Russia 101130 - WikiLeaks
Russia 101130Basic Political DevelopmentsHIGHLIGHTS-Russian President Medvedev's address to the nationAt least half of unspent resources, part of extra federal revenue must go to modernization – MedvedevTAXES LEVIED ON MATERIAL ASSISTANCE TO CHILDREN SHOULD BE CANCELLED - MEDVEDEVMEDVEDEV: PLOTS OF LAND SHOULD BE ALLOTTED TO FAMILIES AFTER BIRTH OF THIRD CHILD?Russian int'l reserves considerably higher than at end 2008 - Medvedev?Unemployment in Russia down 2 mln from crisis peak - Medvedev?Small business to get 2-yr grace on insurance tax, payable at 26%, not 34% - Medvedev?SMALL BUSINESSES TO GET 2-YR TRANSITION WITH MANDATORY INSURANCE TAX RATE OF 26% AND NOT 34% - MEDVEDEV?Russia has to lower inflation to 4%-5% in next 3 yrs –MedvedevRussian economy to grow approx 4% in 2010 – MedvedevUNEMPLOYMENT IN RUSSIA HAS FALLEN BY 2 MLN TO 5 MLN - MEDVEDEVRUSSIA NEEDS TO LOWER INFLATION TO 4%-5% ANNUALLY IN NEXT 3 YRS – MEDVEDEVRussia's Medvedev makes annual state-of-nation speech - Mr Medvedev is expected to touch on his pet theme - the need for modernisation of Russian society, its economy and infrastructure. Russia's Medvedev skips dinner to finish speech for annual addressRussian President delivers annual public address - One of the topics is expected to be Russia’s domestic and international policy successes and failures. Last week, Medvedev lashed out at Russian policies and politics as stagnating, and said Russia needed stronger opposition forces in order to move forward. A major issue of Russia’s international policy to be discussed is the much-discussed “reset” of its relations with the United States.Medvedev to deliver annual message to parliament - According to the Voice of Russia official Yekaterina Yagunova, the address will be broadcast from the Kremlin online in Russian, and will also be translated into English, Spanish and Arabic.?? ?Russia Fails European Anti-Corruption Test, Vedomosti Reports - Russia’s government has failed to meet most of the anti-corruption goals recommended by the Council of Europe in a 2008 agreement, Vedomosti reported, citing an unidentified Russian official in Strasbourg. Japanese Foreign Minister announced the intention to carry out inspection of the South KurilesFM heads to Kazakhstan for security summit, bilateral talks with Russian counterpart - South Korea's top diplomat headed to Kazakhstan Tuesday for an international security summit and bilateral talks with his U.S. and Russian counterparts amid heightened tensions over North Korea's island attack.“Cordial India-Pakistan relations is in Russia's interest”Russia and India likely to ink trade, military dealsRussia offers Amur class submarines to IndiaVladimir Radyuhin: Indo-Russian ties: which way?Russians: Indians Are Coming - There was a fascinating story last week that there is discussion between Russia and India on sending Indian labour for construction in Siberia. Now this is an old reliable. These stories occur every decade or so. Dalai Lama says he wants to visit Russia - Addressing Russian journalists in Dharamsala, the Buddhist leader said that there were many Buddhists living in Russia and that the Supreme Lama of Kalmykia had repeatedly said that he would like to see him in Russia, and that if the Russian government says "yes," then he was ready to come.Hungary to offer Russia Business Hub for Mol Stake, Napi Says RF, Bulgaria to hold talks on Belene NPS in Sofia Tue - Russo-Bulgarian talks on matters concerning the construction of a Belene nuclear power station (BNPS) are to be held here on Tuesday, with Rosatom chief Sergei Kiriyenko and Bulgarian Premier Boiko Borisov taking part. China Yangtze Said in Talks on EuroSibEnergo Stake (Update3) Russian website publishes WikiLeaks revelations on Russian-Georgian warWikiLeaks reveals secret U.S. dossiers on South OssetiaGovernment Brushes Off U.S. Leaks - The Federal Security Service has suggested that it does not see WikiLeaks as a real threat… "If necessary, the site can be shut down forever," Lifenews.ru quoted an unidentified FSB official as saying last month.U.S. judge rejects motion to end Russian pilot's drug trafficking caseRescuers Search Site of Russian Cargo Plane Crash in KarachiRussia's missile forces to replace Topol-M missiles with RS-24Russian rocket forces to replace Topol-M systems with Yars missiles – commanderSixth silo-based Topol-M missile regiment to enter service before year's endSRF: RS-24 - evidence of the priority of Russia in a nuclear fieldRussia to choose submarine for new Bulava missile tests by Dec 10Cutting-edge strategic sub to hit the water4th -generation strategic nuclear submarine launched in SeverodvinskNATO seeks strategic partnership with Russia - NATO seeks to develop strategic partnership with Russia. This was announced on Monday at the Center for Strategic and International Studies in Washington by NATO’s Supreme Allied Commander Europe, Admiral James Stavridis.Russian Missiles Fuel U.S. Worries - The U.S. believes Russia has moved short-range tactical nuclear warheads to facilities near North Atlantic Treaty Organization allies as recently as this spring, U.S. officials say, adding to questions in Congress about Russian compliance with long-standing pledges ahead of a possible vote on a new arms-control treaty.Attempt of US dollars export to Russia prevented - The State Border Service of Azerbaijan has detained a group of persons that attempted to smuggle illegally cash to Russia on a large scale.Russia, Norway audit radwaste cleanup spending in MurmanskSerbia Completes South Stream Feasibility Study, Politika Says - The planned 470 kilometers of the pipeline through Serbia would cost 1 billion to 1.5 billion euros ($1.3 billion to $2 billion) to build and have an annual capacity of 36 billion to 41 billion cubic meters of gas, according to the report. Russia allocates funds for restoration of Orthodox shrines in Serbia - On Monday Russia concluded an agreement with UNESCO on the allocation of $ 2 million for the restoration of Orthodox shrines in Kosovo. The funds will be spent to upgrade the fa?ade and stuccos of Decani Monastery, the restoration of frescoes and the churches proper in the town of Pec, monasteries of Decani and Gracanica.U.S. returns stolen Russian original historic documents - The ceremony of transfer of the documents takes place on Friday at the Russian Embassy in Washington.Loggers Fuel Russian Drug Trade - Loggers dispatched to Russia by the North Korean government are becoming increasingly involved in the illegal drug trade there, according to sources in North Korea.Radical Islam in the North Caucasus - Center for Strategic and International Studies (CSIS)Russian Press at a Glance, Tuesday, November 30, 2010The recent WikiLeaks revelations were among the most discussed topics in the Russian media. Thousands of classified documents may affect U.S. ties with all major players on the international arena(Vremya Novostei, Vedomosti, Kommersant, Nezavisimaya Gazeta)The OSCE summit will begin on Wednesday in Astana(The Moscow Times, Vremya Novostei, Rossiiskaya Gazeta)Moldova's Communist party won the parliamentary elections with 40.98% of the vote, according to preliminary results. However, the party's expected 44 seats in the 101-seat parliament are not enough to elect a president and end the long-term political crisis in the country(The Moscow Times, Vremya Novostei, Kommersant, Rossiiskaya Gazeta)Russian President Dmitry Medvedev proposed tax breaks for individuals who invest in innovation companies and asked for improvements to immigration rules to ease mobility for foreigners(The Moscow Times)EU finance ministers have agreed on an 85-billion-euro financial aid package to Ireland and agreed on a new mechanism to overcome debt crises(Vedomosti)Norimet Ltd., the subsidiary of Russia's largest nickel producer Norilsk Nickel, plans to sell off its controlling stake (51.3%) in Stillwater Mining Company, the only U.S. platinum producer(Vremya Novostei, Vedomosti, Kommersant)Russian gas giant Gazprom, Ukraine's national energy company Naftogaz and Swiss-registered RosUkrEnergo have signed a package of agreements on the return of 12.1 billion cubic meters of gas to the Swiss trader. A statement by Gazprom and Naftogaz says RUE would return its $810-million debt to Gazprom and $1.7-billion debt to Naftogaz(Vremya Novostei, Kommersant)More than one-third of Russian Internet users spend most of their time on social networking sites, the ARMI-Marketing research company said. Most of them consider the Twitter microblogging service "the funniest and coolest." Odnoklassniki and Moi Mir social networking sites were named as "most user-friendly."(Kommersant)A presidential administration official, Andrei Voronin, was arrested on suspicion of assistance in extorting money from medical equipment companies who were seeking to participate in state contracts(Vedomosti, Kommersant, Nezavisimaya Gazeta)Mikhail Lysenko, the head of a prosperous district in Russia's Volga Area, was detained ahead of local elections on suspicion of ordering a murder, though a local lawmaker said the move may be an attempt to oust him from the race. Investigators think Lysenko was the ringleader of a mafia group, established in the 1990s.(The Moscow Times, Rossiiskaya Gazeta)Russia's chances to host the 2018 FIFA World Cup seem quite solid, but the costly sports projects may put too much strain on Russia's economy(Nezavisimaya Gazeta)Moscow press review for November 30, 2010VEDOMOSTICyprus-registered EuroSibEnergo (the holder of a 100% stake in Eurosibenergo and part of the En+ Group, owned by Oleg Deripaska), which planned to start a road show on Monday ahead of an IPO, has put off the placement by three months, two sources close to the placement told Vedomosti. EuroSibEnergo declined to comment. The plans were changed due to the emergence of a core investor. China Yangtze Power Company (CYPC) is prepared to acquire EuroSibEnergo shares worth $168 million, but has not received the official go-ahead for the deal, according to the two sources. This is likely to take two weeks and the road show is expected to start in mid February, immediately after the Chinese New Year holiday, one of them said. (Deripaska Opts for China, see also Kommersant. Page 1. Eurosibenergo Saved for China).Evraz may obtain its own sales chain in Russia. Roman Abramovich, Alexander Abramov and Alexander Frolov's mining holding company may buy one of Russia's largest metal traders Inprom, an employee of the metal trader's core lender, Sberbank (RTS: SBER), has said. The bid was filed with the Federal Anti-Monopoly Service (FAS) on November 18, a FAS representative confirmed. FAS has a month at its disposal to make a decision. (Evraz to Get Sales Network).The Russian Finance Ministry and the organizer banks - JPMorgan, Deutsche Bank, HSBC, Renaissance Capital and VTB Capital, plan to meet in London and New York with potential buyers of Russia's ruble Eurobonds, a banker close to the organizers of the placement and an employee of an investment fund, which plans to buy the bonds, told Vedomosti. The Finance Ministry intends to place five-year papers as a minimum worth 60 billion to 90 billon rubles, the two sources said, without specifying the yield. Deputy Finance Minister Dmitry Pankin earlier said that the ministry plans to place ruble-denominated Eurobonds with an annual yield no higher than the current rates on federal loan bonds. The yields on federal loan bonds maturing in 2015 was 7.3% on Monday. (Russian Chip).Rostelecom (RTS: RTKM) is conducting due diligence of National Telecommunications (NT), two sources close to the parties in the talks told Vedomosti. If the current condition of the assets suits Rostelecom, it could acquire a 100% stake, one of the sources told Vedomosti. The price will be a market one, the second source said. NT changed hands to the National Media Group (NMG, owned by Yury Kovalchuk's Bank Rossiya,) and its partners in the summer of 2008 from Suleiman Kerimov's Nafta Moskva, which had sold the asset for $1,5 billion (the debt included). Rostelecom is also eyeing Akado , two sources close to the talks said. One of them added that it may announce a proposal to Akado shareholders as early as this week. (Between Online and Akado).KOMMERSANTGazprom (RTS: GAZP) and Naftogaz Ukrainy have settled the gas debt with the Rosukrenergo trader, half of which is owned by the Russian gas monopoly. As Kommersant expected, Naftogaz Ukrainy will return the entire amount of gas to the trader, which will sell it at a market price to Gazprom Export to be further sold to the European Union. Subsequently, Rosukrenergo will repay a $1.7 billon debt to Naftogaz and $810 million to Gazprom. In experts' estimate the trader's net profit may amount to $515 million - $800 million. (Page 11. Rosukrenergo Repays Debt).TNK-BP is in talks to buy gas distribution assets of Viktor Vekselberg's KES Holding. The deal involves the purchase of a part of the Gazex business, rejected by the core players on the market. A decision on the deal is expected to be made in mid December. (Page 11. TNK-BP Pulling Gas Networks).MTSU prof defends ex-pats to Russian president - To get even 10 minutes worth of access to a major head of state is a gift which would make thousands of lobbyists giddy with anticipation. Dr. Andrei Korobkov, professor of political science, spoke with Russian President Dmitry Medvedev for two hours at a state reception and dinner at the Kremlin on Nov. 4. National Economic TrendsPM: Russia regaining jobs in 2010 Russia to hold ruble Eurobond road-show on Tue, Wed in New York, London - paperWorst Slump Since May Cuts Putin Bond Advantage: Russia CreditRussia May Import Grain If Shortage Arises, Putin Says - Russia may import gran if the country doesn’t have enough supplies after its worst drought in at least 50 years, Prime Minister Vladimir Putin said. In southern Russia more than 10 million tons of grain storedCorn Advances on Concern Russia May Face Feed-Grain Shortage CBR "Frees Up Hands" for a Rate HikeBank lending is finally recovering Russian banking sector: Oct 2010 results Business, Energy or Environmental regulations or discussionsRussian markets -- Factors to Watch on Nov 30Cherkizovo Group, Lukoil, Polyus Gold, Rosneft: Russian Preview Federal Tariff Service approves two-step residential gas tariff growth of 5% from 1 Jan 2011 and 9.5% from 1 Apr 2011Russia to Invest $300 Billion in Energy EfficiencyRussia's Norilsk Nickel to Sell Stillwater StakeAcron sells potash exploration permit to BHP Billiton VTB may buy the Moscow government's stake in Bank of Moscow Cherkizovo Jan-Sept net profit up 26 pct to $104 mlnEvraz planning building service and distribution network in Russia Yandex, Russia’s most popular search engine, is planning a ?1 billion ($1.56 billion) initial public offering in London in the first half of 2011, the Mail on Sunday reported. (Bloomberg) Norilsk Nickel, the largest holder in U.S. metals producer Stillwater Mining, said Monday that it plans to sell 37 million shares in the company and may withdraw its interest entirely to focus on “core” operations. (Bloomberg)Strabag, central Europe’s biggest construction company, said Monday that third-quarter net income fell to 119.7 million euros from 126.2 million euros a year earlier. (Bloomberg)The Central Bank has sold about $5 billion this month managing the ruble’s exchange rate, First Deputy Chairman Alexei Ulyukayev said, RIA-Novosti reported Monday, adding that net capital outflow may be closer to $20 billion this year than the official forecast of $22 billion. (Bloomberg)The Moscow city government cut borrowing planned for the end of this year and the start of 2011 by 116 billion rubles ($3.7 billion), Interfax reported on Monday, citing Mayor Sergei Sobyanin. (Bloomberg)Activity in the Oil and Gas sector (including regulatory)Russia Raises December Oil Export Duty After Urals Prices Rose Russian Black Sea Oil Exports May Fall on New Capacity to Asia UPDATE 1-LUKOIL Q3 net profit up 37 pct, beats forecastLukoil Third-Quarter Profit Rises 37%, Beats Analyst Estimates LUKoil boosts nine month net profit 29% to $6.82 bln, above forecastSakhalin-1 Budget Approved Rosneft may report lower profits by end 2011 Rosneft's board of directors approves construction plans for two refineries in Russia Deal snapshot: RUSSIAN TATNEFT TAKES FULL CONTROL OF TATEXTNK-BP to Trade Oil From Geneva Profit From the Russian Gas Crisis No One’s Covering - There is a disagreement brewing inside the Russian establishment. And playing its results will make investors some good money back in the States.GazpromUPDATE 1-Gazprom in talks over Qatar gas move – MedvedevGazprom in discussion with Shell over Sakhalin assets swapGazprom, Naftogaz, RosUkrEnergo come to terms Ukrainian Naftogaz to Restore Gas to RosUkrEnergo (Update1) Alexey Miller and Antero Jannes discuss promising areas for Finnish gas market developmentGazprom publishes its first Sustainability ReportMoody's changes outlook on E+ BFSR of Gazprombank to positive from stable ------------------------------------------------------------------------------------------Full Text ArticlesBasic Political DevelopmentsHIGHLIGHTS-Russian President Medvedev's address to the nation Nov 30, 2010 9:13am GMTMOSCOW Nov 30 (Reuters) - Russian President Dmitry Medvedev gave his annual state of the nation address to the federal assembly on Tuesday. Following are highlights: ON THE ECONOMY"Of course the economic situation is complicated ... but we will fulfil our social obligations. The number of unemployed is around 5 million. It has fallen by 2 million from the height of the crisis. This is a significant achievement.""Not all of the problems of the crisis have been overcome, we have to say this clearly." (Reporting by Moscow Newsroom) (moscow.newsroom@; +7495-7751242) 12:32 ? At least half of unspent resources, part of extra federal revenue must go to modernization – Medvedev11/30 12:29 ? TAXES LEVIED ON MATERIAL ASSISTANCE TO CHILDREN SHOULD BE CANCELLED - MEDVEDEV11/30 12:26 ? MEDVEDEV: PLOTS OF LAND SHOULD BE ALLOTTED TO FAMILIES AFTER BIRTH OF THIRD CHILD?11/30 12:25 ? Russian int'l reserves considerably higher than at end 2008 - Medvedev?11/30 12:21 ? Unemployment in Russia down 2 mln from crisis peak - Medvedev?11/30 12:18 ? Small business to get 2-yr grace on insurance tax, payable at 26%, not 34% - Medvedev?11/30 12:15 ? SMALL BUSINESSES TO GET 2-YR TRANSITION WITH