Russia - WikiLeaks
Russia 090312
Basic Political Developments
• Russian Foreign Minister arrives in Azerbaijan
• Argentina signs agreement with Russia on visa-free travels
• Russia says no plans to fine Ukraine over reduced gas intake
• Russia to remit Ukraine’s fines for unpurchased but contracted gas
• Russia provides USD 45 mln in aid to Moldova
• Russia gives in to US enticement on S-300s? - Moscow may shelve the delivery of the advanced S-300 air defense system to Iran as Russia seeks to turn a "new page" in its ties with the US.
• NATO-Russia Council to Resume Meetings in the Wake of April Summit
• NATO, CSTO must cooperate on security, head of 'Russian NATO' says
• Russian army deserter granted refugee status in Georgia
• Georgia not to attend Eurovision 2009 in Moscow
• Norway releases Russian trawler
• New professional Russian border guarding - From January this year, the Russian Border Guard Service uses no conscripts along the 17,000 km long Russian border.
• Foreign diplomats rush to Murmansk - A wide range of countries now send diplomatic delegations to Murmansk in bids to position their respective national industries in the Shtokman project
• Debris of US and Russian satellites begin to fall down on Earth
• Russia Asks Interpol To Arrest Exiled Tycoon Chichvarkin
• Three suspects in high-profile N. Ossetia murders arrested, six others wanted - Investigative Committee
• Three suspects of firing on police post in Ingushetia detained
• Policeman, 3 civilians injured in S.Russia
• Killers of Vladikavkaz mayor Karayev, former mayor Pagiyev wanted
• Bank official shot in Moscow
• Nationalist material confiscated from office of Russian Public Movement
• Poet Found Guilty of Extremism - A 21-year-old poet has been convicted in Veliky Novgorod for publishing Islamic poems on her LiveJournal blog that the Federal Security Service deemed extremist.
• Prosecutors Probe Anti-Putin Poster
• Russia's Billionaire Drop-Offs - Two-thirds of last year's Russian billionaires got knocked out of the ranks.
• Moscow knocked off rich top spot - Russia lost nearly two-thirds of its billionaires during the past year, according to the Forbes 2009 World Billionaire list.
• A Russia Without Oligarchs - Once the economic crisis ends, the Russian government will face the question of how to carry out privatization properly.
• Medvedev Takes Charge of Religious Affairs Giving New Patriarch a Victory
National Economic Trends
• Russia's international reserves down $3.8 bln to $380.5 bln in week
• Individuals transferred $41.1 bln from Russia abroad in 2008
• Monetary Base Stabilizes In February
• Ruble May Plunge 20% as Government Funds Converted, Alfa Says
• Russia's bailout plan to reach 12% of GDP
• Putin says Russia cannot afford low rates –report
• Adapting the Budget to Times of Crisis - Yesterday, the government approved amendments to the Budget Law as a way of adapting it to the current crisis
• Russia may use up to $46bn to balance budget in H1 2009
• Russia's 2009 investment spending to amount to 1.2 trillion rubles –Putin
• Up to 3 trln rbls may be used from Reserve Fund in '09 – Putin
• Reserve Fund to last 2.5 years
• Unemployment Rate Rises to 2 Million
• Meat Prices Jump 23%
• NPLs: A Problem Overlooked by the Market
• COMMENT: Is the Russian bear over-bearing? - While the global financial crisis shows no sign of abating, and if anything is getting worse, the Russian market is showing increasing signs of relative stability.
Business, Energy or Environmental regulations or discussions
• Russia daily c.bank swap limit at 5 bln rbls
• Sberbank Reins In Expansion Goals
• Sberbank looking to buy BTA and Belpromstroibank
• Standard Bank Appoints Peter Ghavami CEO Of Russian Unit
• Vnesheconombank May Buy 40% of Rostelecom, Kommersant Reports
• MegaFon Is Interested in Buying Synterra, Vedomosti Reports
• Megafon and Comstar UTS seen considering Synterra acquisition
• MTS Sees Q4 Profit Fall 68%
• Severstal's Liberia Licenses
• Yeltsin son-in-law may leave Aeroflot CEO job-paper
• Car sales plummet 38% on the year in February
• AvtoVAZ changes payment scheme to deter halts in production
• PM warns energy producers against boosting prices
• Market Council says continued power market liberalisation in question
• Railway tariffs not to go down further, PM says
• RZD Gets Equipment for Sochi Link
• Prysmian Might Make Acquisitions in Russia, Chief Tells MF
• Severstal's Liberia Licenses
• Severstal 2008 results broadly in line with estimates
• NLMK to pay only $234m for backing out of John Maneely deal
• Vedomosti: no final decision on claim to Uralkali
Activity in the Oil and Gas sector (including regulatory)
• Russian waiving gas fines against Ukraine – Putin
• Algeria-Russia: To develop new sources of hydrocarbons
• Central Asia to push on with Russian pipe - Kazakh Prime Minister Karim Masimov and Turkmen President Kurbanguly Berdymukhamedov discussed the Russian project during a meeting in Tehran this week, Kazakhstan's government said in a statement posted on its website late yesterday.
• Regulator to consider fuel hike cases against TNK-BP, Gazprom Neft on April 10
• Sibur Seeks $2Bln Loan
• UPDATE 1-Russia Sibur seeks $2 bln, pays off loan early
• Rosneft announces general meeting date - Rosneft announces general meeting date
• TNK-BP: Investments in Kamennoye field remain stable
• Report: limited environmental harm from Nord Stream
Gazprom
• GRAY: EU has the means to check Gazprom
• FAS gives green light to Gazprom's purchase of 20% of Gazpromneft from ENI
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Full Text Articles
Basic Political Developments
Russian Foreign Minister arrives in Azerbaijan
11.03.2009 15:50
Baku, Fineko/abc.az.
Russian Foreign Minister Sergei Lavrov is arriving in Azerbaijan today.
The Embassy of Russia to Azerbaijan informed within the visit it will summed up the results of three years of implementation of the Declaration on Friendship and Strategic Partnership between the two countries. Lavrov will take part in opening of the Russian Information & Cultural Center in Baku.
According to Azerbaijan Republic Ministry of Foreign Affairs, negotiations between Russian Foreign Minister Sergei Lavrov and Azerbaijani Foreign Minister Elmar Mammadyarov are appointed for morning of March 12.
Argentina signs agreement with Russia on visa-free travels
BUENOS AIRES, March 11 (Itar-Tass) - Argentina has signed an agreement with Russia on visa-free travels for citizens of the two countries. The document was signed here on Wednesday by Argentinean Foreign Minister Jorge Enrique Taiana in the presence of Russia’s Ambassador to Argentina Yuri Korchagin.
The agreement is now to be signed by the Russian side, and it will come into effect after being ratified by the two countries. Citizens of one country having valid passports will be able to get into the other country, leave it, fly through and stay in it without visas for no more than 90 days during each period of 180 days starting from the date of the first entry.
Those who want to stay longer than 90 days or work in the other country must get a visa. According to Foreign Minister Jorge Taiana, the agreement testifies to a bid and readiness of the two countries to develop bilateral relations.
“A lot of steps in that direction were made during an official visit to Russia last December by Argentina’s President Cristina Fernandez de Kirchner,” he said. According to the top diplomat, the agreement on visa-free travels will become a new “practical step that will contribute to the strengthening of contacts between entrepreneurs of the two countries, to the development of tourism and an expansion of cultural exchanges”.
The Russian ambassador, for his part, told Tass that the document signed on Wednesday is “an agreement of a new generation,” which will make it possible to visibly boost contacts between the citizens of the two countries.
Russia says no plans to fine Ukraine over reduced gas intake
NOVOKUZNETSK, March 12 (RIA Novosti) - Russia will not seek reparations from Ukraine for importing less natural gas than the volume stipulated in the contract with Russia's Gazprom, Prime Minister Vladimir Putin said on Thursday.
Ukraine was contracted to buy 2 billion cubic meters of gas from Russia in February for a total of $720 million. However, it bought only half that volume.
"Ukraine is currently not buying the volume of gas from us that it was contracted to do, and should pay a fine for this. We are waiving this fine, based on realities - they can't pay. They are now on the verge of bankruptcy," Putin said, at a meeting with miners in Siberia.
Alexei Miller, the CEO of Russian gas giant Gazprom, said earlier this month that Gazprom was not seeking fines from Ukraine over the fall in gas imports.
Ukraine has asked Russia for a $5 billion loan to pay for gas deliveries.
Gazprom temporarily suspended gas deliveries to Ukraine at the start of the year over a payment delay, and the sides' failure to reach a new gas deal.
Earlier this week, Putin said that a recent dispute surrounding Ukrainian national energy company Naftogaz, "discredited" the country, and could lead to Russia seeking alternative routes for gas transit to Europe.
Russia to remit Ukraine’s fines for unpurchased but contracted gas
NOVOKUZNETSK, March 12 (Itar-Tass) - Russia intends to remit Ukraine’s fines for non-purchased, but contracted gas, said on Thursday Prime Minister Vladimir Putin at a meeting with miners during his working trip to the Siberian Federal District.
“We shall remit these fines, guided by actualities of life: Ukraine is on the brink of bankruptcy, and you understand pretty well that it is impossible to deal the final blow on partners,” he said.
Ukraine used around one billion cubic metres of Russian gas in February, purchased at 360 US dollars per 1,000 cubic metres instead of two billion cubic metres under the contract. However, Gazprom head Alexei Miller assured reporters in Madrid last week that the holding would not use fine sanctions to Naftogaz Ukrainy for non-purchased gas in February.
“We agreed with Naftogaz head Dubina that Gazprom would not use fine sanctions to Naftogaz,” Miller said. Last week, Naftogaz also requested Gazprom to review the volume of gas supplies this year, provided for in the contract, and to cut it from 40 to 33 billion cubic metres.
Speaking with miners, the premier said that the state does not intend to purchase metals for state reserves.
He noted that the demand for metal sharply dropped in the entire world over the crisis, which also entailed a slide in demand for coal. Putin said that there are proposals to purchase steelmen’s products for state reserves to prop up national steel and iron producers.
“It’s impossible. It’s impossible to buy up metal for the entire world – for all consumers in Europe, America and Asia. This is just impossible. We shall stop then paying pensions,” Putin said. He also added that the state has no place where these products to stockpile.
According to the premier, the state can prop up the metallurgical industry by increasing the state order for metal-intensive products, which is already being done.
The prime minister also added that the government would continue work on cutting and even bringing to zero import customs duties on equipment which is not produced in Russia.
One of miners at the meeting called attention of the head of state to the situation when import equipment, purchased for miners, turns more expensive over customs duties, although it is not produced in Russia. He requested the government to dump these duties.
“You are quite correct. Such task is already set before the Ministry for Economic Development,” Putin underlined. He added that customs were slashed or even brought to zero on a considerable number of equipment items which are not made in Russia. “Let us have a look: if miners are still short of something, this can and will be done,” Putin emphasised.
Russia provides USD 45 mln in aid to Moldova
CHISINAU, March 11 (Itar-Tass) -- Russia provided 45 million U.S. dollars worth of humanitarian aid to Moldova affected by natural calamities in 2007 and 2008.
Russian Ambassador to Moldova Valery Kuzmin said Russia had become one of the biggest donors for Moldova.
In 2007, Moldova experienced the severest drought in the past half century, which destroyed more than half of all crops and jeopardized the country’s food security.
In 2008, Moldova was hit by a devastating flood. Up to 8,000 people were evacuated from the settlements on the rivers Dniester and Prut, up to 500 houses were inundated, and half of them collapsed.
According to the ambassador, humanitarian aid was provided evenly to all parts of Moldova, including the Dniester region. In addition to financial aid, Russia supplied fuel, grain, equipment, and clothes.
The Russian Emergencies Ministry’s operation in Moldova became one of the biggest efforts to respond to recent natural calamities, Kuzmin said.
“By providing possible aid to the population of Moldova, the Russian government sought to help as best it could the country with which it was connected by century-old friendship and cultural ties, and no political contexts were necessary,” he said.
Russia gives in to US enticement on S-300s?
Wed, 11 Mar 2009 19:31:06 GMT
Moscow may shelve the delivery of the advanced S-300 air defense system to Iran as Russia seeks to turn a "new page" in its ties with the US.
Russia's Interfax news agency quoted a source familiar with the issue as saying on Tuesday that the Kremlin may freeze a controversial deal to supply Iran with the sophisticated missile system.
"Such a possibility is not excluded. The question must be decided at a political level, especially as the contract was worked out on a purely commercial basis," the unnamed source said.
The report was released on the same day Russian President Dmitry Medvedev said he predicts a "new page" in Russia-US relations under Barack Obama.
"The signals being received from the US president are completely positive," Medvedev said after meeting with high-ranking members of the US Senate in Moscow.
The Obama White House has pledged to mend its strained relations with the Kremlin, stressing that the two sides must find common approaches on a variety of issues, including Iran and its controversial nuclear program.
Tehran says the only aim of its nuclear program is the civilian applications of the technology. The US, Israel and their European allies -- Britain, France and Germany -- accuse the country of having military objectives in its pursuit of nuclear technology.
Despite Western doubts over the success of any military plan against Iran, Israel -- which terms Tehran as an "existential threat" -- has repeatedly threatened to take out Iranian nuclear infrastructure with aerial strikes.
Following an escalation in Israeli rhetoric, Iran has moved to upgrade its defenses and has reportedly opted to acquire the S-300 system -- which, according to Western experts, would rule out the possibility of an Israeli airstrike on Iranian nuclear sites.
"If Tehran obtained the S-300, it would be a game-changer in military thinking for tackling Iran," says long-time Pentagon advisor Dan Goure.
The S-300 surface-to-air missile system, which can track targets and fire at aircraft 120 km (75 miles) away, features high jamming immunity and is able to simultaneously engage up to 100 targets.
The Russian source added that while the contract had been signed in 2005 the delivery of the controversial system has yet to take place.
The delivery of the missiles is expected to ruffle feathers in the United States, which fears Iran is seeking an atom bomb and has long refused to take the military option against the country "off the table".
