Russia
Russia 090716
Basic Political Developments
• Germany, Russia talks: gas, economy to dominate - "The talks will encompass the most important foreign policy questions, such as Iran, North Korea's nuclear programme, the Middle East peace process, as well as economic topics, such as the financial crisis and the read-out from the G8 meeting," Merkel's spokesman, Ulrich Wilhelm, said on Monday.
• President Medvedev flies to Germany to sign $704m credit agreement - Vnesheconombank, Russia’s state development bank, will sign a 500 million euro ($704 million) credit agreement with Frankfurt-based Kreditanstalt fuer Wiederaufbau for financing of joint projects.
• Russia, Germany to sign loan deal to finance joint projects - According to Prikhodko, Medvedev will urge German authorities to support the purchase of the ailing German car giant Opel by an international consortium of Austrian-Canadian auto supplies company Magna and Russia's largest bank, Sberbank.
• Opel on Medvedev’s Agenda in Germany - “[The talks] are intensive … and I would not be bound by a July 15 deadline,” Sberbank chief financial officer Anton Karamzin said Tuesday, referring to Magna’s self-imposed deadline for an Opel deal. A German state minister said Tuesday that he expected the Magna deal to be signed this month.
• 3-Way Gas Talks on Friday - The European Union will host a second meeting Friday involving itself, Ukraine, Russia and international lenders to discuss Kiev’s bid for funds to buy Russian gas and ensure stable supplies to Europe, a spokesman said.
• Havel, postcommunist intellectuals warn Obama of Kremlin – press: Czech Vaclav Havel and other former politicians and intellectuals from eastern and central Europe warn U.S. President Barack Obama of Russia in an open letter sent to him, the Czech daily Lidove noviny (LN) writes.
• Sultanov in Beirut to Discuss Mideast Peace with Lebanese Officials - Al-Mustaqbal newspaper said Sultanov's visit is not liked to the formation of the Lebanese cabinet. However, he will stress during his talks with Lebanese officials on government formation as part of national dialogue and away from regional interference.
• Russia gives credit to Iceland - The Russian government, itself struggling with major economic hardships, has granted Iceland a 500 million USD loan, Deputy Finance Minister Dmitry Pankin yesterday told newspaper Vedomosti. That message comes less than a month after an official Icelandic delegation visited Moscow.
• OECD accession talks to start autumn - Vladimir Tkachenko, deputy director of the Economic Development Ministry's Trade Negotiations Departmen, has said talks on accession to the OECD will start autumn 2009, according to Interfax.
• India: Structural fault in MIG-29 Fighter Planes - Russia has pointed out structural faults in MiG-29 aircraft. The repair scheme and preventive measures are in place and IAF has not encountered major problems concerning the issue. IAF has not entered into a new deal for procurement of MiG-29 aircraft.
• India: IAF’s air-to-air missiles are faulty: Report - India has been procuring these missiles from Russia since 1996 and has even ordered for more than 2,000 missiles after the Kargil conflict out of which 1,000 have already been delivered.
• Kyrgyz Security Summit - Russia and its former Soviet allies will hold a special security summit in Kyrgyzstan in late July, a Kremlin source said Wednesday.
• Russian leader arrives to discuss force projecting - President of Russia Dmitry Medvedev intends to discuss widening of Russian military potential in Kyrgyzstan as part of his upcoming working visit to Bishkek, Argumenty.ru reported.
• Russia's Ex-Soviet Neighbors To Snub Summit – Kremlin: At least four leaders - Ukrainian President Viktor Yushchenko, Uzbekistan's Islam Karimov, Turkmenistan's Gurbanguly Berdymukhamedov and Belarus President Alexander Lukashenko - will be no-shows at a horse race the Kremlin is hosting in lieu of a formal summit, said Kremlin aide Sergei Prikhodko.
• Duma Approves $10Bln Fund to Help Allies - The fund was created to aid Belarus, Kazakhstan, Kyrgyzstan and Tajikistan, all members of a group called the Eurasian Economic Community. But it is not clear whether the aid will be in the form of loans or grants and what terms might be attached.
• Chechen leadership under fire over Russian activist's murder - 'I am convinced that the leadership of the Chechen republic is behind her murder,' said Oleg Orlov, chairman of Memorial, for which Estemirova had worked.
o Murder of Chechen human rights activist seeks to undermine peace - The reports about a cynical and brutal murder of human rights activist Natalia Estemirova were taken with profound indignation, acting Ingush President Rashid Gaisanov said in a statement transmitted to Itar-Tass on Thursday.
o Russian press muted on activist - Russia’s media reacted quietly to the latest murder of a top campaigner in the country, with the news absent from state television headlines and front pages of several newspapers.
o Chechen leader vows to investigate activist murder - The Kremlin-installed leader of Chechnya says he will personally oversee the investigation into the brutal murder of a top Russian human rights activist.
o Medvedev 'indignant' at Estemirova death
o Russian Activist’s Killing Must Be Investigated, U.S., EU Say
o Chechen human rights activist presumably killed in Ingushetia
o Rights Activist Abducted and Killed - Estemirova had been shot repeatedly in the head, chest and abdomen, most likely with a 9 mm Makarov pistol, investigators said. Her purse was lying nearby, and it contained her passport and papers identifying her as a human rights activist.
• Medvedev stresses Islam’s importance for Russia - Russia's religious life is a multi-confessional one and Islam is a faith with a vast influence. So President Dmitry Medvedev said during a meeting with leaders of Russian Muslim organizations.
• Tolerance of other faiths key to fight against extremism in Russia – Medvedev
• Zhyrinovsky wants reunite Eastern Ukraine with Russia
• Police officer killed, investigator injured in Russia's Caucasus - A police officer was killed and another injured in an attack in Russia's North Caucasus republic of Kabardino Balkaria on Thursday morning, a local police source said.
• Police kill three militants in S.Russia - Police officers killed three militants during a shootout in Russia's North Caucasus republic of Dagestan, the local interior ministry said.
• Village official shot dead S. Russia's Daghestan - The head of the Gedzhukh village administration in Russia's North Caucasus Republic of Daghestan has been shot dead near his house, a local police spokesman said on Thursday.
• 46 of 75 neutralized militants eliminated in Ingushetia in 2009 – police
• Medvedev Signals Support For Acting Ingushetian President - Russian President Dmitry Medvedev met on July 14 at his dacha near Sochi with Rashid Gaysanov, who as Ingushetian prime minister automatically assumed the duties of acting president following the June 22 suicide bomb attack that left President Yunus-Bek Yevkurov seriously injured.
• Will Moscow Throw Away A Unique Opportunity In Daghestan? - The name of Lieutenant General Adilgirey Magomedtagirov, who was named Daghestan's interior minister in 1998, has become synonymous with that arbitrary and heavy-handed approach to stamping out "religious extremism." Indeed, one could argue that Magomedtagirov did more than any other single individual to fuel that phenomenon.
• Medvedev’s Military Stagnation - Under Medvedev, current modernization plans assume a realistic approach toward building a modern military. If these measures are carried out, they would cut some of the deadweight from the officers’ ranks, establish a professional noncommissioned officers corps and increase the number of combat troops.
• Russian Weapon Is in Need of Rescue - Shortly before December’s failed test, Sergei B. Ivanov, a senior government official who oversees the project, predicted that the missile would enter production by the end of 2009. At a news conference in June, he said tests would continue at least through 2010.
• Russian spy devices to Norwegian shores - A Russian spy buoy was last week found on the shore of Skallelv, Arctic Norway. The device is the third of its kind found on Norwegian shores only in the course of the last year.
• SBU Challenges the FSB in Crimea - The SBU has officially given its Russian equivalent, the Federal Security Service (FSB), until December 13 to remove itself from Ukraine. SBU chairman Valentyn Nalyvaychenko warned that if the FSB has not left by that date, "then they would bear criminal responsibility. The criminal code contains an article on ‘espionage'" (.ua, June 28).
• Apartments May Be Built at Cherkizovsky
• 2 Accused of Taking Bribe to Free Cash in Bankrupt Bank
• Torrential rains cause river water rise, floods in Sakhalin
• Demographics Make Russia a Risky Long-Term Investment: Russia is a horrible long-term investment because it’s losing population at a percentage rate that could within 40 years match that of medieval Europe’s population loss during the plague years.
National Economic Trends
• Statistics: Russia’s trade surplus down 58% on year in Jan-May
• Industrial production rises in June
• Russia Won’t Reach Last Year’s Growth by 2012, Ministry Says
• Ruble Gains for Third Day Versus Dollar as Oil Near 1-Week High
• Russia c.bank injects 16.26 bln roubles via repos
• Banks ‘Agree’ to Cap Interest Rates at 18%
• CBR Behaves Differently - Since last Friday, the CBR has allowed two big moves in the rouble. First, the currency lost 4% against the EUR-USD basket on Friday-Monday. It then clawed most of the depreciation back on Monday-Tuesday
Business, Energy or Environmental regulations or discussions
• Russia’s Micex Index Fluctuates; Gazprom Rises, Polymetal Drops
• Magnitogorsk Made 1.92 Million Tons of Steel Products in Quarter
• Russia TMK H1 steel pipe shipments down 20 pct y/y
• Deripaska’s First Deputy Zinovieva Resigns, Basic Element Says
• Russian Railways May Face Early Repayment Calls, Vedomosti Says
• Vedomosti on potential breach of RZD loan covenants
• MTS Lent $100M More - Mobile TeleSystems said Wednesday that it had raised an additional $100 million, increasing its three-year syndicated loan signed in May to $695 million.
• Vimpelcom interested in acquiring Synterra
• OPK Shipyards Deliver the New Icebreaker "St. Petersburg"
Activity in the Oil and Gas sector (including regulatory)
• Russian energy players in cash hunt - Russia's oil and gas majors have returned to the debt markets recently as energy prices recovered.
• Russia Lukoil to brief bond investors –sources
• Lawyer: Sberbank Asked Sibir for $60M
• Stroytransgaz to cede stake in Algeria projects to Rosneft – paper
• PetroChina adds refining facilities for Russian oil
Gazprom
• Gazprom plans Eurobond roadshow from July 20 –source
• Tullow, Gazprom Jump in Kudu Bed - THE development of the Kudu Gas Field has been fast-tracked with Tullow Oil, majority shareholder in the project, confirming that they are considering Gazprom, the Russian natural gas giant with whom Government signed a memorandum of understanding (MoU) recently, as a partner in the N$14 billion project.
• Gazprom investment strategy to focus on matching supply with demand
• Azerbaijan-Gazprom agreement puts Nabucco in jeopardy - There is speculation that the deal is part of Russia's effort to control all of Europe's energy routes and make the Nabucco project redundant when considering the gas oversupply of South Stream, a Russian-orchestrated gas pipeline aiming to transfer Caspian gas via the Black Sea to Eastern Europe
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Full Text Articles
Basic Political Developments
Germany, Russia talks: gas, economy to dominate
By Richard Carter – 3 hours ago
MUNICH — German Chancellor Angela Merkel is set host Russia's President Dmitry Medvedev for talks dominated by efforts to avoid a new spat over gas supplies to Europe and the global financial crisis.
The two leaders will hold private talks at a picturesque castle near the southern city of Munich before being joined by key members of both governments, including the ministers for the interior, environment and economy, Berlin said.
"The talks will encompass the most important foreign policy questions, such as Iran, North Korea's nuclear programme, the Middle East peace process, as well as economic topics, such as the financial crisis and the read-out from the G8 meeting," Merkel's spokesman, Ulrich Wilhelm, said on Monday.
"They will discuss a wide range of issues, including on security, gas and economic issues," added a Kremlin official on condition of anonymity.
In addition, the two governments are poised to ink a raft of economic partnership deals, including a 500-million-dollar (357-million-euro) credit agreement, Medvedev's foreign policy aide Sergei Prikhodko said on Wednesday.
Among the documents to be signed or adopted will be a joint declaration on energy cooperation and an agreement between Russian Railways and Siemens to establish a joint venture to produce locomotives.
Nevertheless, with Germany easily Europe's biggest customer for Russian gas, the topic of supplies will likely top the agenda, analysts said, with Merkel seeking assurances that the gas crisis in January does not reoccur.
Russian supplies to much of Europe were cut off as part of a payment dispute between Moscow and Ukraine, which had a brutal effect on Germany during a bitterly cold winter.
Timofei Bordachev, director of the Centre for Comprehensive European and International Studies in Moscow, said the issue of shoring up Ukraine as a transit country for Russian gas would certainly feature in the talks.
"Russia and Germany understand each other here, both want to reinforce Ukraine as a reliable transit country for gas deliveries to Europe," he told AFP.
Alexander Rahr, a Russia expert with the German Council on Foreign Relations, said: "We expect new problems coming up, so we will definitely see gas coming up as an issue."
Only three days before the Munich talks, the European Union signed an agreement on a pipeline it hopes will reduce its dependence on Russian gas.
This Nabucco pipeline is a rival to the Nord Stream project -- led by state-controlled Russian gas giant Gazprom -- which would pump natural gas from Russia under the Baltic Sea to Germany.
Medvedev's aide Prikhodko said the talks would certainly encompass a discussion on Nord Stream, adding that on this topic, "cooperation and mutual understanding with the Germans is quite high."
Another bilateral economic issue likely to feature on the leaders' agenda is the possible takeover of troubled German carmaker Opel by Russian-backed Canadian auto parts maker Magna International.
Berlin agreed in late May to support a bid for a majority stake in Opel by Magna, which has teamed up with state-owned Russian bank Sberbank and Russia's second-largest auto maker GAZ.
However, Opel's parent company General Motors has also received interest from Brussels-based investment group RHJ International and from China's Beijing Automotive Industry Company (BAIC), throwing the deal into some doubt.
Prikhodko said Medvedev would push the deal in Munich. "We'll speak out in support (of the deal) and we'll call on (Germany) to support it too ... It's a useful deal," he said.
The atmosphere at the talks is likely to be warm, said Rahr, as relations between the two countries have improved markedly since Medvedev took the helm from Vladimir Putin, now prime minister, who will not be making the trip.
"They are almost back to where they were now. Merkel has shown she can work together with Medvedev," he told AFP.
President Medvedev flies to Germany to sign $704m credit agreement
Today, 10:49 PM
Vnesheconombank, Russia’s state development bank, will sign a 500 million euro ($704 million) credit agreement with Frankfurt-based Kreditanstalt fuer Wiederaufbau for financing of joint projects.
The agreement will be signed in Munich tomorrow after talks between Russian President Dmitry Medvedev and German Chancellor Angela Merkel, Sergei Prikhodko, an aide to Medvedev, told reporters in Moscow today. The money will be used primarily to finance projects in machine-building, he said.
Medvedev and Merkel will discuss topics including preparations for the Group of 20 summit in September, Russia’s relations with the North Atlantic Treaty Organization, energy security and Russian proposals for a new agreement on European security, Prikhodko said.
The Russian delegation will “express our support” for Magna International Inc.’s bid for General Motors Corp.’s Opel division during the one-day Munich trip, Prikhodko said. OAO Sberbank, Russia’s biggest lender, joined Magna in its Opel bid.
The two leaders have no plans to discuss a July 13 agreement on the Nabucco natural-gas pipeline project, aimed at reducing Europe’s reliance on Russian gas, since neither country is a participant, Prikhodko said.
During the visit, the city of St. Petersburg will sign an initial agreement with VTB Group, Russia’s second-biggest bank, and Fraport AG, operator of the Frankfurt airport, to renovate Pulkovo Airport, which serves Russia’s second-largest city.
Russian-German trade reached a record $67.2 billion last year, while trade in the first quarter was less than half the level of the same period in 2008, Prikhodko said.
Russia, Germany to sign loan deal to finance joint projects
MOSCOW, July 16 (RIA Novosti) - Russia and Germany will sign a credit agreement with 500 million euros ($706 mln) to finance joint projects after talks between the countries' leaders on Thursday, a Kremlin aide said.
Russian President Dmitry Medvedev and German Chancellor Angela Merkel will meet in Munich on Thursday to discuss bilateral trade, economic cooperation, and energy security.
"A 500-million euro credit agreement is planned to be signed between the Vnesheconombank state-run corporation and Germany's KfW Ipex-Bank," Sergei Prikhodko said. The funds will be spent on Russian-German projects, primarily in mechanical engineering.
German engineering giant Siemens AG and rail monopoly Russian Railways (RZD) are set to sign an agreement to establish a joint venture for the production of new generation locomotives.
The parties are also expected to sign a memorandum of understanding to modernize Pulkovo airport in Russia's second city of St. Petersburg.