MANDATORY INSURANCE TAX RATE OF 26% AND NOT 34% - MEDVEDEV?11/30 12:14 ? Russia has to lower inflation to 4%-5% in next 3 yrs –MedvedevNovember 30, 2010 12:12Russian economy to grow approx 4% in 2010 – Medvedev. Nov 30 (Interfax) - The Russian economy will grow around 4% this year, Russian President Dmitry Medvedev said in his speech to the Federation Council."We've been able to stabilize the economy following a significant drop. And this year, growth will be around 4%," Medvedev said.12:07UNEMPLOYMENT IN RUSSIA HAS FALLEN BY 2 MLN TO 5 MLN - MEDVEDEV?12:06RUSSIA NEEDS TO LOWER INFLATION TO 4%-5% ANNUALLY IN NEXT 3 YRS - MEDVEDEV30 November 2010 Last updated at 09:05 GMTRussia's Medvedev makes annual state-of-nation speech President Dmitry Medvedev has begun making his annual state of the nation address. Its contents are a closely guarded secret. The speech is a chance to report back on what the Kremlin has achieved over the last year, and to set out what it still wants to get done.Mr Medvedev is expected to touch on his pet theme - the need for modernisation of Russian society, its economy and infrastructure. He may also talk about the country's political system in his address to both houses of parliament.Just a few days ago, in his video blog, President Medvedev warned Russia was in danger of "political stagnation" if it did not create a more level playing field for opposition parties. Observers will be watching closely for any hints about the president's own plans for the future and whether he intends to run again for president at the next election. Many Russians suspect that, in 2012, Prime Minister Vladimir Putin will replace him and return to the presidency. Russia's Medvedev skips dinner to finish speech for annual address 30/11/2010Russian President Dmitry Medvedev went without dinner on Monday evening as he was too busy preparing his annual speech to the parliament, he said in his Twitter account on Tuesday.Medvedev, who has recently been too busy to respond to other comments, reacted a female Twitter nicknamed inna_smbatyan.The woman said she had seen both of them in a dream having dinner together in a gloomy castle."I did not have dinner yesterday at all. I was busy preparing my annual address :)," the president said in response.Earlier, the Russian president congratulated a journalism student with his birthday as well as to a World War II veteran.Medvedev says he writes all of his tweets himself. He uses a casual tone in his posts on the renamed MedvedevRussia account, while formal statements on president's activities are published on the KremlinRussia blog, which was launched on Monday.Medvedev will deliver his third address to both houses of parliament in the Grand Kremlin Palace on November 30. He plans to speak about the domestic situation and key areas of Russia's foreign policy.MOSCOW, November 30 (RIA Novosti)Russian President delivers annual public address: 30 November, 2010, 08:18In a few hours’ time, Dmitry Medvedev will outline to parliament Russia's goals and achievements in the traditional annual address to the Federal Assembly.In his previous State of the Nation address, the president said modernizing the country's political and economic practices were the main challenges.This year, the topics of the president’s address remain undisclosed, although there are general expectations as to what areas Medvedev is planning to cover in his speech.One of the topics is expected to be Russia’s domestic and international policy successes and failures. Last week, Medvedev lashed out at Russian policies and politics as stagnating, and said Russia needed stronger opposition forces in order to move forward. A major issue of Russia’s international policy to be discussed is the much-discussed “reset” of its relations with the United States.Another topic is the ongoing fight against corruption, which is something Medvedev takes very seriously.Social issues and reforms are also expected to be on the agenda, according to sources close to the president.Medvedev to deliver annual message to parliament 30, 2010 09:40 Moscow TimeDmitry Medvedev is due to deliver his annual message to the Russian Federal Assembly, or Parliament, later today. This will prove his third presidential state-of-the-nation address. The Russian leader will set forth his position on the main areas of Russia’s home and foreign policy in the short term, and will also outline priorities. The Russian leader’s message will be broadcast to more than 100 countries in 40 languages. According to the Voice of Russia official Yekaterina Yagunova, the address will be broadcast from the Kremlin online in Russian, and will also be translated into English, Spanish and Arabic.?? ?Russia Fails European Anti-Corruption Test, Vedomosti Reports Lyubov ProninaNov. 30 (Bloomberg) -- Russia’s government has failed to meet most of the anti-corruption goals recommended by the Council of Europe in a 2008 agreement, Vedomosti reported, citing an unidentified Russian official in Strasbourg. The government has so far met just six of the 26 targets called for in the accord, including establishing educational programs for judges and law enforcement officials, the Moscow- based newspaper said today. Twenty of the initiatives Russia has yet to undertake include establishing administrative courts where the public can file complaints against officials, Vedomosti said. To contact the reporter on this story: Lyubov Pronina at lpronina@ To contact the editor responsible for this story: Brad Cook at bcook7@ Last Updated: November 30, 2010 00:49 ESTJapanese Foreign Minister announced the intention to carry out inspection of the South Kuriles TRANSLATION30.11.2010, 10.45??TOKYO, Nov. 30. Itar-Tass. Japanese Foreign Minister Seiji Maehara on December 4 is going to implement the so-called inspection of the South Kuriles, which Tokyo considers its "northern territories". The Minister announced today at a press conference.To inspect the Foreign Minister will arrive at the northernmost Japanese island of Hokkaido to the port of Nemuro, where part of the Southern Kuriles in fine weather is visible to the naked eye.As reported by ITAR-TASS news agency Japanese government sources, the Minister intends to treat the island from an airplane without having to leave the airspace of the country.A similar examination of the South Kuril Islands on board the patrol in October, made a state minister for Okinawa and Northern Territories Sumio Mabuchi. Trips of this kind previously made periodically and former members of the government of the country, including prime ministers.(LEAD) FM heads to Kazakhstan for security summit, bilateral talks with Russian counterpart 14:37 KSTSEOUL, Nov. 30 (Yonhap) -- South Korea's top diplomat headed to Kazakhstan Tuesday for an international security summit and bilateral talks with his U.S. and Russian counterparts amid heightened tensions over North Korea's island attack.?? Foreign Minister Kim Sung-hwan plans to attend a summit of the Organization for Security and Cooperation in Europe (OSCE), the world's largest security-oriented intergovernmental organization with 56 countries as members. South Korea is one of the OSCE's 12 cooperation partners.?? On the sidelines of the Dec. 1-2 conference, Kim is seeking to meet bilaterally with U.S. Secretary of State Hillary Clinton and Russian Foreign Minister Sergey Lavrov to discuss tensions soaring after North Korea's artillery assault on South Korea's Yeonpyeong Island on Nov. 23.?? The attack killed two marines and two civilians and wounded 18 others.?? Officials are also working to set up Kim's meetings with his French and British counterparts.?? Other bilateral meetings Kim plans to hold are those with U.N. Secretary-General Ban Ki-moon, Austria's president, the foreign ministers of Kazakhstan, Denmark and Albania and the secretary-general of the Comprehensive Nuclear-Test Ban Treaty Organization (CTBTO), an official said on condition of anonymity.?? South Korea is seeking help from China and Russia to deter North Korea from provocations.?? Beijing and Moscow are closer than other major nations to the communist regime in Pyongyang. The two countries are also among the U.N. Security Council's five, veto-holding permanent members.?? Russia has taken a critical stance toward the North's shelling, contrasting with Moscow's reluctance earlier this year to back South Korea's efforts to punish North Korea at the Security Council for the March sinking of a South Korean warship.?? But China, considered to have the largest leverage over North Korea, has still been sticking to a neutral stance, only expressing concern about rising tensions and calling for dialogue to diffuse them, without denouncing Pyongyang for the bloody strike.?? On Sunday, Beijing abruptly proposed an emergency meeting of six nations involved in talks to end North Korea's nuclear programs, but South Korea, Japan and the U.S. have all reacted negatively to the offer.?? South Korea says laying the groundwork for substantial progress at the six-party talks is more important than convening the negotiations itself, and has urged the North to take concrete steps demonstrating its commitment to give up nuclear programs.?? The six-party talks have been stalled since the last session in December 2008.?? jschang@yna.co.kr“Cordial India-Pakistan relations is in Russia's interest” DELHI, November 30, 2010We have been urging Pakistan to check infiltration of terrorists to its neighbours: Sergei Lavrov Russia on Monday said it had been consistently urging Pakistan to check infiltration of terrorists to its neighbours, Afghanistan and India. Asked, after a meeting with Minister of External Affairs S.M. Krishna, as to why Russia appeared to be getting closer to Pakistan, Russian Foreign Minister Sergei Lavrov said, “I sincerely hope that you are not asking this question of the belief that India and Pakistan will be foes forever.”Facilitating ties“As for our position regarding the situation between New Delhi and Islamabad, it is in our interest that relations improve one day, and we are trying to facilitate that using different discussion forums, including the Shanghai Cooperation Organisation (SCO), where both India and Pakistan are observers.“We are welcoming the positions of leaders of India and Pakistan to build up ties and solve problems. Having said that, it important to acknowledge that no compromise is possible with regard to terrorism. This is our position.“We always urge Pakistani leadership to continue it's efforts for eradication of terrorist hotbeds and to sop the infiltration to the neighbouring countries and this position is stable,” he added.“Against isolation”On Russia's contacts with Pakistan, Mr. Lavrov said, “We find it necessary to talk and to cooperate with all countries. It is absolutely important to do it, otherwise it would lead to isolation, and isolation leads to a dead end. We saw an example of Iraq and other places. We are for engagement of all, on which depends the solution of international problems.”Mr. Lavrov also expressed support for India becoming a permanent member of the United Nations Security Council: “We think that the Security Council would only benefit if India would be its permanent member, and this we take into consideration while discussing reform of the U.N.”Commenting on revelation by WikiLeaks, he called it an “entertaining read,” but said “on practical policy making we will take into consideration the deeds of our partners.”Russia and India likely to ink trade, military deals(AFP) – 12 hours agoNEW DELHI — Russia said Monday it hoped to sign a slew of agreements with India, including military and trade deals, during a trip next month by Russian President Dmitry Medvedev to New Delhi.Russian Foreign Minister Sergei Lavrov flew to the Indian capital to prepare the ground for Medvedev's December 21-22 summit with Indian Prime Minister Manmohan Singh."Our discussions concentrated on the visit of the Russian president and our intention is to sign many documents on trade, economy, outer space and military issues," he said after talks with his Indian counterpart S.M. Krishna.Lavrov's announcement came a month after India said it had agreed to buy up to 300 Fifth Generation Fighter Jets (FGFA) from Russia that it will help jointly develop and manufacture.Experts say each 30-ton FGFA is worth up to 100 million dollars.Russian experts have said the country's troubled defence industry would receive a major boost with the FGFA deal with India.Lavrov did not give details of the other agreements slated for December.Indian foreign minister Krishna said the two countries "were on the same page.""Our relations with Russia are a key foreign policy priority for us and has remained in focus in the past weeks," he said, adding defence cooperation between the two strategic partners would continue.The draft agreement for the FGFA project is likely to be signed during Medvedev's trip in December, military experts say.India and Russia in September signed a separate pact to develop multi-role transport aircraft in a project worth 645 million dollars.Moscow is New Delhi's largest military supplier but recent frictions over cost escalations and delays in the delivery of a refurbished Russian aircraft carrier have strained cosy bilateral ties.India is also in the process of acquiring 270 Russian Sukhoi jets worth 12 billion dollars and is poised to hand out a contract for 126 fighter planes as part of a separate 12-billion dollar deal for which six global aeronautical giants are in the race.30/11/2010Russia offers Amur class submarines to India, Nov 30 (PTI) Russia has offered its latest low-noise fourth generation Amur-1650 class submarines to India, which is on the verge of floating global tenders for an estimated USD 11 billion deal.India is vying to purchase six non-nuclear submarines to boost up its undersea warfare capability. The deal may be expanded by acquiring the knowhow to build more such submarines at Indian shipyards.As part of project 751, Indian Navy proposes to have a undersea force of 24 submarines by 2015. India already has 10 Kilo-class submarines and has set up a line to manufacture French Scorpene Submarines at Mazagoan docks in Mumbai, the first of these submarines are expected to roll out by 2012.Russia''s biggest arms trader Rosoboronexport said it would bid for the tender by offering the Amur class submarines, which are an upgraded version of Indian Navy''s Kilo-class submarines.With the speed of 20 knots, the Amur is designed for both anti-submarine and anti-surface warfare. Its armaments include 16 tube launched torpedoes and also has a capability of launching cruise missiles .Rosoboronexport officials were quoted by TASS as saying that the submarine could be fitted with AIP fuel cells to considerably improve its submergence endurance and range."The company will surely take part in the tender, and it will bid with its Amur 1650 non-nuclear submarine," an official said.The Indian Navy has already sent requests for technical specifications to a number of countries including Russia, Germany, Spain and France who have already shown interest in the deal.The Amur 1650 submarine has been developed by the Rubin Central Design Bureau of Naval Technology on the basis of the Kilo-class diesel-electric submarines, the most low-noise submarines in the world.The sonar signature level of the submarines of this class is several times lower in comparison with Kilo-class submarines. These submarines are equipped with radio-electronic weapons of the newer generation created on the basis of the latest achievements in the field of radio-electronics.The new submarine is equipped with 6 torpedo tubes and can take a crew of 35 people. Its depth of submergence is 300 metres, and its endurance is 45 days.Vladimir Radyuhin: Indo-Russian ties: which way? 30, 2010The visit of Russia’s Foreign Minister Sergei Lavrov to India will give the two sides an opportunity to discuss recent strategic shifts in the Asia-Pacific region that may impact upon the Indo-Russian summit next month and bilateral ties in the longer term.On his visit to New Delhi, he will finalise the political agenda of President Dmitry Medvedev’s visit to India in the second half of December. In this context it is important for Moscow to find out what role India sees for itself in Washington’s strategy of containment of China.This strategy came to light when Obama visited India, Indonesia, South Korea and Japan earlier this month, even as US Secretary of State Hillary Clinton, Secretary of Defence Robert Gates and Chairman of the Joint Chiefs of Staff Admiral Michael Mullen paid visits to six other countries in the Asia-Pacific area — Cambodia, Malaysia, Australia, New Zealand, Papua New Guinea and Tonga.This is how Clinton summed up the message that the South Pacific visits sent: “What we are intent upon doing is not just demonstrating we’re back by flying from capital to capital, but putting real meat on the bones of that position… Obviously, our military, in close cooperation with yours, is looking at how we can upgrade the presence of the United States in partnership with Australia and others,” she said in an interview to an Australian daily.During Clinton’s visit to New Zealand, the US effectively revived the Cold War-era Pacific Security Pact, ANZUS (Australia-New Zealand-US), which lapsed into a coma after New Zealand, in 1984, banned US nuclear powered warships from entering its harbours. The Wellington Declaration on a New Strategic Partnership between New Zealand and the US, which Clinton signed, paves the way for the full restoration of the tripartite defence pact.Four days later, Gates, in Melbourne, announced the establishment of a new bilateral working group that, according to the Pentagon’s American Forces Press Service, will be tasked with facilitating “greater US naval presence and port visits in the region.” US visitors also declared Washington resolve to expand its footprint in South-East Asia. Clinton called for beefing up US military presence in Singapore, which implies a firmer grip on the strategic Strait of Malacca, strengthening defence cooperation with Thailand and the Philippines in the fight against terrorism and natural disasters, and stepping up interaction with Vietnam.Earlier this year the US decided to go through with $6.5 billion worth of weapons sales to Taiwan, provoking strong protests from China.During his visit to Japan, Obama assured his hosts that the US-Japan