NATO-Russia Council to Resume Meetings in the Wake of April Summit
[tt_news]=34687&tx_ttnews[backPid]=7&cHash=8e1bb96981
Publication: Eurasia Daily Monitor Volume: 6 Issue: 47
March 11, 2009 01:11 PM Age: 16 hrs
By: Vladimir Socor
NATO has not invited Russia to the alliance's summit on April 3 and 4. The event to be held on both sides of the Franco-German border is billed as a family affair for NATO member countries. NATO has nevertheless initiated ahead of the summit a normalization of relations with Russia. The NATO-Russia Council and other political and consultative processes, which NATO had suspended after Russia's invasion of Georgia in August 2008, are to resume shortly after the summit (see article above).
The suspension of relations has done no more to ameliorate Georgia's situation than the resumption of relations could conceivably do to moderate Moscow's conduct in Europe's East or toward NATO. Since the alliance's summit one year ago, Russia has significantly stepped up its challenges to the post-1991 international order. In addition to invading Georgia, it has threatened to dismember Ukraine and to target Russian missiles on NATO countries that would station elements of the U.S. anti-missile shield. It has completed the evisceration of the Treaty on Conventional Forces in Europe, manipulated energy supplies for political leverage in Europe, resorted to cyber warfare, is posing a growing problem for Allies through penetration of Western economic and sociopolitical systems (Stratfor, March 3), and has orchestrated the closure of the U.S.-led coalition's air base in Kyrgyzstan—to list the challenges within NATO's remit or affecting NATO directly. The alliance has yet to devise effective responses to these actions or at least consensual approaches in the run-up to this summit.
U.S. Secretary of State Hillary Clinton, attending her first NATO ministerial meeting in Brussels on March 5, criticized Russia publicly on some of those counts on behalf of the United States, and certainly in harmony with some NATO countries. She rejected "Russia's claims to spheres of influence over unwilling nations" and "any Russian veto right on countries' aspirations to join NATO or the EU." She pledged "in no way to withdraw our support for Georgia," and recalled that "my country strongly condemned Russia's actions in Georgia"; and borrowing from then-Vice President Richard Cheney's 2006 phrase about Russia, she expressed "serious concern over the use of energy resources as tools of intimidation."
At the same time, however, Clinton called with some urgency for renewing NATO-Russia and U.S.-Russia relationships to work together in areas of common interest, listing: Afghanistan, Iran, nuclear proliferation, and terrorism and its associated threats and challenges (AFP, March 5, 6). The notion that the United States and NATO need Russia's help to resolve those conflicts remains an insufficiently examined assumption on both sides of the Atlantic and is partly responsible for tying Western hands in Europe's East.
At the outset of the Brussels meeting, Lithuanian Minister of Foreign Affairs Vygaudas Usackas suggested that it would be premature to reconvene the NATO-Russia Council so soon, in view of Russia's recent conduct. A few other ministers shared that view, but the majority felt that reconvening the Council would encourage Russia to become more cooperative. The Lithuanian move did, however, help NATO Secretary-General Jaap de Hoop Scheffer strengthen the language on allied support for Georgia's territorial integrity in his concluding statement (BNS, March 5; RFE/RL, March 9).
When the North Atlantic Council suspended official meetings with Russia in August 2008, it pointed out that Russia had breached fundamental principles of jointly adopted NATO-Russia documents, including those of the NATO-Russia Council. Those breaches multiplied in the ensuing months even as the alliance continued informal meetings with Russian officials and began preparing for full resumption of institutional relations. NATO-Russia dialogue never stopped at the working levels during this period. Official resumption accelerated with the change of administrations in Washington, particularly with a new U.S. administration hard pressed to act on the protracted conflicts inherited from the old.
Moscow sounds delighted with the resumption of institutional relations with NATO. Formally, the move restores Russia's equality of status with the alliance, a prize that NATO has conceded for nothing in return. Russian Minister of Foreign Affairs Sergei Lavrov and his spokesmen hailed NATO's move as a "victory for common sense." Moscow seems to feel confirmed in its calculations that invading Georgia was a low-risk affair and that a strategically distracted West would soon reach out to Russia again (Interfax, March 6, 7).
At NATO in Brussels, Russian envoy Dmitry Rogozin taunts and insults the alliance on an almost daily basis irrespective of the state of relations. When NATO announced the NATO-Russia Council's reconvening for next month, Rogozin warned, "Russia is in no hurry [to help] on the issue of Afghanistan. But NATO could hurry. Delaying by a month does not look very patriotic to its soldiers who are spilling blood in Afghanistan" (Interfax, March 5). The next day he went on: "The debate within the alliance was fraught with scandal. We know who spoke against cooperation with Russia....Those states with Russophobic policies are simply afraid of disappearing among the big powers. Old Europeans, however, as well as the new U.S. administration, need good relations with Russia; they don't need this small trash, they could resolve issues together with Russia in an serious way, an adult way" (Interfax, March 6).
NATO leaders have tolerated such treatment in the alliance's own house from the Russian ambassador on a quotidian basis for the last two years.
High-profile, political dialogue with Russia, now about to resume, would have been unexceptionable as part of a coherent NATO policy on manifold contentious issues. Without such a policy, however, Moscow will undoubtedly continue using the NATO-Russia Council and other forms of institutional dialogue as it has done in recent years: as propaganda platforms and opportunities to gain a voice in NATO's own deliberations. Moscow will also offer putative "help" to NATO allies involved in the protracted conflicts in Afghanistan and with Iran, if NATO will in turn defer to Russian geopolitical priorities in Europe's East and Eurasia.
NATO, CSTO must cooperate on security, head of 'Russian NATO' says
March 11, 2009
NATO and its Russian-dominated counterpart, the Collective Security Treaty Organization (CSTO), should work together to form a new security system in Europe, the head of the CSTO said in Brussels on Wednesday. "Nowadays, the system of the balance of power in Europe is failing. The security architecture has to be re-made," CSTO Secretary General Nikolai Bordyuzha told journalists in Brussels.
"We think that the situation demands that (the CSTO and NATO) work together," he said after talks with the ambassadors of CSTO member states at NATO's headquarters in Brussels.
Bordyuzha's comments came amidst a debate over a call from Russian President Dmitry Medvedev for a "new security architecture" in Europe to replace the current stand-off between Russia and the West over issues such as NATO expansion into the former USSR and missile defence.
NATO members are divided over the call, but united in insisting that any new system should not be allowed to sideline their alliance.
Bordyuzha's statement implies that both alliances could be part of any future deal, in what is likely to be taken as a positive sign by NATO members.
"We are ready to unite our efforts" with NATO, he said.
The CSTO is a group of seven countries - Russia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Armenia and Uzbekistan - who have pledged to jointly defend one another's security.
August's war between Russia and Georgia led to a crisis in relations between NATO and Russia. The Western alliance broke off formal ties with Russia immediately after the war, and only decided to renew them on Thursday.
But Bordyuzha said that he saw no reason for a collision between the CSTO - sometimes referred to as the "Russian NATO" - and NATO.
"They are all dealing with the same problems of security," such as terrorism, drug trafficking and illegal migration. The CSTO has been pushing for the last four to five years for more cooperation with NATO on those issues, he said.
"Unfortunately, NATO is not ready to talk with us," he said.
At the same time, he warned that Ukraine would face potentially disastrous consequences if its government pushed for NATO membership.
"Ukraine's defence structures are so linked with those of Russia, Belarus and Kazakhstan ... They would be destroyed," he said.
Russia would be forced to bring in a new visa regime for Ukrainians, affecting millions of people, he said.
Russian army deserter granted refugee status in Georgia
TBILISI. March 12 (Interfax-AVN) - Alexander Glukhov, a sergeant in
the Russian armed forces, has received refugee status in Georgia and
privileges stipulated by the law, Georgian Interior Ministry spokesman
Shota Utiashvili told Interfax on Thursday.
"Glukhov has been granted refugee status, he has a place to live
and a certain allowance, and there is a TV set and a computer at his
apartment," Utiashvili said.
The spokesman refused to identify the address where Glukhov is
staying in Tbilisi for security reasons.
"I am assuring you that nobody is attached to him, and he can move
freely," Utiashvili said.
Glukhov has not applied for Georgian citizenship, he said.
"He is wishes to return home, but not now, as he is facing an
arrest. He has not expressed the desire to travel to a third country,
either," Utiashvili said.
Glukhov left his military unit stationed in South Ossetia in late
January and later resurfaced in Georgia.
Georgia not to attend Eurovision 2009 in Moscow
TBILISI, March 11 (Itar-Tass) -- Georgia has refused to attend the Eurovision 2009 song contest in Moscow this May.
Eurovision Georgia officials told journalists that despite big respect for Eurovision, Georgia would not change the content of the song that had won the national qualification contest.
Earlier, the Eurovision administration officially notified Georgian contenders, Stefane & 3G group, that the text of the song disagreed with the contest rules.
The Eurovision organisers suggested that Georgia change the song or remove political implications from it because the contest rules allow no politics in the songs.
Norway releases Russian trawler
MOSCOW, March 12 (RIA Novosti) - Norwegian maritime authorities have released Russian trawler that was detained on suspicion of violating fishing rules, Russia's Vesti TV channel said on Thursday.
The Proyekt trawler was detained by Norwegian coast guards on Tuesday night for fishing in an area temporarily closed to trawling from October last year until March 2. The vessel was allowed to leave the port of Sortland late on Wednesday after its captain and owners pledged to pay fines of $3,000 and $6,000, respectively.
This is the third case of Norwegian authorities detaining a Russian trawler since the start of the year.
Russian fishing agency officials earlier said that 95% of ship detentions are successfully contested by Russian companies in Norwegian courts. However, one day of detention in a Norwegian port costs Russian fishers $10,000-$12,000.
New professional Russian border guarding
2009-03-12
From January this year, the Russian Border Guard Service uses no conscripts along the 17,000 km long Russian border. That enhances the quality of border protection. However, there is still a long way to go before border-crossing procedures for traders and ordinary people is smooth and efficient, deputy head of the FSB’s Border Service in Northwest Russia admits.
Mr. Rafael Derbayev says to weekly journal Expert that his service now efficiently stops trespassers on the border in Northwest Russia. In 2008, the border guards revealed and stopped 1100 people trying to illegally get in or out of the country, most of them along the Russian-Finnish border. In addition, 150 kg of illegal drugs were confiscated and smuggling worth 67 million RUB stopped, he says.
From this year of, the border guard service is fully professionalized. And new modern equipment is provided to the service.
However, other problems are abundant on the border. Among them is a mentality problem, Expert.ru argues. Parts of the service has still has not fully grasped the new situation on the border with steady flows of people, goods and traders in and out of the country. And the professionalization of the border service might not quickly solve this problem.
In addition, the different federal authorities represented at the border stations have failed to coordinate operations, resulting in unnecessary red tape for the travelers and for cross-border business. –The optimization of these structures’ work includes a major untapped reserve for increased transport capacity, a leader of the Agency of Sea and River Transport said to the journal.
Despite several government attempts to impose new measures on the border, the bureaucratic structures on the border remain more or less unchanged. Thus, the government already three years ago decided that all operations at the border points were to be conducted by the Border Guard Service and the Customs alone and that the travelers should be handled in one-window-system. Today, five different services still operate the border stations.
“The level of interaction of the controlling organs […] demonstrates a complete inability of the authorities to deal with the different bureaucratic structures”, Expert.ru writes.
Foreign diplomats rush to Murmansk
2009-03-11
A wide range of countries now send diplomatic delegations to Murmansk in bids to position their respective national industries in the Shtokman project. Yesterday, Turkish diplomats paid their first ever visit to the Russian Arctic capital.
-Lately, more and more foreign diplomats come to Murmansk, the regional foreign ministry representative Sergey Klyushev says to MBnews.ru. Yesterday, the Turks were in town, today, the Polish General Consul is here and in the near future we will welcome diplomats from the Netherlands and the Baltic countries, he adds.
-For us this is a significant moment, which bears witness about the fact that our region really is of interest, the official highlights.
He confirms that the major planned projects in the region is what attracts the foreigners. Murmansk Oblast will over the next years be the site for the development of the Shtokman project, as well as major port projects and mining projects.
In their meetings with regional authorities, the Turks expressed hopes that their shipbuilding industry could get contracts in the region. We have the fourth most powerful shipbuilding industry in the world, the country’s General Consul in Sankt Petersburg Mehmet Chinar told MBnews.ru.
The Turkish delegation included five business representatives. However, the general consul believes the potential for cooperation is significant, and says he would like to invite industrial representatives from Murmansk to Turkey.
Debris of US and Russian satellites begin to fall down on Earth
11.03.2009
The debris of the two satellites, which collided on Earth’s orbit for the first time in the history of mankind in February of this year, begin to fall down on the planet, RIA Novosti reports with reference to the US Strategic Command, which monitors the near-Earth space.
Russia ’s Cosmos 2251 military communication satellite and US Iridium 33communication satellites collided in space February 10 at the height of over 800 kilometers above the territory of Russia ’s Krasnoyarsk region.
The fragments of the two satellites, which fall down on Earth, pose no danger at all, for they are tiny pieces of the craft – not larger than 1 centimeter. The fragment numbered as 1993-036PX will enter the Earth’s atmosphere on March 12. Fragment 1993-036KW will enter the atmosphere on March 28, and fragment 1993-036MC will follow on March 30, website says. All of them are only one centimeter in size. They will be destroyed in the atmosphere and will pose no danger to people.
The collision of the two satellites in orbit marked the first-ever collision of two undamaged satellites. All the previous incidents occurred when satellites collided with space garbage.
Russia ’s Cosmos 2251 military communication satellite was not operating for many years. It was living out its days in orbit like many other old satellites.
Cosmos 2251 satellite weighs about 800 kilos. It was used as a communication satellite for military purposes. The satellite lasts for only three years.
Iridium 33/24946 is a commercial communication craft weighing about 700 kilos. It lasts from five to eight years. There were 66 Iridium satellites in near-Earth orbit before the collision. Iridium Holdings LLC will replace the damaged satellite during the upcoming 30 days.