According to Prikhodko, Medvedev will urge German authorities to support the purchase of the ailing German car giant Opel by an international consortium of Austrian-Canadian auto supplies company Magna and Russia's largest bank, Sberbank.
"We will call on them to support the deal. We will also voice our support for it," the aide said.
The German government, Magna International and Sberbank, reached an agreement on May 30 for the consortium to take over Opel, part of U.S. car giant General Motors. Russian truck maker GAZ, owned by billionaire Oleg Deripaska is acting as industrial partner.
Opel on Medvedev’s Agenda in Germany
16 July 2009 By Anatoly Medetsky / The Moscow Times
President Dmitry Medvedev and German Chancellor Angela Merkel have a long list of business to discuss when they meet in Munich on Thursday, but perhaps none is so pressing as a Russian-backed bid for control of Opel.
Medvedev is to travel to Germany with ministers and business leaders for a one-day summit where he will promote a bid by Canada’s Magna and Sberbank to purchase the German unit of General Motors, Kremlin foreign policy aide Sergei Prikhodko said Wednesday.
The German federal government chose Magna and Sberbank in May as its preferred bidders for the carmaker, but two rival offers have since gained some traction with General Motors.
The U.S. automaker received offers from China’s BAIC and Brussels-based private equity firm RHJ International. Talks with Magna hit a snag over the Canadian firm’s demand for control of GM’s Chevrolet brand in Russia.
“[The talks] are intensive … and I would not be bound by a July 15 deadline,” Sberbank chief financial officer Anton Karamzin said Tuesday, referring to Magna’s self-imposed deadline for an Opel deal. A German state minister said Tuesday that he expected the Magna deal to be signed this month.
Sberbank chief German Gref will join Medvedev and remain in Germany an extra day, a spokeswoman said.
In other deals, state development bank VEB is expected to sign a 500 million euro ($705 million) credit agreement with German state bank KfW to fund joint projects in areas such as machine building, Prikhodko said.
VEB and St. Petersburg City Hall plan to work with Frankfurt Airport to modernize Pulkovo Airport, and Russian Railways, or RZD, is preparing a venture with Siemens to make new-generation locomotives, Prikhodko said.
Anja Uhlendorff, a Siemens spokeswoman in Germany, said the deal would follow up on a memorandum of understanding that Siemens, RZD and Sinara Transport Machines, a Russian manufacturer of freight locomotives controlled by Dmitry Pumpyansky, signed in May. Siemens and Sinara will jointly build about 100 locomotives per year for RZD starting next year.
Medvedev and Merkel will also discuss the possibility of Russia’s taking a stake in shipbuilder Wadan Yards MTW, German government spokesman Thomas Steg said. The company filed for bankruptcy last month.
They will also discuss the “political aspects” of Nord Stream, an undersea pipeline project to transport Russian gas to Germany, the Kremlin said in a statement. Prikhodko said they would also exchange opinions on Medvedev’s energy security proposals.
On the political agenda, Medvedev and Merkel will look at Afghanistan, Iran and North Korea and discuss Medvedev’s proposals for a European Security Treaty, Prikhodko said. They will also discuss rebuilding Russia-NATO ties, the Kremlin statement said.
The Cabinet press office said the finance, economic development, natural resources and environment, energy and interior ministers would also attend.
3-Way Gas Talks on Friday
BRUSSELS — The European Union will host a second meeting Friday involving itself, Ukraine, Russia and international lenders to discuss Kiev’s bid for funds to buy Russian gas and ensure stable supplies to Europe, a spokesman said.
The meeting will discuss Kiev’s funding request in the light of gas sector reforms proposed by Prime Minister Yulia Tymoshenko, European Commission spokesman Mark Gray said Wednesday. (Reuters)
Havel, postcommunist intellectuals warn Obama of Kremlin – press
published: 16.07.2009, 07:30 | updated: 16.07.2009 07:47:25
Prague - Czech Vaclav Havel and other former politicians and intellectuals from eastern and central Europe warn U.S. President Barack Obama of Russia in an open letter sent to him, the Czech daily Lidove noviny (LN) writes.
Former Czech deputy prime minister Alexandr Vondra brought the letter to Washington on Wednesday and he is to present to the White House, the Department of State and the U.S. Congress.
Vondra is one of the organisers of the letter that was also signed by former Czech foreign minister Karel Schwarzenberg, the paper writes.
The signatories express concern about the influence of Russia and about little interest that the United States show in their region.
They say in the letter that they hoped that the relations with Russia would improve and that Moscow would finally recognise the sovereignty and independence of the countries of the former Soviet bloc after they joined the European Union and NATO, but in vain, according to LN.
If the United States scrap the project of missile defence bases in the Czech Republic and Poland, it may undermine the credibility of the USA in the region, the paper quotes the signatories as saying.
Apart from Czechs, the letter was signed by personalities from Hungary, Poland, Bulgaria, Estonia and other new EU member countries, LN writes.
The letter appears shortly after Obama's first visit to Moscow where several U.S.-Russian deals were made. The Kremlin said it considers it the first crucial step towards improved cooperation between the two countries and it criticised the U.S. missile defence plans in central Europe.
Author: ČTK
ctk.cz
Sultanov in Beirut to Discuss Mideast Peace with Lebanese Officials
Russian Deputy Foreign Minister Alexander Sultanov arrived in Beirut at dawn Thursday for a two-day visit during which he will discuss the Middle East peace process with Lebanese officials.
Al-Mustaqbal newspaper said Sultanov's visit is not liked to the formation of the Lebanese cabinet. However, he will stress during his talks with Lebanese officials on government formation as part of national dialogue and away from regional interference.
The state-run National News Agency said Sultanov will meet with a number of officials in Beirut and will discuss with them Russia's role in supporting Lebanon.
Lebanon is the first stop in the Russian official's tour to the region, which includes Syria, Jordan, the Palestinian territories and Israel.
Al-Mustaqbal said that Moscow has sent Sultanov to the region because he is the Russian envoy for the Middle East Quartet -- comprising the EU, Russia, the United Nations and the United States.
The newspaper added that the envoy's mission is to encourage parties concerned with resuming peace talks. Consequently, he will listen to the lebanese leaders' viewpoints on efforts to achieve peace in the region.
Beirut, 16 Jul 09, 11:09
Russia gives credit to Iceland
2009-07-16
The Russian government has decided to give Iceland a 500 million USD credit in crisis aid.
The Russian government, itself struggling with major economic hardships, has granted Iceland a 500 million USD loan, Deputy Finance Minister Dmitry Pankin yesterday told newspaper Vedomosti. That message comes less than a month after an official Icelandic delegation visited Moscow.
Conditions for the credit remain unclear. A press spokesman for the Icelandic government says however to the newspaper that negotiations are still ongoing.
Iceland quickly approached Russian authorities after the collapse of its economy last year. Negotiations with the Russian have been going on for months. Finance Minister Kudrin quickly admitted however that the bid for a 4 billion USD loan, first requested by Iceland, would be too much for Russia.
Russia has only minor economic relations with Iceland. The North Atlantic state remains however a geo-strategically highly interesting partner for Russia. In addition, it is believed that Russian corporate interests have invested heavily in parts of the Icelandic economy.
The crisis-ridden Icelandic economy is from before supported by a loan from the IMF. All the Nordic countries have also contributed substantial sums to help Iceland overcome it historic economic downturn.
The economic crisis is about to significantly alter the political adherence of Iceland. EU membership is in the pipeline and analysts have also speculated about a possible new role of Russia on the island.
That speculation was spurred by Icelandic President Olafur Ragnar Grimsson during a dinner with foreign diplomats late last year. Mr. Grimsson then shocked the diplomats saying that Russia could be invited to take use of the strategically important Keflavik airbase. As BarentsObserver reported, the president also said that his country needs “new friends”
OECD accession talks to start autumn
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July 16, 2009
Vladimir Tkachenko, deputy director of the Economic Development Ministry's Trade Negotiations Departmen, has said talks on accession to the OECD will start autumn 2009, according to Interfax.
"Today's consultations are an important phase in the preparations for official talks, to begin in autumn 2009, when our memorandum will be discussed with the OECD leadership and when OECD committees will convene to consider it," Tkachenko said, as quoted by Interfax.
Nicola Bonucci, OECD's director for legal affairs, was quoted as saying that attention will focus on corporate governance, environmental protection, tax policy, the fight against corruption and access for investments. He said the technical process of drawing up recommendations last two years this normally lasts for two years and the pace of accession depends on the applicant and on how quickly the applicant will heed the organization's norms and recommendations, according to Interfax.
Structural fault in MIG-29 Fighter Planes
Submitted by Business Desk on July 16, 2009 - 11:29
Russia has pointed out structural faults in MiG-29 aircraft. There was a MiG-29 accident in Russia in December 2008. RAC-MiG has intimated that corrosion on the Fin Root Ribs has been identified as the cause of crack development. There is no plan to decommission MiG-29 aircraft. The repair scheme and preventive measures are in place and IAF has not encountered major problems concerning the issue. IAF has not entered into a new deal for procurement of MiG-29 aircraft.
This information was given by Defence Minister Shri AK Antony in a written reply to Shri Prabhat Jha & Balavant Alias Bal Apte in Rajya Sabha today
IAF’s air-to-air missiles are faulty: Report
New Delhi: Nearly half of Indian Air Force’s beyond visual range (BVR) air-to-air missiles that were tested either did not home in on targets during evaluations or failed ground tests because they were ageing much before their shelf lives, a report claimed on Thursday.
As per the report by an leading English daily, the Comptroller and Auditor General (CAG) in its yet to be released report has raised serious questions on the usability of the R 77 (RVV-AE) BVR missiles, each costing Rs 2 crore, which are fitted on board the Su-30 MKIs, MiG-29s and MiG-21 Bisons.
[pic]India has been procuring these missiles from Russia since 1996 and has even ordered for more than 2,000 missiles after the Kargil conflict out of which 1,000 have already been delivered.
The missiles failure has affected the “operational preparedness” of the IAF, the daily said quoting CAG report.
Moreover, just yesterday Defence Minister A K Antony had disclosed that there were structural problems with India’s lead fighter planes, the MiG-29.
Kyrgyz Security Summit
Russia and its former Soviet allies will hold a special security summit in Kyrgyzstan in late July, a Kremlin source said Wednesday.
Kyrgyzstan initiated the talks between President Dmitry Medvedev and his counterparts in the Russian-dominated Collective Security Pact, the source said. (Reuters)
Russian leader arrives to discuss force projecting
16/07-2009 09:16, Bishkek – News Agency “24.kg”, By Daniyar KARIMOV
President of Russia Dmitry Medvedev intends to discuss widening of Russian military potential in Kyrgyzstan as part of his upcoming working visit to Bishkek, Argumenty.ru reported.
Meantime, Russia’s military power projection is likely to be touched during the OSCE informal summit to run in Kyrgyzstan this summer.
If to believe latest reports of the Russian media, Kremlin plans to open another military base in the southern city of Osh. Although this version is officially disconfirmed yet, it has already triggered unrest in Uzbekistan, which leadership spoke against any foreign bases along its border territory. Kazakhstan by contrast supported the idea.
The agenda of Medvedev’s visit remains secret yet.
Russia's Ex-Soviet Neighbors To Snub Summit – Kremlin
MOSCOW (AFP)--Russia will host an informal summit of ex-Soviet nations this week but several leaders will snub the event as Moscow's ties with its neighbors grow more fraught, a Kremlin official said Wednesday.
At least four leaders - Ukrainian President Viktor Yushchenko, Uzbekistan's Islam Karimov, Turkmenistan's Gurbanguly Berdymukhamedov and Belarus President Alexander Lukashenko - will be no-shows at a horse race the Kremlin is hosting in lieu of a formal summit, said Kremlin aide Sergei Prikhodko.
The horse race at Moscow's Central Hippodrome on Saturday is an annual tradition that in the past has been attended by leaders of the Commonwealth of Independent States, a post-Soviet grouping.
"As per tradition we've sent out invitations to all the CIS leaders with the exception of Georgia, of course," Prikhodko, the top foreign policy aide to President Dmitry Medvedev, told reporters in the Kremlin.
"Some are busy," Prikhodko said, while adding that Moscow won't overreact. "We are not dramatizing and not getting upset."
The CIS comprises all the former Soviet republics with the exception of Estonia, Latvia and Lithuania, as well as Georgia, which announced its withdrawal following its war with Russia last August.
Uzbekistan's Karimov said he couldn't attend, citing scheduling conflicts, said Prikhodko.
Yushchenko's deputy chief of staff, Andriy Goncharuk, confirmed that the Ukrainian president wouldn't attend due to other engagements.
Earlier this year the Kremlin said it expected Berdymukhamedov, the reclusive leader of gas-rich Turkmenistan, to attend the horse race for talks on a key energy deal that would boost Russia's hand in Central Asia.
Sergei Bagapsh and Eduard Kokoity, leaders of the breakaway republics of Abkhazia and South Ossetia, respectively, will attend the horse race, said Prikhodko.
"They will likely be there. They like horses," he said.
Russia has pushed to regain lost influence in the region after it was irritated by U.S. efforts to form political and military ties with post-Soviet countries.
Relations with Belarus and Turkmenistan took a beating in recent months as the countries - formerly solid allies of Russia - have sought closer ties with the West.
Also Saturday, the Kremlin will host three-party talks involving Armenian leader Serzh Sarkisian and his Azerbaijani counterpart Ilham Aliyev on the dispute over Nagorny Karabakh, a separatist enclave of Azerbaijan with a largely ethnic Armenian population.
The three leaders last met in Saint Petersburg last month.
Duma Approves $10Bln Fund to Help Allies
16 July 2009The Associated Press
Russia set up Wednesday a $10 billion crisis fund to help former Soviet nations weather the global economic crisis — and, analysts say, to increase Moscow’s clout in the region.
The fund was created to aid Belarus, Kazakhstan, Kyrgyzstan and Tajikistan, all members of a group called the Eurasian Economic Community. But it is not clear whether the aid will be in the form of loans or grants and what terms might be attached.
The State Duma passed an agreement on the federally funded cash pool, originally announced by President Dmitry Medvedev in February, by a vote of 409-5.
In a statement Wednesday, the government said the aim was to allow the economies of those countries to weather the crisis effectively and to ensure further economic integration was not impeded.
Russia will contribute $7.5 billion to the fund, with the rest coming from the other members of the Eurasian Economic Community.
In recent months, Russia has used its huge pile of cash and assets to dole out billions of dollars to governments in the former Soviet space.
Observers say Moscow hopes to prevent other former Soviet states to follow the path of Ukraine and Georgia, which are determined to strengthen their ties to the West.
The Kremlin appears to have been alarmed by recent moves, particularly in Belarus, to widen economic cooperation with the European Union.
The EU recently lifted sanctions on Belarus after its authoritarian leader released some political prisoners and made other liberal reforms. President Alexander Lukashenko has publicly sought investment from the EU.
Chechen leadership under fire over Russian activist's murder
Jul 16, 2009, 8:16 GMT
Moscow - Russian human rights organization Memorial has lashed out strongly against the Chechen government over the kidnap and murder of rights activist Natalya Estemirova.
'I am convinced that the leadership of the Chechen republic is behind her murder,' said Oleg Orlov, chairman of Memorial, for which Estemirova had worked.
He did however not say whether President Ramzan Kadyrov personally or any of his subordinates, had ordered the murder of the activist who had investigated rights abuses in Chechnya.
Kadyrov has in the past strongly criticized Estemirova's work and threatened other Memorial staff, according to Orlov.
The Chechen president has denied this, saying Estemirova's murder was a threat to peace in Chechnya.
Her body was discovered along a highway in the republic of Ingushetia with multiple gunshot wounds to the head and chest. She had earlier been kidnapped. The 50-year-old activist had been kidnapped in Grozny, the capital of neighbouring Chechnya hours earlier.
Like Russian journalist Anna Politkovskaya who was gunned down in Moscow in 2006, Estemirova had held the state responsible for violence against the civilians in Russia's North Caucasus.
Murder of Chechen human rights activist seeks to undermine peace
NAZRAN, July 16 (Itar-Tass) - The reports about a cynical and brutal murder of human rights activist Natalia Estemirova were taken with profound indignation, acting Ingush President Rashid Gaisanov said in a statement transmitted to Itar-Tass on Thursday.