alliance is “the cornerstone of American strategic engagement in the Asia Pacific” and “the commitment of the United States to the defence of Japan is unshakable.” There is consensus in the Russian expert community that Obama’s visit to India was focused on winning support for Washington’s strategy of containing and encircling China. Most experts think that India is not willing to play the role of “a fulcrum of US anti-China policy,” as one analyst put it.However, India’s reluctance to upset the US in the slightest way, displayed at the trilateral RIC meeting of Russian, Indian and Chinese foreign ministers in Wuhan, China, and which came on the heels of Obama’s visit to India, raised concerns that New Delhi may be cozying up to the US a little too far for Moscow’s comfort.According to informed sources, Indian diplomats struck down a reference to “non-bloc” principles for building “an open transparent inclusive and balanced security and cooperation architecture in the Asia-Pacific region” in the Russian draft of the Wuhan communiqué.The Hindu30 November 2010, 10:01Russians: Indians Are Coming K. Alagh Posted: Tue Nov 30 2010, 10:07 hrs New Delhi: There was a fascinating story last week that there is discussion between Russia and India on sending Indian labour for construction in Siberia. Now this is an old reliable. These stories occur every decade or so. In 1988, the PM was in Moscow and discussing reforms and economic ties with Mr Gorbachov. It occurred to them that trade between the two countries should be doubled and that appeared in their official communiqué. I was asked to operationalise that. I was hesitant. We were liberalising. Barter trade was to be phased out. So was it in the Soviet Union. But an order is an order, so off I went to Moscow. We worked out important priorities which would otherwise have slipped and that was the beginning of the chequered history of the VVER nuclear reactors, the GSLV rockets and many other projects. I always regret that the Delhi metro was put on the backburner because I listened to short-sighted economists who felt we couldn’t afford it. There were two interesting features which were reported but not noticed much. The first was that I insisted that trade should be integrated with reform in both countries. The Soviets were first dragging their feet but soon fell in line. The rupee was in the basket of hard currencies that they put in auction in the beginning of exchange reform. We introduced packets of financing outside the trade plan for private and autonomous public sectors. I got IDBI to join and they set up counterpart agencies. The second was that they asked their best men to be a part of the process. These were all hand-picked reformers. They were in their forties and had great achievements to their credit. They were Gorbachov’s phalanx. I met them one by one and then all of them together in a dinner at the Ashoka in Moscow which B K Chaturvedi organised, as then JS in the Commerce Minstry. It was an occasion as they were the crown jewels of Gorbachov’s perestroika. On our side, I got Sam Pitroda to join and he was a hit with them. He was asked to help them in the Azerbejain earthquake with an IT rehab framework. In the next two years, I was to go through the distressing experience in meetings in Moscow and Delhi of these extraordinary men getting frustrated. The Soviets didn’t get their reform institutions working. One of them was the man who had planned the Siberian expansion in the Eighties and had great achievements to himself. He was the first one to moot the idea of Indian labour in the Siberian projects. We were taken up. The young Soviet electronic engineer who was my counterpart in their Gosplan; the first Soviet engineer trained in USA, discussed the plans, but not much happened before the context changed but the idea keeps on coming up again and again as many others of the period.If it works, it would have another property. It could be the first big labour or factor movement in the globalisation period. There are incidentally interesting proposals by Canadian scholars of a World Visa Organisation arguing that labour mobility across borders will be the great reform frontier.Dalai Lama says he wants to visit Russia , November 30, Interfax - The 14th Dalai Lama has expressed his desire to visit Russia.Addressing Russian journalists in Dharamsala, the Buddhist leader said that there were many Buddhists living in Russia and that the Supreme Lama of Kalmykia had repeatedly said that he would like to see him in Russia, and that if the Russian government says "yes," then he was ready to come.He stressed that he had repeatedly traveled to the Soviet Union and Russia before but in recent years even a short-term transit visit posed a problem.The 14th Dalai Lama said that he would like to visit Russia to see his old friends and meet new ones, and to share his thoughts with them, but that he was unable to do that until he receives the "green light" from Moscow.His predecessor, the 13th Dalai Lama, maintained certain ties with the Russian imperial family and was once presented with a pocket watch bearing a portrait of the Russian emperor, which he kept in his chambers, the Dalai Lama said.Russia is a very important country, a bridge between Europe and Asia and its rich natural resources may have an important part to play in the future, he said.A group of Russian Buddhists will attend the Dalai Lama's teachings in Dharamsala November 30-December 2.Hungary to offer Russia Business Hub for Mol Stake, Napi Says Edith BalazsNov. 30 (Bloomberg) -- Hungarian Prime Minister Viktor Orban will offer Russia the option to build a $4 billion commerce hub in Hungary in exchange for OAO Surgutneftegaz’s stake in Hungarian refiner Mol Nyrt., Napi Gazdasag said, citing unidentified people. Hungary will also offer Russian companies the chance to take part in the expansion of the Paks nuclear plant and may sell stakes in natural gas storage facilities to Russia, the newspaper said. Orban is scheduled to meet Russian Prime Minister Vladimir Putin during a visit to Moscow today, the newspaper said. To contact the reporter on this story: Edith Balazs in Budapest at ebalazs1@ To contact the editor responsible for this story: James Gomez at jagomez@ Last Updated: November 30, 2010 01:47 ESTRF, Bulgaria to hold talks on Belene NPS in Sofia Tue, November 30 (Itar-Tass) - Russo-Bulgarian talks on matters concerning the construction of a Belene nuclear power station (BNPS) are to be held here on Tuesday, with Rosatom chief Sergei Kiriyenko and Bulgarian Premier Boiko Borisov taking part. Traicho Traikov, Bulgarian Minister of Economics, Energy and Tourism, speaking on Monday, expressed the conviction that "If this time a decision is taken to stop (the implementation of) the Belene NPS construction project, no problems will arise, since there are other possibilities to develop the energy market". His opinion is that "The treaty on the Belene NPS contains signed agreements and a series of supplements. However, no accords have been reached so far about the main aspects (of work)". "The construction of the BNPS must be economically beneficial to Bulgaria," Traikov pointed out. Still earlier, Rosatom chief Sergei Kiriyenko had pointed out that the cost of the BNPS might not be less than 6,400 million euros. He said the Russian side may acquire about 30-40 percent of the BNPS-building company's shares. He also warned about possible penalties amounting to about 1,000 million euros in the event of abandonment of the BNPS construction project. According to sources in the Bulgarian government, media here express confidence that the negotiators will manage to coordinate a fixed cost of the BNPS construction at 6,000 million euros. An international conference on the theme of "Energy without Borders" is also to be held here on Tuesday with the participation of representatives of Balkan countries. An official ceremony marking the opening of the conference will be attended by Bulgarian Prime Minister Boiko Borisov. The programme of the forum provides for a report to be delivered by Sergei Kiriyenko. China Yangtze Said in Talks on EuroSibEnergo Stake (Update3) Bloomberg NewsNov. 30 (Bloomberg) -- China Yangtze Power Co., the nation’s biggest hydro dam operator, is in talks to buy a stake in OAO EuroSibEnergo as a key investor for the Russian utility’s planned initial share sale in Hong Kong, said three people familiar with the matter. The investment requires approval from the Chinese government, the people said, declining to be identified as the talks are private. EuroSibEnergo has delayed its offering until 2011 because of the discussions, according to the people. The companies are still negotiating on the price, one of them said. Chinese utilities are collaborating with neighboring countries including Myanmar on power projects that would help supply the world’s fastest-growing major economy. The Russian utility, controlled by billionaire Oleg Deripaska, has also enlisted China Yangtze as a partner in building power plants in Siberia and Russia’s Far East, with some of the generation due for export to China. “China Yangtze is looking abroad to diversify its portfolio,” Cheng Jianguo, an analyst with Guoyuan Securities Co., said by telephone. “Potential hydro resources outside China, including Russia and some southern Asian countries, will be able to supplement its domestic projects and maintain the company’s growth.” China is undertaking a study with Myanmar and Thailand on a 7,000-megawatt hydro dam on the Salween River, the Chinese government said on Nov. 16. EuroSibEnergo and China Yangtze, whose output more than doubled in the first nine months, plan to add 10,000 megawatts of capacity in Russia, Deripaska’s company said yesterday. Hong Kong IPOs Andrei Petrushinin, a spokesman at EN+ Group, Deripaska’s holding company for EuroSibEnergo and his 48 percent stake in Rusal, declined to comment. Lou Jian, China Yangtze’s Beijing- based secretary, couldn’t immediately be reached by telephone. China Yangtze has fallen 16 percent in Shanghai trading this year, the same as the benchmark Composite Index. The stock was down 2.5 percent at 7.50 yuan at 1:16 p.m. local time. Companies in Hong Kong, Asia’s third-biggest stock market, have raised a record $49 billion from IPOs this year as investors seek to benefit from growth in the region, according to data compiled by Bloomberg that include overallotment shares. Seeking Funds EuroSibEnergo, controlled by Oleg Deripaska, is seeking $1.5 billion in a Hong Kong IPO, adding to the $2.2 billion raised by the billionaire’s United Co. Rusal in a share sale in January. Aluminum maker Rusal, whose listing was the first by a Russian company in Hong Kong, has since dropped 11 percent. Investors would be more confident in EuroSibEnergo’s share sale were it backed by “independent, prominent financial investors,” said Michael Hanson-Lawson, chief executive officer of Hong-Kong based East Capital Asia Ltd., by phone. “It’s not really surprising that China Yangtze is going to promote this listing as it’s in their own interest.” New York hedge fund manager Paulson & Co., Russian state- owned development bank Vnesheconombank and Malaysian billionaire Robert Kuok were among investors that agreed to buy Rusal’s shares as so-called cornerstone investors. Cheung Kong (Holdings) Ltd., controlled by billionaire Li Ka-shing, also took part. Proceeds from the EuroSibEnergo share sale will help repay debt, buy assets and add capacity, a person familiar with the plans said in August. An analyst at BOC International Holdings Ltd., one of the IPO’s underwriters, valued the company at $4.1 billion to $5.3 billion. Deutsche Bank AG, Bank of America Merrill Lynch, Credit Suisse Group AG, VTB Capital and Renaissance Capital are among the other banks helping to manage the IPO. --Wang Ying in Beijing, Fox Hu in Hong Kong and Yuriy Humber in Tokyo. Editors: Ryan Woo, Tan Hwee Ann. To contact the Bloomberg staff on this story: Ying Wang in Beijing at ywang30@; Fox Hu in Hong Kong at fhu7@; Yuriy Humber in Tokyo at yhumber@. To contact the editors responsible for this story: Daniel Hauck at dhauck1@; Amit Prakash at aprakash1@. Last Updated: November 30, 2010 00:28 ESTRussian website publishes WikiLeaks revelations on Russian-Georgian war 30/11/2010The Russian Reporter weekly, a WikiLeaks partner, published the U.S. correspondence on the 2008 war between Russia and Georgia over South Ossetia.Russian Reporter is the only Russian magazine, which, along with U.S. and German media, receives materials from whistleblower website WikiLeaks in advance to prepare publications and analysis.On August 7, a day before the war officially began, John F. Tefft, then U.S. ambassador in Tbilisi, blames South Ossetia for beginning the hostilities, saying that "a full-scale South Ossetian attack against a Georgian village" took place.He later reported that "Georgian forces along with GRAD artillery are on the move, either as part of a show of force or readiness, or both.""From evidence available to us it appears the South Ossetians started today's fighting. The Georgians are now reacting by calling up more forces and assessing their next move," the report reads.Later, the ambassador reported that "embassy observers on the highway noted approximately 30 yellow city buses, the usual mode of transport for moving Ministry of Interior forces, carrying uniformed men heading north from Tbilisi."On August 8, Tefft says that "fighting in South Ossetia had continued throughout the night of August 7, resuming four hours after [Georgian] President [Mikheil] Saakashvili unilaterally declared a cease-fire."The WikiLeaks documents also say that the EU member states were divided over the Russian-Georgian conflict, with some having "sympathy for Russia's "defensive/offensive operations.""[Polish Foreign Minister] Radoslaw Sikorski had to overcome significant opposition within the EU even to schedule a foreign minister level meeting on Georgia August 13," the dossier says. "A number of EU member states believed Georgian President Saakashvili was responsible for the conflict."Another leaked report quotes Poland's late Gen. Franciszek Gagor, then Chief of the General Staff of the Polish Armed Forces, as saying that "Saaskashvili made an extremely bad decision to move into South Ossetia and played directly into Russia's hands."It says Saakashvili was "manipulated by Russian agents, possibly even among his advisors," who were seeking to disrupt pipelines in Georgia and derail the country's NATO aspirations."Georgia's "stupid" move only benefits Moscow and greatly strengthens resurgent forces in Russia," the report reads.In July WikiLeaks published some 400,000 secret U.S. military files ("Iraq War Logs") on the conflict in Iraq. This time it plans to publish more than 250,000 documents dated from December 1966 to February 2010.The main suspect in the leak of secret documents to WikiLeaks is jailed U.S. Private Bradley Manning, who had top-secret clearance as an intelligence analyst for the Army when he was stationed in Iraq.The WikiLeaks website does not have a central office or any paid staff and its operations are run only by a small dedicated team and some 800 volunteers.Wikileaks' founder, Australian activist Julian Assange, has no home address but he often pops up in Sweden and Iceland, where Internet anonymity is protected by laws. He is being hunted by Pentagon investigators and is suspected of releasing confidential U.S. State Department documents.A Swedish court recently issued a warrant for the arrest of Assange on suspicions of rape and sexual molestation.MOSCOW, November 30 (RIA Novosti)WikiLeaks reveals secret U.S. dossiers on South Ossetia 30, 2010 01:24 Moscow TimeAmericans knew in advance about the attack masterminded by Georgia against South Ossetia, yet did nothing to stop Tbilisi. These findings have been published on the website of the journal "Russian Reporter". The Russian publication was provided with a collection of classified documents by the infamous web site WikiLeaks. ?? ?In particular, the journalists were able to lay their hands on reports of U.S. Ambassador to Georgia, William Tefft, which said that Tbilisi was increasing its military presence in the conflict zone. ? Georgia attacked South Ossetia on August 8, yet already on August 12th, Russian troops forced Georgia to peace. Two weeks later, Russia recognized the independence of South Ossetia and another former Georgian autonomy - Abkhazia. In response, Tbilisi severed diplomatic ties with ernment Brushes Off U.S. Leaks November 2010By Nikolaus von TwickelThe government on Monday shrugged off embarrassing details about how U.S. officials described Russia's leaders in secret diplomatic cables published by the WikiLeaks whistle-blowing web site together with select media outlets."We found nothing interesting or deserving comment in the material," Kremlin spokeswoman Natalya Timakova told reporters, adding that "fictional Hollywood heroes hardly need comment."In one cable, which was only quoted by news agencies including Reuters, Prime Minister Vladimir Putin is dubbed the country's "alpha-dog" ruler, while President Dmitry Medvedev is belittled as "playing Robin to Putin's Batman," in a reference to the superheroes from the legendary U.S. comic book series.Foreign Minister Sergei Lavrov called the documents "entertaining trash" but denied that they posed a threat to relations with Washington. "Regarding real politics we prefer to go by our partners' concrete deeds," Lavrov told reporters in Delhi, Interfax reported.Earlier, news agencies citied a Foreign Ministry source as saying diplomats felt regret and embarrassment because "digging through diplomatic dirty laundry was not a very pleasant experience."The secret reports contain some very candid descriptions about how power is divided in the ruling tandem, though the Russian cables were less scandalous than in some other countries.In a Feb. 12 cable from the U.S. Embassy in Paris, Defense Secretary Robert Gates is quoted as saying "Russian democracy has disappeared" and that the government is "an oligarchy run by the security services." Gates adds that Medvedev has a more pragmatic vision than Putin, "but there has been little real change," according to the document, which was published at had only published 243 of more than 250,000 documents by late Monday, though several Western media outlets published excerpts from additional