Three hundred and fifty five catalogue entries have been made to designate the debris of Cosmos 2251 and 159 entries – for the fragments of Iridium 33. The debris of Cosmos float in space at the heights from 198 to 1,689 kilometers. The numbers for Iridium are smaller – from 582 and 1,262 kilometers.
Russia Asks Interpol To Arrest Exiled Tycoon Chichvarkin
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MOSCOW (AFP)--Russia has sent a request to Interpol to put on its wanted list the co-founder of the country's leading phone retailer who has reportedly fled to the U.K., a spokesman for prosecutors said Wednesday.
A Russian court in January ordered the arrest of Yevgeny Chichvarkin, the eccentric figure behind the country's leading mobile phone retailer Yevroset on charges of kidnapping and extortion.
Chichvarkin stepped down late last year as chairman of Yevroset to promote a new Kremlin-backed liberal party.
"The Russian General Prosecutor's office has studied the materials of a criminal case and ruled that there are grounds to seek the arrest and extradition of the accused in the case that his whereabouts on the territory of a foreign state are established," its spokesman told AFP.
Russia has stepped up legal action against businessmen deemed to have violated the law, notably following the 2003 arrest of former Yukos oil company head Mikhail Khodorkosvky, who was sentenced to eight years for fraud and tax evasion.
Chichvarkin, who founded Yevroset in 1997, is known for his eccentric dress sense and mullet hairstyle as well as his former company's racy advertising campaigns.
Relations between Russia and the U.K. have nose-dived following Moscow's refusal to extradite a former KGB agent accused of murdering Kremlin critic Alexander Litvinenko in London in 2006.
Three suspects in high-profile N. Ossetia murders arrested, six others wanted - Investigative Committee
MOSCOW. March 12 (Interfax) - A group of nine people, three of whom
have been arrested and another six who are on the international wanted
list, are believed to have been involved in high-profile killings in the
North Caucasus, including the murder of Vladikavkaz mayor Vitaly
Karayev, his predecessor Kazbek Pagiyev and North Ossetia's criminal
investigation chief Vitaly Cheldiyev.
"They are being charged with conspiracy to commit murder and
premeditated murder of two or more persons, as well as the illicit
traffic of firearms and ammunition. The wanted persons were ordered to
be taken into custody," spokesman for the Russian Prosecutor's Office
Investigative Committee Vladimir Markin told Interfax.
Three suspects of firing on police post in Ingushetia detained
NAZRAN, March 12 (Itar-Tass) -- Three people suspected of firing on a block post in the village of Surkhakhi of Ingushetia’s Nazran region were detained in the republic, ITAR-TASS learnt at the Interior Ministry of Ingushetia. The names of the detainees are not given in the interests of investigation.
The incident occurred at 22.00 Moscow time on Wednesday. Unidentified people made several shots on the block post from a grenade launcher.
There are no victims. Investigation is underway.
Policeman, 3 civilians injured in S.Russia
MOSCOW, March 12 (RIA Novosti) - A traffic police officer and three civilians have been injured in two separate incidents in the Russian North Caucasus Republic of Chechnya, police said on Thursday.
The police officer was injured on Wednesday afternoon when a police convoy came under fire near the village of Bamut.
Two hours before the attack, a roadside bomb exploded near the same village, as a civilian vehicle was driving by. The driver and his two passengers were hospitalized with various injuries.
Killers of Vladikavkaz mayor Karayev, former mayor Pagiyev wanted
MOSCOW, March 12 (Itar-Tass) -- Members of a criminal group, which committed high-profile murders in North Ossetia, were unmasked and put on the international wanted list. The suspected killers assassinated Vladikavkaz Mayor Vitaly Karayev, former mayor Kazbek Pagiyev, the chief of the first criminal investigation department of the republican Interior Ministry, Vitaly Cheldiyev, and his son.
“Three suspects have already been put into custody and another six were put on the international wanted list,” spokesman for the Prosecutor General’s Office Investigation Committee (SKP) Vladimir Markin told Itar-Tass on Thursday.
The investigation of these crimes was discussed at an urgent meeting of the SKP main investigation department in the Southern Federal District, chaired by the agency’s chief, Alexander Bastrykin.
“Bastrykin praised highly the joint work of the SKP main investigation department in the Southern Federal District, the Federal Security Service and the Interior Ministry, which unmasked all members of the criminal group involved in the foresaid crimes. Three of them were arrested. Another six were put on the international wanted list,” Vladimir Markin said.
“They are charged with premeditated murder of two and more people committed by a criminal group under a preliminary conspiracy, as well as with illegal acquisition, storage, transportation and carrying of firearms and ammunition. The court has sanctioned their arrest in absentia,” the SKP spokesman said.
He noted that all members of the criminal group put on the international wanted list were unemployed Russian citizens.
Summing up the results of the meeting “the SKP chairman instructed the chief law enforcers to continue the search for the suspects and to gather more substantive evidence.”
Bank official shot in Moscow
Published: March 12, 2009 at 2:04 AM
MOSCOW, March 12 (UPI) -- Gunmen attempted to assassinate the chairman of Konversbank in Moscow, authorities said Wednesday.
"An unidentified gunmen fired several shots at the board chairman of Konversbank and his guard," The Moscow division of the Prosecutor-General's Office Investigation Committee told ITAR-TASS. "Both men have been taken to hospital."
Names of those involved and the condition of the two men were not known.
Nationalist material confiscated from office of Russian Public Movement
MOSCOW. March 11 (Interfax) - A search is under way at the office
of the Russian Public Movement which belongs to the organizing committee
of the so-called Russian March.
"Law enforcers entered the premises which the Russian Public
Movement rents in downtown Moscow after lunch and started a search
without producing a writ," Alexander Belov, leader of the nationalist
Movement against Illegal Immigration, told Interfax Wednesday evening.
He said law enforcement officers confiscated posters made for the
latest public action of the movement on March 1 and also the pamphlet
"17 Questions to a Russian Nationalist with Answers."
Poet Found Guilty of Extremism
12 March 2009
By Natalya Krainova / The Moscow Times
A 21-year-old poet has been convicted in Veliky Novgorod for publishing Islamic poems on her LiveJournal blog that the Federal Security Service deemed extremist.
Yevgenia Savelyeva was sentenced to 160 hours of community service for publicly inciting ethnic, national and religious hatred through what she said were "naive, childish" poems.
Rather than a crackdown on free speech, the case suggests that law enforcement agencies are looking for easy ways to boost their crime-solving rates, said Anton Nosik, director of SUP, the Internet provider for .
Savelyeva, however, accused the authorities of stifling freedom of speech. "Freedom of speech in our country is under rather strict control," Savelyeva said in a telephone interview from Veliky Novgorod.
She said she believed that she had the right to post whatever she pleased on her personal blog, including calls to violence, but that she would no longer publish her poems for fear of criminal prosecution.
Savelyeva refused to recite the poems that were found extremist, citing fears that her telephone was bugged by law enforcement officers.
Poems posted on Savelyeva's blog, written under the nickname "nibaal," included one about shakhids, the term meaning "martyrs" that is often mistakenly used to describe Islamic suicide bombers. The poem, addressed to a shakhid, calls on them to "hold the detonator tight" and says they will die "heroes" of their motherland and go to paradise.
Savelyeva was convicted by Novgorodsky City Court on Feb. 6, the court said on its web site.
The investigation into Savelyeva started in September 2007, she said. That month, officers from the regional branch of the Federal Security Service, or FSB, searched her apartment on suspicion that she had been involved in the August 2007 bombing of the Nevsky Express train, which injured 60 people.
On Savelyeva's confiscated computer, FSB officers discovered her poems, which they suspected contained extremist calls. The FSB handed the materials against Savelyeva to the regional branch of the Investigative Committee at the Prosecutor General's Office, which opened a criminal case in June 2008.
FSB experts later confirmed extremism in the poems and handed the case to the court. During the investigation, the FSB bugged Savelyeva's phone conversations and online communications, she said, citing her case papers.
A regional FSB spokesman, reached by phone this week, referred comments to the regional Investigative Committee. A spokeswoman for the committee refused to comment further than the information on its web site. The web site said investigators had "enough evidence" to charge Savelyeva with extremism.
Nosik, director of LiveJournal's Internet provider, told The Moscow Times that the fact that Savelyeva's blog was open to the public was "enough to find a criminal violation" in her actions.
Nosik also said LiveJournal officially forbade calls to violence, and users would be suspended if someone complained about them doing such things.
But Nosik said Savelyeva's offense, if there had been any, was "insignificant" to the public in general compared to crimes such as rape, terrorist attacks and murders. "All [law enforcement officers] who instead of looking for terrorists read poems on the Internet should be burned," Nosik said.
Law enforcement officials have targeted bloggers in the past. In August, Kemerovo regional prosecutors opened a criminal investigation into the activities of opposition activist Dmitry Solovyov following allegations that he made offensive comments about law enforcement officers on a blog. He faces up to two years in prison if charged and convicted.
In July, Komi blogger Savva Terentyev received a one-year suspended sentence for suggesting on a blog that police officers be publicly burned. He filed a complaint with the European Court of Human Rights in January.
Prosecutors Probe Anti-Putin Poster
12 March 2009
The Moscow TimesVladivostok prosecutors have opened an investigation into whether a banner reading "Putler Kaput!" used by opposition groups at several recent rallies is a call for violence against Prime Minister Vladimir Putin.
A spokeswoman for the far eastern Primorye region, Irina Nomokonova, said Wednesday that the inquiry had been opened on the request of Primorye Governor Sergei Darkin, Interfax reported.
Prosecutors were questioning organizers and participants of the anti-government rallies, she said.
A wave of street protests swept through the Far East after the new year, when Putin's decrees to increase import duties on foreign cars went into effect. The livelihood of thousands of local residents depends on the import of secondhand cars from Japan.
The head of the Vladivostok branch of the Communist Party, Vladimir Bespalov, who helped organize some of the rallies, said the banner was a modification of the popular World War II slogan "Hitler Kaput!" and that it was directed at Putin. But he denied that the banner sought to incite violence against Putin.
"Of course, the authors of this poster aren't calling for any violence against Putin. It is just a slight irony and simultaneously a reminder to [Putin]," he said, without elaborating, Interfax reported.
Opposition groups, most notably members of the banned National Bolshevik Party, have often played word games with their anti-Putin slogans, calling him Mutin or Vova to avoid possible prosecution.
Russia's Billionaire Drop-Offs
Tatiana Serafin, 03.11.09, 06:00 PM EDT
Two-thirds of last year's Russian billionaires got knocked out of the ranks.
Russia's descent into an economic quagmire began when the heavily oil-dependent economy was hit by falling crude prices. In 2008, the MICEX Oil & Gas index dropped 59%; Russia's stock market is down even more--67% over the past year. The ruble has depreciated 29% against the dollar.
Though the country finished off 2008 with 6% gross domestic product growth, the second half of the year saw a stalling economy as the global financial crisis deepened. The Ministry of Economic Development and Trade expects GDP to fall 2.2% in 2009 while inflation climbs 13%, a classic case of stagflation.
Russia's government has already spent $250 billion to maintain the currency's value and avoid sharp devaluation, to help firms refinance foreign debt and to support the stock market. Such measures were not enough to keep 55 Russian citizens from falling from billionaire ranks, including Ruben Vardanian, whose investment bank, Troika Dialog, reportedly got a cash injection from state-owned Sberbank. (Vardanian denies it.)
He and the rest of Russia's drop-offs lost an estimated $90 billion. Together with the 32 who managed to stay on the list, Russian billionaires and former billionaires lost $369 billion.
The credit crunch has brought Russian real estate to a halt. Kirill Pisarev and his partner, Yuri Zhukov, are two of the sector's biggest losers; they each lost 90% of their wealth as shares of their real estate firm, PIK, lost nearly all their value.
When the high-volume housing builder IPO-ed in 2007, it raised $2 billion for a 15% stake valuing the entire enterprise at $13 billion. Its high market valuation led to upward revisions of Russian real estate across the sector. No such luck today. An analyst survey by consultancy Merlin indicates real estate is expected to remain the worst performer in the Russian market, impacted by the dramatic slowdown in property sales and construction.
That's bad news for the Moscow mayor's wife, Elena Baturina, whose real estate projects stalled; combined with a falling stock portfolio, she is down at least $3.3 billion and no longer included in the world's richest ranks.
Heavy debt burdens are proving to be the undoing of many fortunes. Alexander Lebedev was reportedly hit by margin calls in December; his National Reserve Bank and stake in Russian airline Aeroflot are both now worth a fraction of their value last year. Lebedev's net worth is down more than $3 billion.
Perhaps the hardest hit by unmanageable debt is Igor Yakovlev. He lost control of Eldorado, Eastern Europe's largest home appliance and electronic retailer, to Czech billionaire Petr Kellner, from whom he had received a $300 million loan; the company had been valued at $3.5 billion last spring. His other chain, Banana-Mama, which sold goods for babies and children, became insolvent last year. Yakovlev lost an estimated $1.6 billion.
Not everyone is taking the news too hard. Flashy developer Sergei Polonsky last October promised to eat his own tie if real estate prices did not increase 25% in a year. Despite losing nearly $1 billion in value this year, Polonsky Mirax Group still hopes to complete its 1,660-foot Federation skyscraper in the new business district called Moscow City.
Moscow knocked off rich top spot
23:44 GMT, Wednesday, 11 March 2009
Russia lost nearly two-thirds of its billionaires during the past year, according to the Forbes 2009 World Billionaire list.
The number of Russian billionaires fell from 87 to 32, with 27 in Moscow.
It means that New York, with 55 people on the list, has regained the title of billionaire capital of the world from Moscow. London was second with 28.
Russia's richest man, aluminium magnate Oleg Deripaska, saw his fortune plummet from $28bn (£20.3bn) to $3.5bn.
With fortunes falling in Russia and Asia, the US dominated the list of the super-rich.
Microsoft founder Bill Gates regained top spot and Americans made up half of the top 20, compared with only four last year.
Real estate hit
The 87 Russians who made the 2008 list lost a total of $369bn between them.
Those in real estate saw severe losses, with the credit crunch bringing many projects to a standstill.
