inadequate scope of inquiry: the rationale for his detention must also be examined. Medvedev’s spokesman reported that the president has ordered the chief prosecutor and the minister of justice to investigate his death. I hope this effort is carried out in good faith and with adequate resources.
Magnitsky was awaiting trial on tax-fraud charges, allegations he has repeatedly denied. According to most observers, he was arrested in order to pressure him to testify against his client, Hermitage Capital, in a tax evasion case. I recognize that many would not place Magnitsky in the same category as Estemirova. But Magnitsky was not merely entitled to presumption of innocence; his ethical and professional obligations to his client should also have been appreciated by the authorities.
In recent years, it has been journalists and NGO activists who struggled to protect the legal rights of the Russian people. But Russia also has some excellent lawyers with an admirable record of promoting human rights. Magnitsky paid the ultimate price for staying true to the principles of his profession: that everyone is entitled to his day in court, and that the government should violate the rights of persons and legal entities that are guaranteed not merely by the Russian Constitution, but international treaty obligations as well.
Edward Lozansky, President, American University in Moscow, Washington DC:
For Russia, 2009 was a pretty difficult year on the domestic front. It was saturated with severe economic and financial crises as well as horrible terrorist attacks and several man-made catastrophes. Nevertheless, the Russians not only proved once again that they can withstand disaster with dignity, but even in these most difficult times they achieved some impressive results in economic and social areas. The economy started to grow and the performance of the stock market was one of the world’s best. The shops are full of goods and customers, travel abroad is on the rise, and cultural life is bustling at least in the large cities.
However, three huge and potentially devastating problems remain unresolved and actually are getting worse: poor demography, monstrous corruption, and severe alcoholism. If one compares the number of people per square kilometer in of Russia (eight), the United States (50) and China (220), the picture is gloomy. Moreover, this ratio keeps changing, and unfortunately not in Russia’s favor. Will the country in the years ahead have enough manpower to implement Medvedev’s dreams of innovations and modernization, to serve in its army, or at least to hold on to its huge landmass?
Of course, the government should do more to tackle these problems, but unless every citizen realizes that the nation is at risk no dramatic improvements are to be expected. There is an anti-alcohol campaign on TV going on with major sport and movie stars taking part, but perhaps they should also add something about the need to have at least three - and ideally even more - children in the family, and an absolute commitment not to take or give bribes.
In the foreign policy arena Russia did well. It seems that the reset in U.S.-Russian relations is working. A new arms accord has all but been finished and there is a good chance that both countries will agree to make further deep cuts in their nuclear arsenals. The United States is no longer pushing, at least publicly, for NATO expansion, or for stopping the North and South Stream gas pipeline projects. Missile defense in Eastern Europe has been scrapped and in return Russia has agreed to U.S. military over flights to deliver supplies into Afghanistan. The Kremlin will probably do more after NATO’s Secretary General Anders Rasmussen came to Moscow in December to plead for help, which in itself was a historic moment.
In the former Soviet space Russia also made some gains by expanding the common custom space with Belarus and Kazakhstan. On top of that a few other CIS countries are expected to join this union soon. The two most vicious Russia-haters, Ukrainian President Victor Yushchenko and Georgian President Mikheil Saakashvili, are no longer on the list of Western heroes. The former will most likely totally disappear from political scene after the January 2010 elections in Ukraine. Ironically, the chances are very high that Victor Yanukovich, who was portrayed in the Western media as a Russian puppet, will become the next Ukrainian president. Saakashvili, however, is still around and most likely will serve out his term, despite strong internal opposition. The West continues to send him arms, which is definitely a huge mistake because Russia is not going to attack Georgia and no arms in the world will help Tbilisi to recover Abkhazia and South Ossetia. The only thing that this flow of arms could do is provoke Saakashvili into another disastrous adventure. Asking Russia for help in Afghanistan and Iran and at the same time arming a lunatic killer of peacekeepers and destroyer of Second World War Memorials is certainly not a very smart policy.
The West’s lukewarm reception of Medvedev’s appeals for Russia’s accession to Euro-Atlantic institutions is another geostrategic mistake. Since the United States is obviously on the decline and Asia is on the rise there is a strong argument for Russian elites to reevaluate their ideas for a Russia – West alliance. For its own sake and before it is too late the West should reconsider its Russia policy and take the Kremlin’s proposals more seriously.
Vladimir Belaeff, President, Global Society Institute, Inc. (USA):
The crisis year of 2009 has been very trying for all significant societies in the world. For Russia, it was a kind of "stress test" which the country passed with relatively good results. If one compares Russia even with advanced countries like France, Spain, Italy, the UK, Iceland, Scandinavia and even the United States, the overall Russian response to the crisis was quite successful and remained democratic and socially progressive.
Consider how the United States managed to prevent a collapse of its financial sector through major liquidity infusions which have created a sovereign debt burden in excess of 70 percent of annual GDP. Meanwhile, Russia achieved a similar result using her available reserves, without increasing her already low sovereign debt balances.
There was a sharp but temporary impact on Russia's exchanges - but the effects were far less adverse than the no-less sharp collapse of American markets. And the gradually devalued ruble had recovered much of its strength by December 2009.
Add to these crisis-driven events the pandemic of H1N1 influenza, the residual Soviet problems of single-industry cities (a scenario well known in the West, too), and overdependence on raw commodity exports and one can appreciate the success of Russia's government, which calmly and rather smoothly navigated through the storm.
However, there are problematic issues uncovered by the crisis: the significant spike in Russian unemployment indicators (mitigated by programs similar to U.S. President Franklin D Roosevelt’s Works Progress Administration initiatives of the 1930s) and a big decline in annualized GDP. These issues will require transformational, long-term responses from Russia, with implementation of structural modifications to economic governance.
On the international scene, one really cannot judge the 2009 results of the "reset" of U.S.-Russian relations, because this is a process, not an event, and its success may be determined several years after its presumed initiation. Furthermore, the status of the U.S.-Russian relationship is determined simultaneously by both Russia and the United States - therefore success or failure of the "reset" process will depend on America's positive contribution as well.
Regarding the modernization program announced by President Medvedev, this next stage of post-Soviet transformational reforms was announced only recently and is proposed to extend for a couple of decades - to expect substantial results from this initiative, within a few months after announcement, appears rather precipitous at present.
The long overdue escalation of the Russian government’s fight against corruption and bureaucratic malfeasance seems to have gained momentum after several spectacular and lethal events - including the failure of the Sayano-Shushenskaya Hydroelectric plant and the fire at the Lame Horse night club in Perm. In these cases, and others elsewhere, there is ample evidence of the grave social impact caused by corruption at many levels. The strength of governmental response must be emphasized by punishments that are swift, stern and reach all the way to the top - to breach through the Soviet tradition of punishment for lower ranks while the nomenklatura remained sheltered from the consequences of its ineptitude and malpractice.
Despite the complications and distractions brought on by the crisis and unforeseeable lethal events, Russia's 2009 was rather productive and - considering the challenges and dangers which emerged - generally progressive. The stress test was passed with an above average grade, and as a side benefit some weaker aspects in Russia's present systems have been exposed.
Credit must be given when it is due - in 2009 the government of Russia demonstrated its ability to handle prolonged critical situations intelligently and with executive skill, without degrading existing social and political conditions, preserving most of the socio-economic gains of the past decade. This is a very significant achievement.
Professor Stephen Blank, U.S. Army War College, Carlisle Barracks, PA:
I doubt seriously that Russia accomplished much in 2009. It weathered the storm of the global financial crisis but frittered away the opportunity to make major political and or economic changes that are necessary for its continued growth and progress. I see little evidence of decisive moves to an innovation society, but much evidence of continuing intrigues and growing political repression.
There is precious little modernization of any kind taking place and certainly no democratization, or even measurable progress toward a rule-of-law state, something that would mark major progress. The tragedy is that Russia cannot tread water or - more bluntly – stagnate, while other countries, including China, move forward. As this happens Russia's backwardness and sub-optimal economic and political organization will weigh even more in the balance. Thus, domestically there is no realistic plan for Russia.