documents that they received in advance of the public release.In perhaps the most colorful of the cables to be revealed so far, a U.S. diplomat reported from a wedding in the Dagestani capital Makhachkala, where Chechen leader Ramzan Kadyrov "danced clumsily" with his gold-plated gun stuck down his jeans. Together with the host, Gadzhi Makhachev, who heads the Dagneft oil company, Kadyrov was said to have showered dancing children with $100 bills. "The dancers probably picked upwards of $5,000 off the cobblestones," the report notes, adding that Kadyrov, who was Chechen prime minister at the time, gave the happy couple “a five-kilo lump of gold."In another cable, first lady Svetlana Medvedeva is said to be creating tension inside the government and is the object of intense gossip, German weekly Der Spiegel reported on its web site.Medvedeva is running a blacklist of officials deemed disloyal to her husband, the report quoted an unidentified cable from the U.S. Embassy in Moscow as saying.Moscow also told Israel that it would cancel the sale of S-300 missiles to Iran in return for access to sophisticated Israeli drone technology, according to a cable from the U.S. Embassy in Tel Aviv. The document from December 2009 quotes Israeli Defense Ministry official Amos Gilad as saying Russia offered $1 billion for the technology. But Gilad told visiting U.S. Undersecretary of State Ellen Tauscher that Israel would not hand over the technology for fear that it would end up in the hands of China.A Kremlin spokeswoman on Monday refused to comment further on any of the leaks.In another cable from the U.S. Embassy in Baku, Azeri President Ilham Aliyev suggests that Medvedev has little influence over the government."Many high-ranking officials don't recognize [Medvedev] as a leader," Aliyev is quoted in the document, dated Feb. 24, as telling visiting U.S. Undersecretary of State William Burns.The Azeri leader said there were signs of a strong confrontation between the teams of the two men, although not yet between Putin and Medvedev personally, the report says.The revelation could greatly complicate Moscow's efforts to mediate in the Nagorno-Karabakh conflict between Azerbaijan and Armenia, which could be addressed during a OSCE summit in Kazakhstan later this week.The White House condemned the publications as "reckless and dangerous" and directed government agencies to tighten procedures for handling classified information, news reports said.The decision endangers U.S. diplomats, intelligence agents and democratic activists who seek America's help, White House press secretary Robert Gibbs said Sunday, The Associated Press reported.The leak is thought to be the work of Private First Class Bradley Manning, an Army intelligence analyst, who has said he downloaded the documents together with more than 90,000 intelligence reports on the war in Afghanistan from a military computer system.Manning, 22, has been in solitary confinement for the past seven months.At least one State Duma deputy called for tighter controls over the Internet, which has been a haven for free speech in Russia.This scandal shows that serious measures are necessary to protect information from appearing online, the Liberal Democratic Party's Leonid Slutsky, a first deputy chairman of the Duma's International Affairs Committee, told Interfax.Andrei Klimov, a United Russia deputy on the same committee, told The Moscow Times that it was vital to protect sensitive information from getting into the wrong hands."Next time, someone will publish the access code to the nuclear briefcase," he said with reference to the special communications system that guards the country's nuclear arsenal.WikiLeaks founder Julian Assange, an Australian, has said in the past that he planned to publish compromising material about Russian officials and businessmen.Earlier this month, businessman Alexander Lebedev said Assange met with a reporter from the opposition minded Novaya Gazeta, which he co-owns.A Novaya Gazeta spokeswoman said Monday that she could not comment at this stage on the meeting.The Federal Security Service has suggested that it does not see WikiLeaks as a real threat. "If necessary, the site can be shut down forever," Lifenews.ru quoted an unidentified FSB official as saying last month.But most experts argue that it is impossible to censor the Internet on a massive scale like in China, which would result in an international outcry and contradict efforts spearheaded by Medvedev to promote information technology.They point to the fact that even sites of radical Islamists from the North Caucasus are accessible in the country.Mikhail Fedotov, chairman of Medvedev's Human Rights Council and a long-standing secretary of the Union of Journalists, said it was telling that the leak had occurred in the United States."In this case, all criticism goes to the U.S. — they were responsible for keeping the secrets that were leaked," he told The Moscow Times.His words were echoed by Lavrov, who stressed on Friday that the leaks were a problem for Washington, not Moscow."If secret documents are stolen [in the United States], this does not mean that such a thing happens here — and certainly not on such a scale," he was quoted by national news agencies as saying.U.S. judge rejects motion to end Russian pilot's drug trafficking case 30/11/2010A U.S. judge rejected a motion to drop charges against a Russian pilot who was arrested by U.S. intelligence agents in Liberia on suspicion of drug trafficking, a source familiar with pre-trial hearings told RIA Novosti.Konstantin Yaroshenko, 41, was detained by U.S. intelligence agencies in late May on charges of trafficking cocaine to South America, Africa and Europe, mainly from Liberia and Venezuela. The Russian Foreign Ministry criticized the detention, saying it was practically a kidnapping and a violation of international law.During pre-trial hearings into Yaroshenko's case, defense lawyers sought to end the case on the grounds that a U.S. court had no jurisdiction to hear it, the source said on the condition of anonymity.The Russian pilot's lawyers also said evidence supporting the case was wrongfully obtained and numerous wrongful acts were committed during his arrest and subsequent transportation to the United States.No official documentation on the case is available so far.Yaroshenko's trial will officially begin on February 28, 2011.Yaroshenko and other alleged members of the cocaine trafficking group have denied all charges. If they are convicted, they may face from 10 years imprisonment to life sentences.NEW YORK, November 30 (RIA Novosti)Rescuers Search Site of Russian Cargo Plane Crash in Karachi 12:33Smoke was still rising from the debris, as Pakistani rescuers worked to recover more bodies from the wreckage of the cargo plane which crashed into a suburb of Karachi.The Russian-built cargo aircraft went down just a minute after taking off from the city's airport bound for Sudan.It had a crew of eight Russians on board.It was not immediately clear if there were further casualties on the ground.Witnesses spoke of flames coming from the plane as it got airborne.[Ghulam Mustafa, Local Resident]:"My son called me. He works as a security guard near the airport. He said: 'Father, a plane has just taken off from the airport and flames are coming out of it. It's on fire.' Then I heard a big blast. I came running here to find flames and smoke rising up into the sky."The impact of the aircraft crashing into a building under construction at a navy housing complex was caught on amateur video.Several unoccupied buildings in the largely residential suburb also caught fire.Investigators are trying to establish the cause of the crash, Karachi's second fatal aviation incident in a month.On November 5th, a small plane on charter to an international oil company went down, also shortly after take-off from the city's airport.All 21 people on board were killed.Russia's missile forces to replace Topol-M missiles with RS-24 30/11/2010Russia's Strategic Missile Forces (SMF) will be rearmed with RS-24 missiles instead of the RS-12M Topol-M (SS-27 Sickle) mobile intercontinental ballistic missile systems, SMF Commander Lt. Gen. Sergei Karakayev said on Tuesday."The mobile missile system with the RS-24 ballistic missile is an improved version of the Topol-M, and during production experience with fifth generation mobile missile systems was taken into account," Karakayev said, adding that the missile proved itself a reliable weapon. "Therefore it was decided to rearm the SMF with this type of missile system," he continued. "At the same the Topol-M mobile missile system will not be supplied to the Strategic Missile Forces in the future."The SMF said in August that the Topol-M and RS-24 missiles would be the mainstay of the ground-based component of Russia's nuclear triad and would account for no less than 80% of the SMF's arsenal by 2016.As of June 2010, the SMF operated at least 50 silo-based and 18 road-mobile Topol-M missile systems. The RS-24 was commissioned in 2010 after successful testing.The RS-12M Topol is a single-warhead intercontinental ballistic missile, approximately the same size and shape as the U.S. Minuteman ICBM. The first Topol missiles entered service in 1985.The missile has a maximum range of 10,000 km (6,125 miles) and can carry a nuclear warhead with a yield of 550 kilotons.Next year the SMF will hold 10 intercontinental ballistic missile launches, twice as many as in 2010, Karakayev said.MOSCOW, November 30 (RIA Novosti)10:49Russian rocket forces to replace Topol-M systems with Yars missiles – commander silo-based Topol-M missile regiment to enter service before year's end: RS-24 - evidence of the priority of Russia in a nuclear field 10:58MOSCOW, November 30 - RIA Novosti. Mobile complex RS-24 "Yars" increases the security and efficiency of nuclear missile systems and is a real testimony to the priority of Russia in a nuclear field, said on Tuesday the commander of the Strategic Rocket Forces (RVSN), Lieutenant-General Sergei Karakayev."The latest Russian mobile missile system (PGRK) with intercontinental ballistic missiles (ICBM) SS-24" Yars "confers resistance group in responding to and is a real testimony to the priority of Russia's nuclear missile field," - said Karakayev.He noted that the "yars" is "one of the most effective means of solving problems to improve the survivability of missile complexes."Currently in service with the SMF there is a significant set of tools for an adequate response to the different variants of attempts to reduce the effectiveness of our nuclear missiles. This effectively provides a higher survivability of missile complexes under the influence of his opponent by any means, including nuclear power and capacity of their ability to perform the task of unacceptable damage to the aggressor, including in anti-missile defenses "- the commander said.He added that to maintain the necessary balance of power in solving the problem of nuclear deterrence will require "the qualitative improvement of the components of the strategic nuclear forces of Russia.""Naturally, in the domestic rocket will continue to develop new missile systems, including incorporate new technical solutions such as missile system Topol-M missile, which in future will come into service the Strategic Missile Forces," - said Karakayev.Russia to choose submarine for new Bulava missile tests by Dec 10 28/11/2010The Russian government commission for testing Russia's Bulava submarine-launched ballistic missile has completed its analysis of the missile's latest two successful launches and will choose a submarine for further tests by December 10, a source in the commission said on Sunday.Last time, a Bulava missile was successfully test-fired on October 29 from the Dmitry Donskoi nuclear-powered submarine in the White Sea, hitting a target on the Kura test range in Russia's Far East Kamchatka region some 6,000 kilometers to the east.It was the second successful firing in a month, coming after a series of embarrassing failures. Now, seven launches of the Bulava missile have been declared successful and their number has equaled the number of the missile's failures."The work to study the results of the missile's latest two launches came to an end on Saturday. It was decided that the third test launch will be made in the second half of December. The exact date of the launch will depend on weather conditions in the White Sea, from which the missile is planned to be fired," the source said.The government commission is currently deciding on the submarine to launch the Bulava missile, the source said."With a great degree of certainty, we can say that a Bulava missile will be test launched from the Borei-class nuclear-powered undersea cruiser Yury Dolgoruky, which is preparing for tests. A final decision will be made in the first ten days of December," the source said.The Russian military expects the Bulava, along with Topol-M land-based ballistic missiles, to become the core of Russia's nuclear triad.A source in the government commission earlier said that the second stage of Bulava tests would start at the end of May 2011, if the launches in 2010 were a success.The missile's previous failures were officially blamed on manufacturing faults.Despite previous failures, the Russian military has insisted that there is no alternative to the Bulava and pledged to continue testing the missile until it is ready to be put in service with the Navy.The Bulava (SS-NX-30) SLBM carries up to 10 MIRV warheads and has a range of over 8,000 kilometers (5,000 miles).The missile will enter service when it is 100 percent reliable, First Deputy Defense Minister Vladimir Popovkin earlier said.MOSCOW, November 28 (RIA Novosti)?Cutting-edge strategic sub to hit the water The Russian Navy dockyard Sevmash in Severodvinsk (Arkhangelsk region) is preparing to launch another fourth-generation Borey class ballistic-missile submarine, the “Aleksandr Nevsky.”The construction of the submarine began in 2004. The first sub of the series, the “Yury Dolgoruky,” passed state approval in 2010. The third one, the “Vladimir Monomakh,” has been under construction since 2006.The Russian Ministry of Defense plans to have no less than eight submarines of this type.4th -generation strategic nuclear submarine launched in Severodvinsk 30, 2010 05:19 Moscow TimeSeverodvinsk today witnesses the launching of a second strategic nuclear-powered submarine of the fourth generation - ?"Alexander Nevsky". The lead ship – “Yuri Dolgoruky” – is currently being tested. The Ministry of Defense plans to?build a minimum of eight Borei- class missile cruisers. They are designed to become the fundamental component?of the marine strategic nuclear forces of Russia.NATO seeks strategic partnership with Russia 30, 2010 07:12 Moscow TimeNATO seeks to develop strategic partnership with Russia. This was announced on Monday at the Center for Strategic and International Studies in Washington by NATO’s Supreme Allied Commander Europe, Admiral James Stavridis. Dwelling on the main aspects of this cooperation, he named the joint fight against piracy, terrorism, and drug trafficking, as well as cooperation in Afghanistan and Russia's participation in missile defense.NOVEMBER 30, 2010Russian Missiles Fuel U.S. Worries ADAM ENTOUS And JONATHAN WEISMAN The U.S. believes Russia has moved short-range tactical nuclear warheads to facilities near North Atlantic Treaty Organization allies as recently as this spring, U.S. officials say, adding to questions in Congress about Russian compliance with long-standing pledges ahead of a possible vote on a new arms-control treaty.U.S. officials say the movement of warheads to facilities bordering NATO allies appeared to run counter to pledges made by Moscow starting in 1991 to pull tactical nuclear weapons back from frontier posts and to reduce their numbers. The U.S. has long voiced concerns about Russia's lack of transparency when it comes to its arsenal of tactical nuclear weapons, believed to be many times the number possessed by the U.S. Russia's movement of the ground-based tactical weapons appeared to coincide with the deployment of U.S. and NATO missile-defense installations in countries bordering Russia. Moscow has long considered the U.S. missile defense buildup in Europe a challenge to Russian power, underlining deep-seated mistrust between U.S. and Russian armed forces despite improved relations between political leaders.The Kremlin had no immediate comment.Republican critics in the Senate say it was a mistake for President Barack Obama to agree to the new Strategic Arms Reduction Treaty with Russia, or New Start, without dealing with outstanding questions about Moscow's tactical nuclear weapons. New Start would cap the Russian and U.S. deployed strategic nuclear arsenals at 1,550 per side. It doesn't address tactical weapons, which are smaller and for use on a battlefield.Senior administration officials say New Start, like most arms treaties before it, deals only with strategic nuclear weapons, adding that only after it is ratified can Washington and Moscow begin to negotiate a legally binding, verifiable treaty to limit tactical warheads in Europe. The positioning of Russian tactical nuclear weapons near Eastern European and the Baltic states has alarmed NATO member-states bordering Russia. They see these as potentially a bigger danger than long-range nuclear weapons. Tactical weapons are easier to conceal and may be more vulnerable to theft, say arms-control experts.Lithuanian Foreign Minister Audronius Azubalis said he raised concerns about the weapons this month with Secretary of State Hillary Clinton and senior defense officials in Washington."Being a NATO member, of course, someone could say, 'Don't worry.' But when you're living in the neighborhood, you should always be more cautious," Mr. Azubalis said. He added that American officials "expressed worry but they also don't know too much" about where the weapons are and the conditions under which they are kept.Classified U.S. intelligence about Russia's movement of tactical nuclear weapons to the facilities has been shared with congressional committees.During a September hearing on the new arms-reduction treaty, Sen. Jim Risch, an Idaho Republican, spoke of "troubling" intelligence about Russia without saying what it was, adding it "directly affects" the arms-control debate. Senate Foreign Relations Committee Chairman John Kerry (D., Mass.) countered that it