Two of the sector's biggest losers were Kirill Pisarev and Yuri Zhukov. Shares in their real estate firm PIK lost nearly all their value, causing the two men to lose 90% of their wealth.
However, one man who is hopeful of a recovery is developer Sergei Polonsky.
In October, he promised to eat his own tie if real estate prices did not increase 25% in a year.
His Polonsky Mirax Group still hopes to complete a 1,660-ft (506m) skyscraper in the new business district Moscow City.
A Russia Without Oligarchs
12 March 2009
By Konstantin Sonin
Once the economic crisis ends, the Russian government will face the question of how to carry out privatization properly.
As a result of the government's anti-crisis measures, its ownership in leading companies will certainly increase. But even if you go back several years before the crisis, it is clear that the government's nationalization measures have not made the economy more efficient.
To be fair, the private sector was no better, particularly if you look at large enterprises. It is too early to draw any conclusions, but it is already evident that a few of the largest Russian financial and industrial conglomerates have added much value to the economy over the last decade.
Moreover, thanks to cheap foreign credit and government support, a few large conglomerates are drowning in the huge debt they amassed. Nonetheless, with the help of their political influence, they are now seeking huge bailout assistance from the state.
Once the crisis calms down, one of the most important questions will be how the state can conduct privatization so that private ownership gives the right motivation to managers while at the same time ensuring the end of the oligarch system in which the top businessmen have too much political influence.
The main problem in an oligarchic system is that a thin layer of top industrialists are able to seize their companies' profits due to the weak protection of property rights and ineffective and corrupt law enforcement agencies. They accumulate a controlling stake in the enterprises and gradually force out minority shareholders. The losses caused by ineffective and nontransparent corporate management will disappear only when a broad layer of mid-level and top managers are able to gain a majority of shares in the companies.
There is no easy solution to this problem, but I can offer an idea that might help. Russia's top businessmen should be allowed to own single enterprises, but there should be strict controls to prevent them from building the oligarchic business empires that have defined Russian big business for so many years. It is no simple task for politicians with limited power to keep today's oligarchs in check, but if successful, this approach would eliminate the types of conflicts of political and business interests that exist in all oligarchies.
At the same time, each individual business titan who owns a major enterprise -- even if he is a multibillionaire -- would be weak and insignificant in comparison to the government as a whole. This would clearly be better than having a few ruling oligarchs who understood that the most profitable investment was in politics. Once they were able to influence government policies, they set the country on a completely reckless, ineffective economic course.
There is another measure that is crucial to prevent the emergence of oligarchic business empires: Oligarchs should no longer be able to control banks. At the same time, the government should help ensure that corporate lending comes from several major banks. In this kind of economy, Russian banks would play a role similar to that of banks in Germany, where the government, not individuals, holds controlling stakes in the banks. Over time, those banks would have a stabilizing influence on the economy. Because numerous businesses borrow from them, they would be less vulnerable to the demands of any single borrower. Sberbank is a good example of how a leading government-controlled bank can play a positive role in the economy.
Konstantin Sonin, a professor at the New Economic School/CEFIR, is a columnist for Vedomosti.
Medvedev Takes Charge of Religious Affairs Giving New Patriarch a Victory
March 11, 2009
Paul Goble
Vienna, March 11 – President Dmitry Medvedev’s decision to chair the Council of Ties with Religious Organizations raises the status of that group which up to now had been led by an official in the presidential administration and thus gives a major victory to the Russian Orthodox Church and to its newly-installed head, Patriarch Kirill.
On the one hand, this is yet another indication that Medvedev and perhaps especially his wife Svetlana are far more interested than their predecessors in playing a substantive and not just symbolic role in religious affairs and having the Russian Orthodox Church of which they are both active members play a larger role in the affairs of the state.
And on the other, Medvedev’s elevation of this council almost certainly will prevent the formation of a Soviet-style Council of Religious Affairs or religious affairs ministry, a step non-Orthodox groups have long sought to gain better access to the state but one the Moscow Patriarchate has opposed because it would lessen the importance of its privileged access.
In both cases, the president’s move represent a personal victory for Kirill, whose supporters have long argued that once he became patriarch, the Church would be in a position to play a far larger role in politics and society than had been the case under the late Aleksii II, whose role in Moscow at least was more symbolic than practical.
Lest anyone miss the importance of Medvedev’s decision, Kremlin officials told “Kommersant” that it was “unprecedented” that that not only did his chairing of the group raise its status but that the president plans to transform it into a group that meets on a regular basis and makes decisions.
The tilt toward the Russian Orthodox Church was reflected in the composition of those attending: One person each from the three other “traditional” Russian religions, Islam, Judaism, and Buddhism, but seven other leading Orthodox churchmen, including Metropolitans Yuvenalii and Kliment.
Perhaps indicative of the way in which Medvedev plans to deal with religion, Islam was represented by Ravil Gainutdin, the head of the Council of Muftis of Russia (SMR), rather than by the self-styled Supreme Mufti of Russia, Talgat Tadjuddin, Chairman of the Central Muslim Spiritual Directorate (MSD) of Ufa.
But certainly indicative of where things are in Moscow now were those not in attendance: There was no one from the Roman Catholic Church, no one from the Protestant Evangelicals, and no one from the Old Believers, groups that Kirill has long insisted are not “traditional” religions of Russia.
At the same time, Medvedev’s decision to chair the meeting is the latest indication of the Russian government’s tilt toward Kirill more generally. Since he was installed a month ago, Moscow has indicated it will return enormous amounts of property to the Church and announced subsidies for the restoration of the New Jerusalem Monastery.
As “Kommersant” pointed out in its article today, those who pushed for Kirill’s election as patriarch “predicted that the Church under [his leadership] would for the first time become a political subject and not ‘an object of manipulation by the state” and that he would become “a political figure on the federal level.”
One of Kirill’s most outspoken supporters, Deacon Andrey Kurayev said that the coming together of Church and state in this way could lead to a revival after several years of a typically Byzantine model in which the patriarch would serve as regent for a young president [sic!], I beg your pardon, emperor.”
Kurayev’s statements were echoed by Archpriest Vsevolod Chaplin, Kirill’s longtime deputy in the Patriarchate’s External Relations Department. He added that “the Church does not intend to become a subject of politics” but does want influence the country through its followers, “including the most influential.”
Whether either the Russian government or the Russian Church will find this relationship entirely comfortable is uncertain or whether the large number of Russians who believe in the separation of Church and state as required by the Constitution will be happy about this rapprochement between the two is far from clear.
But three things are already obvious, each of which are likely to cause problems in the future. First, Medvedev wants a far closer relationship with Kirill than his predecessors had with Aleksii II. Second, his approach effectively lowers the status of the three other “traditional” faiths of Russia. And third, it makes no provision for all the other religions.
National Economic Trends
Russia's international reserves down $3.8 bln to $380.5 bln in week
MOSCOW, March 12 (RIA Novosti) - Russia's international reserves, which include gold and foreign exchange, dropped $3.8 billion to $380.5 billion in the week from February 27 to March 6, the Central Bank said on Thursday.
Individuals transferred $41.1 bln from Russia abroad in 2008
Alfa
March 12, 2009
According to the CBR, individual transfers abroad from Russia totaled $41.1 bln last year, of which $11.4 bln was sent abroad in 4Q08. The annual figure represents a 38% y-o-y increase on 2007.
In 2008, around 66% of the annual transfers went outside the CIS, very similar to the 2007 figure. However, while in 4Q08 transfers to CIS countries dropped by 25% q-o-q, transfers to other countries (which reflects transfers by Russians) were up 23% q-o-q. This is negative news, since we previously expected the sharp decline in Russian construction to ease pressure on Russia's current account. The rapid ruble depreciation and the flight from the Russian currency seems to be forestalling this potential improvement.
Monetary Base Stabilizes In February
Troika
March 12, 2009
The broad monetary base (cash rubles, voluntary and obligatory reserves) remained stable in February at R4,331 bln ($121.2 bln). This is a rather positive sign that marks stabilization in the financial sphere. Given that gross international reserves were also effectively unchanged in February, we can assume that the run on the ruble has dramatically moderated. Obligatory reserves grew 5.8% in February, which should be accompanied by an equivalent increase in deposits. This is another sign that confidence in the banking system is still high.
All in all, the financial sphere is showing signs that the situation in the economy is normalizing. Money supply seems to have stopped falling last month and the monetary aggregates trend is closely correlated with the real economy's performance. Thus, we can cautiously assume that economic activity also stabilized after falling over November-January.
Ruble May Plunge 20% as Government Funds Converted, Alfa Says
By Emma O’Brien
March 12 (Bloomberg) -- The ruble may slide as much as 20 percent against its target basket this year as the ongoing global crisis and falling oil prices spur banks to convert government- provided funds into foreign currency, Alfa Bank says.
The currency, which is managed against the basket to limit fluctuations that disadvantage exporters, could plunge to about 49 versus the dollar-euro basket, Alfa’s chief strategist Ron Smith said in an interview from Moscow today. The ruble weakened 0.4 percent to 39.4554 versus the dollar-euro basket yesterday.
Alfa predicts Russia’s government will be forced to inject as much as $90 billion into the nation’s banking sector as lenders seek to pay debt due this year for their clients, Smith said. “If you inject that much into the system some of it’s going to go into capital flight,” he said.
Banks will also convert rubles into dollars and euros as a “risk control measure,” as the worst global economic crisis since the Great Depression depresses credit markets and oil slides, he said.
“An oil price of $25 to $30 is completely possible in the next six months,” Smith said.
To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@
Last Updated: March 12, 2009 02:50 EDT
Russia's bailout plan to reach 12% of GDP
RBC, 12.03.2009, Novokuznetsk 11:26:11.The total amount the government and the Central Bank will fork out to tackle the crisis will reach 12 percent of GDP, Russia's Prime Minister Vladimir Putin said at a meeting with miners in Novokuznetsk, Kemerovo region. He made special mention of the fact that Russia had adopted one of the biggest bailout plans globally. Among developed countries, Japan is bracing for the largest earmarks to be worth nearly 2 percent of its GDP. In Russia, government spending alone will reach 4.5 percent of GDP, and if the Bank of Russia's moves are counted, spending will add up to 12 percent of GDP.
Putin also stressed that if the Russian package was any different from those of other nations, it was because of its additional advantages, primarily the scale of social initiatives. The government is poised to meet all of its social commitments despite the crisis, the PM assured.
Putin says Russia cannot afford low rates –report
03.12.09, 03:12 AM EST
MOSCOW, March 12 (Reuters) - Russia cannot afford cutting interests rates below inflation levels as it would represent a serious threat for the country's economy, Russian agencies quoted Prime Minister Vladimir Putin as saying on Thursday.
'If inflation is 13 percent, we cannot set the rates lower than that, it will destroy the economy,' news agency Interfax quoted Putin as saying.
Vesti 24 television channel also showed Putin as saying the package of measures to ease the effects of the financial crisis may reach 12 percent of the gross domestic product this year.
'Government measures amount to around 4.5 percent of the GDP and if you add the measures of the central bank, which is dealing with liquidity, it will amount to 12 percent,' Putin said.
'Our anti-crisis package is bigger than in other countries,' Putin, who was speaking at a meeting with miners in the Siberian town of Novokuznetsk, was shown by Vesti 24 as saying.
Russia's GDP is expected to amount to 40 trillion ($1.14 trillion) this year with budget deficit of around 8 percent after the country revised its revenue forecast following a steep fall in energy and commodities prices.
(Reporting by Tanya Mosolova; Editing by Jan Dahinten)
Adapting the Budget to Times of Crisis
VTB Capital
March 12, 2009
Yesterday, the government approved amendments to the Budget Law as a way of adapting it to the current crisis. The new rules do away with the 1% of GDP limit on the budget deficit until 2012 and also three-year budget planning. The authorities plan to finance the budget deficit out of the Reserve Fund. This may ultimately mean monetary expansion and create risks for prices and rouble stability.
- According to the new rules, the budget deficits in 2009-12 may exceed the previous limit of 1% of GDP. Minister of Finance Alexey Kudrin expects the deficit to reach 5% of GDP in 2010 and 3% in 2011. Hence, the MinFin is to use the Reserve Fund for 2.5 years and tap international capital markets in 2H11, according to Kudrin.
- The authorities assume that there will be a gradual recovery in oil prices, from USD 41/bbl in 2009 to around USD 50/bbl in 2011, but do not specify exact values for 2010-11.
- The MinFin will be able to use the Reserve Fund to cover the decrease not only in oil revenues but also in non-oil revenues in 2009-12.
- The budget planning period will temporarily be shortened to one year. Instead of a three-year budget covering 2009-11, the policy-makers will consider a one-year budget for 2009 and return to three-year planning next year.
- The government corporations (Housing Support Fund and Rosnanotechnology) will get the right to return RUB 75bn and RUB 85bn, respectively, to the budget.
- The MinFin is likely to submit the revised 2009 budget to the government by 16 March.
Russia may use up to $46bn to balance budget in H1 2009
RBC, 12.03.2009, Moscow 09:53:29.To balance the federal budget in the first half of the year, the government will use up to nearly RUB 1.604 trillion (approx. USD 45.67bn) from Russia's Reserve Fund, the government's press office said yesterday citing a decree signed by Prime Minister Vladimir Putin. The funds will be used for the purpose in accordance with amendments to the federal budget law. As reported earlier, on March 10, the government approved a package of amendments to the Budget Code and other legislations which suspended the rule of a maximum budget deficit of 1 percent of GDP and changed the procedure for using the Reserve Fund to bridge the budget deficit.
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Russia's 2009 investment spending to amount to 1.2 trillion rubles –Putin
NOVOKUZNETSK. March 12 (Interfax) - Russia's investment spending in
2009 will amount to 1.2 trillion rubles, Prime Minister Vladimir Putin
said at a meeting with coalminers in Novokuznetsk on Thursday.
"We will not reduce the planned amount of social spending and the
state's investment spending," Putin said.
Investment spending is "a starter mechanism for whole industries,"
he said.