In foreign affairs there is also no plan or sign of genuine improvement. Russo-American relations may have improved, but due to U.S. President Barack Obama, not Medvedev, and Prime Minister Vladimir Putin's latest remarks on arms control strongly suggest that he seeks to block even that limited improvement. Moscow still has no genuine allies and is losing ground in East and Central Asia to China. It has reached the limits of its capabilities in the latter region and is increasingly becoming a mere raw-materials appendage to China, exactly what leading analysts have long publicly worried about. Medvedev's European security plan is dead on arrival. Although some foreign ministers who make money on Moscow are willing to discuss it, it is so palpably self-serving and one-sided as to be hors de concours even before it started. I am not in favor of man or
woman of the year awards and the person who most contributed to improvement of the public sphere is the late Sergei Magnitsky, whose death forced the regime to take what are really minor palliative actions. This is hardly a ringing sign of Russia's political health. But then, as Anders Aslund has observed, Russia has a remarkably venal ruling class.
National Economic Trends
Prime-Tass: PMI: Russian manufacturing sector further deteriorates in Dec
MOSCOW, Jan 4 (PRIME-TASS) -- Russia’s manufacturing sector continued to suffer an overall deterioration in business conditions in December, London-based VTB Capital said in its PMI report released Monday.
The seasonally adjusted headline PMI, a composite index that reflects changes in new orders, output, employment, supplier performance, and input stocks in the manufacturing sector, posted below the no-change mark of 50.0 in December, indicating an overall deterioration in manufacturing business conditions. Moreover, the index declined to 48.8 from 49.1, its lowest level since July.
Output was only marginally higher than in November, and new orders fell for the second month running, the bank said.
Input prices rose on the month in December, while prices charged rose for the sixth month in December, the survey said.
“The Russian Manufacturing PMI declined to 48.8 from 49.1, highlighting the third consecutive month of contraction in December, making September’s number the only growth-indicating result for the past 17 months. Despite the new orders index continuing to point to a decline, with new exports to non-CIS countries remaining weak, the output index has managed to hold above the no-change 50 level. The decline in new orders led to another round of inventories depletion that also contributed negatively to PMI in December,” Dmitri Fedotkin, an economist at VTB Capital, commented on the survey.
“On a more positive note, the employment index continued to improve following October’s sizable drop. This suggests that the recent pick-up in unemployment might fade soon,” Fedotkin also said.
The VTB Capital Manufacturing PMI is derived from a monthly survey of 300 purchasing executives in Russian manufacturing companies and has been conducted since September 1997.
VTB Capital plc is a London-based subsidiary of Russia's second largest bank, government-controlled VTB Bank. VTB Capital was previously known as VTB Bank Europe.
Bloomberg: Russia Manufacturing Contraction Deepened in December, VTB Says
By Paul Abelsky
Jan. 4 (Bloomberg) -- Russia’s manufacturing contraction deepened last month, signaling the economy of the world’s biggest energy supplier may struggle to rebound as waning export demand forces companies to reduce spending and cut staff.
VTB Capital’s Purchasing Managers’ Index fell to 48.8, the lowest since July, from 49.1 in November, the bank said in an e- mailed statement today. The index, which is based on a survey of 300 purchasing executives, has signaled contraction since September.
“The decline in new orders led to another round of inventories depletion that also contributed negatively to the PMI in December,” Dmitry Fedotkin, an economist at VTB Capital in Moscow, said in the statement.
Manufacturers including OAO Novolipetsk Steel are trying to adjust to smaller markets, with Deputy Industry Minister Andrei Dementiev projecting a 7 percent decline in the country’s steel industry in 2009, Interfax said on Nov. 10. Sluggish bank lending and gains in the ruble threaten to hamper a recovery led by last year’s 84 percent gain in Urals crude, Russia’s key export. The ruble gained 13 percent against the dollar in the last three quarters of last year, a trend the central bank has said it wants to curb.
The government has forecast a rebound from Russia’s 10.9 percent annual contraction in the second quarter, the steepest drop since at least 1995. Output fell a further 8.9 percent in the third quarter and will contract about 8.5 percent for all of 2009, Prime Minister Vladimir Putin said on Dec. 30.
‘Key Weakness’
Exports “remained a key source of weakness” as new orders from abroad fell for a 15th month, VTB said. The work backlog contracted at the sharpest pace since April and inventories of finished goods continued to decrease “at a strong rate,” the bank said. Employment in manufacturing fell in December, extending a string of declines that started in May 2008, VTB’s gauge showed.
Earlier signs of recovery in manufacturing may have been caused by one-time effects. While industrial output expanded in November for the first time in more than a year, a six-fold jump in the production of hydraulic turbines accounted for much of the increase, Raiffeisen International Bank-Holding AG’s Russian unit said in a Dec. 22 research note. Chinese imports of raw materials failed to recover in November, “raising doubts that external demand will stimulate the growth of Russian industry,” according to the note.
Rising joblessness and a drop in retail sales in November indicate economic growth last quarter was close to zero, according to Raiffeisen. The unemploymentrate jumped in November to a four-month high of 8.1 percent from 7.7 percent in October.
Gloomier Outlook
Industrial production may have shrunk 11.5 percent in 2009 and capital investment may have fallen 17.6 percent, the Economy Ministry said in a Dec. 22 report. The jobless rate will probably be 8.9 percent compared with a prior estimate for 9.3 percent, the ministry said.
The gloomier manufacturing outlook contrasts with a brighter picture presented by the government, which said on its Web site on Dec. 30 that the economy grew a seasonally adjusted 1.9 percent in the fourth quarter, citing preliminary figures. Putin predicted on Dec. 30 that the economy will expand about 3 percent in 2010.
Russia will post “steady” growth this year after domestic producers regained access to external financing and prices for oil, gas and metals picked up on improved prospects for a global economic recovery, central bank Chairman Sergey Ignatiev said on Dec. 22, forecasting an expansion of 5 percent or more.
The government deployed 900 billion rubles ($31 billion) in stimulus spending as of Nov. 1 and will allocate 195 billion rubles this year for “anti-crisis” measures, Finance Minister Alexei Kudrin said last month.
To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@.
Last Updated: January 4, 2010 00:00 EST
Business, Energy or Environmental regulations or discussions
Khaleej Times: Will the Party in Russian Shares Continue?
MATEIN KHALID (Money Maze)
4 January 2010
Russia’s RTS index was the world’s top performing emerging market in 2009, up an incredible 140 per cent. Yet I believe the spectacular bull market in Russia will continue in 2010, albeit in a more muted fashion. Why? One, Russia goes ballistic when GDP growth swings from an 8 per cent contraction to 5 per cent growth.
This is happening now. The last time this happened was in 1999 when the rouble MICEX index trebled. I know. I was there.
Two, the Russian Central Bank has regained the world’s confidence in the rouble, even though it spent $200 billion to avert a catastrophic post-Lehman shock devaluation that would have awakened the demons of August 1998.
Three, the Russian Federation is the cheapest major emerging market on the planet, at 9 times earnings on the index. China and India trade at 18 – 20 times multiple (depending on whose numbers you believe. In BRIC investing, statistics are what Churchill branded terminological inexactitude). Even Brazil is now expensive at 14 times earnings as the Bovespa is all about low multiple, cyclical Vale, Petrobras, the banks and miners. Russia trades at a one third discount to the MSCI emerging markets index even while EPS growth is estimated at 60 per cent this year. Paying nine times earnings for 60 per cent EPS growth? Yummy.
Four, the Russia banking system was successfully bailed out by the Kremlin with $100 billion in state funds. This is the reason I am long Sberbank and VTB, who control an incredible 50 per cent of Russian deposits, whose share prices have both quadrupled since last January. Sberbank profits, for instance, will rise 600 per cent this year as loan loss provisions peak, corporate debt spreads compress, loan growth surges after the credit squeeze, net interest rate margins rise to 700 basis points, the highest in BRIC or even GEM. Owning Russian banks is a license to print money as earnings surge, cost of equity falls, funding cost decline, deposits swells and rouble capital markets new issuance reopens. Foreign banks in Russia will retrench (Unicredit, Raffisen, Citi) and the oligarch/pocket banks have lost the faith of the public. The last time I recommended a monopoly in this column over the summer, the monopoly traded at 15 times book value. Yet is Microsoft shares surged 50 per cent since I pleaded the bullish case for MSFT in Khaleej Times ad infinitum. But Sberbank and VTB trade at 1.5 – 1.7 times book value. As me, homeboys in Southall croon, goodness gracious me!