had "no impact" directly on Start, without elaborating. Sen. Christopher Bond (R., Mo.), vice chairman of the Senate Select Committee on Intelligence, refused to comment directly on the tactical nuclear warhead issue, but he said the Russians cannot be trusted to make good on their arms-control promises. "We know from published reports of the State Department that the Russians have cheated on all their other treaties, Start, chemical weapons, [biological weapons], Open Skies," he said.U.S. officials say Mr. Obama's revised approach to missile defense, and warming personal ties with Russian President Dmitry Medvedev, have fostered cooperation in key areas, from isolating Iran to opening new routes to transport gear to Afghanistan.But mistrust runs deep, U.S. diplomatic cables released by the organization WikiLeaks over the weekend showed. A February cable quoted Defense Secretary Robert Gates telling a French official that Russia was an "oligarchy run by the security services," despite Mr. Medvedev's "more pragmatic vision." A Gates spokesman declined to comment.Two senior Obama administration officials didn't deny the tactical warhead issue has arisen in private discussions with lawmakers, but said the 1991 pledges, known as the Presidential Nuclear Initiatives, weren't legally binding on either side and were difficult to verify. Administration officials say U.S. and Russian negotiators plan to turn their attention to tactical nuclear weapons, as well as larger strategic warheads that aren't actively deployed, as soon as New Start goes into force. "If we don't ratify Start, we're not going to be able to negotiate on tactical nuclear weapons," one said.Poland's minister of foreign affairs, Rados?aw Sikorski, called Start a "necessary stepping-stone" on the way to a deal to reduce tactical arsenals. Western officials say the Russian military views its aging arsenal of tactical nuclear weapons as a way to compensate for its diminished conventional capabilities, and as a hedge against the U.S.'s expanded missile defenses and China's growing might. U.S. officials point to steps Russia has taken to meet its arms-control obligations over the last two decades, including reducing the number of nuclear-weapons storage sites, once many hundreds, to as few as 50. But officials are skeptical Russia has fulfilled all of its pledges to destroy and redeploy tactical nuclear weapons in line with the 1991 Presidential Nuclear Initiatives.According to the U.S. assessment, Russia has expanded tactical nuclear deployments near NATO allies several times in recent years. An example is Kaliningrad, a Russian enclave between Poland and Lithuania. A State Department cable from April 2009 said Russia had warned it would take countermeasures, including putting "missiles" in Kaliningrad, in response to expanded U.S. missile defenses in Europe. U.S. officials believe the most recent movements of Russian tactical nuclear weapons took place in late spring. In late May, a U.S. Patriot missile battery was deployed in northern Poland, close to Kaliningrad, sparking public protests from Moscow.Some officials said the movements are a concern but sought to play down the threat. Russian nuclear warheads are stored separately from their launching systems, U.S. officials say. In the fall of 1991, the U.S. had about 5,000 tactical nuclear weapons deployed overseas, most assigned to NATO, according to the Arms Control Association. The U.S. destroyed about 3,000 as a result of the Presidential Nuclear Initiatives. Today, the U.S. is believed to have some 1,100 tactical nuclear warheads, of which about 480 are nuclear gravity bombs stored in six European countries.Estimates on the number of Soviet tactical nuclear weapons in fall 1991—just before the fall of the Soviet Union—ranged from 12,000 to nearly 21,700. At a May 2005 conference, Moscow said its arsenal "has been reduced by four times as compared to what the Soviet Union possessed in 1991," and was "concentrated at central storage facilities...." Russia's ambassador to NATO, Dmitry Rogozin, this month reiterated the position that Russia won't withdraw all tactical nuclear weapons behind the Urals until the U.S. takes its battlefield weapons out of Europe.—Stephen Fidler contributed to this article.Write to Jonathan Weisman at jonathan.weisman@ Attempt of US dollars export to Russia prevented 30 November 2010 06:47 GMT | 7:47 Local TimeThe State Border Service of Azerbaijan has detained a group of persons that attempted to smuggle illegally cash to Russia on a large scale.The Service reports that three citizens of Azerbaijan were detained at checkpoint "Samur" on the Azerbaijani-Russian border while trying to smuggle to Russia illegally $154,000.A criminal case was initiated in accord with Article 206.3.2 (smuggling by a group of persons on previous concert) of the Criminal Code of Azerbaijan.Fineko/abc.az Russia, Norway audit radwaste cleanup spending in Murmansk from Russian and Norwegian state auditing authorities have completed a joint inspection of expenses made using funds that Russia’s northern neighbour earmarked to clean up the consequences of radioactive contamination at various sites of Murmansk Region. Alexey Pavlov, 30/11-2010 - Translated by Maria Kaminskaya Located on Russia’s Kola Peninsula, in the far north of European Russia, Murmansk Region is one of Norway’s closest neighbours, and its nuclear and radiation safety has always been of particular concern to the Norwegians. As the very first steps were being made to try to clean up the nuclear legacy of the Cold War across the vast Russian territory, the costs of such an endeavour in this region alone were estimated at some $4 billion – and it was Norway, in the early 1990s, that first suggested aiding Russia in nuclear safety projects in the north.According to official data, between 2001 and 2009, Norway allocated about NOK 100 million ($16.2 million) annually to help Russia upgrade storage conditions for spent nuclear fuel, decommission retired nuclear submarines, and clean up the consequences of radioactive contamination at the now-defunct naval bases formerly run by the Russian Northern Fleet. The money was being placed in the care of Murmansk regional authorities and a range of organisations operating within the Russian top nuclear authority Rosatom – which has over the years been restructured from the former Ministry of Atomic Energy into the Federal Agency for Atomic Energy and then into the State Nuclear Corporation Rosatom.The recent audit was meant to look into just how that money has been spent.“The Russian Accounts Chamber and the Office of the Auditor General of Norway have been carrying out a number of supervisory measures,” said Sergei Antonov, a representative of the Accounts Chamber of the Russian Federation. “Apart from assessing the efficiency of producing results in particular radiation safety projects, there is yet another project due to be completed this year. This will be inspecting the efficiency of using marine bioresources of the Barents and Norwegian seas. A general report on that project will be ready by next spring.”Auditors from both sides have promised to soon summarise their findings and present them to the public. One of the results, however, is already clear: The two countries have made it possible to create an efficient system of cooperation in joint inspections.“The auditors first gather all the material, analyse it, and then present their conclusions,” said Trond Sol?s, a representative of the Office of the Auditor General of Norway. “We are now getting together all the data compiled by the Russian side and working with Norwegian organisations. We are confident that we will be getting good results.”The audit in Murmansk Region has been carried out based on a memorandum of cooperation signed by the auditing agencies of the two countries. The memorandum stated that over the years, the sides have managed to achieve better safety records at Kola Nuclear Power Plant, for example, and also conducted joint training exercises that both parties noted as a useful experience. Among the main results, however, was reducing the scale of contamination across the various sites on the Kola Peninsula and minimising the associated risks. First and foremost, this concerns the removal of spent nuclear fuel and radioactive waste from the former naval base of Gremikha – a project currently still in progress, but approaching completion. Another remediation project clamouring attention – one where much has to be done yet before all radiation risks are removed there – is the former nuclear submarine base in Andreyeva Bay.“Andreyeva Bay is the biggest and most technologically complicated task on the agenda at the moment,” Bellona-Murmansk’s head Andrei Zolotkov said at a recent meeting of the Norwegian and Russian auditors in Murmansk. “They have yet to even start the process of removing spent nuclear fuel from dry storage tanks there. And the Global Partnership programme, which provides most of the financing [for Andreyeva Bay], expires in 2012. So the question arises – will we have international sponsor aid after 2012?”Zolotkov was referring to a programme started in 2002 among the Group of Eight industrialised nations during their meeting in Kananaskis, Canada, in which they promised to give Russia $20 billion over ten years for nuclear clean-up projects. It is also called the “10+10 over 10” programme because America pledged $10 billion over 10 years, leaving the other participating countries (Japan, Canada, Great Britain, France, Germany and Italy) to come up with $10 billion among themselves.Much of this funding has not materialized as expected as all of these countries have slated their contributions to go into their usual aid packages. But regardless of the particulars, continued funding is crucial to keeping the urgent remediation projects in Andreyeva Bay afloat.Great Britain has already refused to finance the construction of the main building planned for spent nuclear fuel removal works in Andreyeva Bay. Bellona believes, therefore, that under no circumstances should Norway abandon the project.Zolotkov said he was very doubtful that Rosatom would see the remediation projects in Andreyeva Bay to the end without the help from Russia’s partners abroad. The projects would require hundreds of millions of euros that Rosatom will have trouble finding – if only because the Russian nuclear authority has been much keener on promoting its new pet project, floating nuclear power plants, and has been just as eagerly pushing for the construction of new stationary nuclear power plants as well. Nuclear construction is already costing huge sums of money to the state budget. For Rosatom, therefore, funds provided by Russia’s Western sponsors, spell a great chance to move ahead with cleaning up the legacy of the arms race without spending a dime.“It is actually very interesting to find out how exactly the money has been spent. Because I have had a chance to participate in operations involving the removal of spent nuclear fuel from nuclear submarines,” Zolotkov said. “I know that a fuel unloading operation costs on the order of hundreds of thousands of euros. And I know what sort of bonuses the team would receive – a few percent of this amount. So I was always interested to know – where does the rest of the money go?”For both Bellona and the general public, it would be interesting to find out whether the works are done according to European or Russian prices. If it’s the latter, then an assumption can be safely made that contracts may be artificially overpriced. It is exactly there – in projects where budget or sponsor funds are involved – that potential scandals abound, since the temptation is just too big to take a pass on. And Rosatom has already given more than reason to doubt the efficiency of the ways in which it spends money allocated to this or that project.The results of the joint inspection by Russian and Norwegian auditors will be discussed at a meeting of the Collegium of the Accounts Chamber of the Russian Federation in late December. After that, the findings will be made available for the media. That is likely to happen in early 2011.Serbia Completes South Stream Feasibility Study, Politika Says Misha SavicNov. 30 (Bloomberg) -- Serbia completed a feasibility study for the route of the planned South Stream pipeline through its territory and has sent a proposal to Russia’s OAO Gazprom, the project leader, Politika reported, citing Dusan Bajatovic, who heads Srbijagas, Serbia’s gas company. The pipeline would enter Serbia from Bulgaria near the southeastern city of Zajecar, passing through central and northern areas on the way to Hungary, with one section branching westward to Bosnia-Herzegovina, the newspaper said. The planned 470 kilometers of the pipeline through Serbia would cost 1 billion to 1.5 billion euros ($1.3 billion to $2 billion) to build and have an annual capacity of 36 billion to 41 billion cubic meters of gas, according to the report. To contact the reporter on this story: Misha Savic in Belgrade at msavic2@ To contact the editor responsible for this story: James M. Gomez at jagomez@ Last Updated: November 30, 2010 02:58 ESTRussia allocates funds for restoration of Orthodox shrines in Serbia 30, 2010 00:31 Moscow TimeSerbia has prepared drafts on utilizing resources allocated by Russia for the restoration of Orthodox shrines in Kosovo and Metohija. This was announced in Belgrade by the country’s Culture Minister Nebojsa Bradi?. ?? On Monday Russia concluded an agreement with UNESCO on the allocation of $ 2 million for the restoration of Orthodox shrines in Kosovo. The funds will be spent to upgrade the fa?ade and stuccos of Decani Monastery, the restoration of frescoes and the churches proper in the town of Pec, monasteries of Decani and Gracanica.U.S. returns stolen Russian original historic documents 30, 2010 04:15 Moscow TimeThe U.S. is returning to Russia original historical documents, stolen from Russian archives. Among them are decrees by Russian rulers, as well as orders, issued by Soviet military leader Marshal Georgy Zhukov. The documents were stolen in the 90's, and 2000’s. They were discovered at auctions in America and quickly withdrawn.?? ?The ceremony of transfer of the documents takes place on Friday at the Russian Embassy in Washington. American authorities have on numerous previous occasions returned to Russia various historical relics.Loggers Fuel Russian Drug Trade Korean loggers in Russia are producing and selling large amounts of methamphetamine.Loggers dispatched to Russia by the North Korean government are becoming increasingly involved in the illegal drug trade there, according to sources in North Korea.They said that loggers manufacture large quantities of methamphetamine in their workplaces in collaboration with Russian nationals with the aim of selling it to traffickers to earn extra money for remittance home to North Korea.The loggers also use the drugs themselves to cope with the harshness of the conditions they labor under, the sources said, adding that some of them have become severely addicted.One North Korean source, a railway employee from a working class area in Rajin-Sonbong, near the Tumen River, said several loggers had been arrested on drug charges in the last few months. The river serves as part of the boundary between Russia, North Korea, and China. “In late August, 16 loggers were arrested at the same time on drug charges. On Oct. 16, six loggers were apprehended and transferred by a train bound for the Tumen River area,” the source said.One of those apprehended—a photographer based near the Tumen River in North Korea’s Northern Hamgyeong province—was dispatched as a logger to Russia in May 2009.According to the same source, four of the six North Korean loggers arrested Oct. 16 were charged in North Korea with producing philopon, a methamphetamine, and selling it to Russian drug dealers.The remaining two were charged in North Korea with selling philopon to fellow loggers. North Korean security agents were dispatched to make the arrests, the source said, adding that all six face imprisonment in North Korea.The source said that many people in North Korea are aware that loggers in Russia often produce illegal drugs and sell them to Russian dealers.He said that North Koreans who produce illegal drugs commonly bribe Pyongyang officials in order to be sent to Russia as loggers, and use that cover to engage in drug manufacturing and trafficking.The North Korean loggers engage in illegal drug operations in Russia and then exchange the money they earn through Chinese middlemen, the source said, eventually sending it as remittances to their families in North Korea.As a result, an informal economy is on the rise, consisting largely of middlemen engaged in laundering and exchanging drug money, and of transporters carrying the money across the Tumen River into North Korea, the source said.Turned to addictionAccording to a second source who worked as a logger in Russia and currently resides in North Korea’s North Hamgyong province, some loggers have turned to using methamphetamines in order to cope with the strenuous work and harsh weather conditions of the Siberian logging industry.“Loggers need drugs in order to cope with Russia’s terribly cold weather, the backbreaking labor, and the hunger,” he said.