The figure of 1.2 trillion rubles is "slightly higher than last
year, but slightly lower than we planned originally," he said.
Up to 3 trln rbls may be used from Reserve Fund in '09 – Putin
NOVOKUZNETSK, March 12 (Itar-Tass) - Up to 3,000,000 million roubles from the Reserve Fund may be used in 2009, Head of Government Vladimir Putin told mineworkers during a meeting with them on Thursday.
Putin said, "Our plan is that the budget deficit will be financed from the Reserve Fund revenue of the past years, and we shall spend about 3,000,000 million roubles this year".
"The accumulated 8,000,000 million roubles of reserves enable us not to apply for an external financing," Putin added.
There will be a four-time indexation of pensions this year, not a three-time one as was planned earlier, the Premier told mineworkers during a meeting with them on Thursday.
Putin said, "We planned a three-time indexation of pensions this year. However, everything seems to indicate that inflation may be higher than the planned parameters, we shall adjust pensions for inflation four times."
"At the end of the year, beginning from December 1, we must augment pensions by 30 percent so that social pensions would not be less than the subsistence wage," the Premier said.
Reserve Fund to last 2.5 years
Russia’s Reserve Fund will last for another 2.5 years, until the middle of 2011, Finance Minister Alexei Kudrin told reporters following a government meeting on Tuesday.
“We will have to borrow to cover the second half of our 2011 budget deficit, which is estimated at 3 percent,” he explained. At the same time, Kudrin said the situation could improve if the global economy changed: “if markets open and borrowing terms improve, we will rely less on the Reserve Fund and focus on borrowing instead.”
The minister expressed confidence that the debt markets will stabilize over the next three years. In this respect, he said Russia has its advantages, including its comparatively low foreign debt, at 10 percent of GDP. “This is another powerful resource we can use, but the optimal measures (to cover the budget deficit) for each particular case will be determined according to the situation,” Kudrin specified.
The finance minister also said that the government had approved amendments to the Budget Code and some other laws. Among other things, the proposed amendments suspend 1 percent of GDP limit for a federal budget deficit, also changing the rules for using the Reserve Fund to cover the budget deficit. Until now, the Reserve Fund could only be used to compensate for lower than expected oil and gas export revenues, but the latest amendments extend the usage.
The government will set budget deficit limits for the next few years, Kudrin said, adding that it could be up to 5 percent of GDP for 2010 and 3 percent for 2011. “We have not yet decided on the 2012 deficit, but it will certainly be below 3 percent of GDP, and from 2013 on we will return to the 1 percent standard,” he explained.
The amendments also lift restrictions on the support for municipal budgets: only 10 percent of them were eligible for such support earlier, but that limitation will not apply in 2009-2012.
The Customs Code is up for a change, too. Once the amendments take effect, the Federal Customs Service’s accounts will be transferred to the Federal Treasury, which means that taxpayers will pay directly to the federal budget. Funds that got stuck for long periods in the Federal Customs Service’s accounts reached RUB 100 billion (approx. $2.8bn) a year, Kudrin remarked.
The Fund for the Promotion of the Housing and Utilities Sector Reform and the Russian Nanotechnology Corporation will see changes, too: both organizations will be allowed to transfer their idle funds to the federal budget.
The Finance Ministry is offering to cancel the 2010-2011 budget and return to the earlier practice of annual budgets, Kudrin said.
“The significant decline in revenue expected in 2011 requires a revision of many parameters,” he explained. Three-year budgets could then be re-introduced after 2010, according to the proposed amendments to the Budget Code.
“Compared to Europe, Russia has suffered a sharper decline in oil and other export revenues, which has dropped by about 30 percent over the crisis period, against an average of 10 percent for European countries. This means that we must have a smaller budget deficit, in order to ensure that we can always cover it by borrowing once the Reserve Fund dries up,” he stressed.
The amendments to the Budget Code do not cancel any long-term contracts signed earlier as part of the federal targeted programs. RUB 181 billion (approx. $5.1bn) worth of such contracts have been signed for 2010, and RUB 80 billion (approx. $2.3bn) for 2011. The funding will go on as planned, according to Kudrin.
On March 16, the Finance Ministry will submit the revised 2009 budget to the government, he said, refusing to specify the exact amount of the spending cut. “The sum has been approved, and it is currently being discussed with government departments,” he noted, confirming that the new budget plan would be considered by the government on March 19.
Unemployment Rate Rises to 2 Million
12 March 2009
Reuters
The number of Russians officially registered as unemployed has risen by more than 1 million since August to reach 2.03 million, Yury Gertsy, head of the Federal Labor and Employment Service, said Wednesday, Interfax reported.
The total is now at its highest level in the 10-year history of data on the State Statistics Service web site.
"The number of unemployed as of today stands at 2.03 million. That is those who are registered in employment organizations and will get ... unemployment benefits," Gertsy told Prime Minister Vladimir Putin.
The latest official data from the State Statistics Service showed 1.71 million people officially registered as unemployed in January.
The Health and Social Development Ministry said last week that the count had reached 1.97 million by Feb. 25.
Meat Prices Jump 23%
Russia's average retail meat and poultry prices jumped more than 23 percent in 2008, outpacing the almost 18 percent gain in the overall cost of food, the U.S. Foreign Agricultural Service said.
"Meat-market analysts expect this trend to continue in 2009 as the Russian government continues to take protectionist measures to limit imports of meat and poultry," the attache said in a report e-mailed Wednesday. (Bloomberg)
NPLs: A Problem Overlooked by the Market
Alfa
March 12, 2009
NPLs, previously of interest only to banking analysts, are becoming a macro issue. Russian companies' $220 bln of near-term debt repayment obligations, when combined with January's 9% drop in GDP, will drive NPLs to 15% and require a $90 bln injection to recapitalize banks. Much of this injection will finance capital outflows, implying another 15-20% drop in the ruble despite lower import levels.
Russian companies burdened with $220 bln of near-term repayments: Russia's total corporate debt (in local and foreign bank debt plus bonds) is $780 bln. The two key risks posed by this debt are its high exposure to foreign currency risks and its short maturity: Foreign debt represents around 40% of total corporate obligations, similar to Indonesia in 1997. Some $220 bln of debt, or 30% of the total, is due in the next 12 months, hampering companies' ability to repay their loans and driving up NPLs.
Drop in consumption unlikely to boost retail NPLs materially: Given January's 9% drop in GDP, the economic environment is working against borrowers, and we reiterate our view that consumption trends will deteriorate substantially in the coming months. However, the retail loan portfolio of Russian banks is equal to only 10% of GDP, one-third of banks' corporate exposure, so the retail segment shouldn't be as large a concern for the banking system as the corporate segment.
Best case is 15% NPLs: If growth remains weak, global markets stay closed and the ruble continues under pressure, we anticipate that NPLs will rise to $88 bln, or 15% of total corporate loans. This would be equivalent to 80% of the entire banking sector's equity capital, or 7% of GDP. The lowest estimate for the amount needed to recapitalize banks appears to be around 5% of GDP.
NPLs will soon become a macro issue: We believe that until now, only the banking community has been concerned about the increase in NPLs. However, it will soon become a macro issue. Should NPLs be covered by the direct recapitalization of Russian banks or the creation of a special state agency, this additional injection of state funds will at least partially finance capital outflow, adding to ruble depreciation and higher inflation. If the state delays solving the problem of NPLs, payment arrears will continue to increase.
Ruble to weaken despite current account surplus: While the 40% y-o-y drop in imports in January-February is very good news for the ruble in the very near term, the risk of NPLs lead us to forecast another 15-20% depreciation of the currency by year-end, all else being equal, as the unavoidable injection of liquidity into the banking system gets turned into capital flight.
COMMENT: Is the Russian bear over-bearing?
Liam Halligan of Prosperity Capital Management
March 12, 2009
While the global financial crisis shows no sign of abating, and if anything is getting worse, the Russian market is showing increasing signs of relative stability.
The RTS index of leading Russian shares rose 1.7% during February. Over the same period, the S&P500 fell 12.2% and the main MSCI EM global emerging markets index lost 5.9%.
Russian share valuations remain chronically depressed - with the RTS trading at an overall price/earnings of 2.4x. Several leading companies continue to be valued at less than the cash they have in the bank. Such low equity multiples, the result of waves of forced-selling in the fourth quarter, can only be justified under a "systemic meltdown" scenario that now looks highly unlikely.
It's now more than six weeks since the Central Bank of Russia (CBR) pledged to defend the ruble at a rate 41 against the dollar-euro basket. Since then, despite widespread scepticism, this limit has held. Russia's foreign exchange reserves have stabilized, ruble bank deposits are starting to grow and many short positions against the currency have been unwound.
Having fallen 70% since last summer, oil prices may also have bottomed-out. At $45 per barrel, West Texas Intermediate is flat year to date, but 17% above its pre-Christmas low.
On their own
Earlier in March, Arkady Dvorkovich, the influential presidential aide, said large Russian companies "shouldn't expect the government to provide them with further support." Dvorkovich stressed companies must "take responsibility for their own futures" and "work efficiently." This statement marks a shift in strategy. Since last autumn, the Russian government's $230bn "bail-out" package has been aimed at helping banks and other large strategic companies - particularly those with overseas debts. This led to concerns, aired in both the domestic and foreign press, about "cronyism" and an "overbearing Russian state".
Now the threat of systemic collapse has diminished, ministers say they've switched their focus away from big business and towards the population as a whole. Further help for companies is most likely to take the form of non-monetary measures. The external debt repayments facility of Vnesheconombank, the public body that has been administering emergency credits, has been closed. VEB seems determined instead to ensure state cash already earmarked or allocated is being used, or will be used, as efficiently as possible.
One reason Dvorkovich made this statement - which has since been echoed by First Deputy Prime Minister, Igor Shuvalov - is that the state's recent willingness to rollover and restructure Russian company debt has made foreign commercial creditors less willing to do so. Without this "get-out", the government calculates - probably correctly - that overseas banks will be more willing to refinance Russian companies they have previously backed.
The other reason for this change in tone is that Prime Minister Vladimir Putin and President Dimtry Medvedev, mindful that fears about political risk have weighed heavily on Russia's financial markets, seem keen to stress they want less, not more state involvement in the economy. While there are areas of concern, we feel this is largely true. Based on our close observation of both Putin and Medvedev over many years, we'd say their principal attitude is that greater state control over the economy is undesirable.
At the recent Davos summit, Putin said that "while the state's increased role in times of crisis is a natural reaction to market setbacks... the concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation." Looking at events in the US, UK and across Western Europe, it's difficult to argue otherwise.
In a passage aimed squarely at Western hawks, Putin said: "In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made our economy totally uncompetitive and this lesson cost us dearly. I'm sure nobody wants to see it repeated."
The PM then added: "The spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, has been eroded in the last few months. There is no reason to believe we can achieve better results by shifting responsibility onto the state". These words are worth recording, as they weren't reported in Western newspapers. Having said that, politicians are best judged, of course, not by words but deeds.
Again, in our view, since taking office almost 10 years ago, the current crop of Russian leaders has generally pursued pro-market policies, showing little sign of wanting to implement the kind of "state-takeover" many Western investors fear. Since 2000, Putin/Medvedev have extended Russia's mass privatization programme - selling-off important industrial and mineral assets, including the power sector and key licenses for coal, potash, oil and ferrous and non-ferrous metals. The state controls around 30% of Russia's oil production - which is actually a far lower proportion than almost any other major energy exporter.
As president, Putin introduced a basic rate of income tax of 13% in Russia - easily the lowest of any significant economy in the world. State expenditure overall remains at 19% of GDP - compared with more than 40%, and counting, in most Western economies.
There are more privatizations to come - Russia's rail network will soon be on the auctioneer's block and further telecomunication sell-offs are in the pipeline. All in all, the government past and likely future actions do not to us appear consistent with a regime that's looking to impose a state power-grab.
As a one-time minority shareholder in the now disbanded oil company Yukos, Prosperity has said and written a great deal since that episode took place in 2002/03. We would never condone the government's actions, and we wish that state had resolved the issue in a different way. But we believe its fair to see Yukos as a one-off re-balancing of politicized power, away from the private sector and back towards the state, after one of the original "oligarchs" broke an implicit deal not to use his spectacular wealth to heavily influence party politics. In our view, the circumstances that led to the Yukos affair were unique to the early stages of Russia's transition - and are most unlikely to be repeated. But there's an important proviso to this view: sometimes the Russian government acts to "protect" strategic assets falling into foreign hands - as do many Western countries.
Over the last few years, quite a few "oligarchs" have used their core assets - including their holdings in companies controlling a significant slice of Russia's raw material wealth - as collateral when raising working capital from Western banks. In recent months, many of these creditors have faced the genuine danger that Western bankers could take over their collateral. Such banks would then presumably sell-off these highly sensitive assets to the highest bidder, presumably the Chinese. Under these circumstances, it isn't surprising the government stepped in to refinance these loans - keeping these supremely important assets in Russian hands. In terms of both strategic imperatives and domestic politics, ministers didn't have a choice. And the government has so far refrained from taking direct control of such companies - offering debt finance, rather than taking equity stakes.
Western creditors have been mindful of the sensitivity of these loans. That's why some have taken advantage of the government's concerns to exit credit arrangements in Russia at the most favourable terms possible in the current climate. Ministers are now trying to stem that practice - which is one reason they've called time on big state bailouts. It strikes us that this concern about the public finances and the burden on Russian taxpayers, contrasts with the attitude of many Western governments at the present time.
While investors worry about political risk in Russia, we maintain our long-held view that, in general, by far the most important risk faced by investors in Russia is corporate governance - the actions of other private individuals, rather than the government. Prosperity's highly activist investment approach is designed precisely to reflect and attempt to cope with this reality. So far, Western reports of upcoming government expropriation - not to say widespread political unrest - have not been borne out. And, while it is extremely difficult to predict how any government will act, not least in Russia, we see little evidence of a long-term increase in the state's role in the economy.