“This crime is seeking to undermine peace and accord not only in Chechnya and Ingushetia, but also on the whole North Caucasus and all over Russia,” Gaisanov said. On behalf of the Ingush people he expressed deep condolences and support to the near and dear of the killed human rights activist. “We mourn together with you and share pain of the irreparable loss,” the statement runs.
Rashid Gaisanov expressed confidence that “the masterminds and perpetrators of this barbaric assassination will be found and punished deservedly.”
According to the Ingush prosecutor’s office, Natalia Estemirova was kidnapped at 8.30 a.m. Moscow time on Wednesday in Grozny not far from her house. Estemirova, 50, was found dead at about 4 p.m. Moscow time on Wednesday at the 100th kilometer of the Caucasus federal highway in Gazi-Yurt, the Nazran region of Ingushetia. Ingush Prosecutor Yuri Turygin suggested “it is necessary to search for the killers at the place, where Estemirova was kidnapped.” A criminal case was opened under several articles of the Criminal Code (murder, illegal storage and carrying of weapons and ammunition).
Chechen President Ramzan Kadyrov instructed the republican law enforcement agencies to do their best to solve Estemirova’s murder. According to Kadyrov, “The kidnapping and murder of the human rights activist are cynical, demonstration and provocative.” The murder “is a well masterminded action seeking the goal to mar the name of the peoples of Ingushetia and Chechnya;
distract attention and the forces of the law enforcement agencies involved in large-scale special operations, in which policemen of two republics and federal interior departments pooled efforts to destroy dozens of terrorists and their warlords for a short period of time.”
For his part, speaker of the Ingush parliament Makhmud Sakalov believes that the criminals pursued the goal to hamper the work of Estemirova as a human rights activist, destabilize the situation in the region and drive a wedge between two fraternal peoples – Ingushetia and Chechnya.
Natalia Estemirova was born in the Saratov region. She graduated from the history faculty of the Grozny State University. Before 1998 she worked as a history teacher in a Grozny school, then she engaged in human rights journalism. In 2000 Estemirova moved to Ingushetia and became an activist of the Memorial human rights center. In 2004 she was awarded with the Right to Existence Prize established by the Swedish parliament for outstanding views and the work for the sake of humankind. In 2007 Estemirova was awarded with the first annual prize in the name of Anna Politkovskaya in London. Estemirova was fighting actively with the falsification of criminal cases. She was a member of the committee for keeping conditions at penitentiaries, visited detention centers and investigated the abductions.
In 2004 Natalia Estemirova was nominated as a candidate for the Sakharov Prize “For Freedom of Thought”.
Russian press muted on activist
AFP
Published:Jul 16, 2009
Russia’s media reacted quietly to the latest murder of a top campaigner in the country, with the news absent from state television headlines and front pages of several newspapers.
• ‘Politkovskaya murder ordered’
• Russian official targeted in blast
• Police chief killed in Russia
The murder on Wednesday of Natalya Estemirova, who worked for the top Russian rights group Memorial in Chechnya, has already provoked a wave of international condemnation and calls on Moscow to bring the killers to justice.
“Killed for the truth,” headlined the Novye Izvestia daily, one of the few newspapers to put the news of the killing on its front page.
It added that Estemirova “until the very last day... informed the public of crimes committed by Russian military and Chechnya’s troops”.
The opposition daily Kommersant reported the murder in a factual manner with a smaller story on its front page which was still dwarfed by its lead headline on interest rate changes.
“Her collection of data on kidnappings and summary executions committed both by federal and local law enforcement agents, often irritated Chechen authorities,” it noted.
Only the Gazeta daily made the killing its main story, with a photograph of Estemirova speaking through a loud hailer and the headline “Chechnya rights activist hit by two bullets.”
However broadsheet pro-government dailies Izvestia and Rossiiskaya Gazeta did not mention Estemirova’s killing at all.
Unsurprisingly there was also no mention in the tabloid dailies like Komsomolskaya Pravda.
State broadcaster Channel One briefly mentioned the killing in its evening bulletin on Wednesday but the news did not feature in its headlines on Thursday which instead led on heavy rains on Russia’s Pacific island of Sakhalin.
Russian newspapers and television channels have come under increasing state ownership and influence over the past decade although opposition voices remain, particularly in weekly news magazines and the Internet.
Russia’s best known opposition newspaper the Novaya Gazeta - for whom Estemirova had worked 0 publishes three times a week. Its next issue is due on Friday.
Chechen leader vows to investigate activist murder
2009-07-16 08:30:03 -
GROZNY, Russia (AP) - The Kremlin-installed leader of Chechnya says he will personally oversee the investigation into the brutal murder of a top Russian human rights activist.
Wednesday's daylight slaying of Natalya Estemirova in the volatile North Caucasus republic followed the killings in recent years of reporters, lawyers and other activists who challenge the official line.
It appeared to confirm that Russia remains a place where political murders are committed without fear of punishment.
Colleagues of Estermirova accuse Chechen leader Ramzan Kadyrov of involvement in her murder. Estemirova investigated rights violations in his province.
Kadyrov's spokesman Alvi Kerimov said Thursday that Kadyrov called the murder «cynical» and «provocative.
The U.S. and European Union have condemned the attack.
Medvedev 'indignant' at Estemirova death
July 16, 2009 - 7:19AM
Russian President Dmitry Medvedev has voiced "indignation" at the murder of prominent rights activist Natalya Estemirova and ordered a top-level investigation, his spokeswoman said.
"He expressed indignation at this murder and ordered the head of the prosecutor general's investigative committee ... to take all necessary steps to investigate" the killing, Kremlin spokeswoman Natalya Timakova said on Wednesday, quoted by Russian news agencies.
Estemirova, a prize-winning activist, was found murdered on Wednesday hours after she was abducted from her home in Chechnya, officials said.
Her corpse, which showed signs of a violent death, was found at 5.20pm (2320 AEST Wednesday) near the city of Nazran in Ingushetia, the region neighbouring Chechnya, ITAR-TASS news agency said, citing the regional interior ministry.
Timakova said it was "obvious" the murder may have been linked to Estemirova's activities as a rights activist, Interfax said, and added that Medvedev had expressed his personal condolences to her family and friends.
Russian Activist’s Killing Must Be Investigated, U.S., EU Say
By Lucian Kim and Paul Tighe
July 16 (Bloomberg) -- The U.S. and European Union called on Russia to investigate the killing of Natalya Estemirova, a human rights activist found dead after being kidnapped in the southern region of Chechnya.
“The murder of Natalya Estemirova in the northern Caucasus draws attention to the necessity of protecting human rights defenders in Russia,” the EU Presidency, currently held by Sweden, said in a statement late yesterday.
The Russian government should “demonstrate that lawlessness and impunity will not be tolerated,” Mike Hammer, a spokesman for the U.S. National Security Council, said in an e- mailed statement from Washington.
Estemirova was kidnapped outside her home in the Chechen capital of Grozny yesterday, the human rights group Memorial said on its Web site. She helped journalist Anna Politkovskaya, who was killed by gunmen in 2006, with her reports on human rights abuses in Chechnya and was honored for her work by a group in the European Parliament.
Estemirova was found dead in the neighboring republic of Ingushetia at about 5 p.m. yesterday, the regional Interior Ministry said on its Web site. Investigators are gathering evidence at the site, the ministry said.
Her death is “especially shocking” coming one week after President Barack Obama met with civil society activists in Moscow, including those from Memorial, Hammer said in his statement.
“Such a heinous crime sends a chilling signal to Russian civil society and the international community and illustrates the tragic deterioration of security and the rule of law in the North Caucasus over the last several months,” he said.
Brutal Act
The EU condemns the “brutal act” and calls on Russian authorities “to try to establish who’s responsible and take the action that is called for,” Swedish Foreign Minister Carl Bildt told reporters in Strasbourg, France yesterday.
Russia’s President Dmitry Medvedev was angered by the murder and ordered a full investigation, ITAR-TASS reported.
Violence continues in the Russian North Caucasus even after the federal government lifted a 1999 decree that imposed anti- terrorist operations in Chechnya. Mostly Muslim Chechnya has been engulfed in two wars between separatists and federal troops since the collapse of the Soviet Union. The region is now controlled by Kremlin-backed President Ramzan Kadyrov.
A number of Kadyrov critics, including Politkovskaya, have been killed in recent years. Human Rights Watch, an international rights watchdog, issued a report in 2006 that accused Kadyrov’s security units of illegal detention and torture, including the use of electric shocks and beatings.
Politkovskaya was gunned down in her Moscow apartment building. Her killers are still at large.
A body preliminarily identified as Estemirova’s, with gunshot wounds to the head and chest, was discovered 100 meters from a highway in Ingushetia, the Investigative Committee of the Russian Prosecutor General’s Office said on its Web site.
To contact the reporters on this story: Lucian Kim in Moscow at lkim3@; Paul Tighe in Sydney at ptighe@.
Last Updated: July 15, 2009 23:47 EDT
Chechen human rights activist presumably killed in Ingushetia
MOSCOW, July 15 (Itar-Tass) -- The body of a woman with gunshot wounds that presumably belongs to Chechen human rights activist Natalia Estamirova was found in Ingushetia on Wednesday.
The body with two gunshot wounds in the chest and the head was found in a forest 100 metres from the federal highway Kavkaz near the village of Gazi-Yurt, Nazran District, the Investigation Committee under the Prosecutor General’s Office (SKP) said.
“In the woman’s bag was a passport in the name of Natalia Estamirova, a certificate of a member of the expert council under the office of the Russian ombudsman in Chechnya, and a mandate of a public observer of the commission for public control over human rights in places of incarceration and assistance to persons held in places of incarceration,” an SKP official said.
The woman was kidnapped in Grozny at 08:30 Moscow time (0430 GMT) on Wednesday.
Ingush law enforcement agencies told Itar-Tass several venues of the investigation would be pursued. The main of them are: professional activity in Chechnya and a murder induced by a hostile personal relationship.
“Experienced criminalists from the central office in Moscow will be dispatched to help the investigation,” SKP spokesman Vladimir Markin said.
Russian President Dmitry Medvedev was angered by the murder of the Chechen human rights activist and ordered the SKP chief Alexander Bastrykin to take all necessary measures to investigate it.
Estamirova was born in the Saratov region of Russia. She graduated from Grozny University. Until 1998 she worked as a teacher of history at one of schools in Grozny and then engaged in human rights journalism.
In 2000, she moved to Ingushetia and started working for the human rights centre Memorial. In 2004, she was awarded the “Right Livelihood” prize established by the Swedish parliament for outstanding views and work on behalf of mankind.
In 2007, she received the first annual Anna Politkovskaya Prize.
Estamirova fought relentlessly against falsification of criminal cases, was a member of the commission on the terms of incarceration, visited investigation prisons, and investigated abductions.
According to Ingushetia’s parliament speaker Makhmud Sakalov, Estamirova was known in the region as “a courageous and brave person who defended the rights of ordinary people and who helped them.”
Memorial Head in Chechnya Shamkhan Akbulatov told Itar-Tass that Estamirova was a human rights activist in the real sense of this word. “She was fearless and boldly defended the truth and protected the interests of people. She was killed because of her professional work,” he said.
Rights Activist Abducted and Killed
16 July 2009 By Nikolaus von Twickel / The Moscow Times
Natalya Estemirova, a prominent human rights activist who documented abductions and murders in the North Caucasus, was snatched off a Grozny street Wednesday morning and found dead hours later along an Ingush highway.
The horrific killing of Memorial’s representative to Chechnya sent shock waves through the human rights community, and President Dmitry Medvedev ordered an investigation.
The attack also may put international attention back on the North Caucasus, where violence has spiraled in recent weeks.
Attackers grabbed Estemirova as she left her Grozny home at around 8:30 a.m. Wednesday and forced her into a white Zhiguli, Memorial said.
“She could only shout that she was being kidnapped,” the human rights group said in a statement on its web site.
When Estemirova failed to appear at scheduled meetings, Memorial representatives went to her home and learned about the abduction from an eyewitness, Memorial said. She had several meetings planned for the day, including a trip to the Stavropol region with Chechen Interior Ministry officials.
Estemirova’s body was found at around 4:30 p.m. lying in grass about 100 meters from the Kavkaz federal highway near the village of Gazi-Yurt, north of Ingushetia’s main city of Nazran, the Investigative Committee said.
Estemirova had been shot repeatedly in the head, chest and abdomen, most likely with a 9 mm Makarov pistol, investigators said. Her purse was lying nearby, and it contained her passport and papers identifying her as a human rights activist.
Estemirova, a 50-year-old single mother, had frequently spoken out against violence and kidnappings in Chechnya. She had also worked as a freelance journalist and was awarded the first annual Anna Politkovskaya Award in 2007 for her work as a female human rights defender.
Reporters Without Borders urged the authorities to bring Estemirova’s killers to justice. “A human rights activist’s abduction in the heart of Grozny and ensuing murder at a time when Chechnya is supposedly safe again shows that, despite the optimistic claims, the issue of the Caucasus has not been resolved,” the media watchdog said in an e-mailed statement.
The Kremlin announced an end to counterterrorism operations in Chechnya earlier this year, but violence has continued to rattle the republic and has increased in Ingushetia and Dagestan.
Estemirova helped Reporters Without Borders conduct a fact-finding visit to Chechnya, Ingushetia and Dagestan in March. “The information and analyses she shared with Reporters Without Borders reinforced our conviction that the Caucasus is on the brink of chaos and that human rights activists like her are bravely filling the gap left by a dwindling independent press,” it said.
Medvedev’s spokeswoman Natalya Timakova said the president was outraged by Estemirova’s killing and had ordered Investigative Committee chief Alexander Bastrykin to investigate.
“Unfortunately, it is clear that this premeditated murder might be linked to Natalya Estemirova’s human rights work,” she said, Interfax reported. “So the punishment for the criminals should be that much harsher.”
The Chechen government saw the killing as an attempt to undermine stability in the republic. “She was well known to all of us, and it is outright tragic that this happened now, when the situation in Chechnya is stabilizing,” Timur Aliyev, an adviser to Chechen President Ramzan Kadyrov, told The Moscow Times.
Human rights groups have accused Kadyrov of kidnappings, torture and murder to keep order in the republic. Kadyrov denies the charges.
Lev Ponomaryov, a prominent human rights activist, said he had no doubt that Estemirova’s death was linked to her human rights activities. “I knew her very well. She had received many threats,” Ponomaryov told Interfax.
Estemirova, who was born in the Saratov region, joined Memorial in 2000 after stints as a history teacher and journalist in Grozny. She was the recipient of the Right Livelihood Award, known as the Alternative Nobel Peace Prize, by Sweden’s parliament in 2004, and a medal from the European Parliament in 2005. She had worked closely with Politkovskaya, who was shot dead in her Moscow apartment building in 2006, and human rights lawyer Stanislav Markelov, who was killed in central Moscow in January.
Violence, meanwhile, has continued to grip Chechnya and surrounding republics this week, killing at least 14.
On Wednesday, gunmen killed an Ingush court marshal and a passenger in his car on the same highway were Estemirova’s body was found hours later.
In Chechnya, four Interior Ministry troops were killed and five were injured Tuesday in a gunbattle with rebels in the mountainous Vedeno district. A day earlier, a bomb attached to a police truck killed a policeman in Grozny.
In Dagestan, ambushes and gunbattles killed at least seven this week.
Last month, a suicide bomber badly injured Ingushetia’s president, and snipers killed Dagestan’s interior minister.
Analysts said the violence was worse than the usual summer peak when rebels can take shelter in mountain forests. Speculation has been rife that regional officials have been paying rebel leaders not to attack them.
Maxim Agarkov, an analyst with the SK-Strategia think tank, said a reduction in funds sent from Moscow to the North Caucasus was partly to blame.
Agarkov also said that mounting unrest in Chechnya might be linked to the lifting of the counterterrorism operation in the spring, which enabled authorities there to introduce a local customs levy.
“Federal bureaucrats do not like this at all because they fear losing revenues,” he said.
Medvedev stresses Islam’s importance for Russia
15 July, 2009, 17:52
Russia's religious life is a multi-confessional one and Islam is a faith with a vast influence. So President Dmitry Medvedev said during a meeting with leaders of Russian Muslim organizations.
The statement was made as Medvedev was paying a visit to the country's central Mosque in Moscow to see ongoing reconstruction work.
After being shown around the historical part of the mosque and a section under construction, Medvedev met with muftis.
Medvedev stressed the importance of Islam in the country's internal affairs.