“People specializing in producing drugs sell them for U.S. $30 per gram (0.04 ounces).”The source said some loggers become addicted to drugs and return home with no money at all, despite all their hard labor, while others end up committing suicide.He said loggers who manufacture drugs bribe North Korean security agents dispatched to their worksites to turn a blind eye to their illegal activities.The higher quality drugs are sold to Russian and Chinese criminal gangs, while the lower-end drugs produced at logging sites are sold to North Korean loggers, he said.According to the source, drugs manufactured by the loggers end up in the hands of Chinese trafficking gangs after being transported through Jiamusi city in China’s Heilongjiang province on their way to North Korea. Jiamusi sits near the Sino-Russian border.Both sources pointed out that although drug manufacturing and trafficking has subsided inside North Korea following a crackdown by authorities, the lucrative business has migrated to Russia and is now on the rise there within the North Korean logger community.Logging downsizeEarlier this month, a North Korean official speaking anonymously said Pyongyang will close 10 forestry offices in Russia that oversee North Koreans dispatched to work as loggers in Siberia. The move followed Russia's refusal to renew North Korean logging permits, in favor of cheaper and more qualified labor from China and Southeast Asian nations.Nuclear-armed North Korea relies heavily on foreign exchange from logging operations in Siberia, in the central and eastern portion of Russia. A significant part of the salaries of North Korean loggers goes into cash-starved Pyongyang's coffers.At least 10,000 North Koreans are believed to be working as loggers in Siberia.Most loggers receive less than 10 percent of the money Russian logging companies provide their North Korean handlers as salary.Previous to 1995, North Korean authorities used to send food and snacks for loggers, in order to avoid spending hard currency on supplies.However, after the food crisis worsened in North Korea, Russian authorities were asked to provide food for the loggers.Because working conditions are poor and pay low, many North Korean laborers escape from their workplaces.Reported by Moon Sung Hui for RFA’s Korean service. Translated by Grigore Scarlatoiu. Written in English by Joshua Lipes.Copyright ? 1998-2010 Radio Free Asia. All rights reserved.Radical Islam in the North Caucasus: Center for Strategic and International Studies (CSIS)Full report: $File/full_report.pdfDate: 29 Nov 2010By Sergey MarkedonovNov 29, 2010 As Kyrgyzstan plunges into crisis and the threat of a second Afghanistan in Central Asia looms large, the situation in the "Big Caucasus" seems less pressing and thus overshadowed. The worst scenarios predicted by analysts and politicians for the period of the 2008 August war have not been realized. The Russian attempt to "replace the regime" of Mikhail Saakashvili or apply the Georgian pattern in Ukraine, expected by many in the West, has not taken place. Neither have the attempts from the West (the United States, NATO, and others) to "nudge Georgia into a rematch," which were expected in Moscow. Nonetheless, the Caucasus region remains one of the most vulnerable spaces in Eurasia. In the Caucasus, the first precedent of a revision of borders between the former Soviet republics was established. For the first time in Eurasia, and particularly in the Caucasus, partially recognized states have emerged. While their independence is denied by the United Nations, it is recognized by the Russian Federation, a permanent member of the UN Security Council. After the "hot August" of 2008, Moscow demonstrated its willingness to play the role of a revisionist state for the first time since 1991. Russia defines the "Big Caucasus" as the sphere of its vital interests and priorities and consequently pretends to be a key stakeholder for the whole region. But there is a paradox in this situation. Identifying itself as a guarantor of Caucasus stability and security, Russia faces serious challenges inside its own country in the North Caucasus area. Moreover, in 2009 the situation there was characterized as the most important domestic policy issue by President Dmitry Medvedev. What challenges have turned the North Caucasus into a primary issue for Russia? Could we paint the political, ideological, and psychological portrait of the North Caucasus militant resistance? What resources do they have, and why has radicalism becomes popular? What external and internal factors determine their approaches? What mistakes did Russia, its society, and the Western observers make? And, finally, could the rise of Islamist militancy in the North Caucasus bring Moscow and Washington closer, regardless of the numerous foreign policy disputes existing between the two countries? This report is an attempt to answer these questions. It is based on open sources and interviews made during several trips to the North Caucasus republics, and it aims to promote more practical approaches to the situation there. ? The Center for Strategic & International Studies Russian Press at a Glance, Tuesday, November 30, 2010 30/11/2010POLITICSThe recent WikiLeaks revelations were among the most discussed topics in the Russian media. Thousands of classified documents may affect U.S. ties with all major players on the international arena(Vremya Novostei, Vedomosti, Kommersant, Nezavisimaya Gazeta)The OSCE summit will begin on Wednesday in Astana(The Moscow Times, Vremya Novostei, Rossiiskaya Gazeta)Moldova's Communist party won the parliamentary elections with 40.98% of the vote, according to preliminary results. However, the party's expected 44 seats in the 101-seat parliament are not enough to elect a president and end the long-term political crisis in the country(The Moscow Times, Vremya Novostei, Kommersant, Rossiiskaya Gazeta)Russian President Dmitry Medvedev proposed tax breaks for individuals who invest in innovation companies and asked for improvements to immigration rules to ease mobility for foreigners(The Moscow Times)ECONOMYEU finance ministers have agreed on an 85-billion-euro financial aid package to Ireland and agreed on a new mechanism to overcome debt crises(Vedomosti)METALS & MININGNorimet Ltd., the subsidiary of Russia's largest nickel producer Norilsk Nickel, plans to sell off its controlling stake (51.3%) in Stillwater Mining Company, the only U.S. platinum producer(Vremya Novostei, Vedomosti, Kommersant)OIL & GASRussian gas giant Gazprom, Ukraine's national energy company Naftogaz and Swiss-registered RosUkrEnergo have signed a package of agreements on the return of 12.1 billion cubic meters of gas to the Swiss trader. A statement by Gazprom and Naftogaz says RUE would return its $810-million debt to Gazprom and $1.7-billion debt to Naftogaz(Vremya Novostei, Kommersant)TELECOMS & ITMore than one-third of Russian Internet users spend most of their time on social networking sites, the ARMI-Marketing research company said. Most of them consider the Twitter microblogging service "the funniest and coolest." Odnoklassniki and Moi Mir social networking sites were named as "most user-friendly."(Kommersant)SOCIETYA presidential administration official, Andrei Voronin, was arrested on suspicion of assistance in extorting money from medical equipment companies who were seeking to participate in state contracts(Vedomosti, Kommersant, Nezavisimaya Gazeta)Mikhail Lysenko, the head of a prosperous district in Russia's Volga Area, was detained ahead of local elections on suspicion of ordering a murder, though a local lawmaker said the move may be an attempt to oust him from the race. Investigators think Lysenko was the ringleader of a mafia group, established in the 1990s.(The Moscow Times, Rossiiskaya Gazeta)SPORTRussia's chances to host the 2018 FIFA World Cup seem quite solid, but the costly sports projects may put too much strain on Russia's economy(Nezavisimaya Gazeta)November 30, 2010 10:12Moscow press review for November 30, 2010. Nov 30 (Interfax) - The following is a digest of Moscow newspapers published on November 30. Interfax does not accept liability for information in these stories.VEDOMOSTICyprus-registered EuroSibEnergo (the holder of a 100% stake in Eurosibenergo and part of the En+ Group, owned by Oleg Deripaska), which planned to start a road show on Monday ahead of an IPO, has put off the placement by three months, two sources close to the placement told Vedomosti. EuroSibEnergo declined to comment. The plans were changed due to the emergence of a core investor. China Yangtze Power Company (CYPC) is prepared to acquire EuroSibEnergo shares worth $168 million, but has not received the official go-ahead for the deal, according to the two sources. This is likely to take two weeks and the road show is expected to start in mid February, immediately after the Chinese New Year holiday, one of them said. (Deripaska Opts for China, see also Kommersant. Page 1. Eurosibenergo Saved for China).Evraz may obtain its own sales chain in Russia. Roman Abramovich, Alexander Abramov and Alexander Frolov's mining holding company may buy one of Russia's largest metal traders Inprom, an employee of the metal trader's core lender, Sberbank (RTS: SBER), has said. The bid was filed with the Federal Anti-Monopoly Service (FAS) on November 18, a FAS representative confirmed. FAS has a month at its disposal to make a decision. (Evraz to Get Sales Network).The Russian Finance Ministry and the organizer banks - JPMorgan, Deutsche Bank, HSBC, Renaissance Capital and VTB Capital, plan to meet in London and New York with potential buyers of Russia's ruble Eurobonds, a banker close to the organizers of the placement and an employee of an investment fund, which plans to buy the bonds, told Vedomosti. The Finance Ministry intends to place five-year papers as a minimum worth 60 billion to 90 billon rubles, the two sources said, without specifying the yield. Deputy Finance Minister Dmitry Pankin earlier said that the ministry plans to place ruble-denominated Eurobonds with an annual yield no higher than the current rates on federal loan bonds. The yields on federal loan bonds maturing in 2015 was 7.3% on Monday. (Russian Chip).Rostelecom (RTS: RTKM) is conducting due diligence of National Telecommunications (NT), two sources close to the parties in the talks told Vedomosti. If the current condition of the assets suits Rostelecom, it could acquire a 100% stake, one of the sources told Vedomosti. The price will be a market one, the second source said. NT changed hands to the National Media Group (NMG, owned by Yury Kovalchuk's Bank Rossiya,) and its partners in the summer of 2008 from Suleiman Kerimov's Nafta Moskva, which had sold the asset for $1,5 billion (the debt included). Rostelecom is also eyeing Akado , two sources close to the talks said. One of them added that it may announce a proposal to Akado shareholders as early as this week. (Between Online and Akado).KOMMERSANTGazprom (RTS: GAZP) and Naftogaz Ukrainy have settled the gas debt with the Rosukrenergo trader, half of which is owned by the Russian gas monopoly. As Kommersant expected, Naftogaz Ukrainy will return the entire amount of gas to the trader, which will sell it at a market price to Gazprom Export to be further sold to the European Union. Subsequently, Rosukrenergo will repay a $1.7 billon debt to Naftogaz and $810 million to Gazprom. In experts' estimate the trader's net profit may amount to $515 million - $800 million. (Page 11. Rosukrenergo Repays Debt).TNK-BP is in talks to buy gas distribution assets of Viktor Vekselberg's KES Holding. The deal involves the purchase of a part of the Gazex business, rejected by the core players on the market. A decision on the deal is expected to be made in mid December. (Page 11. TNK-BP Pulling Gas Networks).MTSU prof defends ex-pats to Russian president : Tuesday, November 30, 2010 12:00 amTo get even 10 minutes worth of access to a major head of state is a gift which would make thousands of lobbyists giddy with anticipation. Dr. Andrei Korobkov, professor of political science, spoke with Russian President Dmitry Medvedev for two hours at a state reception and dinner at the Kremlin on Nov. 4. Korobkov encountered Medvedev at the fourth annual Assembly of the Russian World Foundation, which took place Nov. 2-4 in Moscow.“The organization is actively supported by President Medvedev, who is very interested in pushing it and considers it a way to reestablish links with the Russian diaspora abroad,” says Korobkov. “Increasingly, he is getting interested in bringing back Russian intellectuals who left.”Medvedev has poured a great deal of his political capital into the Skolkovo Project, an attempt at a Russian Silicon Valley north of Moscow. He has obtained monetary contributions from Microsoft, Cisco and several Japanese companies. “Huge amounts of money are being invested there, but, for now, their attempts to bring large numbers of Russian academics are in vain, basically,” says Korobkov. “I have been studying this problem for a long time, so I gave the main presentation at the conference.”Korobkov says he emphasized to Medvedev that Russian intellectuals who have achieved tenure at universities in the West will not be inclined to return to their home country, especially given the degree of interaction with the Russian government they would be expected to endure. “To imagine that in Russia it would be possible to leave academics alone is very hard because it’s an extremely bureaucratized country, and it became more bureaucratized than it was under the Soviet regime, ironically,” says Korobkov.Therefore, Korobkov says he suggested to Medvedev that incentives be provided to lure these Russian academics back for short periods of time so they could give top-flight graduate students crash courses that would set them on the path toward becoming the country’s new “brain gain.”On a personal level, Korobkov says Medvedev operates as a person accustomed to having power and not shy to show it.“He is not used to people disagreeing with him,” says Korobkov.” And a couple of times he was kind of sharply angrily asking me, ‘So what, you disagree with me?’”Korobkov also talked politics with Vyacheslav Nikonov, the Russian World Foundation executive director, who has been a Kremlin insider for some 20 years and an adviser to both Medvedev and Russian Prime Minister Vladimir Putin. Nikonov is the grandson of Vyacheslav Molotov, former Soviet Prime Minister and then Foreign Minister under Joseph Stalin after Stalin assumed the title of Prime Minister.“He is a kind of shadow operator who has access to the highest echelons of power,” says Korobkov. ”Nikonov is very smart, very well educated, pretty calculating, a typical political consultant. If you look in the U.S., you can probably compare him to David Axelrod working for (President Barack) Obama or Karl Rove working for (President George W.) Bush.”Prior to attending the Russian World Federation conference, Korobkov participated in an intense three-day gathering Oct. 27-30 in Garmisch-Partenkirchen, Germany, sponsored by the George C. Marshall European Center for Security Studies.Members of parliaments, committee chairs, representatives of international organizations and the European Union, as well as academics, discussed security and stability in Central Asia and Mongolia. Korobkov says the countries of this region face great challenges due to a water shortage and governments that are either openly authoritarian or lean in that direction. However, some of these countries, which include the former Soviet republics of Kazakhstan, Tajikistan, Turkmenistan, Uzbekistan and Kyrgyzstan, are rich in important substances, including plutonium, platinum, oil and natural gas.“There is a huge flow of migrants from those countries to Russia and from Russia to other parts of the world,” says Korobkov. “Second, this region is becoming increasingly the traffic route for drugs from Afghanistan.” However, Korobkov says it would be unlikely that these countries would be invited to join NATO or the European Union as a way of protecting them from totalitarian takeovers.“After the Georgian-Russian War, it became very dangerous to expand NATO because, in NATO, an attack against any member is an attack against every member,” says Korobkov.National Economic TrendsPM: Russia regaining jobs in 2010 , 30.11.2010, Moscow 11:39:37.More than 1m jobs were created in Russia since the start of 2010, and the total number of unemployed fell to 5.1 million people, down from 6.2 million in the period from January to October of 2010, Russian Prime Minister Vladimir Putin said at a meeting with Chairman of the Federation of Independent Trade Unions Mikhail Shmakov, the government's press office reported.??????Shmakov noted that the total number of registered unemployed amounted to 1.5 million people in September-October of 2010, compared to 1.3 million registered before the crisis. However, Shmakov expressed concern over the age of the unemployed. "There are 27 percent of the unemployed under age 35, with 6 percent aged 15-19, but they are neither working nor studying. So, considering that, 21 percent of the unemployed are between 19 and 30," he concluded. Russia to hold ruble Eurobond road-show on Tue, Wed in New York, London - paper 30/11/2010The Russian Finance Ministry and lead managers of Russia's ruble-denominated Eurobond issue, JPMorgan, Deutsche Bank, HSBC, Renaissance Capital and VTB Capital, will hold the bonds' road-show in New York and London on Tuesday and Wednesday, Vedomosti business daily quoted a banking source close to lead managers as saying on Tuesday.The source was quoted as saying that the issue volume would amount to 60-90 billion rubles, while the bonds would carry a maturity of no less than five years.A source familiar with the matter earlier told RIA Novosti that the issue volume would amount to 80-100 billion rubles with a maturity of 3-10 years.Deputy Finance Minister Dmitry Pankin has said that the ministry intends to place ruble-denominated Eurobonds with yields matching current rates for the ministry's OFZ domestic federal loan bonds. On Monday, OFZ bonds with maturity in 2015 traded at 7.3% per annum, while yields on OFZ bonds with different repayment periods ranged from 3.54% to 8.87%.In April, Russia placed two tranches of sovereign Eurobonds after a more than ten-year pause. In particular, Russia placed $2 billion five-year bonds and $3.5 billion 10-year bonds. On Monday, the five-year bond yield amounted to 3.548%.Russia's Alfa-Bank analyst Stanislav Bozhenko was quoted by Vedomosti business daily as saying that Russia's ruble Eurobonds would fetch good demand as Russia's sovereign rating was expected to be raised while European investors showed interest in ruble instruments. He also added that the bond issue price guidance could stand at 7%.MOSCOW, November 30 (RIA Novosti)Worst Slump Since May Cuts Putin Bond Advantage: Russia Credit Denis MaternovskyNov. 