Five, Russia was the world’s most profitable petro-currency play in 2009. One third of the Russian GDP is oil and gas. The double headed eagles of the Tsars can boast gasfields in Yamal-Nenets Arctic ice floes and the Siberian taiga in the Far East. Rosneft is increasing production at a time when the Kremlin will cut taxes to boost FDI and capex. Meanwhile, Gazprom’s gas and volume woes are over. Notice that the spreads on the new Gazprom five year bonds have fallen 200 per cent since they were issued in the Eurobond market in August.
Six, Russian sovereign Eurobonds have been spectacular winners. The 2030 dollar bond yield has fallen from 10 per cent last March to 5.4 per cent now. The Russian CDS risk has collapsed. The world’s smart money loves Russian risk. And why not? The Kremlin earns 700 million dollars a day in oil and gas exports. The Russian central bank has $437 billion in hard currency and gold reserves. Incroyable!
Seven, Russian allocations are being raised by EM fund managers, though as a Pavlovian contrarian, this gets me worried. Yet Putin wants to attract FDI, not just hot money. Finance Minister Alexei Kudrin even tried to dampen the animal spirits in Moscow by stating that the markets were overheated, President Medvedev decried the “primitive structure” of the economy and vowed to wage war on corruption and vodka (a recurrent theme in Russian politics since Tsar Peter the Great!) If Russia embraces a market economy and the rule of law to attract foreign capital, if it unleashes the vast purchasing power of 140 million people, if the oligarchs repatriate $100 billion in flight capital? Take real estate. I have researched Russian property plays where NAVs will rise fivefold as they will not in, say, Palm Jumeirah, let alone International City. I claim no emotional neutrality on Russia but I feel in my soul that Moscow will be the epicentre of history’s next spectacular bull market, the El Torro to beat all torros. Yet, sadly, if anything in finance sounds too good to be true, it never is.
As a trader in Russian equities, the rouble and Gazprom debt for the past decade, I am all too aware that black swans emerge traumatically from the Siberian permafrost, the risk rollercoaster in Moscow must never discounted, that the politics of the Kremlin clans is as secret and unpredictable as the conclaves of successive Soviet Politburos from Lenin to Andropov (the real ruler of the USSR for three decades even though Uncle Leonid was General Secretary). Russia’s political bombshell were, tales of vengeance and sorrow straight from the pages of Doestovski and Tolstoy. The rouble devaluation and banking collapse of August 1998, the rigged oil auctions of the Yeltsin era that created a new tribe of oligarch-billionaires, the meteoric rise of ex KGB lieutenant colonel Putin from obscurity in the St. Petersburg mayors office to ultimate power in the Kremlin, the second Chechnya war, the Moscow bombings and terrorist carnages in Beslan, the fall of Mikhail Khodorovsky, judicial strangulation of Yukos, the gas spats with Ukraine, the war with Georgia, the steel price fixing change against OAO Mechel, the murder of an ex KGB dissident in London and Russia’s oil concession disputes with BP and Shell. These were all events etched in my nervous system as I navigated the financial souks of the Rodina, the Russian motherland that bewitched me so long ago with its surreal pantomimes of ice, blood and tears.
Yet, bizarrely enough, I believe that the real risk to a Russian equities portfolio will emanate from abroad, not the Kremlin Putin and Medvedev have learnt the lessons of 2008. Russia, for all its $435 billion hard currency reserves, cannot develop or diversify if it is blackballed from the international capital markets. Russian politics can, be definition, not be captured in any model or Gaussian curve fits or mathematical algorithms that presuppose even an iota of rational predictability. Yet both Putin and Medvedev will do their best to minimise policy risk and capital flight. So what could go wrong? A lot. The Chinese property bubble could blow up. Something is dangerously wrong when the price of the Beijing apartment is 80 times average income, when factories make more phantom money flipping land than making widgets, when billions of yuans in bank loans to state companies and provincial Communist Party bosses end up in glitzy condo projects and concrete Xanadus. When property bubbles burst, debt deflation ensures kaput GDP growth and bank failures, as the experiences of Japan, Latvia, Southeast Asia and even now the Gulf attests. This could be a catalyst for a brutal correction in oil, gold, gas and emerging markets (EM). I can easily imagine a ghastly 50 per cent fall in EM if the grizzlys run amok in Shanghai as the Middle Kingdom’s credit and property bubble deflates. Other than China, I am convinced that the financial chain reaction of sovereign debt defaults is inevitable in 2010. This means emerging markets debt credit spreads surge even as the Uncle Sam Treasury note yield spikes to 5 per cent as the American economic colossus accelerates to 6 per cent GDP growth and the Federal Reserve exits from the Bernanke’s Wall Street life support packages. Gold is a classic case of the Greater Fool Theory of investing, which saved me from the madness of paper condo flipping or credit note arbitrage when tulip mania was the rage all over town. What happens to crude oil if Superdollar surges to 1.25 euros? Black gold at 25? Sometimes Russian roulette seems a lot safer to me than Russian equities but when the stars, dear Brutus, are aligned just right, the mythical firebird soars above the fairy tales spires of the winter palace. For me, it is from Russia with love.
Bloomberg: Rusal Said to Sell Shares 16% Cheaper Than Chalco (Update1)
By Bei Hu and Kyunghee Park
Jan. 4 (Bloomberg) -- United Co. Rusal Ltd.’s Hong Kong initial public offering may value the world’s largest aluminum producer 16 percent cheaper than its biggest Chinese competitor.
The HK$9.10-to-HK$12.50 a share price range announced last week would give the Moscow-based company controlled by billionaire Oleg Deripaska an enterprise value of between 10.6 times and 13.3 times its 2010 pretax profit, said two people familiar with the information.
Rusal may become the first Russian company to go public in Hong Kong after the city’s benchmark Hang Seng Index gained 52 percent last year. The metal producer, restricted from selling stock to retail investors, plans to raise as much as HK$20.1 billion ($2.6 billion) to pare debt of $14.9 billion.
“Projections are always difficult,” said Francis Lun, a Hong Kong-based general manager at Fulbright Securities Ltd. “Performance of the shares is what really matters. Since they have no retail investors, I think they will be able to maintain the listing price.”
Banks helping to arrange the IPO estimated Rusal will generate earnings before interest, tax, depreciation and amortization of $2.2 billion this year, said the people who declined to be identified as the information is private.
Enterprise Value
The enterprise value, or a company’s stock and debt minus cash, to EBITDA ratio for Aluminum Corp. of China Ltd., the country’s largest producer of the metal, is almost 15.9 times, according to data compiled by Bloomberg. Alcoa Inc., the largest U.S. aluminum producer, trades at 9.3 times, while Rio Tinto Group, the world’s second-largest aluminum producer, is valued at 10.2 times.
Christine Chan, a Hong Kong-based spokeswoman for BNP Paribas SA, and Adam Harper, a Credit Suisse Group AG spokesman in the city, declined to comment. BNP and Credit Suisse are leading others including Bank of America Merrill Lynch, BOC International Holdings Ltd., Nomura Holdings Inc., Renaissance Capital Ltd., OAO Sberbank and VTB Capital SA, to arrange the sale.
Rusal posted a net loss of $868 million in the first half of 2009, compared with a net income of $1.4 billion a year earlier. Profit won’t be less than $434 million for 2009, it said in its prospectus.
Expand IPO
The metal producer is selling 1.61 billion new shares, or a 10.6 percent stake, it said in filings to the Hong Kong stock exchange last week. Rusal may expand its IPO by another 225 million shares to meet additional demand, according to an e-mail sent to institutions today.
Vnesheconombank, the Russian state development bank also known as VEB; NR Investments Ltd., the principal investment company of billionaire Nathaniel Rothschild; New York hedge-fund manager Paulson & Co., and Malaysian billionaire Robert Kuok and companies controlled by him have agreed to buy HK$6.86 billion worth of shares in the IPO.
Rusal’s debt almost doubled after buying a quarter of OAO GMK Norilsk Nickel before commodity prices collapsed. The company doesn’t expect to pay dividends through 2013, it had said in the prospectus.
To contact the reporters on this story: Bei Hu in Hong Kong at bhu5@; To contact the reporter on this story: Kyunghee Park in Hong Kong at kpark3@
Last Updated: January 4, 2010 00:16 EST
Bloomberg: Rusal May Expand Hong Kong IPO by 225 Million Shares, EMail Says
By Andreea Papuc
Jan. 4 (Bloomberg) -- United Co. Rusal Ltd., the world’s largest aluminum producer, may expand its Hong Kong initial public offering by 225 million shares, an e-mail sent to investors today said.