”Russia is a multi-national and multi-confessional country. Russian Muslims have enough respect and influence. Muslim foundations are making an important contribution to promoting peace in society, providing spiritual and moral education for many people, as well as fighting extremism and xenophobia,” he said before adding:
“There are 182 ethnic groups living in Russia, and 57 of them claim Islam as their main religion. This figure speaks for itself.”
The president also stressed the importance for religious Muslim organizations to have their own system of training imams and teachers, and promised the government would continue to assist in this work.
15 July 2009, 17:53
Tolerance of other faiths key to fight against extremism in Russia – Medvedev
Moscow, July 15, Interfax - Promoting tolerance toward people of other faiths is a major task amid intensive extremist activities occurring in Russia today, President Dmitry Medvedev said.
"Everything is still very complex in the world. There exists ethnic and religious conflicts. Unfortunately, a surge in extremist sentiments can be observed in many regions of the planet. And, to our regret, extremist organizations have been quite active in Russia," Medvedev said at a meeting with the country's muftis on Wednesday.
Extremists use different slogans - both Islamic and non-Islamic, as well as slogans that have nothing to do with their faith, the president said.
"But, nevertheless, this factor is quite complex. It destabilizes the situation in our country. And we certainly have to bear it in mind and to take all the necessary measures to neutralize it. Given these conditions, our crucial joint task is to spread the ideas of tolerance toward people of other faiths and tolerance in general and to carefully treat the spiritual values and traditions, as well as the cultural diversity, of all peoples living in our multiethnic country," he said.
// 16.07.2009 // 11:14 //
Zhyrinovsky wants reunite Eastern Ukraine with Russia
.ua
The Eastern Ukraine will be included into the Russian Federation in future, Vice Speaker of the State Duma of the Russian Federation Vladimir Zhyrinovsky claimed.
“I am sure the referendum will be held and the Eastern Ukraine will have a desire to reunite with Russia. It is the best solution of the problem”, Novy Region – Kyiv cites Russian politician as saying.
“The Russians must study the subjects in the Russian language. Our fleet must be in Sevastopol for always”, Vladimir Zhyrinovsky stressed. At the same time, he considers that Russian authority should not help independent Ukraine.
“The biggest mistake of the USSR was to give resources and funds to someone. There is gas for 50 years in Kazakhstan. But in Russia people stoke with firewood. We gave everything to Ukraine. We ceded Crimea to them – 40 territories. But Ukrainians begin to prohibit the Russian language. We should not help anyone while we have problems in our country”, Vladimir Zhyrinovsky explained.
Police officer killed, investigator injured in Russia's Caucasus
MOSCOW, July 16 (RIA Novosti) - A police officer was killed and another injured in an attack in Russia's North Caucasus republic of Kabardino Balkaria on Thursday morning, a local police source said.
Unknown attackers in a Lada car opened fire on two police officers who were jogging near the village of Psychokh in the republic's Baskan district.
"A detective officer sustained severe injuries as a result of the attack, and died while being transported to hospital," the spokesman said.
An investigation in underway.
A counter-terrorism operation was launched in Kabardino-Balkaria's Elbrus District in late June.
Police kill three militants in S.Russia
MAKHACHKALA, July 16 (RIA Novosti) - Police officers killed three militants during a shootout in Russia's North Caucasus republic of Dagestan, the local interior ministry said.
"The incident occurred at around 9:20 (Moscow time) in Dagestan's Kumtorkalinsky district. Police attempted to inspect a suspicious vehicle when men inside it opened a fire. As a result of the armed clash, three militants were killed and two policemen were injured," ministry spokesman Mark Tolchinsky told RIA Novosti.
An investigation into the incident is ongoing.
Russia's North Caucasus has seen an upsurge in violence in recent months, particularly in Dagestan, Ingushetia, and Chechnya.
Village official shot dead S. Russia's Daghestan
MAKHACHKALA, July 16 (RIA Novosti) - The head of the Gedzhukh village administration in Russia's North Caucasus Republic of Daghestan has been shot dead near his house, a local police spokesman said on Thursday.
"At about midnight the head of the village, Gualakhmed Hodzhayev, was shot dead in the courtyard of his house by unidentified assailants with Kalashnikov assault rifles," the source said.
Investigators are currently working at the crime scene.
Russia's North Caucasus regions have seen a rise in violence in recent months. Attacks on police, officials and troops have been reported almost daily in Chechnya, Ingushetia and Daghestan.
46 of 75 neutralized militants eliminated in Ingushetia in 2009 – police
NAZRAN. July 16 (Interfax-AVN) - Police in Ingushetia have
neutralized 75 active members of criminal armed groups since the start
of the year, Ingushetia's Deputy Interior Minister Andrei Kolesnichenko
told the ministry's senior officials.
"Seventy-five leaders and members of criminal armed groups have
been neutralized. Of them 21 have been detained and 46 were killed after
they offered armed resistance," he said.
A large amount of weapons, ammunition, explosives and other
property have been seized, he also said.
The number of registered crimes has increased by 16%, Kolesnichenko
said, noting that the rate of serious and grave crimes has increased by
19% and 45%, respectively. The rate of murders, attempted murders and
abductions of law enforcement officials has also risen.
Police and other law enforcement services have done serious work to
detain persons involved in high-profile crimes, he said.
Medvedev Signals Support For Acting Ingushetian President
July 15, 2009
Russian President Dmitry Medvedev met on July 14 at his dacha near Sochi with Rashid Gaysanov, who as Ingushetian prime minister automatically assumed the duties of acting president following the June 22 suicide bomb attack that left President Yunus-Bek Yevkurov seriously injured.
Medvedev assessed as successful the ongoing joint operation by Chechen and Ingushetian police and Interior Ministry forces to locate and destroy resistance fighters hiding out in the range of forested hills along the border between the two republics. But at the same time, in a move that will dilute the influence over that operation of Chechen Republic head Ramzan Kadyrov, Medvedev said the crackdown should be intensified, and that federal forces should also participate.
Immediately after the attack on Yevkurov, Medvedev tasked Kadyrov with coordinating the joint operations by Chechen and Ingushetian police to locate and eliminate armed militants. "I will personally control the operations...and I am sure in the near future there will be good results," Reuters quoted Kadyrov as saying after meeting personally with Medvedev on June 22.
Kadyrov's announcement that he planned to take command of the anti-insurgency campaign triggered alarm across Ingushetia, even though Gaysanov told journalists on June 24 that he himself would remain in overall charge of the republic, while Kadyrov would only supervise police operations in the area along the border between the two republics.
Following days of media speculation that the power-hungry and ruthless Kadyrov was out to expand his fiefdom by taking Ingushetia under his personal control, Medvedev issued a decree on June 3 formally designating Gaysanov acting president of Ingushetia. Presidential administration head Sergei Naryshkin said that appointment is strictly temporary, until such time as Yevkurov recovers from his injuries and can resume his presidential duties. But Naryshkin also stressed that the decree invests Gaysanov with all relevant presidential powers, and that it is he who bears responsibility for the situation in the republic.
The news agency Regnum on July 3 quoted Aleksandr Moskalets, who is deputy chairman of the State Duma committee on constitutional law, as saying Medvedev's intention in issuing the decree was to "demolish doubts" and emphasize Gaysanov's official status. But it could equally have been meant as a shot across the bow of those Ingush oppositionists who advocated the temporary appointment of former President Ruslan Aushev to head the republic pending Yevkurov's recovery. Gaysanov served as economy minister under Aushev from December 1999 until Aushev stepped down in the spring of 2002.
Four days after his official endorsement by Medvedev, Gaysanov held a briefing in Moscow during which he discussed the situation in Ingushetia in depth. As summarized by the Russian daily "Vremya novostei," his comments were thoughtful, moderate, and articulate, in stark contrast to Kadyrov's intemperate, contradictory, and unsophisticated blustering. But he also cast himself as the defender of his republic in the event of any threat to its continued existence as a separate federation subject.
Gaysanov began by spelling out the nature of the "assistance" that Chechen police are providing in the conduct of the joint operation launched by Kadyrov on May 16. He explained that while the Chechen power agencies should continue to help their Ingushetian colleagues battle the Islamic underground, any reunification of Chechnya and Ingushetia into a single republic is out of the question. He added that if the issue of abolishing Ingushetia's status as a separate republic is ever formally mooted, "I shall be among the first to fight it and I am ready to lead that fight."
Gaysanov took a noticeably softer line than Medvedev or Kadyrov with regard to the North Caucasus resistance. True, he repeated their line that the upsurge in recent weeks in militant attacks demonstrates the extent to which support for the resistance is crumbling. But in contrast to recent exhortations by both Medvedev and Kadyrov to show no mercy in eradicating "bandits," Gaysanov argued that while "diehard fighters [he eschewed the term 'bandit'] should bear the responsibility for their acts...the struggle against them should proceed from the unassailable priority of saving a citizen's life."
Alluding to the fact that many resistance fighters are very young, Gaysanov admitted that one of the main factors that drives them to join the resistance is official corruption. "From their point of view there are bureaucrats who consume the national wealth and honest people who fight for 'justice,' in quotes." That black-and-white perception, he suggested, is in part the consequence of shortcomings in the education of an entire generation. (Over half the republic's population of approximately half a million is under the age of 30.)
The government, he continued, is still losing the struggle for the hearts and minds of that generation, but intends to win out in the end by improving living standards and creating jobs. (The official unemployment rate in Ingushetia is 54 percent.)
Gaysanov took a cautious line with regard to the domestic political opposition, appealing to them not to "rock the boat" by convening unauthorized public meetings. At the same time, he affirmed that "the authorities are open for dialogue with any public forces, even those that reflect the interests of only the most minuscule section of the population." The only exception, he went on, is "those who have taken up arms and operate outside the law," and the authorities will seek to win over even them by persuasion.
This is the second occasion on which Medvedev travelled to the North Caucasus and met there with the president of Ingushetia, but not with Kadyrov. The first was in January, three months after Yevkurov was named president. On that occasion, Medvedev announced a huge aid package for the republic's economy.
Will Moscow Throw Away A Unique Opportunity In Daghestan?
July 14, 2009
For years, political observers and NGOs both in Russia and abroad have argued that the indiscriminate violence with which Daghestan's18,000-strong police force targets suspected Islamic militants has only served to drive increasing numbers of young men to join the resistance ranks.
The name of Lieutenant General Adilgirey Magomedtagirov, who was named Daghestan's interior minister in 1998, has become synonymous with that arbitrary and heavy-handed approach to stamping out "religious extremism." Indeed, one could argue that Magomedtagirov did more than any other single individual to fuel that phenomenon.
Magomedtagirov was himself shot and fatally injured in Makhachkala on June 5. His death creates an opportunity for the Russian authorities to appoint a successor who will take a more nuanced approach to combating Islamic terrorism while conducting a purge of Daghestan's corrupt and inefficient Interior Ministry staff.
Both the International Crisis Group (ICG) and the Russian human rights movement Memorial have expressed concern over the routine abduction of, and physical abuse meted out to, devout but peaceful young Muslims in Daghestan in the name of combating religious extremism. In a detailed report released in June 2008 entitled "Russia's Dagestan: Conflict Causes," the ICG concluded that a combination of factors, including clan-based corruption at a level that surpasses that in many other federation subjects, unemployment, and above all police brutality "feed the grievances" of young Daghestanis and "drive them into radical Islamic movements."
Memorial for its part has chronicled numerous instances of the arrest and torture of peaceful and law-abiding young believers, and of "gross violations of the law" in the course of "counterterror operations" against suspected militants. Specifically, Memorial claims that on some occasions, in an excess of zeal, Interior Ministry forces have ruthlessly killed people who are posthumously shown to have had no connection whatsoever with the Islamic resistance. Those operations often involve the use of artillery against residential buildings.
In a July 5 interview with the website kavkaz-uzel.ru, political commentator Gadjimurad Kamalov, who is the founder of the embattled independent Russian-language weekly "Chernovik," contrasted the arbitrary and brutal approach of the Interior Ministry with what he described as the targeted and effective counterterrorism operations conducted by the Daghestan directorate of the Federal Security Service (FSB) since the appointment in September 2007 of a Russian, Vyacheslav Shanshin, as its head.
Even Daghestan's president, Mukhu Aliyev, lambasted the Interior Ministry just 10 days after Magomedtagirov's demise. Alluding to Russian President Dmitry Medvedev's comments at a June 9 Security Council session to the effect that the poor performance of the Interior Ministry in several North Caucasus republics has undermined popular trust in those republic's leaders, Aliyev singled out the ineffectual work of Daghestan's police as the most important of three factors that, he claimed, hamper the fight against "religious extremism." The other two were corruption and "clans," meaning primarily ethnic- or family-based economic interest groups.
Addressing local police-department heads on June 15, Aliyev asked rhetorically: "How many people work in the police who are not worthy of doing so? Many of them discharge their duties inadequately and some of them discredit the entire police force."
That criticism raises the question why, if Aliyev was so dissatisfied with Magomedtagirov, he did not alert Moscow to the damage he believed Magomedtagirov was inflicting and ask Moscow to replace him. According to Kamalov, Aliyev did in fact twice ask Moscow to name a new interior minister, but Russian Interior Minister Rashid Nurgaliyev rejected those requests.
Visiting Makhachkala on June 25 to present his condolences to Magomedtagirov's family, Nurgaliyev said that a successor would be named by the end of the month. No such announcement has been forthcoming, however, which suggests serious disagreements between Makhachkala and Moscow, and/or between government agencies in Moscow, over the most appropriate candidate.
Speaking to the news agency Regnum just hours after Magomedtagirov's death, Kamalov argued that on no account should a successor be chosen from among Magomedtagirov's subordinates. Kamalov argued that "the level of corruption within all subdivisions of the republican Ministry of Internal Affairs is too great.... At the same time, there is no point in naming a minister from outside Daghestan who has no previous connections with the republic. The best solution would be to choose a candidate from among Daghestanis serving in the power agencies in other federation subjects. There are experienced managers who come from Daghestan. Such a person, who is familiar with the situation on the ground, could normalize the situation within the ministry in three or four months."
But the professional qualifications and political reliability of Magomedtagirov's successor may not be the only, or the most important factor under consideration. The most qualified (on paper) Daghestani candidate may well belong to the "wrong" ethnic group. Magomedtagirov was an Avar, as is Aliyev, but he was named interior minister under Aliyev's predecessor Magomedali Magomedov, who was a Dargin. Moscow may be chary of risking a repeat of the political crisis that followed the appointment in February of a Slav to the post of Daghestan's top tax official -- a position traditionally held by a Lezghin.
Chechen 'Cooperation'
A further factor of possible relevance is the ongoing joint operation to locate and destroy militants on the border between Chechnya and Ingushetia. Announcing that joint operation on May 17, Chechen Republic head Ramzan Kadyrov proposed that Daghestan's police and security forces should coordinate their activities with those of the other two republics.
Daghestan's leaders initially ignored that call for three-way cooperation. Then on May 20, Interior Ministry spokesman Colonel Mark Tolchinsky told kavkaz-uzel.ru that his ministry knew nothing about it. He said his ministry "can fight terrorists and extremists without Kadyrov's help," and implied that its methods are more selective and persuasive and less brutal than those of his Chechen colleagues.
On June 10, five days after Magomedtagirov 's assassination, Kadyrov repeated his plea for greater regional cooperation. He argued that "it will be easier for us to wipe out the enemy through joint efforts," and that "only together can we put an end to this evil."
Finally, in a long interview with Interfax dated July 8, Kadyrov claimed that he reached an agreement with Magomedtagirov on such cooperation shortly before the latter was killed. Kadyrov characterized the situation in Daghestan as more unstable than anywhere else in the North Caucasus, and advised President Aliyev to "take things into his own hands and start imposing order."
Kadyrov further claimed that Russian Interior Minister Nurgaliyev had given the green light for cooperation between the interior ministries of all North Caucasus republics, but that "there is still no progress on an reaching such an agreement" with Daghestan.
Daghestani experts reacted negatively to Kadyrov's repeated offers of "help." Journalists Khabib Magomedov told Regnum on July 9 that the participation of Chechen police in operations in Daghestan would only make things worse. Even if there were a slight improvement in the overall security situation, Magomed argued, it would be more than offset by the negative political reactions. Moscow-based human rights activist Abdurashid Saidov similarly argued that Chechen involvement could cause the situation to deteriorate irrevocably.
Kamalov for his part challenged Kadyrov's claim to have reached an agreement with Magomedtagirov on cooperation between their respective forces. Kamalov said he met twice with Magomedtagirov in the month before his death, and that Magomedtagirov adamantly opposed the deployment to Daghestan of either police or Interior Ministry troops from neighboring republics.