30 (Bloomberg) -- Russia, the world’s biggest energy exporter, is losing its borrowing cost advantage over the rest of emerging market nations as weaker economic growth and faster inflation send bonds to their biggest monthly slide since May. The average yield on Russian dollar bonds climbed 17 basis points, or 0.17 percentage point, in November, the biggest increase in six months, to 5.79 percent, according to JPMorgan Chase & Co.’s Corporate EMBI Russia Blended Yield Index. Russian government yields are 27 basis points below the average of 22 developing nations in JPMorgan Chase & Co.’s EMBI+ Index of sovereign debt, down from 105 basis points in February. “There is this general unease with Russia,” said Vladimir Gersamia, who helps manage $2 billion of debt including Russian government bonds at Threadneedle Asset Management in London. “The economic recovery is taking too long.” Russia’s $1.2 trillion economy grew at an annual rate of 2.7 percent in the third quarter, compared with the 9.6 percent pace in China. Inflation may exceed a government estimate of 8 percent this year, according to the central bank, compared with 4.4 percent in China and 5.2 percent in Brazil in October. Concern Europe’s sovereign debt crisis is spreading precipitated declines in emerging-market bond prices this month as investors trimmed holdings of riskier assets. Ireland secured an 85 billion-euro ($113 billion) aid package this week, six months after Greece was bailed out. “When it’s a risk-off mood, Russian bonds are among the first to be sold,” said Sergey Dergachev, who helps manage the equivalent of $8.5 billion of emerging-market debt at Union Investments in Frankfurt. Rising Yields Russia’s dollar bonds due in 2020 declined for the first time since May this month, pushing the yield 50 basis points higher to 5.01 percent, according to data compiled by Bloomberg. The yield has climbed from 4.112 percent on Nov. 4 and is 7 basis points short of the level when the bonds were issued in April in the country’s first international debt sale since 1998. The yield difference between the 2020 dollar bonds and Brazil’s similar-maturity dollar securities widened to 121 basis points yesterday, the largest gap since April. The yield for Russia, whose Baa1 credit ratings from Moody’s Investors Service are two levels above Brazil, was 64 basis points higher than the Latin American government on Nov. 9. Russian Eurobonds lost 1.9 percent in November compared with the 2.2 percent decline for JPMorgan’s EMBI+ Index of foreign-currency debt from the biggest emerging-market sovereign borrowers. The country’s bonds returned 9.4 percent year-to- date, compared with a 12.9 percent gain for Brazil and 16.2 percent for the Philippines, the indexes show. Spreads, Swaps The yield on the government’s ruble notes due in August 2016 climbed 5 basis points to 7.45 percent and added 28 basis points during November. The bond yielded 7.08 percent on Oct. 14, the lowest level since it was sold in August. The extra yield investors demand to hold Russian debt rather than U.S. Treasuries increased 16 basis points to 236 basis points, according to JPMorgan’s EMBI+ Index. The difference compares with 150 basis points for debt of similarly rated Mexico and 188 basis points for Brazil. The cost of protecting Russian debt against non-payment for five years using credit-default swaps fell 2 basis points to 158.5 points yesterday, down from this year’s peak of 217, according to CMA prices. The contracts, which pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements, fell 15 basis points this month. Credit-default swaps for Russia cost 19 basis points more than contracts for Turkey, which is rated four levels lower at Ba2. Turkey’s advantage is the biggest in 11 months. Russia swaps cost as much as 40 points less than Turkey on April 20. Ruble Rates The ruble added 0.2 percent to 31.3575 per dollar in Moscow trading, rebounding from its weakest closing level since June. The currency lost 1.7 percent against the dollar during November. Non-deliverable forwards, or NDFs, which provide a guide to expectations of currency movements and interest rate differentials and allow companies to hedge against currency movements, show the ruble at 31.7275 per dollar in three months. The ruble is headed for its worst month since May against the dollar, and the central bank more than doubled its estimate on Nov. 16 for capital outflows this year to $22 billion. Funds holding Russian bonds took in less money this month than those for Brazilian, Indian and Chinese debt, according to Boston- based research firm EPFR Global. Russia’s economy will probably grow 3.8 percent this year, compared with a previous estimate of 4.2 percent, Morgan Stanley analysts said in a report yesterday. International Monetary Fund forecasts stand at 7.5 percent for Brazil and 10.5 percent for China, according to its October World Economic Outlook. Inflation The annual inflation rate in Russia reached 7.5 percent in October, the highest since January. Bank Rossii Chairman Sergey Ignatiev said on Nov. 25 that inflation in Russia may exceed a government estimate of 8 percent in 2010 after the worst drought in five decades. The annual inflation rate in Russia reached 7.5 percent in October, the highest since January. The rate compared with 4.4 percent in China and 5.2 percent in Brazil. “Investors do like Russian bonds, but more as a tactical play, since because of their tremendous liquidity it is very easy to buy them at low levels and sell them when risk increases,” Dergachev said. To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@ To contact the editor responsible for this story: Gavin Serkin at gserkin@ Last Updated: November 29, 2010 16:00 ESTRussia May Import Grain If Shortage Arises, Putin Says Ilya KhrennikovNov. 29 (Bloomberg) -- Russia may import gran if the country doesn’t have enough supplies after its worst drought in at least 50 years, Prime Minister Vladimir Putin said. “I asked colleagues form other countries to reserve some grain volumes to ship to Russia should it face shortage,” Putin said in Moscow today. Russia’s crop fell to 60.3 million metric tons this year from 97.1 million tons in 2009 because of the drought. To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@ To contact the editor responsible for this story: Maria Kolesnikova at mkolesnikova@ Last Updated: November 29, 2010 09:16 ESTIn southern Russia more than 10 million tons of grain stored TRANSLATIONSouthern Russia has accumulated 10 million tons of grain in siloses. Vedomosti writes that the export is prohibited to transport grain, and in the center of Russia is impossible to remove because of the infrastructure. As a result, in October 2010 from the south were shipped only 400,000 tons of grain.The newspaper wrote that the last 10 years South Russian grain went only for export, while the center to buy a Siberian wheat. Now the whole car park Rusagrotrans, the largest carrier of grain by rail in Russia, can transport from the south up to 1.5 million tons of grain, but the reception inside the country elevators are not designed for such volumes.Much of the accumulated in the south of the grain is wheat, whereas in the drought-affected central and Volga lack of fodder grain. As a result, prices for feed grain in Russia are growing, although because of the ban on exports to Russia, according to government statistics, there are more than 12 million tons for export grain.The drought summer of 2010 led to the deaths of nearly 40 percent of the grain harvest. In some regions of Russia due to abnormally hot and dry weather emergency was declared. The threat of famine, grain prices in the country in July and August went up t to meet the needs of the country, was forced to introduce a moratorium on the export of grain till July 2011.According to the Ministry of Agriculture, this year (from 1 July 2010 to June 30, 2011) grain consumption in Russia will be 77 million tons. Cereal production in 2010 at 60.3 million tonnes in net weight. Another 26.3 million tons account for the so-called carry-overs, including 9.64 million tons of grain intervention fund.Corn Advances on Concern Russia May Face Feed-Grain Shortage Luzi Ann JavierNov. 30 (Bloomberg) -- Corn futures climbed, narrowing the first monthly decline in six, and wheat advanced on speculation Russia may increase feed-grain imports, intensifying competition among buyers. March-delivery corn gained as much as 0.5 percent to $5.56 a bushel on the Chicago Board of Trade, and traded at $5.5475 at 4:17 p.m. in Singapore, paring the monthly loss to 4.7 percent. Wheat for delivery in March added 0.4 percent to $6.93 a bushel, trimming the monthly decline to 3.4 percent. Prime Minister Vladimir Putin said yesterday he has asked other countries to reserve some grain volumes to ship to Russia in case the nation faces a shortage. The nation was the third- largest wheat grower until the worst drought in at least five decades slashed this year’s harvests of wheat and corn. “Providing some support was a projection by Argentina’s international trade secretary that Russia may buy up to 3 million tons of Argentine corn,” Ker Chung Yang, an analyst at Phillip Futures Pte., said in a report e-mailed today. A purchase by Russia of that amount would be equal to 20 percent of corn supplies from Argentina, the world’s second- largest exporter, according to Bloomberg calculations based on the U.S. Department of Agriculture’s Nov. 9 estimate. That may increase competition among corn buyers, after the USDA trimmed its estimate of global exports in the year from Oct. 1 to 93.2 million metric tons, from 93.6 million tons a month ago, as it cut supplies available for shipment from the U.S., after dry weather curbed yields in the largest shipper. Russian Shortfall Russia will have a shortfall of 2.5 million to 3 million tons of feed grain by March or April next year and will probably need imports to bridge the gap, Sergei Shakhovets, head of analytics at the Moscow-based Grain Producers’ Union, said Nov. 26. The nation may need to import as much as 5 million tons of grain in the marketing year that ends June 30, he said. Russia’s grain crops fell to 60.3 million tons this year from 97.1 million tons in 2009 because of drought. About 47 percent of the U.S. winter-wheat crop was rated good to excellent in the week ended Nov. 28, unchanged from a week earlier, the USDA said yesterday. That compares with a rating of 63 percent for the same period last year. January-delivery soybeans rose 0.7 percent to $12.435 a bushel in Chicago, reversing a 0.6 percent loss. The contract is set for a 0.6 percent little changed this month. Soybeans for export, inspected at U.S. ports fell 15.1 percent to 48.9 million bushels in the week to Nov. 25, from a week earlier, the USDA said. The U.S. is the world’s largest grower and exporter of the oilseed. Soybean growers in Brazil, the second-largest shipper of the oilseed, have sold 32 percent of next year’s crop, up from 20 percent a year ago, forecaster Celers said yesterday. Farmers have sown 85 percent of the crop as of Nov. 26, more than the 82 percent planted in the same period last year, Celers said. In Brazil’s Mato Grosso state, growers have sold 57.4 percent of next year’s crop, speeding up the forward sales from 30 percent a year earlier, the state’s agriculture research agency, known as Imea, said. To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@. To contact the editors responsible for this story: James Poole at jpoole4@ Last Updated: November 30, 2010 03:26 ESTCBR "Frees Up Hands" for a Rate Hike CapitalNovember 30, 2010CBR "frees up hands" for a rate hike. At the Russian Economic and Financial Forum in Germany, CBR First Deputy Chairman Alexey Ulyukaev announced that the central bank has "freed up its hands" for higher interest rates in the statement on the policy rate decision last Friday. Ulyukaev highlighted that the CBR removed the phrase 'in the nearest months' when talking about the monetary policy staying accommodative and thus sending a signal to the market about monetary policy tightening. Monetary drivers of inflation kick in. Contrary to the latest official statement, Ulyukayev surprisingly acknowledged that it was not only food prices but also monetary pressures that were pushing inflation higher. We expected monetary drivers to kick in at the end of this year or in early 2011. The lack of monetary drivers for inflation was the CBR's official excuse for not hiking interest rates, but now this reason is out of the way.Need to hike due to capital outflow and RUB risk-reward profile. As it can be observed in interest rates decision statements earlier this year, one of the key reasons for the CBR to lower interest rates was the fight against 'hot money' inflows. With the recent capital outflow and the CBR burning FX reserves on supporting the RUB, hiking rates to curb capital outflows might be on the agenda. We stressed in Pouring Oil on Troubled Waters of 17 November that the RUB risk-reward profile has changed after the crisis. It is no longer a low carry - low volatility currency as it was the case in 2007/mid-2008, but a low carry - high volatility currency. The probability of rate hike in the next three month has increased. Given the CBR has explicitly stated that monetary drivers are pushing inflation higher and explaining to the market the changes in the policy statement wording, a hike is most likely on the CBR's agenda. Ulyukaev's statement suggests that the CBR is switching to direct tightening from using other tools, which is a material risk to our 'no change through 2011' interest rates forecast. We think the monetary authorities will watch December inflation and capital outflows data before making the decision.Aleksandra EvtifyevaBank lending is finally recovering BankNovember 29, 2010? Russian bank lending finally reached positive real y/y growth, as nominal bank lending increased 8.9% y/y at the beginning of November. ? We expect the lending growth to accelerate further, reaching 15% y/y even by the end of this year. ? Stagnant bank lending has been holding back the economic recovery this year, but we expect it to give a significant boost to 2011 growth through consumption and investments. Assessment and outlook According to the Russian Central Bank, outstanding bank loans reached RUB21600bn at the beginning of November. This corresponds to about half of total GDP, so changes in bank lending are a significant GDP driver. In particular, bank lending to households and firms tends to transmit quite quickly into the real economy through consumption and investments. Year-on-year growth in total bank lending reached 8.9% and lending to households and firms grew 9.5% and 5.9% respectively. This is exactly in line with our expectations, as we expect lending growth to reach 15% y/y by the end of this year, led by the household sector. Average lending rates to the private sector are finally falling to more tolerable levels to below 10%. We believe that the significance of bank lending has been widely underestimated and that has led to the downside surprise in 2010 GDP growth. Correspondingly, 2011 growth is likely to surprise on the upside, as bank lending growth could easily reach 30% y/y next year.Russian banking sector: Oct 2010 results CapitalNovember 30, 2010Event: The Central Bank of Russia (CBR) has issued October statistics for the Russian banking sector, which show thefollowing key trends:Corporate lending was up 0.5% MoM in October (+9.2% YtD), thus slowing down from August (+1.2%) and September (+2.9%), but still showing positive monthly growth for the seventh consecutive month. Retail lending increased 1.7% MoM in October (+10.2% YtD). The total loan book was up 0.7% MoM in October and is now up 9.4% YtD.The sector's total deposits were flat MoM in October (+12.5% YtD), on the back of 2.3% MoM growth in retail deposits, while corporate deposits dropped 2.0% on a monthly basis.The non-performing loan (NPL) proxy for the banking system decreased by 7 bpts to 6.2% in October. Loan loss reserves decreased 2.4% MoM and stood at 11.2% of gross loans as at 10M10. However, according to a member of the CBR's board of directors, Mikhail Sukhov, this decline was largely caused by the banks writing off uncollectable loans and corresponding reserves.Action: Neutral for the sector, in our view.Rationale: The October results show that the trends of recent months have largely continued. Credit growth, albeit slower than in Aug-Sep, is very welcome. NPLs continued to decline, with their share reaching the lowest level since the start of the year. Although this was partly due to write-offs, it is still encouraging to see signs of the asset quality cycle turning the corner. A summary of key figures is shown in the table below.Business, Energy or Environmental regulations or discussionsRussian markets -- Factors to Watch on Nov 30 Nov 30, 2010 7:18am GMT MOSCOW, Nov 30 (Reuters) - Here are events and news storiesthat could move Russian markets on Tuesday. You can reach us on: +7 495 775 1242 STOCKS CALL (Contributions to moscow.newsroom@): OTP Bank: The external background is moderately negative, weexpect the market to open near the levels of the previoussession's close. Troika: We are opening our prices this morning varied, fromflat to up 0.5 percent. EVENTS [RU-DIA] (All times GMT): MOSCOW- Russian President Dmitry Medvedev's annualstate-of-the-nation address -0900 GMT. MOSCOW- Russian Prime Minister Vladimir Putin to meet hisHungarian counterpart Viktor Orban. MOSCOW- Russia's second-biggest oil producer LUKOIL(LKOH.MM) to announce Q3 2010 results; hold a board meeting. MOSCOW- Rosinter Restaurants (ROST.MM) to report Q3 results. MOSCOW- Cherkizovo (GCHE.MM)(CHEq.L) to report Q3 results,followed by a conference call. MOSCOW- M.Video (MVID.MM) holds an EGM. IN THE PAPERS [PRESS/RU]: Kommersant runs an interview with Deutsche Bank's (DBKGn.DE)director for Russia and the CIS who says the bank will get a"somewhat smaller" profit in the full-year 2010 as a result of aglobal uncertainty and advises clients that they should borrowas much as they can while interest rates are historically low. Vedomosti writes that Russian steelmaker Evraz Group(HK1q.L) has applied to the anti-monopoly service to allow itacquire one of Russia's largest metals traders, Inprom. Russian long-distance call operator Rostelecom (RTKM.MM) maybuy National Telecommunications -- a major player on the Moscowinternet market with 2009 revenue at 8.3 billion roubles ($265.1million), Vedomosti reports citing sources. TOP STORIES IN RUSSIA AND THE CIS [RU-NEWS]: TOP NEWS:* 'Alpha-dog' Putin rules Russia chaos-WikiLeaks [ID:nLDE6AS1OF]* Kyrgyz govt says 4 insurgents killed in raid [ID:nLDE6AS19B] COMPANIES/MARKETS:* Rouble up on liquidity squeeze,correction eyed [ID:nLDE6AS1Y3]* LUKOIL Q3 net profit seen up 3 pct-poll [ID:nLDE6AS1W8]* VTB seen returning to black in Q3-poll [ID:nLDE6AS18H]* RUSAL denies interest in India's smelter [ID:nLDE6AS1XM]* VEB to keep 2011 borrowings at or higher 2010 [ID:nLDE6AS102]* Acron sells Canada potash licence to BHP [ID:nLDE6AS0G1]* INTERVIEW-Russia more investor friendly [ID:nLDE6AS1MK] ECONOMY/POLITICS:* Russia cbank says rate hike chances rising [ID:nLDE6AS0DX]* Cbank sees 2010 bank deposit growth of 27-28pct[ID:nLDE6AS0V2] ENERGY:* TNK-BP to double global oil trade [ID:nLDE6AS1C8]* Gazprom and Ukraine settle gas dispute [ID:nLDE6AS23U]* Russia may decide on 2011 oil products mid-Dec [ID:nLDE6AS07J] COMMODITIES:* Russia PM does not rule out grain interventions[ID:nLDE6AS1J3]* Russia to up spring grain sowing by 2.9 mln ha [ID:nLDE6AS1BZ]* Barley leads rising Russian grain market [ID:nLDE6AS0D4] MARKETS CLOSE/LATEST: RTS .IRTS 1,596.8 +0.47 pct MSCI Russia .MIRU00000PUS 837.5 -0.73 pct MSCI Emerging Markets .MSCIEF 1,076.8 -0.36 pct Russia 30-year EurobondRU011428878= yield: 4.855/4.815 pct EMBI+ Russia 11EMJ 248 basis points over Rouble/dollar RUBUTSTN=MCX 31.3755 Rouble/euro EURRUBTN=MCX 41.1395 NYMEX crude CLc1 $85.19 -$0.54 ICE Brent crude LCOc1 $86.85 -$0.49 For Russian company news, double click on [E-RU] Treasury news [M-RU] Corporate debt [D-RU] Russian stocks [.ME] Russia country guide RUSSIA All Russian news [RU] Scrolling stocks news [STXNEWS/EU] Emerging markets top news [TOP/EMRG] Top deals [TOP/DEALS] European companies [TOP/EQE] ($1=31.31 Rouble)Cherkizovo Group, Lukoil, Polyus Gold, Rosneft: Russian Preview Ilya ArkhipovNov. 