Last Updated: January 3, 2010 20:42 EST
Jan. 3, 2010, 11:44 a.m. EST
MarketWatch: Citi among 4 advisers for Russia's Suek IPO: report
By London Bureau
LONDON (MarketWatch) -- Russia-based coal producer, Siberian Coal Energy Co., or Suek, has chosen Citigroup (NYSE:C) as one of four advisers for its $9 billion initial public offering, the Independent reported Sunday, citing a banker close to the deal.
According to the report, it isn't clear who the other three advisers will be.
Suek is expected to list 25% of the company in both London and Moscow during the first half of 2010, the Independent said.
The Independent: Russian miner turns to Citi in $9bn flotation
By Mark Leftly
Sunday, 3 January 2010
Citi, the investment bank, will help to lead the London listing of the Russian coal giant Suek, one of a number of huge initial public offerings (IPOs) in 2010.
A leading mining banker at a rival institution who had pitched for one of the four roles on the float said this weekend that Citi had been lined up as one of the four advisers on the deal. It was not yet clear who will take the other positions, which were coveted by the big banks this winter as the flotation of 25 per cent of Suek could value the company at as much as $9bn, meaning juicy fees.
Together with the likes of London Eye owner Merlin Entertainments and travel technology group Travelport, IPOs in 2010 will dwarf the value of the 18 held in London last year, which raised less than £1.7bn in total. The bigger IPOs were shelved as owners remained sceptical of how much they could raise from share issues in the downturn.
Suek, which is the world's fifth biggest coal miner and is owned by oligarchs Andrey Melnichenko and Sergey Popov, is expected to list in both London and Moscow during the first half of the year.
Also known as the Siberian Coal Energy Company, the miner originally planned to list in mid-2008 but abandoned the plan as markets and commodities prices tumbled. Citi was one of the advisers at that time. Suek shareholders are also involved in the IPO of Russian aluminium giant United Company Rusal. They hold an 18 per cent stake in Rusal, which is majority owned by Oleg Deripaska.
Mr Deripaska snubbed London for a Hong Kong listing, a blow to the City as it has long been considered the financial capital of world mining. The likes of BHP Billiton, Rio Tinto, Anglo American and Xstrata are Ftse 100 standard bearers.
Instead, Rusal plans to raise up to $2.58bn from Hong Kong and a secondary listing on the Paris-based Euronext exchange to help pay off its debt mountain.
Advisers, led by Credit Suisse and BNP Paribas, had hoped to take advantage of the improved market conditions of the second half of last year and get a listing away by Christmas. The move was delayed by Hong Kong authorities scrutinising some worrying signs from the group: the IPO prospectus, published last week, included more than 30 pages of risk warnings as aluminium prices tumbled. In the first six months of 2009, Rusal made an $868m loss.
But, Rusal has attracted star names as cornerstone investors, including the investment vehicle of financier Nathaniel Rothschild. Mr Rothschild has also taken part in a $2bn convertible bond issue of Swiss commodities trader Glencore, which is expected to be a prelude to an IPO.
JANUARY 1, 2010, 11:02 A.M. ET
WSJ: Russia's Altimo Joins Bidding In Zamtel Privatization
JOHANNESBURG (Dow Jones)--A fourth bid-- from Russia's Altimo--has been accepted for a controlling stake in phone company Zambia Telecommunications Co. , the Zambia Development Agency said Friday.
Altimo's bid was submitted five minutes after the deadline Dec. 23, so it wasn't added that day to offers from Libya's LAP Greencom Ltd. together with LAP Green Networks, Angola's Unitel Corp. (UNTL) and India's state-owned Bharat Sanchar Nigam Ltd., the agency said in an emailed statement.
It said its board met Wednesday and decided to accept the submission from Altimo, which, like the others, is not binding.
The short-listed bidders have been invited to conduct further due diligence on Zamtel, and will be asked to submit a binding bid for a majority equity stake. The ZDA said details of the next phase of the privatization and of the indicative bids received are set to be revealed Jan. 11.
The ZDA in mid-September said it was selling Zamtel, which also owns mobile-phone operator Cell-Z and Internet service provider Zamtel Online. The government plans to retain a minimum 25% stake in the company, but has reserved the right to sell this through an initial public offering on the Lusaka Stock Exchange.
-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848; robb.stewart@
Reuters: Russia's Profmedia delists Rambler from AIM
Thu, Dec 31 2009
MOSCOW, Dec 31 (Reuters) - Russia's Internet company Rambler Media , controlled by Profmedia holding, has delisted its shares from the AIM junior market on the London Stock Exchange, Rambler said on Thursday.
Profmedia, controlled by Russian industrial magnate Vladimir Potanin, has said it plans to float up to 40 percent of its stock in an initial public offering in April 2010.
Profmedia announced in November it would delist Rambler and bought out minority shareholders, increasing its stake in the owner of Russian search engine rambler.ru to 75 percent. [ID:nLC471495] (Reporting by Dmitry Sergeyev; editing by Karen Foster)
BarentsObserver: Less mineral mining on the Kola Peninsula
2010-01-04
Mineral mining on the Kola Peninsula declined with 23.5 percent in the period January-November 2009 compared to the same period in 2008.
According to numbers from the Murmansk Statistic Service, production of apatite concentrate decreased with 6.9 percent, loparite concentrate with 23.1 percent, nepheline concentrate with 25 percent, nonmetallic building materials with 49.5 percent and vermiculite concentrate with 49.5 percent, web site B- reports.
Production of baddelite concentrate rose with 1.4 percent and iron ore concentrate with 1.2 percent.
Activity in the Oil and Gas sector (including regulatory)
RBC: Russia hikes wholesale gas prices
RBC, 04.01.2010, Moscow 10:12:12.Pipeline gas rates for Russian manufacturers rose 15 percent on average from January 1, 2010, according to a decision made by the Federal Tariff Service which approved wholesale prices for gas produced by Gazprom and its affiliates and sold to Russian consumers. The same growth rate applies to gas prices for the public except for people living in regions with lower gas prices. These regions will see two raises this year: by 5 percent from January 1, and by 15 percent from April 1, 2010. The rates were set in line with the key parameters of Russia's social and economic development forecast for 2010 as approved by the government.
The federal service has also set minimum and maximum prices for Russian consumers to subject to state regulation. The minimum prices equal wholesale prices for industrial consumers, while the maximum price level envisages a rise of 20 percent in the first half of 2010, and an increase of 10 percent in the second half from the minimum level.
Reuters: UPDATE 1-Russia 2009 oil output hits new high after 2008 blip
Sat Jan 2, 2010 4:02pm IST
* Production expected to grow further in 2010
* Importance of East Siberian fields increasing
* Main challenge to replace dwindling West Siberia output
(Adds average daily export figures, analysis)
By Dmitry Zhdannikov
MOSCOW, Jan 2 (Reuters) - Russian oil output grew by around 1.5 percent in 2009 to a new post-Soviet high, putting the world's largest crude producer on an upward trend again after a 2008 blip, when production fell for the first time in a decade.
Energy ministry data showed on Saturday the country extracted 9.925 million barrels per day last year, a record since the collapse of the Soviet Union, up from 9.78 million bpd in 2008 and 9.87 million bpd in 2007.
The resumption in growth came as a surprise. At the end of 2008 analysts had largely expected the decline to continue due to a lack of new greenfield developments and a sharp drop in crude prices [ID:nLE221505]
But as crude prices recovered and oil majors such as Rosneft (ROSN.MM: Quote, Profile, Research) sped up the development of East Siberian fields to fill Russia's first pipeline to the Pacific [ID:nLDE5BR00F], output outpaced expectations and growth is expected to continue.
Analysts now say Russia will produce 1.1 percent more oil in 2010 as fields in East Siberia pump enough crude to mask a decline in mature deposits further west. [ID:nLDE5BK0JX]
Russia is currently producing more oil than traditional world leader Saudi Arabia, which has reined in output to comply with OPEC cuts.
The recovery in oil prices CLc1 has allowed non-OPEC member Russia to grab increased market share and revive drilling activity while reducing costs after a rouble devaluation versus other currencies at the beginning of 2009.
Russian pipeline oil exports stood at 4.28 million bpd in December, bringing the annual average exports in 2009 to 4.24 million bpd, up from 4.19 million bpd in 2008 but still down from 4.43 million bpd in 2007.