Whether or not senior officials in Daghestan -- specifically President Aliyev and Shanshin -- share those reservations is impossible to say. Nor have there been any indications that Moscow is seriously considering empowering Kadyrov to coordinate police operations with Daghestan's Interior Ministry, which would necessitate selecting a candidate to head Daghestan's Interior Ministry who would be willing in effect to cede his personal authority from the day of his appointment.
True, Moscow can delay a decision on Magomedtagirov's successor for several more weeks, but not indefinitely. By contrast, Aliyev, whose presidential term expires in February 2010, needs a highly qualified candidate who would duplicate Shanshin's differentiated approach to be named as soon as possible.
In his July 5 interview with kavkaz-uzel.ru, Kamalov warned that the wrong choice -- meaning a Magomedtagirov clone -- would not only nix Aliyev's chances of being reappointed for a second presidential term; it could also lead within six to 12 months to an upsurge of terrorist activity that could prove impossible to contain.
Medvedev’s Military Stagnation
16 July 2009 By Marcel de Haas
The Russia-Georgia war last August demonstrated Moscow’s assertive stance in foreign and security policy, of which military power is one of its major instruments. But the short five-day war showed that much of Russia’s weaponry is obsolete and that its ability to conduct skillful warfare is limited. Although Russian forces were victorious against their southern neighbor, whose active military personnel numbers about 36,000, compared to Russia’s 1 million, the Georgian conflict clearly demonstrated the shortcomings in the Russian armed forces.
After the conflict, President Dmitry Medvedev concluded that these shortcomings should be corrected by instituting military reforms and procuring new, modern weapons systems. But the successful implementation of these plans has been hampered by the political elite, which put far too much emphasis on nuclear modernization, as well as by the military elite, who continue to think and act in a Cold War framework.
Military operations in the West take a completely different approach. Every aspect of warfare at all levels of the spectrum — from evacuation of noncombatants to full-scale war — is covered within one single operation. This concept is often referred to as a “three-block war.” These comprehensive operations demand specific doctrines and a military force that can cope with any task at the same time. Examples of this concept can be seen in Iraq and Afghanistan. Furthermore, Western military forces have expeditionary capability and can be deployed far away from the homeland at short notice. This requires highly skilled permanent forces that can perform strategic air and sealifts and that have high-tech equipment for communications, command and control, and intelligence.
As a result of Sept. 11, Western armed forces also have to strengthen homeland security to avert terrorist attacks. To do so, close cooperation with police and other nonmilitary security agencies is necessary as part of a larger coordinated and centralized command at a national level. These security demands have completely restructured the Western military apparatuses from what they were during the Cold War.
When Vladimir Putin served as president, he set several ambitious foreign policy goals, but they required a highly skilled, modern military force that could be deployed at short notice anywhere in the world. At the same time, protracted conflicts in the North Caucasus required a military capable of conducting asymmetric warfare against an irregular opponent. In October 2003, then-Defense Secretary Sergei Ivanov released a defense white paper titled “The Priority Tasks of the Development of the Armed Forces of the Russian Federation.” It rightly focused on local conflicts as a defense priority as opposed to large-scale conventional wars. The modern-day threats of extremism, separatism and terrorism were listed, but there were also traditional, worn-out Cold War vestiges in the strategy document, such as expansion of military blocs and military presence in traditional regions of Russian interest.
Under Medvedev, current modernization plans assume a realistic approach toward building a modern military. If these measures are carried out, they would cut some of the deadweight from the officers’ ranks, establish a professional noncommissioned officers corps and increase the number of combat troops.
Western armed forces have largely demilitarized obsolete, Cold War-era unit levels, such as divisions and army corps. In their deployments overseas, brigades and battalions are the commonly used units. The Russian reform plans intend to do the same. Furthermore, most large unfilled framework units will be dissolved in order to focus on permanent ready units. If successfully carried out, these measures will increase the combat readiness of the armed forces. Additionally, the planned massive introduction of modern weapons and equipment as of 2011, as well as the formation of airborne rapid reactions forces, can create the capacity to conduct power projection abroad.
But it is doubtful whether there is any real chance that the restructuring of the armed forces will succeed. The military and political leadership are fond of announcing ambitious new military reform programs, but none of them have been carried out to any serious degree. The attempts at reforms are constantly thwarted by the country’s generals and a lack of political will. Currently, Defense Minister Anatoly Serdyukov is confronted with severe opposition from the military leadership, who remain focused on large-scale warfare against the United States and NATO. Although Russia’s defense budget rose rapidly during Putin’s two presidential terms, there was no considerable improvement of combat readiness because of rampant corruption and the inefficient allocation of resources.
In addition, the global financial crisis has hit Russia more severely than most other nations. As a result, diminishing federal funds will probably be spent on efforts to avoid social unrest than on improving military capabilities. Furthermore, the military and political elite still consider nuclear arms’ modernization to be its top security priority. But without modern-day armed forces, the Kremlin will not be capable of handling internal irregular conflicts nor of conducting operations abroad.
Lieutenant Colonel Marcel de Haas is senior research fellow at the Netherlands Institute of International Relations Clingendael. His book “Russia’s Foreign Security Policy of Putin, Medvedev and Beyond” will be published in February.
Russian Weapon Is in Need of Rescue
By MICHAEL SCHWIRTZ
Published: July 15, 2009
MOSCOW — It was intended to be a symbol of Russia’s post-Soviet military might. The nuclear-armed Bulava missile would be unlike any weapon in the world in its speed, accuracy and ability to defeat any defense the West might throw up, Russian officials claimed, helping to propel the country’s armed forces into the 21st century.
Today, however, the Bulava is having trouble just propelling itself.
A test flight in December went wildly off course. So did a string of launchings in 2006 and 2007. Only half the tests since 2003 have been even partly successful.
Now, sometime this month, another test is scheduled, perhaps the most important yet. One more failure would endanger the project, which is facing mounting criticism from military and security experts, and embarrass Russia’s leaders, who have staked their country’s prestige in part on its success.
The Bulava, whose name is Russian for a mace, the medieval weapon, was once praised by Vladimir V. Putin as a reflection of Russia’s military revival after the collapse of the Soviet Union and the disarray of the 1990s, when the military suffered greatly.
Shortly before December’s failed test, Sergei B. Ivanov, a senior government official who oversees the project, predicted that the missile would enter production by the end of 2009. At a news conference in June, he said tests would continue at least through 2010.
But as Russia and the United States work on slashing their nuclear arsenals, the emerging question for many critics is not whether the Bulava can fly, but whether it should.
“My view is that the government is failing to recognize the current threats,” said Nikolai Zlobin, a Russian defense analyst at the Washington-based Center for Defense Information. “This is very much an old way of thinking, when you believe that if you have better weapons you are more secure.”
Officials claim that weapons like the Bulava are aimed against modern threats like the missile defense shield the United States might deploy in Eastern Europe. (Washington insists that the defensive system, if it is ever built, will not be directed against Russia, though this has not soothed Moscow’s agitation over the program.)
Still, many Russian military analysts see the emphasis on nuclear modernization here as less strategic than political.
“Every fourth ruble of government military orders goes toward atomic weapons,” said Viktor N. Litovkin, deputy editor of the magazine Independent Military Review. “If you have strategic nuclear weapons, then you are a great power; if not, then you are no one.”
Upon becoming president in 2000, Mr. Putin, now prime minister, vowed to restore Russia’s strength. As oil prices soared and Russia’s energy-driven economy hummed, the Kremlin began pumping cash into the military, particularly its nuclear arsenal. The submarine-launched Bulava together with the land-based Topol-M, Mr. Putin said in a 2006 speech, would form the base of Russia’s newly revamped nuclear forces. Perhaps more important, it would be a new source of pride.
President Dmitri A. Medvedev has vowed to continue his predecessor’s nuclear policy, and Russia did successfully test-fire the less sophisticated Sineva missile this week.
But even while Russia is spending billions to develop the Bulava, a significant portion of its conventional military has fallen into disarray. Hardware is aging, the ranks are rife with abuse and even officers live in conditions that can in some cases be described as squalid.
In a sign of the state of Russia’s once mighty military industrial complex, Adm. Vladimir S. Vysotsky, the commander of the Russian Navy, said in June that Russia might begin purchasing foreign-made ships.
Yet, few think that Russia will back off the program, even if the test this month fails.
“Russia really needs this rocket to maintain nuclear parity with the United States,” said Aleksandr Golts, an independent Russian military analyst. “This task is political, and no effort or expense has been spared.”
Indeed, Russian officials have played down the Bulava’s setbacks and defended Russia’s nuclear priorities.
“Deploying any new rocket is difficult, and, unfortunately, takes a long time,” Anatoly E. Serdyukov, Russia’s defense minister, told the newspaper Rossiiskaya Gazeta in May. “The Bulava is no exception.”
The American Trident 2 submarine-launched missile also got off to an inauspicious start in the late 1980s with several high-profile failures. So far, however, Bulava appears to have fared worse.
Some Russian news agencies have even speculated that the United States, the news media’s favorite scapegoat, has been sabotaging the missiles. Mr. Serdyukov denied the claims.
Rather, Mr. Ivanov and others have said that part of the problem has been coordinating the dozens of subcontractors involved. Many military analysts also say that the timeline for completing the missile was unrealistic from the start.
The Russian military plans to conduct at least four more sea-based tests of the Bulava by the end of 2009, during which the remaining problems will be resolved, Admiral Vysotsky said last month, according to the Interfax news agency.
“We will have the Bulava this year,” he said. “It will fly.”
Russian spy devices to Norwegian shores
2009-07-16
A Russian spy buoy was last week found on the shore of Skallelv, Arctic Norway. The device is the third of its kind found on Norwegian shores only in the course of the last year.
Norwegian military experts confirms to NRK that the 3,6 meter long device is a Russian spy buoy for monitoring of ship traffic. According to the broadcaster, the device appears to be relatively new.
The buoy is not the first one drifting ashore on the Norwegian side of the border. Last year, a similar buoy was found near Berlevåg on the Barents Sea coast, a reader of NRK.no informs. According to Vesterålen Online, another buoy was found at Andøya in winter 2008.
SBU Challenges the FSB in Crimea
[tt_news]=35261&tx_ttnews[backPid]=7&cHash=d064d7abf0
Publication: Eurasia Daily Monitor Volume: 6 Issue: 134
July 14, 2009 12:52 PM Age: 2 days
By: Taras Kuzio
In line with implementing stricter security policies in Sevastopol and the Crimea, the Security Service of Ukraine (SBU) is adopting tougher policies towards Russian intelligence activities in the peninsula. These follow the August 2008 decrees restricting the movement of Russian Black Sea Fleet vessels in and out of Sevastopol without Ukrainian consent. The SBU has officially given its Russian equivalent, the Federal Security Service (FSB), until December 13 to remove itself from Ukraine. SBU chairman Valentyn Nalyvaychenko warned that if the FSB has not left by that date, "then they would bear criminal responsibility. The criminal code contains an article on ‘espionage'" (.ua, June 28).
The FSB officers also operate in counter-intelligence matters. Russia utilizes its domestic intelligence agency, (the FSB) in its dealings with the CIS, because it is regarded as the "near abroad" (the SVR is used in the "far abroad"). Russian policy would be the equivalent of the FBI rather than the CIA operating in Central and Latin America.
Nalyvaychenko explained that he had consulted the Ukrainian foreign ministry before advising Moscow of the cancellation of the protocol permitting the FSB to operate in Sevastopol. Nineteen FSB officers currently operate in Sevastopol. Russian intelligence has always been thought to support separatist, anti-NATO and anti-American groups and parties, even providing Black Sea Fleet personnel who wear civilian clothes to participate in protests. Nalyvaychenko revealed that one factor behind the decision to terminate the right of the FSB to maintain its presence in Sevastopol was that they did not restrict themselves to the naval base. "Foreign special services operate in the city of Sevastopol. And this is against Ukrainian law," he said (bbc.co.uk/ukrainian, June 18).
One member of the Ukrainian parliamentary committee on national security and defense, Oleksandr Skybinetsky, said that most Ukrainian experts in security affairs are concerned that Russian intelligence orchestrates various groups and protest movements that are hostile to Ukrainian sovereignty. The SBU has instituted criminal charges against separatists and brought in political leaders for interrogation. The leader of the Progressive Socialist Party faction in the Sevastopol city council, Yevhen Dubovyk, was recently questioned after he threatened radical steps to unite Sevastopol and the Crimea with Russia (Ukrayinsky Tyzhden, June 12).
A second factor of concern to the SBU is the possible recruitment of Ukrainian citizens who comprise the majority of the 20,000 workforce in the fleet and military-industrial enterprises that provide services to it. Financial inducements are hard to resist when pay in the fleet and its ancillary industries is twice that in other Russian naval units and many times higher than the average pay in Ukraine.
Why the FSB needs to be involved in the security of the Black Sea Fleet is puzzling, since this would more normally be the task of military intelligence. Ukrainian military intelligence operates in Sevastopol and it is assumed by Kyiv that Russian military intelligence maintains a presence within the fleet.
The ostensible reason the Black Sea Fleet claims it needs Russian intelligence units is to safeguard the security of the fleet on foreign territory. The question is against whom? The SBU has offered to provide full security for the fleet. Nalyvaychenko revealed that the SBU had established a new "powerful counter-intelligence unit in Simferopil, Sevastopol and other cities of the Crimea." This unit would be ideally suited to protect the fleet, he added (Nezavisimoy Gazete, June 15). As soon as this unit was established, Nalyvaychenko advised his Russian counterparts that the FSB was no longer required in the Crimea.
The SBU could deal with law and order and terrorist issues. "We do not need assistance or the physical presence of foreign secret services," Nalyvychenko said (Nezavisimoy Gazete, June 15). The Russian reaction was predictably negative and similar to Yushchenko's August 2008 decrees. The Russian foreign ministry reiterated that the FSB was in Ukraine based on earlier agreements in relation to the fleet. They could only be removed through mutual agreement (.ua, June 18).
Anatoliy Tsyganok, the head of the Russian Center for Military Forecasting, believes that the FSB will ignore the Ukrainian demand (.ua, June 17). Kiril Frolov, a representative of the Institute for the CIS, warned of an "asymmetrical response" from Russia for this "unfriendly Ukrainian act against the Russian state" (bbc.co.uk/ukrainian, June 18). It remains unclear how Russia can retaliate, since Ukraine has no military base on its territory and the SBU only has a minimal presence in its diplomatic representations within Russia.
The old and technologically obsolete vessels in the fleet are not a threat to the four NATO member countries in the Black Sea. The only occasion they have been used is in the August 2008 invasion of non-NATO member Georgia. NATO has long known everything it needed to know about the Fleet. In December 1991, this author faxed to Ukrainian members of parliament, after they had held a successful referendum on independence, xeroxes of the pages pertaining to the Black Sea Fleet in the International Institute for Strategic Studies' Military Balance. Open source IISS publications were purchased by the Soviet Embassy who then classified them as "confidential" and they were subsequently placed in the restricted areas ("spetsfond") of Soviet libraries.
Sevastopol was neglected by Kyiv since independence. The city has few memorials dedicated to Ukrainian history, but is full of Russian and Soviet symbols tying the twice "hero city" to Russia. The city's youth is "educated exclusively on Russian history, Russian patriotism and loyalty to Russian statehood." The fleet plays an important role in this process, which transcends its military function, "especially in the areas of education, propaganda, information and culture" (Ukrayinsky Tyzhden, June 12).
On June 12 Ukrayinsky Tyzhden asked: "What about official Kyiv?" "Well, it (official Kyiv) undertakes a policy of non-interference in the internal affairs of Ukraine." Russian policies towards Sevastopol are conducted within the context of "great power politics." Ukrainian policies in contrast are "the private affair of individual patriotically inclined persons who have become accustomed to disinterest from official Kyiv" (Ukrayinsky Tyzhden, June 12).
Apartments May Be Built at Cherkizovsky
16 July 2009 The Moscow Times
A senior Moscow lawmaker said Wednesday that Cherkizovsky Market might never reopen and its territory might be used to construct apartment buildings.
“The shutdown of the market is not only a gift for all citizens of the eastern Moscow district, but it was also a long-term fight,” Moscow City Duma Deputy Speaker Andrei Metelsky said, Interfax reported.
He said the 300 hectares occupied by Cherkizovsky, Eastern Europe’s largest market, might be used for municipal housing.
Cherkizovsky, which employed tens of thousands of people, was closed June 29 after federal inspectors found sanitary and fire violations there.