Liam is Halligan Chief Economist of Prosperity Capital Management
Business, Energy or Environmental regulations or discussions
Russia daily c.bank swap limit at 5 bln rbls
03.12.09, 03:49 AM EST
MOSCOW, March 12 (Reuters) - Russia set the daily limit for currency swap operations with the central bank at 5 billion roubles ($142.4 million) on Thursday, the same as in the previous session.
Limits on how much foreign currency banks can swap for roubles in the central bank were introduced from Oct. 20 in a bid to hinder currency speculators. Operations which do not involve the central bank are unaffected. ($1=35.11 Rouble)
Sberbank Reins In Expansion Goals
12 March 2009
By Jessica Bachman / The Moscow Times
Sberbank has reined in its ambitious global-expansion plans and in the short term will limit its international presence to Kazakhstan, Ukraine and Belarus -- if the bank gets its way, Ilka Salonen, the bank's deputy board chairman, said Wednesday.
Salonen, who oversees Sberbank's international operations, told journalists that the bank is in acquisition talks with Kazakhstan's largest lender, BTA Bank, and is looking into privatizing Belarus' Belpromstroibank.
Last month, the Kazakh government acquired close to 80 percent of BTA's shares as part of a wider banking-sector bailout.
"Our end goal is to acquire 100 percent of the banks' shares. Anything lower and there would be no point," Salonen said, adding that Sberbank was still "far from signing on the dotted line" for the purchase of BTA.
"Discussions will be constructive but in no way simple. We hope to find common ground with the sellers, but we aren't expecting quick results."
According to its five-year development plan released in October, the lender's goal was to become one of the world's top banks by 2014. And although Sberbank has decided to open a branch in India and a representative office in China, global financial turbulence has forced the bank to re-evaluate its plans for Asian and European markets.
"It's a run versus a marathon," Salonen said, referring to the differences between expansion into the Commonwealth of Independent States and China and India, its priority Asian markets.
"Going into these markets is much more difficult than in other countries ... but in the long term, these will be important elements for the realization of our global strategy," Salonen said.
Sberbank looking to buy BTA and Belpromstroibank
bne
March 12, 2009
Sberbank's deputy board chairman Ilka Salonen said that Sberbank was interested in purchasing largest Kazakh bank BTA and Belarus Belpromstroibank. Salonen, who is from Finland, is in charge of Sberbank's international operations.
The move to acquire BTA follows the Kazakh government acquisition of almost 80% of BTA's shares as part of a bailout.
"Our end goal is to acquire 100 percent of the banks' shares. Anything lower and there would be no point," Salonen said, as quoted by Interfax. He added that Sberbank was still "far from signing on the dotted line" for the purchase of BTA.
Sberbank has said it aims for 5-7% of its earning to come from foreign operations by 2014.
Regarding Belpromstroibank, Salonen said the cost of the acquisition would be decreased by the crisis. "Like the Belarusian economy, the Belarusian bank depends on the Russian economy, therefore this will have a strong impact on the cost," he said. Salonen said due diligence would be completed in March, and talks are underway with Belarusian president Aleksandr Lukashenko.
Salonen said that plans to enter India and Asian markets were only a long-term perspective.
According to VTB Capital's Dmitry Dmitriev regarding BTA there are "huge risks related to asset quality as well as to overpaying for the asset, and so we are reiterating our negative stance on this deal."
Dmitriev expects Sberbank to acquire Belpromstroibank, but says that the acquisition is "immaterial, given its size relative to Sberbank's
balance sheet."
In general, Dmitriev warns that "the expected complications in 2009 (including the deteriorating quality of its own loan portfolio in Russia) require Sberbank to focus on domestic market operations."
Standard Bank Appoints Peter Ghavami CEO Of Russian Unit
March 11, 2009: 08:21 AM ET
JOHANNESBURG -(Dow Jones)- Standard Bank Group Ltd. (SBK.JO), Africa's largest lender by assets, Wednesday said it has named Lehman Brothers' (LEH) former head of capital markets for Russia as chief executive of ZAO Standard Bank in Moscow.
The small Russian arm of the Johannesburg-based bank is set to be merged with investment bank Troika Dialog (TROYVT.RS) as part of a wider deal unveiled earlier this month that would see Standard Bank take a 33% stake in the Russian company.
Peter Ghavami will join ZAO Standard Bank as president and CEO, responsible for continuing the rollout of the bank's platform in Russia and ensuring its banking businesses in Russia are developed within the new partnership with Troika, Standard Bank said.
Ghavami will replace Yury Voicehovsky, who will take up the position of chairman of ZAO Standard Bank, it said.
-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848; robb.stewart@
Vnesheconombank May Buy 40% of Rostelecom, Kommersant Reports
By Maria Ermakova
March 12 (Bloomberg) -- Vnesheconombank, Russia’s state development bank, may buy a stake of about 40 percent in OAO Rostelcom, the country’s biggest long-distance telephone company, from banks that hold it as collaterals, Kommersant reported.
State-controlled OAO Gazprombank, VTB Group and OAO Sberbank together got 40 percent of Rostelecom from KIT Finance investment bank as collateral under repurchase agreements, the newspaper said, citing an unidentified person close to Russia’s Communications and Mass Media Ministry and a person from KIT Finance.
The government plans to decide on Vnesheconombank’s purchase of the stake by the end of the month, according to Kommersant.
Officials at Rostelecom, Svyazinvest, Communications Ministry and the banks declined to comment to the newspaper.
To contact the reporter on this story: Maria Ermakova in Moscow at mermakova@.
Last Updated: March 12, 2009 02:48 EDT
MegaFon Is Interested in Buying Synterra, Vedomosti Reports
By Maria Ermakova
March 12 (Bloomberg) -- OAO MegaFon, Russia’s third-largest mobile-phone operator, is interested in buying Synterra, a Russian telecommunications holding, Vedomosti reported, citing unidentified people close to Synterra.
MegaFon is evaluating the company, the people told the newspaper. MegaFon spokeswoman Marina Belasheva and officials at Synterra and its main owner, Promsvyazcapital, declined to comment to Vedomosti.
OAO Comstar United Telesystems, Russian billionaire Vladimir Yevtushenkov’s telecommunications company, is also interested is buying Synterra, the newspaper said, citing two people close to Synterra and a person close to AFK Sistema, Yevtushenkov’s holding company.
To contact the reporter on this story: Maria Ermakova in Moscow at mermakova@.
Last Updated: March 12, 2009 02:41 EDT
Megafon and Comstar UTS seen considering Synterra acquisition
Combined reports
March 12, 2009
Quoting several unnamed sources, Vedomosti speculates this morning that Megafon is in talks to acquire Synterra, one of the larger alternative fixedline operators in Russia. The newspaper further quotes an unnamed source close to AFK Sistema as saying that Comstar UTS might also be interested in the asset.
Synterra is owned by Promsvyazcapital. The company has a vast backbone 68,000km network and controls 20% of Internet backbone traffic in Russia, according to its own estimates.
According to VTB Capital's Alexey Yakovitsy, "Vimpelcom's acquisition of Golden Telecom in early 2008 marked the beginning of a new wave of telecoms consolidation in Russia focused on the formation of national integrated giants, as opposed to the pure fixed-line and wireless companies that dominate the telco landscape at the moment."
"With MTS clearly considering a tie up with Comstar UTS," continues Yakovitsky, "it is hardly surprising that Megafon is interested in Synterra, the only operator of a size comparable to Golden Telecom and Comstar UTS."
"While the relative strategic importance of the asset is far greater for Megafon than for Comstar UTS, we attribute the latter's interest in the potential deal to Synterra's i) vast regional backbone; ii) dominant position in St Petersburg, where Comstar UTS is weak (by virtue of owning Peterstar); and iii) wholesale data exposure."
Yakovitsky estimates Synterra's 2008 revenues at USD 500-600mn with EBITDA profitability north of 30%.
Rencap's Ivan Kim writes: "The acquisition makes sense for both MegaFon and Comstar, in our view. MegaFon would get (1) a backbone network which would be used for provision of 3G services and solve the capacity problem; and (2) a transport base for broadband services development. Comstar would currently be more interested in acquiring a backbone network rather than last-mile infrastructure: Comstar does not own the extensive long-distance network and lacks the backhaul capacity to develop regional broadband."
According to Kim, both MegaFon and Comstar have or could raise funds for the acquisition. MegaFon had $400mn net cash as of the end of 3Q08. Comstar could be relieved from around 90% of its debt if the swap of its Svyazinvest stake with the state happens; and has 14% of its shares in treasury currently worth $160mn.
MTS Sees Q4 Profit Fall 68%
12 March 2009
Bloomberg
Mobile TeleSystems, the country's biggest mobile-phone company, said fourth-quarter profit fell 68 percent because of foreign-exchange losses.
Net income declined to $146 million from $460 million a year earlier, the company said in a statement Wednesday. Sales rose 4 percent to $2.42 billion.
Mobile TeleSystems, controlled by Vladimir Yevtushenkov's Sistema holding company, posted its second consecutive quarterly profit drop as the ruble's decline against the dollar causes revaluation of dollar-denominated debt. The ruble lost 13 percent against the dollar in the fourth quarter.
"The current economic situation and unstable national currency rates are having a negative influence on the financial and operational results of the company," CEO Mikhail Shamolin said in the statement. To "provide for further growth, MTS will continue to invest in the retail division and third-generation network."
Capital expenditure will total $1.5 billion this year, Shamolin said Wednesday at a news conference in Moscow.
Operating income before depreciation and amortization rose 3 percent to $1.16 billion in the quarter. Profitability on that basis narrowed to 48.1 percent of sales from 48.4 percent a year earlier.
Average revenue per user in Russia climbed to 258.28 rubles ($7.35) from 247.15 rubles a year earlier.
Yeltsin son-in-law may leave Aeroflot CEO job-paper
Thu Mar 12, 2009 4:02am EDT
MOSCOW, March 12 (Reuters) - The veteran chief executive of Russia's Aeroflot, the son-in-law of Russia's first president Boris Yeltsin, may be replaced by an executive from a Moscow industrial conglomerate, Kommersant daily said on Thursday.
Valery Okulov, married to Yeltsin's daughter Yelena, has run Aeroflot since 1997. One source told the newspaper there had been short list of seven candidates to replace him, while another said the only candidate was Vitaly Savelyev, a former deputy economy minister who works for Sistema (SSAq.L: Quote, Profile, Research, Stock Buzz).
Okulov led Aeroflot's transformation from a command-economy behemoth to a modern airline and packed its fleet with new Boeing and Airbus planes. He held his post after Yeltsin handed power to Prime Minister Vladimir Putin, supported by Aeroflot chairman Viktor Ivanov, a close Putin ally.
Kommersant said Okulov had been repeatedly turned down government jobs overseeing air transport.
More recently, he challenged a plan to roll Russia's failing regional airlines into a new market player, Russian Airlines, chaired by another Putin ally, Sergei Chemezov, the head of state corporation Russian Technologies.
"To send a new player into a falling market is simply creating a bubble," he said last autumn.
Savelyev runs the telecoms division at Sistema, which controls Russia's largest mobile network, Mobile TeleSystems (MBT.N: Quote, Profile, Research, Stock Buzz).
No one at Aeroflot was immediately available to comment on the report. (Writing by Melissa Akin; Editing by Hans Peters)
Car sales plummet 38% on the year in February
bne
March 12, 2009
The drop in car sales accelerated in February, with sales falling by 38% year on year after falling 33% in January, according to the Association of European Businesses.
"Because of the increased customs tariffs, high loan interest rates and the ruble devaluation, we can expect a further price increase and decline of the automotive market in Russia in the coming months," AEB vice chairman Martin Jahn said, according to Reuters.
Some domestic producers have already announced that they could reduce car and LCV output by 25-50% in 2009 (depending on the market conditions). In particular, AvtoVAZ plans to reduce car output by 35%YoY to about 530,000 units in 2009, according to Vedomosti.
Although YoY car unit sales weakened considerably based on AEB figures, in February there was a 15% MoM increase in total unit sales of all vehicles, despite the trend for foreign models to increase in price in rubles terms due to rouble devaluation.
According to VTB Capital's Elena Sakhnova "the latest data indicates that the situation on the Russian car market remains extremely difficult and that there are no signs of recovery so far."
However, Sakhnova notes that the YoY decline looks pronounced because of a high base effect, since production at the beginning of 2008 was strong. "Moreover," she says, "the massive support to the domestic auto industry approved by the government late last year has not been provided yet. We believe that this support will help revive the market to a certain extent starting from 2Q09, with domestic producers and some foreign assembly plants being the key beneficiaries."
UralSib's Natalia Sorokina writes, "competitive pressures on domestic manufacturers have not subsided, despite support from a weaker ruble and pressure on foreign manufacturers to hike ruble prices"
According to Sorokina, in February 2009, foreign car sales were up 22% MoM, while sales of domestically produced vehicles were virtually flat. This means that the share of foreign makes in total passenger and light commercial vehicles unit sales in Russia has climbed from 57% in January to 64% in February.
"AvtoVAZ's announcement that it is downsizing its 2009 production plans is not unexpected and state support alone is not likely to be enough to salvage the company's market share," adds Sorokina.
In related news, Volkswagen said in a press release yesterday March 11 that is is considering adding light commercial vehicle assembly to its plant in Kaluga.
"The financial instability in Russia has prompted the leadership of Volkswagen-Commercial Vehicles to improve the strategy for promoting the brand on the Russian market and raise the competitiveness of the Volkswagen model. The assembly of Volkswagen vehicles at the Volkswagen AG plant in Kalyuga would be a solution to this task," the press release says.
"The decision to possibly start semi-knocked down assembly is based on high customs duties for the import of cars produced abroad as well as the instable financial situation," the company said. "The plant's production capacity allows for setting up the assembly of virtually the brand's entire model line, which, of course, will have a positive impact for buyers on the price of cars produced in Russia," concludes the press release.
AvtoVAZ changes payment scheme to deter halts in production
SAMARA, March 12 (RIA Novosti) - Russia's leading carmaker AvtoVAZ will give up its current payment scheme and pay suppliers in cash in 2009 to prevent production disruptions, the plant said, citing its president.