Traders expect exports to remain largely flat over the coming years as Russia modernises its refineries to process more crude at home and export more refined products.
One trend that will become evident over the next year will be increased supplies of crude via the new Kozmino oil terminal on the Pacific as Russia is keen to exploit Asian markets and reduce its supplies to Europe. [ID:nLDE5BH175]
While the government is unlikely to further slash taxes for the oil industry, which together with gas brings over 60 percent of budget revenues, it will also likely refrain from raising the tax burden on the industry, which allowed Russia to weather last year's financial storm.
Russia will become increasingly dependant on East Siberian deposits in future and as a sign of their growing importance, the government set a zero export duty for 13 fields in the region from Dec. 1.
JPMorgan analysts forecast East Siberia would account for 2.3 percent of Russia's crude output in 2010, up from about 1.1 percent in 2009.
Rosneft Chief Executive Sergei Bogdanchikov forecasts his company's own output will rise between 4 percent and 5 percent in 2010 [ID:nLDE5BE2CT].
The long-term challenge for Russia, analysts say, will be to replace depleted reserves in West Siberia, Russia's oil Eldorado for the past three decades. (Reporting by Dmitry Zhdannikov, Editing by Ron Askew)
Bloomberg: Russian Oil Output Climbed 1.2 Percent in 2009 (Update1)
By Anna Shiryaevskaya
Jan. 2 (Bloomberg) -- Russia, the world’s largest oil producer, increased crude output 1.2 percent in 2009 as new projects helped reverse a decline in production a year earlier.
The country pumped 494.2 million tons, or 9.93 million barrels of oil a day, of oil last year, CDU-TEK, the Russian Energy Ministry’s central dispatch unit, said on its Web site today.
Russian oil producers rely on remote Arctic and east Siberian provinces to offset declining production at aging fields in western Siberia. OAO Rosneft, Russia’s largest oil producer, brought the Vankor field in the Krasnoyarsk region on stream in August and has ramped up output there. TNK-BP and Surgutneftegaz tapped east Siberian fields, filling the new oil pipeline to the Pacific coast. OAO Lukoil focused on the Yuzhno Khylchyu project in Timan Pechora.
Russian oil output fell 0.7 percent in 2008, prompting some officials, including Lukoil’s Deputy Chief Executive Officer Leonid Fedun, to say last year that production had already peaked.
Russian crude output climbed 3 percent to 42.49 million tons last month, the CDU-TEK statement said.
Russian crude exports remained little changed in December from the same period in 2008, and rose 3.3 percent during 2009. Russia exported 246 million tons, or almost half of its crude production, last year, according to the data.
Production of natural gas declined 12.4 percent to 582.4 billion cubic meters after a global economic crisis reduced demand for the fuel within Russia and in Europe. State-run OAO Gazprom, Russian biggest gas producer, reduced output by 16.1% to 462.1 billion cubic meters.
Exports fell 10.3 percent to 167.1 billion cubic meters, while domestic demand slid 6.6 percent, according to data from CDU-TEK.
To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@
Last Updated: January 2, 2010 09:52 EST
Bloomberg: Venezuela, Russia May Develop More Orinoco Oil, Universal Says
By Jose Orozco
Jan. 3 (Bloomberg) -- Venezuela and Russia may develop the Junin 3, Ayacucho 2 and Ayacucho 3 oil blocks in the South American country’s Orinoco Belt as part of agreements signed late last year, El Universal reported.
The three Orinoco blocks would add more than 450,000 barrels of oil per day to joint production between the two countries, El Universal said, citing people familiar with the projects.
Russia wants to develop its Venezuelan oil business to strengthen its presence in the U.S. East Coast market, the Caracas-based newspaper said.
To contact the reporters on this story: Jose Orozco in Caracas at jorozco8@
Last Updated: January 3, 2010 09:45 EST
Bloomberg: Azerbaijan Starts Natural Gas Exports to Russia, Vesti TV Says
By Anna Shiryaevskaya
Jan. 1 (Bloomberg) -- Azerbaijan has started exports of natural gas to Russia at an initial 1.5 million cubic meters a day, Vesti TV said on its Web site.
OAO Gazprom, Russia’s gas exporter, will buy at least 500 million cubic meters of gas a year from State Oil Co. of Azerbaijan under a contract signed last October, according to the broadcaster. Azerbaijan later agreed to double sales to Russia to 1 billion cubic meters a year, Vesti said.
To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@
Last Updated: January 1, 2010 11:14 EST
Your Oil and Gas News: Statoil and Lukoil have agreed to adjust the ownership split in West Qurna 2
Saturday, Jan 02, 2010
29 December 2009 Lukoil and Statoil initialised the contract with Iraqi authorities for the West Qurna 2 field. Lukoil and Statoil have agreed to adjust the ownership split, increasing Statoil’s share from 15 % to 25 %. Lukoil’s share is reduced to 75 %.
Lukoil and Statoil secured the winning bid on the West Qurna 2 field during the second licensing round in Iraq 11 and 12 December. Based on thorough analysis and an optimised development plan for the field, Lukoil and Statoil were able to bid a production plateau of 1.8 million barrels per day and a remuneration fee of 1.15 dollars per barrel.
The increased Statoil share will create a more balanced consortium and confirms Statoil’s confidence in this being an important position for the company. An Iraqi state partner will be included in the consortium with a share of 25 %, reducing Lukoil and Statoil shares to 56,25 % and 18,75 %.
After the contract now has been initialised it will now be subject to political approval in Iraq before final signing of the contract.
The adjustment in ownership split will not entail any compensation to be paid, but Statoil will get a proportional higher stake in the project.
Source: Statoil
BusinessWire: Sistema Sells Controlling Stakes In Four Bashkir Oil Companies To Bashneft
MOSCOW--(BUSINESS WIRE)--
Moscow, Russia – January 4, 2010 – Sistema (the “Group”) (LSE:SSA), the largest diversified public financial corporation in Russia and the CIS, which invests in and is a major shareholder of companies operating in different industries, today announced the sale of its equity stakes in Ufaneftechim JSC (47.18%), Novoil JSC (61.57%), Ufaorgsintez JSC (51.49%) and Ufimskiy NPZ JSC (55.58%) to ANK Bashneft JSC (“Bashneft”). The objective of these transactions is to create a vertically integrated oil group.
Itar-Tass: Tatarstan to commission Russia’s biggest petrochemical facility in 2010
03.01.2010, 16.53
KAZAN, January 3 (Itar-Tass) -- The first stage of Russia’s biggest petrochemical facility will be commissioned in Nizhnekamsk in 2010, Tatarstani Prime Minister Rustam Minnikhanov told Itar-Tass, announcing plans for the future.
“As many as 6,500 builders and steelworkers are involved in the construction of the facility. About 120 billion roubles [ USD 1 = RUB 30.18] have already been spent for the works,” he said, adding that the workers were expected to continue their operations in the New Year holidays.
In his words, the installation and setting-up of the technological equipment will be completed by October 2010, to prepare the facility for commissioning.
Initially, the plant was expected to refine seven million tonnes of high-sulphur crude oil, which is produced in Tatarstan and very aggressive for transportation product, the prime minister said.
However, the republican authorities decided to increase the capacity to 14 million tonnes a year. Currently, an oil refinery with an annual capacity of seven million is operating in the republic.
With due account of the above-mentioned facts, Tatarstan will refine 21 million tonnes of hydrocarbons annually, out of 32 million tonnes of crude, which the republic produce every year, he said.
The project costs over 227 billion roubles. The facility will consist of three plants designed in compliance with the most advanced technologies. They are meant for oil refining up to the record high quality of 96 percent.
In addition, the facility will produce about 20 types of petrochemical products, from gasoline of the Euro-4 and Euro-5 standards, to polypropylene, polyethylene terephthalate and linear alkylbenzene (LABs), which are current exported by the country.
Your Oil and Gas News: VTB Bank granted a credit limit of 26.8 billion Rubles to TNK-BP
Monday, Jan 04, 2010
VTB Bank granted a credit limit of 26.8 bln rubles to TNK-BP, according to the bank’s statement. Earlier, VTB Bank offered a credit of $50 mln to TNK-BP for a period of six months within the established credit limit. The credits were taken for financing the current economic activities of the company. Apart from that, the two parties have signed an agreement on a revolving credit line of $200 mln for a period of 1.5 years.