The closure followed a demand by Prime Minister Vladimir Putin in early June for “convictions” in connection with the September seizure of $2 billion in goods at the market that purportedly had been smuggled from China.
Unemployed market workers, meanwhile, submitted an appeal to President Dmitry Medvedev to protest the closure. The appeal was accepted by the presidential administration, which promised to examine it, Itar-Tass reported
Also Wednesday, several dozen workers tried to stage an unsanctioned protest on Staraya Ploshchad near the Kitai Gorod metro station but were stopped by police, Itar-Tass said.
2 Accused of Taking Bribe to Free Cash in Bankrupt Bank
16 July 2009 The Moscow Times
A federal employee of the Deposit Insurance Agency and a former bank executive have been detained on suspicion of taking a $34,000 bribe in exchange for letting a depositor withdraw $315,000 from a bankrupt bank, police said Wednesday.
But the Deposit Insurance Agency, a state corporation, denied that its employee had done anything wrong and said she had prevented an attempt to steal a client’s funds.
Yekaterina Merzlyakova, an employee in the agency’s liquidation department, and Vladimir Yanovsky, a board member of Siberian-Moscow Commercial Bank, were detained by investigators from the police’s economic security department, the police said in a statement carried by Interfax. Merzlyakova and Yanovsky “planned to receive a bribe of 24,000 euros from a client of the bank in return for allowing him to withdraw his 224,000 euros, which were in a deposit box,” it said.
Merzlyakova was acting as the bankruptcy receiver at the bank, the statement said. The bank lost its license in April and was declared bankrupt on June 16, Vedomosti reported.
Yanovsky was detained with the cash in a car outside the Deposit Insurance Agency, and Merzlyakova was detained in her office an hour later, police said.
If charged and convicted of bribery, Merzlyakova and Yanovsky face up to 12 years in prison.
The Deposit Insurance Agency said Yanovsky approached Merzlyakova with a fake power of attorney allowing him to receive the cash. The agency, in turn, informed law enforcement agencies about the fraud, it said in a statement posted on its web site. The money was handed to its unidentified owner on June 8, the statement said. The agency considers Merzylakova’s actions to be “legal and justifiable,” and she is continuing to carry out her duties, it said.
A police spokesman responded by saying that “some protectors of the suspects have turned up and are trying to shield them from criminal investigation,” Interfax reported.
Torrential rains cause river water rise, floods in Sakhalin
YUZHNO-SAKHALINSK, July 16 (Itar-Tass) – Torrential rains have caused a steep rise or water levels in the rivers on the Far-Eastern island of Sakhalin, causing the introduction of an emergency situation regime in one of the districts of the regional capital Yuzhno-Sakhalinsk where about 50 private houses have been flooded.
At the time of reporting, the authorities were considering a possible evacuation of 130 residents.
Sakhalin division of the Russian Ministry for Emergence Situations and Civil Defense /EMERCOM/ and the city mayoralty have dispatched four operative groups to the zone of inundation.
Demographics Make Russia a Risky Long-Term Investment
by: Beacon Asset Managers July 16, 2009 | about: OIL / RSX / RYE / XLE
Exceptionally rich in natural resources and currently among the world’s top 10 largest economies, investment in Russia (via the Market Vectors Russia ETF Trust - RSX) might seem like a good long-term play. But is it?
We would argue that demographically, no, Russia is a horrible long-term investment because it’s losing population at a percentage rate that could within 40 years match that of medieval Europe’s population loss during the plague years.
Russian birth rates are so low and its death rates so high that the country is expected to lose at the least 30 percent of its population within the next 40 years, falling from an estimated 141 million to somewhere between 80 to a 100 million. No country in recent centuries has experienced such a dramatic and rapid peacetime drop in its population, so demographers, economists, sociologists and other disciplines are coming up with varying conclusions about the potential impacts.
But all of these specialists, both from within Russia and from outside, tend to agree that if drastic measures are not taken, the impacts will be devastating, if not catastrophic.
The demographic numbers are staggering enough without pondering their implications. According to the U.S. Central Intelligence Agency’s “World Factbook,” Russia’s population growth rate is -0.47 and is ranked 225 out of 232 countries, and its total fertility rate, at 1.40 (a total fertility rate of 2.1 is considered necessary for population replacement), is ranked 195th. Life expectancy at birth is 65.94, according to the C.I.A., and ranked 161 out of 223. Russia’s death rate, at 16.06 per 1,000, is 18th highest, and considered double that of developed countries.
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The Russian male’s life expectancy, at an estimated 59.2 years (the Russian female life expectancy is 72.4 years), is much lower than the Russian overall average, and considered among the lowest in the industrialized world.
According to American Enterprise Institute demographer Nicholas Eberstadt, only three out of seven Russian men can expect to celebrate their 65th birthday, while seven of eight Swiss men will likely celebrate theirs.
Russia also leads the world in number of abortions per capita, has one of the highest suicide rates, and leads the developed world in the number of deaths by accident.
To compound Russia’s dire demographic outlook, the country may also be facing an HIV/Aids crisis on par with those African countries that are experiencing severe epidemics. While official HIV/Aids death numbers are thus far relatively low, activists charge that the true numbers are masked by other diseases, such as tuberculosis, that are listed as the “cause of death.” World health experts estimate that nearly one million Russians are HIV positive, and the World Bank projects that that number will grow to between 5.4 to 14.5 million by 2020.
Meanwhile, official response to the potential crisis has long been considered lacking, and the government only recently boosted HIV/Aids spending.
The biggest cause of death in Russia is heart disease, which is estimated by the World Health Organization, to kill more than 1. 2 million Russians per year. This is followed by poisonings (the majority being alcohol-related), suicide, lung cancer, “violence” and accidents.
Russia’s exceptionally high rate of alcohol consumption is considered to be the primary aggravating factor behind all of these deaths, and gives the country a mortality profile that points to a society losing members of its younger, working-age population, rather than the elderly.
And this is exacerbating the country’s impending demographic crisis.
"There is a big shortage of skilled labor," said Alexander Lehmann, senior economist and specialist on Russia's macroeconomy at the European Bank for Reconstruction and Development in London. "In 2007, Russia's labor force reached a peak of 90 million. It will be 15 million fewer by 2020. This will be a fairly substantial burden on economic growth. It will be more difficult to sustain high growth rates."
He added that domestic and foreign companies are already feeling pressured by the labor shortage, with wages rising an annual 12 to 15 percent.
Nikita Mkrtchian, demography expert at the Economic Forecasting Institute of the Russian Academy of Sciences said Russia’s population decline is accelerating at a “frightening pace,” and that without significant immigration inflows, the working population will start falling by about 1.5 million per year by 2015. “This will become a barrier to economic growth,” he said, adding that according to his institute’s calculations only one person in five will be working by the year 2025.
Zhanna Zaenchkovskaya, head of the Center for Migration studies in Moscow, called the demographic crisis potentially devastating for the Russian economy.
From the middle of [2006] a natural decrease in the Russian workforce will begin. And in Russia now, even before this natural decrease, we had a deficit of around one million job vacancies. This will grow like a snowball.
Government response to the twin–birth and death–demographic challenges has been somewhat limited. Former Federation President Vladimir Putin first publicly mentioned the problem in a 2000 address, and then called it “the most urgent problem facing Russia,” in his 2006 state of the nation address.
Perhaps the most meaningful action taken by the government since then has been a doubling of the nation’s health care budget. Critics charge that the funding is not well spent and does not specifically target any of the problems behind the high death rate
However, pay for general practitioners was doubled, in part to stimulate the goal of getting Russians to have routine check-ups every two years. Many say that government moves to curb drinking would provide the biggest boost to improving death rates, but beyond releasing the occasional warning about alcohol poisoning the government seems little inclined to make alcohol less accessible.
As for increasing the birth rate, the only government moves have been to modestly increase child care funding and provide a cash bonus to women who give birth to a second child. And while the birth rate did experience an uptick in the two years following this move, critics say the uptick is not sustainable.
Russia’s leading demographer Anatoly Vishnevsky said the uptick will not reverse the trend. He said the primary reason for the recent rise was that there was an uptick in the Generation X birth rate in the 1980s, and that those people born then are now having the children.
However, the generation following is much smaller, he said, and Russia will see a “rapid decline in the number of births” within the next few years.
Many experts say immigration will be the only way for Russia to stem the pending crisis. According to Nikolay Petrov, a specialist on Russian society at the Carnegie Center in Moscow, the country will need one million immigrants per year to compensate for the labor shortage.
But the Russian government seems disinclined to take measures to boost legal immigration. “No sort of immigration will solve Russia’s demographic problem,” said Putin in his 2006 address. Nevertheless, the government has formulated a plan to encourage Russians living in neighboring countries that were formally part of the Soviet Union to move back to Russia.
Critics contend that, at most, only about five million Russians might be willing to return, only enough people to stem the decline for the next six or seven years.
All in all, Russia’s demographic outlook is gloomy, and perhaps it is too late to curtail the country’s fast approaching disintegration. Viktor Perevedenstev, one of Russia’s leading sociologists who has been studying the country’s population trends for more than 40 years, believes it may be too late. He considers the commonly accepted demographic figures as “overly optimistic,” and believes Russia’s population will halve by 2050.
The Russian population has “reached a tipping point beyond which direct intervention would be ineffective.” The term “catastrophe,” for Russia’s imploding population reflects reality and is “not a case of hyperbole from overly emotional Russian patriots,” he said.
If, given all of the above information, an investor is still inclined to put some money into RSX we would suggest treating it like a shorter-term commodities-based investment, as it is heavily weighted (more than 45 percent) with energy stocks. But then why not just trade an energy sector ETF, such as XLE, or the oil commodity ETF OIL, or, our personal favorite, the S&P Equal Weight Energy ETF RYE.
National Economic Trends
Statistics: Russia’s trade surplus down 58% on year in Jan-May
MOSCOW, Jul 16 (Prime-Tass) -- Russia’s trade surplus fell 58.2% on the year to U.S. $34.6 billion in January-May, Russia’s Federal Statistics Service said in a report obtained by Prime-Tass on Thursday.
Russia’s exports decreased 47.4% on the year to $101.4 billion in January-May, and imports fell 39.3% to $66.8 billion. Russia’s trade went down 44.5% on the year to $168.3 billion in January-May.
Russia’s trade with the European Union fell 49.4% on the year to $78.98 billion during the period, while trade with countries of the Asia-Pacific Economic Community (APEC) fell 41% to $33.381 billion. Russia’s trade with countries of the Commonwealth of Independent States (CIS) fell 46.9% on the year to $23.302 billion in January-May.
Russia’s oil exports fell 53.5% on the year to $32.025 billion for the period, and natural gas exports dropped 52.5% to $14.067 billion.
The figures are based on data provided by the Central Bank of Russia (CBR).
Industrial production rises in June
UralSib
July 16, 2009
Worst for Russian industry probably over ... Industrial production in Russia increased by 4.5% MoM last month, Rosstat reported yesterday. Industrial output fell by 12.1% YoY in June, which is the lowest decline since December 2008 and a significant improvement over the May figure of 17.1% YoY. We had forecast a decline of 13.3% YoY in June. The improvement indicates that the worst period for Russian industry - and the economy in general - is probably over. We expect that the rate of decline of industrial production will continue to improve in the months ahead, and we forecast that Russian industry will return to growth in YoY terms in November.
... as manufacturing trend shows some visible improvement. Adjusted for the number of working days, the decline in industrial production in June was slightly deeper (down 13.4% YoY), as there was one more working day last month than in June 2008. However, even with this factor taken into account, an improvement was quite evident. The largest positive change was in the manufacturing sector, which was the key driver behind sharp falls in industrial output in previous months. Manufacturing declined by 16% YoY last month, a major change over the 23.7% YoY fall in May 2009. Improvement in the monthly manufacturing trend can be seen in output statistics for many items, with the most visible gains recorded in food and consumer goods production.
Crude oil output turns positive in June. The mining industry fell by 4% YoY, due mainly to a large contraction in natural-gas production (down 29.4% YoY). However, in June, Russia's crude-oil output increased by 1.4% YoY (it fell by 2.8% YoY in May 2009). The utilities sector also showed improvement, with annualized output down by 7.9% YoY versus a drop 9.5% YoY in May.
Vladimir Tikhomirov
Russia Won’t Reach Last Year’s Growth by 2012, Ministry Says
By Paul Abelsky
July 16 (Bloomberg) -- Russia’s economy will fail to match last year’s pace of growth until 2012, even under the government’s most optimistic forecast, as capital investment dries up, the Economy Ministry said.
Investments will probably lag as much as 14 percent behind their 2008 peak as borrowing costs remain high, according to a report late yesterday from the ministry, whose “moderately optimistic” forecast for the next three years was approved by the government on July 13.
“Expanding the activity of the banking sector and reducing interest rates” are “the most important factors for the recovery of economic growth” in the forecast, the report said.
The economy of the world’s biggest energy exporter may shrink as much as 8.5 percent this year, the ministry said, revising its May forecast for an 8 percent contraction. A fall in company inventories accounted for 80 percent of the drop in gross domestic product during the first three months, according to the ministry’s estimate. GDP contracted the most in 15 years in the first quarter, tumbling an annual 9.8 percent.
The economy last year grew at the slowest pace since 2002, expanding 5.6 percent compared with 8.1 percent in 2007.
The central bank has cut the refinancing rate, seen as the limit for borrowing, four times this year, the first reductions since 2007.
Bank lending will probably advance 1.9 percent this year after jumping 35.9 percent in 2008, the report said. Under the forecast, loans to consumers and companies will rise 12 percent next year, between 15 percent and 17 percent in 2011 and as much as 24 percent in 2012.
Russia’s working population will annually decrease by about 1 million every year between 2009 and 2012, the ministry predicts. The country’s population fell to a post-Soviet low of 141.9 million in 2008, the 14th consecutive year of a decline.
To contact the reporter on this story: Paul Abelsky in St. Petersburg at pabelsky@.
Last Updated: July 16, 2009 01:51 EDT
Ruble Gains for Third Day Versus Dollar as Oil Near 1-Week High
By Denis Maternovsky
July 16 (Bloomberg) -- The ruble gained for a third day against the dollar and the euro as oil, Russia’s chief export, traded near a one-week high.
Russia’s currency strengthened 0.6 percent to 31.6826 per dollar by 10:40 a.m. in Moscow, and advanced 0.7 percent to 44.5850 per euro. Those movements left the ruble at 37.4857 against the central bank’s target dollar-euro basket, which is used to manage swings that hurt Russian exporters.
The basket is calculated by multiplying the dollar’s rate to the ruble by 0.55, the euro to ruble rate by 0.45, then adding them together. The ruble remains within the 26 to 41 band the central bank pledged Jan. 22 to defend.
Crude oil was little changed after rising above $62 a barrel as China’s economy showed signs of rebounding from its weakest growth in almost a decade.
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@
Last Updated: July 16, 2009 03:02 EDT
Russia c.bank injects 16.26 bln roubles via repos
16-JUL-2009 09:09
MOSCOW, July 16 (Reuters[pic]) - The Russian central bank injected 16.26 billion roubles ($507.5 million) of one-day funds into the banking system at a rate of 9.17 percent in its first repo auction of the day on Thursday. The minimum interest rate was set at 8.0 percent, and a maximum of 20 billion roubles had been on offer for the two repo
auctions scheduled for the day. Following are results of the latest auction, provided by the
central bank on its Web site (cbr.ru):
Banks ‘Agree’ to Cap Interest Rates at 18%
16 July 2009 By Ira Iosebashvili / The Moscow Times
The Central Bank and lenders have “reached an agreement” that beginning next month, no new deposits will be offered at interest rates above 18 percent, deputy chairman Gennady Melikyan said Wednesday.
With inflation beginning to slow, the Central Bank has been trying to reduce interest rates across the board to stimulate the economy, and it has cut its benchmark refinancing rate four times since April, most recently on Monday to 11 percent.
The agreement was reached after the Central Bank met with a number of banks offering rates of 18 to 20 percent, Melikyan told reporters. Most reacted positively to the idea, he said, although he also warned that lenders that do not comply with the agreement could face administrative measures.
The move appears to be an attempt to head off situations where banks, faced with lower revenue because of the economic crisis, would have difficulty paying out the high rates to depositors.
“All banks are having some income problems, and [the Central Bank] wants to avoid high-risk situations,” said Dmitry Murzin, a director at the Russian Association of Regional Banks.
“This would have happened naturally. Lending money at those rates is becoming expensive for banks, and they will have a hard time returning it,” he said. “In any case, they can get cash at a better rate from the Central Bank.”