AvtoVAZ briefly shut down its assembly line twice in early February over shortages of auto parts. The supply problems emerged after the company introduced a new payment scheme, under which 30% of components supplied were paid for in cash, and AvtoVAZ used promissory notes from its own and affiliated banks to pay the remaining 70%.
"The company plans to pay off the money owed for supplies provided in the first three months of 2009," the manufacturer said in a news release after company President Boris Aleshin's meeting with suppliers on Wednesday. "AvtoVAZ will stick to cash payments in 2009 due to changes in its production plan and difficulties facing suppliers."
However, the manufacturer said it would still pay its 2008 supply debts partly by promissory notes.
The press service said the plant planned to produce about 590,000 cars and assembly sets in 2009. Last summer, AvtoVAZ executives said that about a million cars and assembly sets were planned for production in 2009.
PM warns energy producers against boosting prices
RBC, 12.03.2009, Novokuznetsk 11:24:39.Russian Prime Minister Vladimir Putin warned energy producers against setting unreasonably high prices. Commenting on an increase in energy tariffs against the background of sinking coal prices, the PM indicated that energy companies wanted to cover their losses by hiking up prices. He assured the miners in Novokuznetsk, however, that the companies who exceeded the limits would "face problems." He cited the example of "astronomical oil prices" plummeting and thus deepening the crisis, noting that the same could happen with electricity prices. With this in mind, Putin insists that the government must carefully examine the situation on the energy market.
Market Council says continued power market liberalisation in question
Combined reports
March 12, 2009
Speaking to the press yesterday, Deputy Head of Electricity Market Council Vladimir Shkatov said that he expected a new wave of discussion over freezing the liberalisation of the electricity market to arise in government bodies in April.
Electric utilities sector tariffs increased by 19% YoY January 2009, according to VTB Capital.
Shkatov added that the Market Council opposed freezing the liberalisation of the power market and was seeking other ways of supporting energy consumers in the current situation.
Shkatov added however that a delay could help inefficient generation companies currently suffering from low deregulated wholesale electricity prices. The liberalized electricity price is now below the regulated tariff for some inefficient generators.
Reuters quoted Shkatov as saying that electricity consumption currently stands at the level of 2006 or 5-7% below last year and in all probability will follow this pattern until the end of the year. Shkatov did not rule out another wave of 'this crisis' causing a further contraction of electricity demand.
VTB Capital's Dmitry Skryabin writes, "the news fully supports our expectation that a new wave of pressure on the electricity sector is possible from large consumers wanting cheaper monopolies' tariffs."
"It might well be that after the break up of UES and Chubais' resignation, the electricity sector has lost its lobbying power in decisionmaking circles and could suffer more than other industries during this crisis," adds Skryabin.
VTB Capital analysts also point out that Sergey Novikov, the Head of the Federal Tariff Service, was quoted by Interfax yesterday saying he saw no reason for the 2009 tariffs for natural monopolies to be reconsidered.
Rencap's Vladimir Sklyar writes that, "judging from data provided by the wholesale electricity Trading System Administrator, the YoY demand contraction has weakened and seems unlikely to persist at January's minus 7% level."
"Furthermore," he continues, "we believe Shkatov's prediction of a forthcoming 13% fall in electricity prices should be seen in the perspective of a 25% decline which was observed in the same period of 2008. In this light, and with further opening of generation markets expected from 1 July, we caution investors against taking too pessimistic a view of genco financial performance in 2009. Overall, we expect generators will at least maintain the admittedly unimpressive financial margins they achieved in 2008."
UralSib's Matvey Tait writes, "the first call to postpone liberalization came in November, when domestic oil companies sent a letter to the government requesting a delay due to the global financial crisis," says Taits. "A delay would have helped end consumers, which were suffering from high deregulated electricity prices. But now the situation has changed dramatically and the government may be obliged to introduce additional measures to help the generators, as unregulated electricity prices have dropped sharply in many regions and are below breakeven point for many generators."
"We do not believe the government will change the liberalization schedule as the reform involves the interests of large international and domestic investors such as E.On, Enel, Fortum and Gazprom. However this sort of speculation is one of the main reasons for the domestic sector's significant discount to international peers based on EV/capacity ($52/kW vs. $624/kW)," concludes Taits.
Railway tariffs not to go down further, PM says
RBC, 12.03.2009, Novokuznetsk 10:50:47.Russian Prime Minister Vladimir Putin considers any further decreases in tariffs for railway cargo transportation unacceptable for Russia. He made this statement during today's meeting with miners in Novokuznetsk. "In the present conditions, it is not feasible and even dangerous to cut tariffs further," he observed, noting that the tariffs were expected to go up 14.5 percent in 2009. However, a recent decision stipulates for a maximum of a 5-percent increase. Putin stressed that the railway was a major customer of metallurgical companies. With this in mind, the government will allocate RUB 50bn (approx. USD 143.79m) from the budget to pay off the debts of Russian Railways so that the company's investment plans are not jeopardized, the PM noted.
RZD Gets Equipment for Sochi Link
12 March 2009
By Maria Antonova / The Moscow Times
Russian Railways on Wednesday received its first delivery of equipment for a 260 billion ruble ($7.4 billion) transportation link between Sochi and Krasnaya Polyana, considered the hardest part of the 2014 Olympics preparations.
Cargo airline Volga-Dnepr said in a statement that it delivered the first of five tunnel-boring machines needed for construction of the 50-kilometer railroad and highway project. A spokesman for Bamtonnelstroi, which Russian Railways, or RZD, has hired as a contractor, said the project would have five tunnels with a total length of 27 kilometers, Itar-Tass reported Wednesday.
A Russian Railways spokesman declined to comment on the project's final cost, saying the details were still being finalized. When the state railways won the tender last summer to build the link, it was slated to cost 260 billion rubles and be completed by 2013.
The announcement came a day after Deputy Prime Minister Dmitry Kozak sought to reassure investors at the MIPIM real estate fair in Cannes, France, where the Sochi Organizing Committee displayed 11 projects, including four sports venues.
The venues' construction will start this year and be finished two years ahead of the games, Kozak told Reuters in an interview.
Despite a renewed effort to attract investors, including the extension of some tender deadlines, there have been no new agreements for unclaimed Sochi venues. One of the projects advertised in Cannes is an 8,000-person speed skating center, listed on Olimpstroi's web site as being funded by Russneft. An Olimpstroi spokeswoman declined to say why the venue was again up for grabs, referring questions to Kozak.
Spokespeople for Kozak and Russneft were unavailable for comment Wednesday.
The sports venues would only be interesting to investors if they are packaged with state financing and commercially attractive projects or land in Sochi, said Olga Shirokova, an analyst at Blackwood.
Theoretically, Kozak's deadline can be met, she said. "People are willing to work more for less money during the crisis, so in that respect the time is right for large projects like Olympics construction."
Dmitry Baranov, an analyst at Finam Management disagreed, however, calling early completion of the sites "unlikely." He also said the link from Sochi's airport in Adler to the Krasnaya Polyana ski resort needed to be available before major construction could start on some venues.
"The main problems are land allocation, inadequate financing, construction difficulties because of local geology and environmental problems," he said.
The government's confidence in Olympics preparations was shaken last week when Natural Resources and Environment Minister Yury Trutnev said the construction sites "look terrible."
Speaking at a meeting of at the Federal Service for Environmental, Technological and Atomic Inspection, Trutnev said the issue needed to be addressed urgently -- before the International Olympic Committee says construction in Sochi is environmentally damaging.
Prysmian Might Make Acquisitions in Russia, Chief Tells MF
By Armorel Kenna
March 12 (Bloomberg) -- Prysmian SpA wants a “direct presence” in Russia, where it may make acquisitions, daily MF reported citing and interview with Chief Executive Officer Valerio Battista.
Prysmian will have a “difficult” first half and the company plans to further reduce fixed costs, Battista said in the report. Prysmian also plans to increase its sales in China by 50 percent by 2010, the executive said in the report.
To contact the reporter on this story: Armorel Kenna in Milan at akenna@
Last Updated: March 12, 2009 04:00 EDT
Severstal's Liberia Licenses
Liberia granted Severstal a two-year license to explore for iron ore in the southeast of the country, a government official said.
Severstal is now preparing to undertake a two-year exploration program at the Putu Mountain range in Grand Gedeh county, Presidential Press Secretary Cyrus Badio said by phone from Monrovia on Wednesday. (Bloomberg)
Severstal 2008 results broadly in line with estimates
UBS
March 12, 2009
FY08 results above estimates on sales and EBITDA, below on net earnings
Severstal reported FY08 sales of $22.4 bn and EBITDA of $5.37 bn, 7% and 2% above our estimates, respectively. Net profit of $2 bn was significantly below our estimates due to non-cash expenses, forex losses ($279 mn), and impairment of non-current assets ($1.54 bn), related to impairment of PP&E and goodwill, mainly at its US operations.
Russian operations remained profitable in 4Q08
Despite the sharp decrease in volumes and prices in 4Q08, driven by changing steel market conditions, Russian steel operations remained profitable with EBITDA of $312 mn, which we think is due to their low cost nature. Mining operations earned $42 mn of the EBITDA, while EU operations broke-even and US operations recorded a $74 mn negative EBITDA in 4Q08. In 2008, Russian operations contributed to 85.5% of the group's EBITDA.
Outlook for 2009 remains difficult
Severstal reported that it increased utilization at its Russian steel operations to 65%-70% at the beginning of the year (c57% in 4Q08), while US operations went to 55%-60%. The company also noted there was a positive impact from the ruble depreciation, lowering the company's costs such as labor, transport and energy at its Russian operations, adding to their competitiveness on a global scale. At the same time, prices and volumes remain the key driver of performance for 2009.
Valuation
We value Severstal on a DCF basis with a PT of $7.5. The company trades in line with its domestic peers and at a 15%-20% discount to the EM and global steel average. Refinancing risk for Severstal remains low, with $3.6 bn in cash on its balance sheet and only $1.9 bn in debt to be repaid/refinanced in 2009.
NLMK to pay only $234m for backing out of John Maneely deal
Combined reports
March 12, 2009
According to an official statement by Novolipetsk Steel (NLMK), the company has agreed pay a $234m fine for breaking off the John Maneely Company (JMC) deal.
NLMK announced it was terminating the deal in Nov 2008. The agreement provides for the full mutual release and discharge by NLMK and JMC shareholders from their claims arising from the transaction. NLMK agreed to pay DBO a settlement amount of $234mn within four business days of signing.
Analysts have broadly welcomed the news, since the fine was less than the $529m previously stated, and the $1bn originally anticipated by some, and the deal was anyway widely seen as a dead end.
According to VTB Capital, NLMK had $2.7bn in cash and equivalents on its balance sheet so the $234m fine does not present any threat to the company's liquidity position.
"The company has faced enough criticism for the JMC deal already and the fact that this issue is now off the table adds more attractiveness to NLMK's shares, which remain one of our top picks among Russian steels," say VTb Capital analysts.
UralSib's Michael Kavanagh believes, "the company managed to avoid an acquisition which would have been inadvisable in the current market environment. The US construction steel market, which is the main market for JMC, is likely to face a large slowdown in 2009. The fine looks negligible to us, particularly in light of the fact that NLMK had $2.75 bln of cash as of end 3Q08, with only $1.34 bln of short-term debt."
In addition, according to Rencap's Boris Krasnojenov, NLMK may now use long-term debt it raised previously for the JMC deal ($1.6bn five-year pre-export finance loan), at a reasonable rate of LIBOR + 1.2%, to finance its capex and working capital needs.
Vedomosti: no final decision on claim to Uralkali
VTB Capital
March 12, 2009
The government has not made any decision about the final amount of the compensation claim to Uralkali for the 2006 flooding, Vedomosti quotes a government source as saying. Regarding the potential claim for lost reserves, the paper quotes the December letter from Rosnedra (the Russian subsoil agency) as suggesting that the company be charged just USD 29-86mn to cover the lost mineral extraction tax (but not the lost reserves themselves).
The news is yet another indication that Uralkali is unlikely to face massive claims in addition to the already agreed USD 220mn. Vedomosti also quoted lawyers as saying that it would be extremely difficult legally to substantiate any payment for the lost reserves, including for the lost mineral extraction tax (these payments, according to the reinvestigation act, could add up to USD 2.5bn to the final claim).
We also note that the Vedomosti article is primarily based on documents related to the reinvestigation act signed in January and thus adds little to the already known information. Given the latest positive developments around the company, we are reiterating our view that Uralkali is unlikely to be charged for the lost reserves, although the company is likely to be able to cope even the worst case scenario (an additional claim of USD 2.5bn for the lost reserves).
Activity in the Oil and Gas sector (including regulatory)
Russian waiving gas fines against Ukraine – Putin
NOVOKUZNETSK. March 12 (Interfax) - Russia is waiving fines against
Ukraine for using less gas than stipulated by contracts, Russian Prime
Minister Vladimir Putin said during a visit to Russia's coal-rich
Kuznetsk basin.
"Ukraine is not using as much gas as it has ordered from us and
should pay fines, but we are waiving those fines because we are
realistic about things: Ukraine is on the verge of bankruptcy, and we
can't finish a partner off," Putin said.
Putin also said Russia's Gazprom (RTS: GAZP) was having to cut gas
output as demand falls. "[Gazprom chief Alexei] Miller reported
yesterday that they are cutting output, which indicates the economy is
tightening," he said.
Algeria-Russia: To develop new sources of hydrocarbons
11 March, 2009 07:03:00 ennahar
The group Sonatrach (Algeria), Rosneft and Stroytransgaz (Russia) has been authorized to develop new sources of hydrocarbons in Algeria by the Algerian oil recovery (Alnaft), Sonatrach announced Wednesday.
The group obtained the agreement of Alnaft for development plans of two oilfields and a gas field located in the basin of Illizi (extreme south-east), Sonatrach said in a statement.
Work on developing the fields discovered between 2003 and 2006 would be launched between 2009 and 2012, Sonatrach said.
Central Asia to push on with Russian pipe
Wire services
Central Asian gas producers Turkmenistan and Kazakhstan agreed to press ahead with a new Caspian Sea gas pipeline - a Russia-backed project rivaling Europe-backed Nabucco, an official government report said.