TNK-BP is the third largest oil company of Russia owned, on a parity basis, by BP and the AAR Consortium (consisting of Alfa Group, Access Industries, and Renova). The shareholders of TNK-BP also own about 50% of the Russian oil and gas company Slavneft.
In 2008, the company used to produce an average of 1.65 mln barrels of liquid hydrocarbons a day. With the 50% stake in Slavneft, the average production level of TNK-BP was 1.85 mln barrels of liquid hydrocarbons a day. TNK-BP accounts for approximately 16% of all oil production in Russia (including the stake of TNK-BP in Slavneft). According to the estimation procedure of the US Security and Exchange Commission (SEC), the overall proven reserves of the company as of December 31, 2007, regardless of the license validity period, amounted to 8.225 bln barrels of oil equivalent.
The producing assets of the company are located in Western Siberia, Eastern Siberia, and the Volga-Ural region. TNK-BP owns five oil refineries in Russia and Ukraine and a network of retail sites working under the brands of BP and TNK.
The net income of TNK-BP in January–September 2009, according to US GAAP, decreased by a factor of 1.8 from $6.552 bln in the same period last year to $3.691 bln, and the revenues dropped from $43.9 bln to $24.747 bln. The operating expenditures of the company amounted to $2.945 bln compared to $3.914 bln earlier, and the earnings before interest, tax, depreciation and amortization (EBITDA) reduced by 39% from $10.918 bln to $6.663 bln.
The open joint-stock company VTB Bank is the second largest Russian bank after Sberbank. The participation of the state in the authorized capital of VTB is 85.5%.
As of September 30, 2009, the sales network of the VTB Group consisted of 949 offices in Russia, the Commonwealth of Independent States (CIS), and Europe, including 476 offices of VTB 24 Bank. The activities of the VTB Group outside Russia are conducted through its five subsidiary banks in the Commonwealth of Independent States (Armenia, Ukraine, Belarus, Azerbaijan, and Kazakhstan), one subsidiary bank in Georgia, five subsidiary banks in European countries (Austria, Germany, France, the United Kingdom, and Cyprus), one subsidiary bank and one financial company in Africa (Angola and Namibia), and one associated bank in Vietnam. The VTB Group has branches in India and China and representative offices of its UK investment banking subsidiary in Singapore and the United Arab Emirates.
The net income of VTB in 2009, according to the International Financial Reporting Standards (IFRS), decreased by a factor of 7.1 down to $212 mln. The net loss of VTB in the first 9 months of 2009, according to the IFRS, amounted to 45.5 bln rubles. The net income of VTB in the first 11 months of 2009, according to the Russian Accounting Standards (RAS), amounted to 31.88 bln rubles.
Source: TNK-BP
Russia Today: Ecology comes first in Russian Caspian oil search
01 January, 2010, 14:15
Russia's first Caspian Sea oil rig has started operations in a major project for Lukoil, where environmental issues are in focus.
Oil revenues is one of the main sources of income for Caspian nations. Azerbaijan and Kazakhstan have been active in oil extraction in the region for years.
In 2009, Russia has decided to take advantage of its vast energy deposits, starting a project of its own.
But while previous explorations threatened the environment – a Kazakh project reportedly killed hundreds of seals in the Caspian several years ago – Russia took a different approach, according to Igor Nasenko, an employee at the Yury Korchagin oil rig
“Our company has more than ten years of drilling experience in the Caspian Sea. We stick to the policy of zero discharge. Which means that nothing gets into the water. No damage to the sea, no hazardous emissions.”
Vagit Alekperov, the president of Russia's biggest PRIVATE oil company, Lukoil, grew up on the Caspian Sea. He says taking care of its precious ecosystem seems only natural. That's why he personally examined Lukoil's equipment for detecting, and cleaning, oil spills – should they ever happen.
“We have a whole system of ecomonitoring here. It includes GPS monitoring that will detects any oil spills on the surface of the sea. We also have detectors that check the chemical content in the water, it will tell us if there are any oil leaks.”
Lukoil says an estimated 30 oil rigs will mushrooom in the Russian part of the Caspian Sea over the next decade. But with safety as one of the main self-proclaimed priorities for the company, there's a good chance that the environmental impact will be minimal.
Your Oil and Gas News: Novatek and First Cargo Company sign a three-year cooperation agreement
Monday, Jan 04, 2010
OAO NOVATEK and OAO First Cargo Company have entered into a three-year cooperation agreement for liquid transportation services. The agreement was signed by NOVATEK’s First Deputy CEO Mikhail Popov and FCC’s General Director Salman Babayev.
The three-year agreement anticipates transporting increasing volumes of stable gas condensate produced from the Company’s Purovsky Plant, thus making FCC one of NOVATEK’s major partners for railway cargo transportation.
OAO NOVATEK is Russia’s largest independent gas producer and the second-largest natural gas producer in Russia. Founded in 1994, the Company is engaged in the exploration, production, processing and marketing of natural gas and liquid hydrocarbons. The Company’s upstream activities are concentrated in the prolific Yamal-Nenets Region, which is the world's largest natural gas producing area and accounts for over 90% of Russia's natural gas production and 20% of the world’s gas production. NOVATEK is an open joint stock company established under the laws of the Russian Federation. The Company’s shares are listed on the Russian Trading System (RTS) and the London Stock Exchange (LSE) under the ticker symbol ‘NVTK’ and on the NASDAQ PORTAL System as Rule 144A GDR under the ticker symbol “NVATY”.
ОАО First Cargo Company is Russia largest railway operator. Its main founder and holder of FCC’s ordinary shares is ОАО Russian Railways (RZD). FCC was established in July 2007 and, in November of the same year, began to independently manage the rail car fleet. Currently, FCC owns more than 200 000 units of various types of rolling stock and maintains a 21% market share for rolling stock in the Russian Federation. In 2008, FCC transported over 100 million tons of cargoes.
Source: Novatek
Globalpost: Poles wary of Nord Stream pact
In Poland, claims the "Molotov-Ribbentrop" natural gas pipeline is an attempt to weaken the EU and NATO, much as the Nazis and Soviets did to Poland in WWII.
By Tom Hundley
Published: January 3, 2010 07:52 ET
WARSAW, Poland — History suggests that when Russia and Germany announce a deal that is slightly too sweet, Poland has reason to be wary.
Which is why the Polish foreign minister, Radoslaw Sikorski, acidly dubbed a plan to build an underwater natural gas pipeline from Russia’s Siberian gas fields to Germany’s Baltic coast “the Molotov-Ribbentrop pipeline,” a reference to the pact between the Nazis and the Soviets to carve up Poland on the eve of World War II.
The Russians and Germans hail the $11 billion project as “a new benchmark for cooperation between the European Union and Russia.”
The Poles think not. They suspect the Russians of using the pipeline to pursue a classic divide and conquer strategy aimed at weakening the EU and NATO.
The Polish government has been working overtime to persuade its erstwhile partners and allies in the EU and NATO that the pipeline deal is a bad one that could undermine energy security for all, but last month (November) the final piece of the deal fell into place when the governments of Sweden and Finland granted their approval for the pipeline to cross their territorial waters.
The 760-mile twin pipeline, called Nord Stream, is a joint venture between Gazprom, the Kremlin-controlled gas giant, and a group of German and Dutch energy companies. It will stretch from the Russian port of Vyborg to the coastal town of Lubmin in Germany.
For understandable commercial reasons, the Germans are happy to have a direct pipeline from one of their main suppliers. Russians are happy too, but their reasons are a bit more geo-strategic.
“If Gazprom were a normal Western company, interested in profits and building customer relations, the situation would not be so drastic, but as we have seen, Gazprom is not this kind of company; it is better understood as a tool of foreign policy for the Russian Federation,” said Dominik Smyrgala, an expert on energy issues on academic leave from the Polish foreign ministry.
Gazprom currently supplies Western Europe with nearly 30 percent of its natural gas, and most of it flows through pipelines that cross Ukraine. Political and financial squabbles between Russia and its former satellite have disrupted the flow of gas to Europe numerous times since the breakup of the former Soviet Union, and the Russians have made no secret of their desire to bypass Ukraine in their gas-transit route.
This could have been done easily and for far less money with an overland route through the Baltic states and Poland. The only reason for building the costly and environmentally questionable underwater route would appear to be to exclude Poland, Estonia, Latvia and Lithuania.