Most regional banks are already lending within the “14, 15 or 16 percent range,” he added.
Earlier this month, First Deputy Chairman Alexei Ulyukayev said the Central Bank would punish lenders who did not lower interest rates on deposits and credit facilities by limiting their access to Central Bank funding.
“If the Central Bank lowers its refinancing rate and all its other interest rates, reduces the cost of funding for banks, that should be the basis for banks to moderate their approach to deposits and loans,” Ulyukayev said.
It applied similar restrictions earlier this year on cash and loans secured by bonds or other collateral to limit bets on the ruble devaluation.
When asked last month why rates at state-controlled Sberbank, Russia’s largest lender, were significantly lower than the competition, president German Gref scoffed at depositors who sought sky-high percentages on their money.
“We’re not a casino. There are plenty of banks that are offering 20 percent [per year]. People who want to lose, I’ll send to those banks. We’ll see later how they’re going to get their money back out,” he said, adding that Sberbank’s 12 percent rate on ruble deposits was “balanced.”
The following day, Sberbank cut its ruble rates by another percentage point.
CBR Behaves Differently
VTB Capital
July 16, 2009
Since last Friday, the CBR has allowed two big moves in the rouble. First, the currency lost 4% against the EUR-USD basket on Friday-Monday. It then clawed most of the depreciation back on Monday-Tuesday.
We would like to draw your attention not only to the increased volatility of the rouble but also to the noticeable change in the way in which the CBR intervened. When trying to limit the rouble depreciation, the regulator stepped back very quickly. As a result, on Friday dealers were confused as to where the CBR's bid actually was.
We think the CBR now has a more flexible rouble in mind and is trying to keep interest rates low. Had it intervened more heavily, we could have seen a surge in interest rates similar to that last year and rouble liquidity would have disappeared again (please see the charts on the left).
In our view, the CBR is likely to i) allow the rouble to fluctuate up and down with oil and ii) continue to lower interest rates. The recent announcement by First Deputy Chairman of the CBR Alexey Ulyukayev that the CBR plans to adopt a flexible rouble in 2010, rather than in 2011, now looks more credible.
Aleksandra Evtifyeva
Business, Energy or Environmental regulations or discussions
Russia’s Micex Index Fluctuates; Gazprom Rises, Polymetal Drops
By William Mauldin
July 16 (Bloomberg) -- Russia’s Micex Index fluctuated as OAO Gazprom climbed and metals companies including OAO Polymetal and OAO GMK Norilsk Nickel retreated.
The 30-stock Micex was little changed at 942.55 at 11:23 a.m., compared with 941.21 at the close yesterday. The RTS Index rose 1.5 percent to 901.10.
Gazprom added 1.5 percent to 146.17 rubles on the Micex Stock Exchange, a fourth day of gains. The world’s biggest natural-gas producer was raised to “outperform” from “market perform” at Sanford C. Bernstein & Co, which cited “improving production” and the stock’s underperformance this year compared with other emerging-markets shares.
Polymetal, Russia’s biggest silver producer, dropped 1.2 percent to 231 rubles, a seventh day of declines. Silver dropped 0.2 percent to $13.2550 an ounce, and gold also retreated. Norilsk Nickel dropped 0.5 percent to 2,751.02 rubles. Nickel for delivery in three months slipped 1 percent to $15,775 a metric ton in London, and copper also declined.
Russian stocks entered a bear market, under the most common definition, last month after the Micex fell more than 20 percent from its high on June 1. The index has risen 52 percent this year after slumping 67 percent last year.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@
Last Updated: July 16, 2009 03:43 EDT
Magnitogorsk Made 1.92 Million Tons of Steel Products in Quarter
By Yuriy Humber
July 16 (Bloomberg) -- OAO Magnitogorsk Iron & Steel produced 1.92 million metric tons of steel products in the second quarter, Rafkat Takhautdinov, vice president for strategy, said in an e-mailed statement from the company today.
To contact the reporter on this story: Yuriy Humber in Moscow at yhumber@
Last Updated: July 16, 2009 01:49 EDT
UPDATE 1-Russia TMK H1 steel pipe shipments down 20 pct y/y
Thu Jul 16, 2009 9:50am BST
MOSCOW, July 16 (Reuters) - TMK (TRMK.MM: Quote, Profile, Research), Russia's largest producer of steel pipes for the oil and gas sector, said on Thursday first-half 2009 shipments fell 20 percent year-on-year due to weak market demand.
TMK shipped 1.2 million tonnes of pipes in the first six months of 2009, including 765,000 tonnes of seamless pipes and 437,000 tonnes of welded pipes, the company said in a statement.
"The company estimates that the Russian pipe market declined by 34.8 percent in the first half of 2009 as compared to the first half of 2008," TMK said in the statement.
Shipments in the second quarter, however, rose seven percent compared to the first three months of 2009 as a result of new capacity and orders for the company's large-diameter pipe.
TMK said it expects further growth in demand for these pipes in the second half of the year, especially from Gazprom's (GAZP.MM: Quote, Profile, Research) Sakhalin-Khabarovsk-Vladivostok gas pipeline in the Russian Far East, and the BTS-2 oil pipeline being built by Transneft (TRNF_p.RTS: Quote, Profile, Research) to bypass Belarus en route to the Baltic.
"Demand growth is also expected in the CIS as state-owned oil and gas companies in Uzbekistan, Turkmenistan and Kazakhstan invest in the development of oil and gas fields and related infrastructure," TMK said. (Editing by Jon Boyle)
Deripaska’s First Deputy Zinovieva Resigns, Basic Element Says
By Yuriy Humber
July 16 (Bloomberg) -- Olga Zinovieva resigned as first deputy chief executive officer of Russian billionaire Oleg Deripaska’s Basic Element holding company.
Zinovieva, formerly head of Basic Element’s financial division, quit “in the last month” as planned, Sergei Babichenko, a spokesman for the Moscow-based holding company, said by phone today.
She was appointed as first deputy CEO in April and tasked with carrying out measures designed to help the company weather the global slump, Babichenko said.
To contact the reporter on this story: Yuriy Humber in Moscow at yhumber@
Last Updated: July 16, 2009 02:49 EDT
Russian Railways May Face Early Repayment Calls, Vedomosti Says
By Anastasia Ustinova
July 16 (Bloomberg) -- OAO Russian Railways may face calls to repay debt early should the state-run company post a net loss or increase its debt, Vedomosti reported, citing an uindentified person close to the board and another employee.
Russian Railways will probably need a state subsidy of 55 billion rubles ($1.74 billion) to avoid violating covenants next year in addition to an increase of 9.4 percent in freight rates, the Moscow-based newspaper said.
To contact the reporter on this story: Anastasia Ustinova in Moscow at austinova@
Last Updated: July 16, 2009 02:23 EDT
Vedomosti on potential breach of RZD loan covenants
Rencap
July 16, 2009
Today (16 July), Vedomosti published an article discussing Russian Railways' (RZD; Baa1/Negative, BBB/Negative, BBB/Negative) covenants contained in its bank loans.
The existence of the covenants was mentioned in the company's IFRS reporting, but what exactly is limited and the threshold figures were never publicly disclosed. According to Vedomosti, RZD is required to keep its net margin positive, and its total debt-to-EBITDA ratio should not exceed 2.5x. The article states that the covenants are maintenance rather than incurrence. The article discusses the likelihood of a possibility of a breach and how RZD is preparing to resist it by requesting subsidies (RUB55bn) from the state next year, in addition to the already approved 9.4% increase in regulated cargo tariffs.
In our view, the news itself reveals another vulnerability that RZD now has, after its standalone financial position significantly deteriorated on the back of the slumping volumes of cargo traffic - we have been warning of this weakening since late autumn last year. RZD now has two outstanding syndicated facilities from foreign banks: 1) the remaining half of a $600mn loan attracted in Nov 2005, now gradually amortising and due to fully mature in Oct 2010; and, 2) the $1.1bn facility received in Mar 2008 in two tranches that will start amortising in Mar 2010 and is fully due by Mar 2013.
We think it is the latter facility that poses the greatest real risk in this regard, although the article quotes an unnamed RZD representative as saying that almost all of RZD's bank loans are conditioned on these limits (it is not clear whether the same covenants are included in all loan agreements or that they may trigger acceleration through cross-defaults).
We are confident the company will either be able to renegotiate the covenants with the members of the syndicate, or, alternatively, refinance the facility with new borrowings from the largest Russian banks (where RZD is currently a very frequent borrower) and, to a lesser extent, using a new EBRD loan signed just this week ($500mn unsecured for 10 years). We note that the EBRD has a favourable track record of waiving breaches in RZD borrowings and not demanding acceleration.
Petr Grishin
MTS Lent $100M More
Mobile TeleSystems said Wednesday that it had raised an additional $100 million, increasing its three-year syndicated loan signed in May to $695 million.
The loan, split between a $295 million Facility A and a 214.5 million euro Facility B, was agreed with a group of 18 mandated lead arrangers in May to refinance part of a $1.33 billion loan signed in 2006.
MTS said five more banks had lent it an additional $100 million, split between $65 million and 23.6 million euros ($33.2 million). (Reuters)
Vimpelcom interested in acquiring Synterra
Rencap
July 16, 2009
According to Vedomosti today (16 July), VimpelCom is interested in acquiring Synterra, one of Russia's largest backbone providers. According to the article, VimpelCom made a non-binding offer to Synterra shareholder Promsvyzcapital. MegaFon and Comstar are also interested in the purchase of Synterra.
Synterra has a vast backbone 68,000 km (only Rostelecom is larger with 150,000 km) network and controls 20% of Internet backbone traffic in Russia, according to its own estimates. The acquisition makes sense for VimpelCom, in our view. VimpelCom would get: 1) a backbone network that would be used for the provisioning of 3G services and solve the longer-term capacity problem; and 2) a transport base for broadband services development. Additionally, VimpelCom would not allow the asset to go to its competition. That said we think financially MegaFon and Comstar are better positioned to make the purchase vs VimpelCom which had around $8bn of debt as of 1Q09.
Ivan Kim
|OPK Shipyards Deliver the New Icebreaker "St. Petersburg" |
| |
|MOSCOW, July 16 /PRNewswire/ -- United Industrial Corporation (OPK) shipyards have delivered a diesel electric line icebreaker "St. Petersburg" |
|to Rosmorport (Russian Maritime Port). A solemn ceremony of the signing of the takeover certificate and making the colors of the Russian |
|Federation on the icebreaker was held at the Baltiysky Zavod plant, a part of OPK. |
|The participants of this ceremony were Vladimir Putin, Prime-Minister of the Russian Federation, Igor Levitin, Russian Minister of |
|transportation, Valentino Matvienko, the Governor of St. Petersburg, Sergey Pugachev and Lyudmila Narusova, members of the Council of Federation |
|of the Federal Assembly of the Russian Federation, Alexander Gnusarev, OPK Chairman of the Management Board, Andrey Fomichev, CEO of the |
|Baltiysky Zavod plant. |
|According the certificate the icebreaker is the property of Rosmorport. It's planned to start its exploitation in the Gulf of Finland in the |
|winter of 2009. |
|OPK shipyards build fundamentally new multifunctional icebreakers, analogues of which no other Russian company has built earlier. The |
|multifunctional Moskva icebreaker was completed by OPK and delivered in December 2008, which became the first vessel to be built at a domestic |
|plant for the last 34 years. |
|The St. Petersburg icebreaker is the second diesel-electric line icebreaker, built by OPK at the request of Rosmorport. It constitutes a |
|two-decked vessel with two propulsors of a total capacity of 16 MW. Due to this peculiarity it has high mobility and passability. In addition to |
|these characteristics, the icebreaker is equipped with such a particular outfit to fulfill the search of sunken ships at the depth of 300 meters.|
|The shape of the vessel's hull has been especially designed with application of the latest solutions for decreasing the power input in |
|ice-breaking operations and improving sea-worthiness. The icebreaker is designed for escorting targe tankers (50 m beam); towing operations for |
|vessels in icy and open waters. The high mobility lets the icebreaker carry out salvage operations during roughness force. The displacement |
|totals about 10 000 tons, the length totals 116 meters, the width 26,5 meters, the draft 8,5 meters and the speed totals 17 knots. |
|The icebreaker has been tested and inspected by specialists of the Baltiysky Zavod plant. OPK's shipbuilding assets have 80 years of operational |
|experience in the construction of icebreakers. In March 2007, the Baltiysky Zavod plant finished executing a historical contract for the |
|construction of the world's biggest atomic icebreaker "50 let Pobedy". |
|About OPK |
|United Industrial Corporation (OPK) is a diversified holding company with total value of assets of more than US$13 billion. OPK develops and |
|manages an investment portfolio in major sectors of the Russian economy, including the financial sector, real estate development, shipbuilding, |
|mining and media. For more information please visit the OPK website |
Activity in the Oil and Gas sector (including regulatory)
Russian energy players in cash hunt
Wire reports
Russia's Lukoil is briefing investors regarding a possible Eurobond issue, banking industry sources said today.
Russia's oil and gas majors have returned to the debt markets recently as energy prices recovered.
"The company is testing the market: they had plans to issue about $1 billion of Eurobonds, but only the demand will show to what extent this sum can be realised," a source at one of the banks told Reuters.
The source added that Lukoil could place the bond in September.
Lukoil declined to comment to Reuters on the matter.
Lukoil earlier this month signed a $1.2 billion syndicated loan with a group of 12 banks, banking sources close to the deal said.
Separately, a banking industry source told Reuters on today that gas export monopoly Gazprom will meet with investors from 20 July to discuss its planned $2 billion Eurobond issue.
Russian player TNK-BP, half owned by UK supermajor BP is also meeting with investors this month in order to gauge their interest in a planned Eurobond issue, a banking industry source told Reuters earlier this month.
Wednesday, 15 July, 2009, 21:08 GMT | last updated: Wednesday, 15 July, 2009, 21:08 GMT
Russia Lukoil to brief bond investors –sources
Thursday July 16, 2009 04:01:17 AM GMT
MOSCOW, July 15 (Reuters) - Russia's LUKOIL is briefing investors regarding a possible Eurobond issue, banking industry sources told Reuters on Wednesday.
"The company is testing the market: they had plans to issue about $1 billion of Eurobonds, but only the demand will show to what extent this sum can be realised," a source at one of the banks said.
The source added that LUKOIL could place the bond in September.
LUKOIL declined to comment on the matter.
Russia's oil and gas majors have returned to the debt markets recently as energy prices recovered.
LUKOIL, Russia's second largest oil producer and the country's largest private oil firm, earlier this month signed a $1.2 billion syndicated loan with a group of 12 banks, banking sources close to the deal said. Separately, a banking industry source told Reuters on Wednesday that gas export monopoly Gazprom will meet with investors from July 20 to discuss its planned $2 billion Eurobond issue.
TNK-BP, half owned by oil major BP, is also meeting with investors this month in order to gauge their interest in a planned Eurobond issue, a banking industry source told Reuters on July 6.
(Reporting by Oksana Kobzeva, writing by Alfred Kueppers; editing by Elaine Hardcastle)
|16 July 2009, Thursday |
MAHIR ZEYNALOV İSTANBUL
Lawyer: Sberbank Asked Sibir for $60M
16 July 2009 By Irina Malkova / Vedomosti
Sberbank wanted a $60 million “premium” for providing Sibir Energy with a $192 million loan, a lawyer for Shalva Chigirinsky, the oil company’s beleaguered former shareholder, told a London court.
Details of the loan agreement were disclosed in evidence presented by Christopher Grierson, a partner at the British legal firm Lovells who is representing Chigirinsky in London’s High Court. Vedomosti obtained a copy of the evidence, and Grierson has confirmed its authenticity.
The former billionaire is in court to defend his claim to a 23 percent stake in Sibir Energy.
Chigirinsky found out about the condition “at the last minute,” before the deal with Sberbank was concluded, Grierson said, citing his client.
Negotiations with the bank were conducted last fall, when Chigirinsky was in danger of losing his stake in Sibir Energy due to a barrage of margin calls by Merrill Lynch. They were led by Igor Kesayev, Chigirinsky’s partner at Sibir Energy, the document said.
The document said the Sibir Energy executives assumed that Sberbank would lend around $200 million with an interest rate of 11 percent to 12 percent to Kesayev’s Orton Oil, which would then transfer the funds to Gradison, a company controlled by Chigirinsky.
This method was chosen because Orton Oil already had a credit history with Sberbank, the document said.