Russia agreed with Central Asian gas producers in 2007 to construct the pipeline along the Caspian Sea coastal line that would allow Moscow to keep regional gas flows under its control.
But some analysts have speculated the project is slow to progress as Central Asia awaits a clearer message from the European Union on the details of the Nabucco gas pipeline.
Kazakh Prime Minister Karim Masimov and Turkmen President Kurbanguly Berdymukhamedov discussed the Russian project during a meeting in Tehran this week, Kazakhstan's government said in a statement posted on its website late yesterday.
"During their meeting they highlighted their common interest in regional and international matters as well as their readiness to fully cooperate in all spheres," said the Kazakh statement.
"The sides noted that 'everything is going according to plan and there should be no problems in implementing this project'," it added in reference to the Russian Caspian pipeline.
The Russian-backed Caspian Gas Pipeline is expected to take in up to 10 bcm of Turkmen gas and the same volume of Kazakh supplies. Officials say it would come on stream by March 2010 but its estimated cost remains unclear.
Russia buys about 50 billion cubic metres of gas from Turkmenistan, the region's biggest producer, a year - the bulk of the country's output.
But, like other Central Asian nations including Uzbekistan, Turkmenistan is considering alternative export routes for its volumes as it seeks to boost output in the future.
Europe, for its part, depends on Russia for a quarter of its gas and is keen to nudge Central Asia towards diversification.
Anxiety over the reliability of Russian supplies rose dramatically at the start of the year due to a gas row between Russia and Ukraine which disrupted flows to the European Union.
As gas diplomacy gathered steam, Russia's Gazprom signed a deal this week with Hungarian Development Bank to build part of the South Stream pipeline, another project that would bypass Ukraine in delivering gas to Europe.
Europe's hopes for diversifying its supplies rest largely on rival Nabucco, a plan to pump up to 31 bcm a year of gas from the Caspian Sea region to Europe while bypassing Russia.
But the project lacks enough committed sources of energy to give it a full go-ahead, and there are concerns whether Central Asia does indeed have enough gas to fill all the pipelines. Russia says the plan is impossible without Iran's participation, reported Reuters.
Thursday, 12 March, 2009, 06:25 GMT | last updated: Thursday, 12 March, 2009, 06:27 GMT
Interfax, dd/11.03.2009 16:16
Regulator to consider fuel hike cases against TNK-BP, Gazprom Neft on April 10
The Russian Federal Antimonopoly Service (FAS) on April 10 will consider cases against TNK-BP (RTS: TNBP) and Gazprom Neft (RTS: SIBN), which are accused of excessively raising wholesale prices on petroleum products in the fourth quarter of 2008 and in early 2009, FAS deputy chief Anatoly Golomolzin told Interfax.
Similar cases against other companies will be considered later as materials are still being collected on their violations, he said.
The FAS leveled charges against Rosneft (RTS: ROSN), Lukoil (RTS: LKOH), Gazprom Neft and TNK-BP for artificially raising petroleum products by 30%-60% in late February.
FAS chief Igor Artemiev said the cases against the oil companies were opened because such price hikes are not typical for the month of February.
Sibur Seeks $2Bln Loan
Petrochemicals firm Sibur is seeking more than $2 billion from state-bank VEB and Western banks and has repaid a $200 million loan ahead of schedule, the firm said Wednesday.
Sibur will use the fresh credits for new projects, including developing a polyvinyl chloride plant and a polymers plant, its strategy director Sergei Komyshan told reporters.
In March, the firm paid off early its $200 million syndicated loan, organized by the London branches of ABN AMRO and Citibank, which was due this August. (Reuters)
UPDATE 1-Russia Sibur seeks $2 bln, pays off loan early
03.11.09, 02:33 PM EDT
By Vladimir Soldatkin
MOSCOW, March 11 (Reuters) - Russian petrochemicals firm Sibur said on Wednesday is seeking more than $2 billion from Russian state bank VEB and western banks, and has repaid its $200 million loan ahead of schedule.
If the deal goes through it would be the second major Western loan to a Russian firm since the credit crunch shut Russian borrowers' access to international capital markets late last year. The only deal on record so far is oil firm Rosneft's $1.35 billion pre-export loan.
Sibur will use the fresh credit for new projects, including developing its polyvinyl chloride (PVC) plant and a polymers plant, strategy director Sergei Komyshan told reporters.
'We've received comforting letters from export agencies that support financing, but there are still no guarantees,' Komyshan said, adding that ecological tests might need to be done first before the firm received any credit.
VEB would lend money and help organise loans with Western banks after obtaining guarantees from international export agencies Hermes and others, he said.
Sibur is controlled by Gazprombank, the banking arm of Russian gas export monopoly Gazprom.
The company said it needed to spend $1.441 billion to bring its polymers plant in Tobolsk in western Siberia onstream in 2012. It will have a capacity of 500,000 tonnes a year.
It also plans to spend 564 million euros to build a 330,000 tonne per year PVC plant in Kstovo on the Volga river in central Russia.
Sibur is asking VEB to provide a quarter of the credit needed for the polymers plant in Tobolsk and 60 percent for the PVC plant in Kstovo.
The firm has already used 10 billion roubles ($284.8 million) of its own funds on the two plants -- about 10 percent of the total cost -- from its own funds.
ibur also said it paid off its $200 million syndicated loan this month, organised by the London branches of ABN AMRO and Citibank. It had been due in August 2009.
(Writing by Amie Ferris-Rotman; editing by Karen Foster)
Rosneft announces general meeting date
RBC, 11.03.2009, Moscow 19:56:42.Rosneft's annual general meeting of shareholders has been scheduled for June 19, 2009, with the record date set for April 30, the Russian oil company said in a statement, citing a corresponding decision documented in the minutes of a meeting of the company's board of directors dated March 10. Shareholders will be offered to approve the 2008 annual report, annual financial statement, including profit and loss accounts, as well as the distribution of profits, including the declaration of dividends for 2008. Shareholders will also elect members of the board of directors and audit commission, appoint a company auditor, and approve related-party transactions, among other things.
As reported earlier, Rosneft's net profit under U.S. GAAP fell 13.5 percent to $11.12bn in 2008 compared to the previous year.
TNK-BP: Investments in Kamennoye field remain stable
UralSib
March 12, 2009
Kamennoye project on track. TNK-BP (TNBP - Speculative Buy) has announced that investments in its Kamennoye oil field could reach $700 mln in 2009-13, Interfax reported yesterday. Since 2004, the company has invested $600 mln developing this field, mostly rehabilitating idle wells, and has reduced the amount of idle wells from 45% to 10%. In our view, the current news is positive as this project will provide substantial support to TNK-BP's production in the near future.
Complicated field with huge potential. The Kamennoye field is one of TNKBP's core West Siberian projects. The extractable reserves of 280 mln tons are characterized by complicated geology, which impeded this field's development during Soviet times. Using proper modeling based on 3D-seismic, specific adjustments to standard techniques of horizontal drilling and fracturing, TNK-BP has made crude oil extraction on this complicated field economically viable. Oil production on this field is expected to grow from 1.3 mtpa in 2008 to 1.8 mtpa in 2009 and up to 4.2 mtpa in 2012. Potentially, Kamennoye oil output could hit 7- 8 mtpa by 2020. More than 40% of the company's 2009 capex ($250 mln) in Kamennoye field will be directed towards infrastructure, while the remainder will go towards drilling.
Greenfields are main production drivers. Although oil companies have reduced capex for 2009 due to lower oil prices, TNK-BP has highlighted that capex for its core projects in Western and Eastern Siberia will not be cut - these projects include Verkhnechonskoye, Uvat and Kamennoye. In October 2008, the company commissioned the Verkhnechonskoye field in Eastern Siberia and in February 2009 the Uvat project in Western Siberia. Together these two projects could generate up to 3.7 mtpa of oil in 2009. We estimate that in 2009 TNK-BP will maintain production at 68.8 mtpa. We reiterate our Speculative Buy recommendation on TNK-BP's ordinary and preferred shares with target prices of $1.1/share and $0.8/share.
Victor Mishnyakov, mishnyakovvv@uralsib.ru
Report: limited environmental harm from Nord Stream
2009-03-11
The construction of the Nord Stream pipeline will have only limited impact on marine life in the Baltic Sea, a new study concludes.
The laying of the 1220 km long underwater pipeline from Vyborg in Russia to Greifswald in Germany will stir sediment on the sea bottom and harm fishing. However, most of the harmful effects would be local and of short duration, newspaper Helsingin Sanomat reports.
The report reads that the pipeline would cause long-term problems for trawler fishing in the Gulf of Finland, and that wartime munitions sunk in the sea could detonate. The sea bottom in the Gulf of Finland would undergo considerable interference. Laying the pipeline and the dragging of the anchors of the installation vessel along the bottom would stir up bottom sentiment. Wartime munitions sunk in the sea could also detonate.
Nord Stream will transport up to 55 billion cubic metres of gas each year, which is enough to supply more than 25 million households.
Gazprom
GRAY: EU has the means to check Gazprom
C. Boyden Gray SPECIAL TO THE WASHINGTON TIMES
Thursday, March 12, 2009
ANALYSIS/OPINION:
It should now be a clear consequence of the latest Gazprom/Ukraine/European Union gas crisis that the EU must take at least two steps to protect itself from future Gazprom blackmail and the adverse impact that could have in U.S.-EU relations and energy security. Ignoring Gazprom's gas dominance is all the more puzzling given the EU's continued attacks on Microsoft, whose Windows operating system poses much less of an economic and security threat than Gazprom's monopoly.
There is a European consensus to connect various segments of the EU grid into a coherent, integrated whole with respect to both gas transit and electricity interconnectivity. This is essential to the creation of a common external energy policy, but the regulatory and competition tools that would work to achieve this result have been blocked by certain member states in an effort to protect internal national champions.
More specifically, the EU has sought unbundling of production and transit so that cross-border transmission can develop without opposition from incumbent producers, whose retention of control over transmission could permit them to block competition. Rather than use its unquestioned competition authority, however, the EU chose instead to use its internal market power, which requires approval of both the Council of the European Union and the European Parliament.
As a result, the EU's plan did not require clean unbundling, allowing generators instead to retain ultimate control of both production and transmission.
In part as a result of permitting continued local monopolization, there is virtually no U.S. investment in the EU utility sector, while EU companies have significant investment in the much more deregulated U.S. energy market. There is little the U.S. can do about this situation except to complain that the bias against outsiders is a barrier to trans-Atlantic investment in violation of the open investment declaration agreed to by the Transatlantic Economic Council in June 2008. But the competition failure has even greater consequences for relationships with Russia.
If its competition authority were fully utilized, the EU could trim Gazprom's monopoly power, which is what has made it possible for Russia, twice, to terminate gas deliveries to Europe. If third party gas suppliers, both inside and outside Russia, had non-discriminatory access to Gazprom's pipeline system, it is questionable whether Gazprom could successfully cut off European gas. The minute Gazprom limited the delivery of its own supplies, other suppliers, whether Rosneft with its associated gas or other independent producers, would have quickly jumped in to pick up market share in Europe at Gazprom's expense.
The EU has the authority to open Gazprom's grid to outside suppliers, just as it is exercising its authority to curb "abuse of dominance" to force Microsoft license access to Windows to third party software suppliers. The EU has recently argued that Gazprom has no position of dominance, or even if it does it has never abused that dominance, or that there is no legal way to reach into Gazprom itself because it is headquartered in Moscow.
These positions have no merit. Gazprom is clearly the dominant 80 percent-90 percent supplier in Eastern Europe. Even before the recent cutoff there were many documented examples of abuse; now there can be no question about it. Unlike Microsoft, which has employees in a few research facilities in Europe, Gazprom owns or has significant investments in at least 60 energy entities strewn across Europe.European Commission President Jose Manuel Barroso was confident enough of the EU's authority to raise it at lunch at last year's EU-Russia Summit.
According to participants at the lunch, Russian Prime Minister Vladimir Putin became agitated, threatening to cut off European supplies if the EU even raised the issue publicly. Since then, the EU has done little to Gazprom beyond limiting its future investment in energy facilities inside the EU. EU countermeasures now would seem to be in order, beginning with a DG Comp investigation of the relevant facts.
The EU's inaction is especially troubling in light of its new demands of Microsoft that it unbundle the Internet Explorer browser. The Financial Times reported that the EU's purpose is "to turn Windows into a distribution vehicle for other companies' software." Why not ask Gazprom to distribute other companies' gas?
However, as the Russians are quick to point out, it is difficult for the EU to apply competition law to Gazprom without also applying it to European energy monopolies. Thus, applying EU competition law internally remains the necessary first step, after which its application to Gazprom would be an easier if not also essential next move. On the other hand, the Russians should welcome more access to Gazprom's grid. They should remember that John D. Rockefeller's wealth quadrupled within a very few years after his monopoly was opened up, and Gazprom is badly in need of cash.
Finally, there is also the climate change issue of the 40-50 billion cubic meters of gas flared by Russian producers because they cannot sell the gas into Gazprom's grid. This flaring is equivalent to about one-third of the EU's greenhouse gas reduction target and could be attributed to the EU since the EU has done nothing to stop it by challenging Gazprom. Both Mr. Putin and Igor Sechin, the chairman of Rosneft's Board of Directors, have reportedly called for an end to Gazprom's export monopoly; the least the EU can do is ask for the same.
• Ambassador C. Boyden Gray served as President George W. Bush's ambassador to the European Union from 2006 until 2008.
FAS gives green light to Gazprom's purchase of 20% of Gazpromneft from ENI
Citi
March 12, 2009
Last December Gazprom requested permission from the Federal Antimonopoly Service (FAS) to purchase the stake, Vedomosti reports. FAS replied that no special permission is needed for the transaction. The news reconfirms Gazprom's statements that there are no changes to the plan to repurchase the stake at the option expiry in April of this year. Yet, its 2009 budget does not include expenditures associated with the US$4bn purchase.
We believe that if the company proceeds with the purchase for cash, the news will be taken slightly negatively for Gazprom as Gazpromneft currently trades more than 40% below the option strike price.
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