“The whole idea of this pipeline is to cut off the Baltic states from NATO and the EU,” said Pawel Zaleswski, who represents Poland in the European Parliament.
Nord Stream, along with a parallel project in southern Europe called South Stream, will give the Russians a commanding position in the EU’s energy market. Not only will they be the main supplier of natural gas, they will also control the transit routes.
Last summer, nearly two dozen former heads of states and other public figures from Central and Eastern Europe, including the former Polish president, Lech Walesa, and former Czech president, Vaclav Havel, wrote an open letter to President Barack Obama in which they criticized Russia’s “abuse of its [energy] monopoly and cartel-like power inside the EU,” and warned that “Russia is back as a revisionist power pursuing a 19th-century agenda with 21st-century tactics.”
After invading Georgia in August 2008, the Russians did little to calm the nerves of their former satellites this September when they staged large-scale military and naval maneuvers on the borders of Poland and the Baltic states.
“This is a kind of taste of the future militarization of the Baltic, but there has been almost no reaction on the EU level,” said Zalewski.
The EU’s non-reaction is bitterly disappointing to the Poles, but it is hardly surprising. Nations pursue their own interests, and Germany is deeply interested in securing its energy supply. Germany also believes that it is in its interest to draw Russia toward Europe with as many linkages as possible — an understandable approach, but one that gives Moscow considerable leverage over Central and Eastern Europe.
“If you are sitting in Moscow, you don’t even see Poland,” said a senior Polish foreign ministry official who asked that his name not be used.
“For the Russians, we are a small irritation,” said the rueful official. “They don’t like us because we know them so well and because we speak openly about what they are doing, even though it is now clear we can’t influence EU policy toward Russia.”
What adds to the Poles’ mistrust of the Nord Stream project is the web of personal contacts that was used to get the deal done.
The former German chancellor, Gerhard Schroeder, and Prime Minister Vladimir Putin of Russia, who enjoy a warm personal relationship, are seen as the prime movers behind the deal. Schroeder’s government approved the deal — and provided nearly $1.5 billion in loan guarantees to Gazprom — just weeks before he lost the 2005 election. A few weeks before the defeat, Schroeder accepted a job as chairman of Nord Stream.
Matthias Warnig, Nord Stream’s chief executive, is a former member of the Stasi, East Germany’s notorious secret police, and served as a senior officer in the foreign intelligence section during the same years that Putin was a top KGB agent in East Germany.
“As an ordinary Pole, I’m frightened,” said Monika Michaliszyn, a specialist in energy issues at Warsaw University. “We are isolated — we and the Baltic states. It’s like the Second World War. We know that when the Germans and the Russians do something together behind our back, it’s not good.”
MENA : Moscow throws down the gauntlet to OPEC
(MENAFN - Arab News)
As a New Year begins with renewed hopes, aspirations and indeed fears, competition seems focusing on Asia � China to be specific. Voices in the US, clamoring to diversify away from the energy rich Gulf as far as possible, for their energy needs, have been gaining strength in recent months and years. And with Europe too endeavoring, one way or the other, to look for sources other than Russia, a battle to grab optimal share of the growing Chinese pie seems intensifying. As geo-political considerations continue to play the usual big role in the selection of energy supplier(s), Moscow seems focused on developing infrastructure that could provide it long-term customers and security. What more can a supplier ask for? Russia is already a major player. It has played its cards rather deftly in recent years. At times it tends to play to both the tunes � cooperation and competition � with the OPEC (Organization of the Petroleum Exporting Countries). Using the high oil prices for the last couple of years, Moscow has succeeded in reinvigorating its energy infrastructure. It is now ahead of even Saudi Arabia, as far as crude production is concerned. While Riyadh had to restrain its output under OPEC quota requirements and indeed market dictates, Moscow capitalized and raised its production to 10.02 million barrels/day in November, gaining 2.6 percent year on year and, according to the president of Russia's national oil pipeline operator Transneft, Nikolai Tokarev, the Russian production is expected to grow to 11 million bpd after 2012. And Moscow is taking long-term measures to ensure it retains the edge. It is endeavoring to capture markets on a long-term basis � that could provide it with some sort of demand security � that OPEC has been clamoring for long � yet has not been successful in its efforts so far. Last week the Russian Prime Minister Vladimir Putin opened a new oil export terminal that would serve as a key gateway for Russian energy exports to Asian markets. According to the Russian premier, "It is a strategic project, which enables us to enter the growing markets of the Asia-Pacific region." And indeed it is proceeding with a bang. Inaugurating the huge infrastructure, the Russian premier clicked on a computer mouse to fill a tanker at the terminal in the far eastern port of Kozmino, built at a cost of 60 billion rubles (about $2 billion). The terminal is the destination point of a new pipeline that will pump crude from oil fields in eastern Siberia. The pipeline's first 2,750-km (1,700-mile) section linking Taishet in eastern Siberia with Skovorodino near the border with China was completed last month, but exports to the energy-hungry economic giant are expected to start only in 2011 after the two neighbors' pipeline systems are linked. It cost 360 billion rubles (about $12 billion) to build the Taishet-Skovorodino pipeline, which was completed quickly thanks to a deal with China in February that provided $25 billion in loans to Russian state energy companies in exchange for oil supplies for the next 20 years. The second leg stretching from Skovorodino to Kozmino, another 2,100 km (1,300 miles) east, is still being built, and until its completion in 2012 the oil will be carried there by rail. And all the efforts are already paying off. Rosneft has signed a 20-year contract with CNPC for the delivery of 300,000 bpd from Skovorodino, and supplies to China through the pipeline could increase beyond this in the future. The contract envisages total oil deliveries of 300 million mt (close to 2.26 billion barrels) over 20 years. Russia's deputy Prime Minister Igor Sechin estimated the contract between Rosneft and CNPC to be worth at least $100 billion. And yet there is another twist to the game plan too. Through this emerging infrastructure, Moscow has also made efforts to introduce the ESPO Blend crude, named after the East Siberian-Pacific Ocean (ESPO) pipeline, capitalizing on the window that the newly built infrastructure opened for it to export the grade to Asia. With the ESPO blend hitting the market, some analysts maintain the rules of the game in Asia may change � at the expense of Middle East competitors. Exports of the diesel-rich, medium-heavy sweet ESPO grade could ultimately rise to 600,000 barrels per day (bpd) over the next few years, from 250,000 bpd in the first quarter, targeting refineries in China, Japan and South Korea, traders and analysts say. Provided refiners are content with the grade's quality, the new supply may force Gulf producers to review their export strategies, crude pricing and even consider offering a competing grade blended from different crudes to match the ESPO quality. Analysts say that ESPO Blend could turn out to be ideal for Asian refiners because of their ability to handle higher amounts of sulfur and based on initial assessments for the grade's exceptional yield of middle distillates. "It could change the demographics of the region's crude buying. I mean, how the Venezuelan crude could compete with an Espo that is directly pumped in when they have to be shipped halfway across the world?" said Al Troner, president of Asia Pacific Energy Consulting. "It could force Gulf producers to lower their prices to Asia to stay competitive and not lose market share," he added. Asian markets are heavily dependent on imported oil and the role of Russian oil has been growing in recent years. The East Siberian-Pacific Ocean pipeline offers the perfect vehicle for Russia to further increase oil exports to the growing economies in Asia, especially when the link to China comes online within two years, analysts therefore think. This has been an interesting move by Moscow on the energy chess board. With the Gulf OPEC producers, also focusing on China, in medium to long-term, as the destination for most of their crude, can OPEC check mate the move?
By Syed Rashid Husain
Gazprom
BarentsObserver: Gazprom production down 16 percent
2010-01-04
Russian gas major Gazprom decreased gas production with 16 percent in 2009 compared to the year before.
Gazprom production shrunk from 550 billion cubic meters of gas in 2008 to 461 billion cubic meters in 2009, Rosbalt.ru reports citing Gazprom official Sergey Kupriyanov.
According to Kupriyanov the reason for the decline is the downfall in gas demand in both Russia and Europe because of the economic crisis. Gas consumption in Russia fell with 10 percent in 2009, in Europe – with 8 percent.
According to the Russian Statistic Service the overall gas production in Russia dropped with a little more than 14 percent in 2009 compared to 2008.
RIA: Gazprom's gas output to decline 16% to 461bln cu m in 2009
17:0031/12/2009
Gazprom's natural gas output will decline 16%, year-on-year, in 2009 to 461 billion cubic meters, Gazprom spokesman Sergei Kupriyanov said on Thursday.