The final amount of the loan was $192 million, with an interest rate of 16 percent. But in addition to commissions of $2.28 million, Sberbank wanted Gradison to “pay a premium to Sberbank Capital in the amount of $60 million,” Grierson said.
Sberbank Capital is a subsidiary of Sberbank.
Parties to the deal prepared to formalize the extra $60 million as a repo transaction for an 8.6 percent stake in Bennfield, which held a 46.65 percent stake in Sibir Energy.
Chigirinsky’s company was going to sell the shares to Sberbank Capital for $1, and in turn buy up 4 percent of Sibir Energy’s shares on the London Stock Exchange, but not for less than $60 million, according to the documents.
Memorandums for the deal were signed simultaneously with the issuance of the loan for $192 million, but the deal itself did not take place.
The documents presented by Grierson said that Chigirinsky sought advice from the legal firm Muranov, Chernyakov & Partners, who told him that a Russian court would view the documents regarding Bennfield as “regulated by Russian laws” and therefore “not legally binding.”
Alexander Muranov, a managing partner at the firm, confirmed that he provided an opinion on the issue to Chigirinsky’s legal team, but refused to comment further.
When asked about the deal, Sberbank’s press office said: “This information is a bank secret.”
Stroytransgaz to cede stake in Algeria projects to Rosneft – paper
MOSCOW, July 16 (RIA Novosti) - Stroytransgaz, a major Russian engineering company, is holding talks with Rosneft on selling its 50% stake in a joint venture developing oil and gas fields in Algeria, a business paper reported on Thursday.
"The negotiations are ongoing, and this seems to be an interesting asset for Rosneft. Rosneft thinks likewise," Vedomosti quoted Stroytransgaz CEO Alexander Ryazanov as saying.
A Rosneft representative told the paper that the state-owned crude producer was open to offers.
A consortium of Rosneft and Stroytransgaz won a tender in 2001 to develop the 245-South oil and gas block in Algeria on production-sharing terms. The partners hold 60% in the project on a parity basis, while the remaining 40% is held by Algeria's Sonatrach, the paper said.
Two oil deposits, Eastern and Western Takuazet, were discovered at the block in 2003-2004 and a gas condensate field, Northern Tesselit, was discovered in 2006. Rosneft plans to start production at the fields in 2009-2012, the paper said.
According to Vedomosti, the deposits' reserves have been estimated at 415 million barrels of oil and 24.6 billion cubic meters of natural gas, with proven oil reserves at 36.5 million barrels.
Representatives of Rosneft and Stroytransgaz have not disclosed new data on the deposits' reserves. However, Ryazanov said that the 100% stake in the joint venture was estimated at $600 million or $300 million for a partner. The project's entire cost is put at $1 billion, the paper said.
Algeria's proven natural gas reserves stand at 4.58 trillion cubic meters, the second largest in Africa after Nigeria (5.15 trillion cubic meters). The country's natural gas reserves are largely located in central and eastern Algeria.
Algeria's proven oil reserves amount to 1.58 billion metric tons (11.6 billion barrels), the third largest in Africa after Libya and Nigeria.
Stroytransgaz is involved in the construction of oil and gas facilities in 17 countries. Its major shareholder is Russian energy giant Gazprom.
PetroChina adds refining facilities for Russian oil
Wed Jul 15, 2009 11:05pm EDT
BEIJING, July 16 (Reuters) - Asia's top oil and gas company PetroChina (0857.HK: Quote, Profile, Research, Stock Buzz)(601857.SS: Quote, Profile, Research, Stock Buzz) has started an expansion of its Liaoyang refinery in northeastern China to prepare for more oil imports from Russia, its parent CNPC said in a company newspaper.
Liaoyang is the main plant in China for processing Russian oil.
Liaoyang will add a hydrocracking unit with capacity of 1 million tonnes per year (tpy), a hydrorefining unit of 2 million tpy and a sulphur removing and recovering unit of 30,000 tpy, as well as other facilities including reserve tanks.
All construction work would be completed before the end of 2010, the China Petroleum Daily reported on Thursday. It did not disclose the investment involved.
In March, the general manager of the plant said Liaoyang planned 110,000 bpd of crude throughput for 2009.
The plant has a crude processing capacity of nearly 200,000 barrels per day (bpd), data published on CNPC's website showed.
According to an oil-for-loan deal between China and Russia agreed in April, about 15 million tonnes of Russian crude oil will be sent to China every year from 2011 upon completion of a pipeline, scheduled for October 2010.
China imported 11.6 million tonnes of crude oil, mostly via rail, from Russia in 2008, down 20 percent from a year earlier, Chinese customs data showed. (Reporting by Jim Bai and Chen Aizhu; Editing by Chris Lewis)
Gazprom
Gazprom plans Eurobond roadshow from July 20 –source
Wed Jul 15, 2009 8:45am EDT
MOSCOW, July 15 (Reuters) - Russia's gas export monopoly, Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz) will meet with investors from July 20 to discuss its planned $2 billion Eurobond issue, a banking industry source told Reuters on Wednesday.
Banking industry sources said earlier this month that Gazprom planned to carry out the bond issue in two separate tranches in order to help finance recent acquisitions by its Gazprom Neft (SIBN.MM: Quote, Profile, Research, Stock Buzz) oil unit. (Reporting by Oksana Kobzeva, writing by Alfred Kueppers, editing by Toni Vorobyova)
Tullow, Gazprom Jump in Kudu Bed
Wed. July 15, 2009; Posted: 09:38 AM
Jul 15, 2009 (The Namibian/All Africa Global Media via COMTEX) -- TUOIF | Quote | Chart | News | PowerRating -- THE development of the Kudu Gas Field has been fast-tracked with Tullow Oil, majority shareholder in the project, confirming that they are considering Gazprom, the Russian natural gas giant with whom Government signed a memorandum of understanding (MoU) recently, as a partner in the N$14 billion project.
Tullow Chief Operating Officer Paul McDade was quoted in The Irish Times yesterday as saying they are prepared to cooperate with Gazprom or other partners to advance Kudu.
"We will be happy to work with any party that helps the commercialisation of the Kudu field," McDade told the newspaper in a telephonic interview. Time at Kudu is running out for Tullow. Spokesperson Martin Jackson told The Namibian that Tullow's initial development period expires at the end of next month.
However, in terms of its petroleum license, Tullow can apply for a 25-year production period, which "shall be" approved by the Minister, Jackson said. Tullow's remarks come at a time when Government's patience with the dragging development has clearly run out.
Speaking in Cape Town yesterday, Namibian Petroleum Commissioner Immanuel Mulunga said Government intends on selling Kudu's gas exclusively if the project plans of current license holders Tullow Oil, Namcor and Itochu don't commercialise soon. "There is definitely a new impetus... 2013 is the date (we are targeting) for first gas to be produced," Mulunga told Reuters on the sidelines of the African Energy Conference.
If the current Kudu gas-to-power project doesn't get off the ground soon, Government will sell the gas to raise money on royalties and taxes, he said. This is the second time in less than a month that Government threatens to take matters at Kudu, which was discovered more than 30 years ago, into its own hands.
Mines and Energy Minister Erkki Nghimtina told Parliament in June that if Kudu's shareholders can't reach consensus on the development, Namibia should take the bold step to simply extract the gas and export it.
"Currently the gas in the ground benefits no-one, but if we export it, Namibia will earn considerable income through royalties and taxes," he said then. More importantly, Nghimtina added, Namibia will become a gas producing country, creating lots of new jobs and even associated industries.
During their visit as part of Russian President Dmitry Medvedev's visit to Namibia two weeks ago, Gazprombank, the lending arm of Gazprom, signed an MoU with the National Petroleum Corporation of Namibia (Namcor), paving the way for the bank to finance the construction of an 800 MW power station at Walvis Bay, a pipeline and other infrastructure for Kudu to the tune of US$1,2 billion.
Both Namcor and the Ministry were reluctant to tie the MoU directly to Kudu, saying that Gazprom's involvement will still have to be negotiated with the shareholders. Gazprom, on the other hand, told the world it was a done deal. "It is quite a nice, sexy little project", Gazprom International Chief Boris Ivanov said in Windhoek.
A day afterwards, Ivanov told Reuters in Luanda that the firm was in advanced talks with Eskom to sign a power purchase agreement for the electricity to be generated at the combined cycle gas power station in the south of Namibia.
Under the agreement, Eskom would use 500 MW of the power generated, while Namibia would use the remaining 300 MW.
"We are at an advanced stage of talks with the South African national energy company ... (the contract) will become a guarantee for financing of the project by Gazprombank and a pool of international lenders ... mainly from the Middle East and in Lebanon in particular," Ivanov said.
He said that while the company's mandate was limited to organising the finances for now, it would also try to attract Russian contractors for the project, including Technostroiexport and Stroitransgaz.
Ivanov said Kudu's declared deposits are estimated at 45 billion cubic metres and the construction would take up to four years.
"This is a pilot project ... to ensure the realisation of our concept of complex exploration from gas well to kilowatts, to the final consumer. This is what we are trying to do in Russia and other countries," he said.
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Gazprom investment strategy to focus on matching supply with demand
15 July, 2009, 11:31
While oil and gas firms spent 10% more on new assets worldwide in the first half of 2009 year on year, Gazprom in Russia sharply reduced its investment plan for the year.
The state owned gas giant has told the government it will have to slash its investment programme by 6% from last year. Its approved $23 billion spending plan includes upstream projects, liquefied natural gas and pipeline infrastructure.
Nevertheless, Prime Minister Vladimir Putin is upbeat about the future saying the Government should prepare for a significant growth in demand which will definitely come in the near future.
“The demand for goods from large producers like Gapzrom is falling, along with the price. Gas extraction in the first quarter of the year slumped 20%. However, we are sure that together with the economic revival demand will grow and in the long term will exceed the pre crisis level. We should be ready for that.”
Some key fields will be delayed, including the Bovanenkovo field, which, with a capacity of more than 115 billion cubic meters of gas a year, is equal to Russia's annual exports to the EU.
But analysts say the company is right to postpone new fields, with current demand down.
Pavel Sorokin, analyst at Unicredit Securities, says matching existing production levels with demand is the company’s current priority.
“The current priority for Gazprom is to preserve the production it has now and create a base for the potential recovery of demand in the future. So, what we are actually trying to do now is to invest into upstream projects, preserve Shtockman's launch to at least fit into some of preplanned margins.”
Azerbaijan-Gazprom agreement puts Nabucco in jeopardy
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Russian gas company Gazprom signed a deal with State Oil Company of the Azerbaijan Republic (SOCAR) in Baku last week in connection with the first phase of the Shah Deniz gas field to transfer 500 million cubic meters of gas to Europe under the auspices of Gazprom. Seen as a potential supplier for the Nabucco gas pipeline, Baku's step raised some questions regarding Nabucco's gas supply problem.
Russian President Dmitry Medvedev's visit to the Azerbaijani capital of Baku last week, this time accompanied by Russian businessman Alexei Miller, the CEO of Gazprom, Russia's largest company and the biggest gas company in the world, was part of efforts to secure Baku's gas. The gas is also coveted by the EU-backed $11 billion Nabucco project, a gas pipeline project that is envisioned to transport primarily Caspian Sea gas to Europe through Turkey, bypassing Russia. Gazprom's CEO Miller and Rövnaq Abdullayev, the head of SOCAR, signed an agreement to transfer 500 million cubic meters of gas from the rich Shah Deniz gas field starting in January of next year. Russian President Medvedev and Azerbaijani President İlham Aliyev labeled the agreement a huge step forward in energy policy and bilateral relations.
There is speculation that the deal is part of Russia's effort to control all of Europe's energy routes and make the Nabucco project redundant when considering the gas oversupply of South Stream, a Russian-orchestrated gas pipeline aiming to transfer Caspian gas via the Black Sea to Eastern Europe. However, President Medvedev said their motives are solely based on economic, not political, interest. Miller said they are looking forward to getting special privileges in the second phase of the Shah Deniz gas field, which will be inevitable unless other companies offer more attractive deals to Azerbaijan. Although the current deal only allows 500 million cubic meters of gas to be sold to Gazprom, the company foresees annual increases in supplies to Russia in the future.
Although the Nabucco pipeline's sources of gas are still to be decided, the project has been seen as one of the primary actions to counter the difficulties raised by Russia's harsh and strict energy policies. The EU is not a partner in the Nabucco project, but it has great interest in keeping it safe and out of Russia's control. In the meantime, Russia is planning to establish the rival South Stream gas pipeline.
Commenting on the rivalry between Nabucco and South Stream, Shirvani Abdullayev, Russia's Alfa Bank's top oil and gas analyst, told The Associated Press that giving Gazprom priority for the Shah Deniz gas field would spell the end for Europe's Nabucco project. “Nabucco was designed to use Shah Deniz gas,” he said. “Now it is left without the source of gas.” Abdullayev said it was “unrealistic to think” that South Stream and Nabucco could coexist. “The market does not need so much gas,” he said.
Ferruh Demirmen, an independent energy analyst based in Texas, told Today's Zaman that “Azerbaijan sent a message to Turkey and to the West by signing a contract with Russia.” He continued, saying, “The first gas supply for Nabucco will be from Shah Deniz-2. Nabucco's future is in question as Shah Deniz-2's gas went to Russia.”
Also speculating on the aftermath of the agreement on the Nabucco project, Demirmen said, “It is undeniable that with Shah Deniz-2's gas stream to Russia, Nabucco will be adversely influenced.” Demirmen also claimed that this agreement would “force” the other partners in the Shah Deniz Consortium to act the same way as SOCAR. “Although as a partner country, SOCAR has only a 10 percent share of the gas consortium, according to the Production Sharing Agreement,” Demirmen said, “SOCAR will get the rights for a significant portion of the gas and sell it to Russia. This situation will also push other partners to sell their shares of gas to Russia.”
Azerbaijan, undoubtedly, also plans to use the agreement in its foreign policy. The long protracted conflict over the disputed territory of Nagorno-Karabakh, an Azerbaijani territory currently controlled by Armenian military forces, has been Azerbaijan's primary foreign policy challenge for nearly two decades. In his interview with Today's Zaman, Demirmen said: “Azerbaijan plans to use its gas reserves in its foreign policy with this agreement, too. Russia, throughout the history of gas trade with Europe, has also used its gas policy as a geopolitical tool. This agreement shows that Azerbaijan has allied itself with Russia. Azerbaijan's primary message to the West is about its Nagorno-Karabakh problem.”
Sami Sevinç, a member of the Turkish Industrialists and Businessmen's Association's (TÜSİAD) Energy Working Group, told Today's Zaman that “Turkey still produces 60 percent of its electricity from gas. If Turkey gets gas through Gazprom and not directly from Azerbaijan, it will be a losing situation for Turkey.” At a Strategic Cooperation Conference in Baku in September of last year there was great support for the Nabucco project. "Azerbaijan is not giving up on the Nabucco project," Azerbaijani Industry and Energy Minister Natiq Aliyev had said, "This is a project that has a future."
Sohbet Karbuz, the head of the oil and natural gas department at the Union of Mediterranean Energy Companies (OME), told Today's Zaman that “the details of Azerbaijan's agreement with Gazprom are not yet clear. An annual 500 million cubic meters of gas does not really have importance. What's important is Shah Deniz's second phase. There was a short ‘gas crisis' between Russia and Turkmenistan, and thus Russia's agreement with Azerbaijan also sends a warning alarm to Turkmenistan. However, Russia cannot give up Turkmenistan. For the South Stream [pipeline] Russia needs Turkmen gas.” Speaking optimistically about Azerbaijan's intention not to cooperate with Nabucco, Karbuz said: “Right now, the most reasonable deal is to send gas to Russia as there is a real gas pipeline. However, as the fate of Nabucco is not clear, Azerbaijan, I believe, will not become involved in large-scale agreements with Russia”.
In his interview with Today's Zaman, Mert Bilgin, a professor at Bahçeşehir University, said: “Azerbaijan's political goal is about Nagorno-Karabakh and the limits of compromise in Turkey-Armenia talks. If Russia supports Azerbaijan's cause to keep the Nagorno-Karabakh region within Azerbaijan's territory with a largely autonomous nature, then Azerbaijan may increase the gas supply to Russia. If Turkey makes solving this problem a priority, the normalization of relations with Armenia, for whatever goals and real intentions, will not be welcomed in Azerbaijan, and Russia's regional influence will increase.”
To end the discussions on the issue, Azerbaijani President İlham Aliyev, in a Monday speech at Chatham House in London, said they have enough oil to sell to various parties.
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