Kupriyanov told Ekho Moskvy radio station that the energy giant's gas output decline could be attributed to reduced gas demand in Russia and Europe due to the global economic crisis.
Gazprom CEO Alexei Miller earlier said that gas output reduction was expected and the fourth quarter had not made the situation more dramatic.
Miller said that the energy giant's output was also affected by reduced gas consumption in Ukraine. Russia supplied 27 billion cubic meters of gas to Ukraine in 2009, compared with 55 billion cubic meters in 2008.
According to data of the Russian Energy Ministry, gas output in Russia declined 14.5% in January-November 2009 to 519.409 cubic meters, with gas exports down 16.1% to 143.94 billion cubic meters.
MOSCOW, December 31 (RIA Novosti)
KyivPost: Gazprom cuts gas output to 461 billion cubic meters in 2009 from 549.7 billion cubic meters in 2008
December 31, 2009 at 18:27 | Interfax-Ukraine
Gazprom produced "approximately 461 billion cubic meters" of gas in 2009, down from 549.7 bcm in 2010, the Russian gas giant's spokesman, Sergei Kupriyanov, said live on the Ekho Moskvy radio station.
"The gas industry has never seen such a drop before," Kupriyanov said.
Reuters: Gazprom says does not fear competition in China
Thu, Dec 31 2009
MOSCOW, Dec 31 (Reuters) - Gazprom is confident it will be able to supply China with large volumes of natural gas despite a recent deal between Beijing and Turkmenistan, the Russian gas export monopoly's chief spokesman said on Thursday.
"Luckily, the Chinese market is so big and so full of prospects that we are a long way from seeing real competition there," Sergei Kupriyanov said during a live radio broadcast on Ekho Moskvy radio station.
He said Gazprom was confident it would one day sign a large supply deal with China, which will follow the opening of a major pipeline between Turkmenistan and China earlier this month. [ID:nLDE5BD0F2] (Reporting by Dmitry Zhdannikov, editing by Robin Paxton)
BarentsObserver: Gazprom orders 4 tankers for Shtokman
2010-01-04
The South Korean shipyard Daewoo will by year 2015 or 2016 deliver four tankers for the Shtokman project, Gazprom’s deputy chief Aleksandr Ananenkov announced in a meeting last week.
The vessels will have a joint cost of two billion USD, Anenenkov said, the Moscow Times reports. In addition, Gazprom also plans to order two supply ships for a combined two billion rubles, the company deputy confirmed.
Meanwhile, Gazprom confirms that the Shtokman project will face delays. As reported recently by BarentsObserver, Russian First Deputy Prime Minister and Head of Gazprom’s Board of Directors Viktor Zubkov in a meeting late December said that the Shtokman project start-up will be delayed. He did however not specify any new time for the project launch.
The news from Mr. Anenenkov was announced during Prime Minister Vladimir Putin’s visit to the Russian Far East last week. The government leader then announced plans for major investments in regional shipyards and infrastructure. Among the projects announced were two major infrastructure projects by the state-run United Shipbuilding Corporation together with foreign partners. Combined investments in the projects will be 700 million USD, Putin said, a meeting transcript reads.
According to the new deals, the Korean Daewoo will be responsible for the construction of a dry dock at the territory of the Zvezda shipyard. The new dock will enable the yard to construct tankers and LNG carriers.
Bloomberg: Gazprom, Turkey Agree on Pricing, Volumes for 2010 Gas Supplies
By Ercan Ersoy
Dec. 31 (Bloomberg) -- OAO Gazprom and Boru Hatlari ile Petrol Tasima AS, the Turkish natural-gas distributor known as Botas, agreed on pricing and volumes for Turkey’s gas imports from Russia next year, Gazprom said.
“In particular, the sides agreed on the ‘take-or-pay’ terms of the contract and on pricing, which is based on a basket of oil-product prices,” Moscow-based Gazprom said today in an e-mailed statement, without specifying volumes or tariffs.
Alexander Medvedev, deputy chief executive officer of Gazprom, and Mehmet Konuk, acting CEO of state-run Botas, held talks in Ankara today, according to the Russian company.
Milliyet reported on Dec. 26 that Russia, which supplies almost 65 percent of Turkey’s gas needs, may increase its sales price for the country by at least 16 percent in 2010. The Istanbul-based newspaper cited unidentified officials from the Turkish Energy Ministry.
Turkey has three gas-import contracts with Russia, giving it a total of 30 billion cubic meters a year. Supplies come through two pipelines, one across the Balkans and the other via the Black Sea.
To contact the reporter on this story: Ercan Ersoy in Istanbul at eersoy@
Last Updated: December 31, 2009 08:24 EST
Russia Today: South Stream development pushes cut off risk into past
04 January, 2010, 10:27
European gas consumers have faced disruptions to their supply over recent New Years breaks, but the threat of future cutoffs is receding with the progress of the South Stream project.
The trans-European project made big strides in 2009. South Stream passed the tipping point – winning approval from 6 transit countries. That secures its route – from the Black Sea to Europe, splitting into two forks, north and south. Only Bulgaria says it may yet review an agreement reached with the previous administration.
The feasibility study for the underwater section will be launched at the beginning of 2010 with construction scheduled to begin at the end of the year according to Gazprom CEO, Alexei Miller.
“The realization of the South Stream project will ensure undisrupted supplies of gas to Europe. The pipeline will carry 63 billion cubic metres of gas annually from 2015. We are sure that construction will go according to schedule.”
The project launched by Gazprom and Italy’s Eni was joined by Electricity de France – which will take a 10% stake in the underwater part of the pipeline.
The multiple backers will secure funding for the project, according to Vitaly Ermakov from Cambridge Energy Research Associates.
These are just permissions to start project work, preparing the project documentation. The issue of financing this very costly project has not yet been considered seriously. It will be an issue. South Stream, according to Gazprom's estimates, may cost as much as 25 billion dollars – unprecedented for a new pipeline.
And even when it's built, there remains a question over demand for gas in the target market of the EU according to Alexander Nazarov, Senior Analyst IFC Metropol
“To the question, ‘is there a need for South Stream?’ the answer is no. Especially if we keep in mind the Nord Stream pipeline project.”
There are other rivals, including the already-completed Blue Stream to the south. As for gas producing countries, some like Iran and Azerbaijan may be willing to supply Europe, while Turkmenistan has turned East, and is scheduled to start gas deliveries to China next year.
Hurriyet: Gazprom, Turkey agree on pricing, volumes for 2010 gas supplies
Sunday, January 3, 2010
ISTANBUL – Bloomberg
OAO Gazprom and Turkish natural-gas distributor Botaş have agreed on pricing and volumes for Turkey’s gas imports from Russia next year, Gazprom said.
“The sides agreed on the ‘take-or-pay’ terms of the contract and on pricing, which is based on a basket of oil-product prices,” Moscow-based Gazprom said Thursday in an e-mailed statement which did not specify volumes or tariffs.
Alexander Medvedev, Gazprom’s deputy chief executive officer, and Mehmet Konuk, acting chief executive officer of state-run Botaş, held talks in Ankara on Thursday, according to the Russian company.
The daily Milliyet reported on Dec. 26 that Russia, which supplies almost 65 percent of Turkey’s gas needs, may increase its sales price for the country by at least 16 percent in 2010. The newspaper cited unidentified officials from the Turkish Energy Ministry.
Turkey has three gas-import contracts with Russia, giving it a total of 30 billion cubic meters a year. Supplies come through two pipelines, one across the Balkans and the other via the Black Sea.
Steel Guru: Slowdown signs - Gazprom to limit dividends for 2009
The Moscow Times reported that Gazprom may pay some of its lowest dividends for a second straight year after its profit continued to melt.
Mr Viktor Zubkovboard chairman and First Deputy Prime Minister said on Friday. “I can not say now what the dividends will be for 2009, but most likely they will about the same. We aren’t planning for big dividends yet. There is a clear understanding among the shareholders that investment in the company’s development is a priority.”
The world’s largest gas company paid just 5% of its 2008 profit to Russian accounting standards, the smallest payout in the previous seven years, as it was trying to save money for investment in the crisis-battered economy.
Gazprom’s profit for the first nine months of the year plunged 56% YoY to RUB 189 billion (USD 6.4 billion) according to Russian accounting standards.
(Sourced from The Moscow Times)
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