30 (Bloomberg) -- The following companies may be active in Russian trading in Moscow. Stock symbols are in parentheses and share prices are from the previous close of trading. Russia’s 30-stock Micex Index dropped 0.8 percent to 1,554.65. The dollar-denominated RTS Index fell 0.8 percent to 1,589.28. OJSC Cherkizovo Group (GCHE RX): One of Russia’s leading meat producers will announce its third-quarter results. Shares fell 0.1 percent to 914.45 rubles. OAO Lukoil (LKOH RX): Russia’s largest non-state oil producer is scheduled to report third-quarter financial results. Company shares fell 1.7 percent to 1,682.15 rubles. OAO Polyus Gold (PLZL RX): Gold rose, heading for the first gain in three sessions, on speculation that Europe’s sovereign- debt crisis will boost demand for the precious metal as a haven. Shares in Russia’s largest gold miner rose 1.2 percent to 1,762.26 rubles. OAO Rosneft (ROSN RX): Oil rose to a two-week high as U.S. consumers spent more over the Thanksgiving weekend than last year, a sign confidence in the economy is strengthening, and European finance chiefs handed Ireland a bailout package. Shares in Russia’s largest oil company fell 0.9 percent to 209.58 rubles. To contact the reporter on this story: Ilya Arkhipov at iarkhipov@ To contact the editor responsible for this story: Willy Morris in London at wmorris@ Last Updated: November 29, 2010 22:00 ESTFederal Tariff Service approves two-step residential gas tariff growth of 5% from 1 Jan 2011 and 9.5% from 1 Apr 2011 CapitalNovember 30, 2010Event: Yesterday (29 Nov), the Federal Tariff Service (FST) announced that it has approved tariff growth for residential customers of 5% from 1 Jan 2011 and 9.5% from 1 Apr 2011. Nothing has been reported regarding the approval of tariffs for industrial customers or transportation services. Action: We view the news as neutral for Gazprom. Rationale: Tariff growth of 15% during 2011-2013 was agreed to by the government in the past and yesterday's announcement is consistent with the original plan. While nothing was mentioned about industrial tariff growth, we expect it to be 15% in 2011, in line with the government's longer-term plan. While we do not believe netback parity is achievable anytime soon under our $80/bbl long-term oil price forecast, we still expect significant growth in domestic gas tariffs to approximately $107/mcm by 2013. In our view, domestic business is set to become the most significant earnings growth driver for Gazprom against the backdrop of weaker demand in Europe, and it is encouraging that the government's commitment to higher residential gas tariffs remains intact. Ildar DavletshinRussia to Invest $300 Billion in Energy Efficiency CleanTechies at CleanTechiesMon Nov 29, 2010 11:27am EST by Edouard StengerSome interesting news recently went unnoticed. Last month, Russia unveiled a massive energy efficiency plan, as the country wastes as much energy as the French economy consumes.Soviet-era buildings and factories completely lack energy efficiency as they were built as cheaply as possible to answer the demands of the government at that time.But this might soon change. The Moscow Times recently noted that:"Promoting energy efficiency is one of the priorities of Medvedev's modernization program and includes a goal to cut the amount of energy spent per unit of economic output by 40 percent by 2020.The country is estimated to use 2.5 times more energy to produce a given amount of goods and services than the world average."To solve this, Dmitry Medvedev's government will invest no less than $300 billion in order to cut the amount of energy spent per unit of economic output by 40 percent by 2020.The recent heat waves and related events as well as the prices of energy have pushed the local government to start acting on climate change.It is estimated that the efforts will enable the population and companies to save an estimated $35 billion on energy per year.Russia is the world's first natural gas producer and has ample reserves. Local selling prices are fixed by the State and this drastically slows energy efficiency efforts and behavioral changes.Additionally, 13 millions smart meters will be installed over the next ten yearsBeyond energy efficiency, Russia is also working on implementing renewable energy sources such as solar, wind and hydro power.Recycling is also gaining some interest as RBTH notes:"Russia's Natural Resources and Environment Ministry also drafted a bill in August to promote recycling. The legislation would require factories to recycle the material they currently throw away.Pulp and paper factories could easily sell much of their waste to biofuel plants, resulting in economic gains for them as well as reduced waste."Will the country join the cleantech arms race? Only time will tell.Photo by Andrew Kuznetsov/flickr/Creative CommonsReprinted with permission from CleantechiesRussia's Norilsk Nickel to Sell Stillwater Stake's Norilsk Nickel to sell stake in Montana precious metals miner StillwaterBy MATTHEW BROWN Associated PressBILLINGS, Mont. November 29, 2010 (AP) A Russian mining giant announced Monday that it was selling its majority ownership stake in two Montana precious metals mines, but the mine operator said the move would not derail its major expansion plans.MMC Norilsk Nickel said it was selling its 51 percent stake in the Stillwater Mining Company to focus on its "core operations" in the global mining and metals industry."The sales of our holdings in Stillwater Mining Company represent an important milestone in the fulfillment of our strategic objectives," said Vladimir Strzhalkovsky, Norilsk Nickel's general director.Norilsk has long been described by Stillwater executives as a relatively hands-off owner. Directors of the Russian company said in April they were open to potential buyers for the two Montana mines — the only domestic source of platinum and palladium.The announcement came as precious metals prices continue to recover from their crash two years ago. Platinum is now selling for about $1,640 an ounce — more than double its 2008 low, but well short of the pre-crash peak of $2,250 an ounce.In 2003, Norilsk paid $100 million and 877,000 ounces of palladium for Stillwater — a deal the company said was worth $257 million. At Monday's share price, Norilsk's stake in the company was worth more than $950 million.Stillwater shares fell 96 cents, or about 5 percent, to $19.05 on news of the Norilsk sale.Stillwater spokesman Dan Gagnier said the news about Norilsk will not effect Stillwater's plans to expand those mines and develop another in Ontario, adding that it was "business as usual at Stillwater."The company's two mines in the Beartooth Mountains southwest of Billings produced 529,900 ounces of palladium and platinum last year.In September, Stillwater launched a $118 million bid to gain control of the Canadian precious metals company Marathon PGM Corp. Stillwater plans to develop a $400 million pit mine near Marathon, Ontario over the next three years, tapping into a reserve estimated to hold more than 3 million ounces of palladium and platinum, or about 94 tons.Earlier this month, Stillwater announced plans to spend $68 million on the expansion of its Montana mines, which are near the towns of Nye and McLeod.Copyright 2010?The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.Acron sells potash exploration permit to BHP Billiton CapitalNovember 30, 2010Event: Yesterday (29 Nov), Acron announced that its subsidiary 101109718 Saskatchewan Ltd. had sold its potash exploration permit, KP 373, to BHP Billiton Canada, which is part of the BHP Billiton group. The permit is located in the central part of Saskatchewan and encompasses an area of 83,880 acres. The price paid was not disclosed. The company said that it believes that the sale reflects a strong recovery of the potash industry in general, and that both parties were pleased with the deal. Action: The news is neutral for Acron, in our view. Rationale: This is the second permit the company has sold this year. In October Acron sold another permit, KP 385 (about 88,400 acres), to a Canadian company, Sanya Resources Corporation, for CAD6mn, and we believe that the price paid for KP 373 was close to the price paid for KP 385. In 2008 Acron bought exploration permits for 36 areas with a total area of 2,537,913 acres for CAD61mn. Previously, RBC Daily reported that the company plans to sell some of these permits and spend the proceeds from the sale on the exploration of other areas. After the exploration of these other areas, expected to be completed in 2012, the company might seek a strategic investor for its potash project in Saskatchewan and might also organise an IPO for its Canadian business. Mikhail SafinVTB may buy the Moscow government's stake in Bank of Moscow CapitalNovember 30, 2010Event: Vedomosti reported today (30 Nov), citing an unnamed source, that VTB is planning to buy the Moscow government's stake in Bank of Moscow (46.5%) and that the pricing of the deal will be based on the bank's market price. According to the newspaper, it is not clear yet whether VTB would be increasing its shareholding to a controlling level through the acquisition of (part of) the 17.5% stake in the bank owned by Stolichnaya Strakhovaya Group (controlled by the city government and Bank of Moscow). Bank of Moscow should hold a shareholder meeting on 21 Feb to consider the deal, Vedomosti says; meanwhile, VTB First Deputy Chairman Mikhail Kuzovlev reportedly may join the bank's board as deputy chairman prior to the meeting. Action: Neutral for VTB at this stage, in our view. Rationale: VTB is currently sitting on excess capital, and while we continue to believe that any deal with Bank of Moscow is far from certain, management clearly has been sniffing around. The Bank of Moscow franchise is impressive, especially in its home region, and there are clear franchise value-adding reasons for VTB to consider a deal of this nature. In our view, any deal will be based on price. Armen GasparyanCherkizovo Jan-Sept net profit up 26 pct to $104 mln 30/11/2010MOSCOW, November 30 (RIA Novosti) - Cherkizovo Group, one of Russia's leading meat producers, posted a 26 percent year-on-year increase in its January-September US GAAP net profit to $104.4 million, Cherkizovo said on Tuesday.Cherkizovo's revenues in the first nine months of 2010 grew 20 percent to $877.7 million year-on-year, the company said.The company's EBITDA in January-September grew 21 percent to $159.5 million, while gross profit increased by 16 percent to $235.9 million."However, our results were affected by the tighter pricing environment in the poultry and pork divisions, particularly towards the end of the third quarter, and we expect pricing trends to remain challenging throughout the fourth quarter of 2010 and rolling over into the first quarter of 2011," said? Cherkizovo Group Chief Executive Officer Sergei Mikhailov.Evraz planning building service and distribution network in Russia CapitalNovember 30, 2010Event: Vedomosti reported yesterday (29 Nov) that Evraz has filed an application with the Federal Antimonopoly Service to acquire Inprom, one of the largest Russian metal traders. Inprom has 27 major service and distribution centers across key regions. Inprom also owns logistics terminals in western (Belgorod) and southern (Taganrog) Russia. Inprom's net debt currently amounts to RUB5.5bn ($175mn). Inprom defaulted on its bond issue at the end of 2009, after facing severe long steel demand softening on the domestic market last year. Action: The news is positive for Evraz, in our view. Rationale: The potential acquisition of Inprom may improve Evraz's access to the customer base in the regions with the highest activity in the construction sector, including southern Russia. Evraz has already faced visible competition from long steel producers from Turkey, Belarus and Ukraine this year. The acquisition of a large metal trader may also help Evraz to increase the share of higher-value-added steel products in its sales mix. Metal traders in Russia usually demonstrate quite thin EBITDA margins of 3-5%. We would not expect the acquisition of Inprom to have a major impact on Evraz's financials in the short term. However, the deal looks strategically reasonable on a medium-term horizon. Evraz recently refinanced its debt burden, which exceeds $7bn, and does not have significant debt repayments in 2011-2012. Taking into account Inprom's poor financial condition, we expect the equity part of the deal to be relatively small. Boris KrasnojenovFor the Record November 2010Yandex, Russia’s most popular search engine, is planning a ?1 billion ($1.56 billion) initial public offering in London in the first half of 2011, the Mail on Sunday reported. (Bloomberg) Norilsk Nickel, the largest holder in U.S. metals producer Stillwater Mining, said Monday that it plans to sell 37 million shares in the company and may withdraw its interest entirely to focus on “core” operations. (Bloomberg)Strabag, central Europe’s biggest construction company, said Monday that third-quarter net income fell to 119.7 million euros from 126.2 million euros a year earlier. (Bloomberg)The Central Bank has sold about $5 billion this month managing the ruble’s exchange rate, First Deputy Chairman Alexei Ulyukayev said, RIA-Novosti reported Monday, adding that net capital outflow may be closer to $20 billion this year than the official forecast of $22 billion. (Bloomberg)The Moscow city government cut borrowing planned for the end of this year and the start of 2011 by 116 billion rubles ($3.7 billion), Interfax reported on Monday, citing Mayor Sergei Sobyanin. (Bloomberg)Activity in the Oil and Gas sector (including regulatory)Russia Raises December Oil Export Duty After Urals Prices Rose Stephen BiermanNov. 30 (Bloomberg) -- Russia will raise its duty by 4.5 percent on standard crude exports and by 9.3 percent on oil from a privileged group of fields tomorrow after Urals prices climbed. The standard tax will rise to $303.80 a metric ton ($41.45 a barrel) from $290.60 a ton in November, according to an order signed by Prime Minister Vladimir Putin published today in state newspaper, Rossiyskaya Gazeta. The discounted rate on fields supplying the East Siberia-Pacific Ocean pipeline will rise to $108 a ton from $98.80 a ton. Russia sets the duty based on the average Urals price from the 15th day of one month to the 14th day of the next. Urals, Russia’s benchmark export blend, averaged $82.89 a barrel in the period, Alexander Sakovich, an adviser at the Finance Ministry, said on Nov. 15. The export tax on light oil products will be increased to $217 a ton from $208.10. The duty on heavy products will rise to $116.90 from $112.10. To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@. To contact the editor responsible for this story: Will Kennedy at wkennedy3@. Last Updated: November 30, 2010 02:21 ESTRussian Black Sea Oil Exports May Fall on New Capacity to Asia Stephen BiermanNov. 29 (Bloomberg) -- Russian crude oil export volumes through the Black Sea are likely to decline in the next five years as OAO Transneft adds pipelines, according to TNK-BP. The East Siberian Pacific Ocean, ESPO, link to the Asia/Pacific, will draw a larger portion of Russia’s crude exports eastwards, said Jonathan Kollek, TNK-BP’s vice president for sales, trading and logistics. “The Black Sea, in my opinion, lost its attractiveness in comparison to other destinations” as it’s less profitable than the Druzhba pipe to Europe and links to Baltic ports, Kollek told reporters today in Moscow. “It is the inferior one.” Transneft, the state pipeline operator, may have as many as 113 million tons of spare capacity in its system after it completes construction of ESPO and the Baltic Pipeline System-2, BTS-2, by 2015, TNK-BP estimates. The quality of crude being transported west is also likely to decline as the eastern route takes better quality crude, Kollek said. “The issue of crude quality is not limited to the east,” Kollek said, since the ESPO blend should improve in quality of API and sulfur content next year. Urals export blend quality to the west will be depressed as volumes that had improved the blend go east instead and OAO Tatneft’s Taneco Refinery project has yet to refine high sulfur crudes, he said. To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@. To contact the editor responsible for this story: Will Kennedy at wkennedy3@. Last Updated: November 29, 2010 10:00 ESTUPDATE 1-LUKOIL Q3 net profit up 37 pct, beats forecast IST* Q3 net income $2.8 billion, vs Reuters poll $2.1 billion* Revenues $26.5 billion, vs Reuters poll $25.3 billion* Bottom line helped by higher oil prices, one-off(Adds detail)MOSCOW, Nov 30 (Reuters) - LUKOIL (LKOH.MM: Quote, Profile, Research), Russia's No.2 oil producer, beat forecasts with a 37 percent rise in third-quarter net income to $2.8 billion due to higher oil prices and a one-off gain.LUKOIL, which published its GAAP financial results on Tuesday, posted a 21 percent rise in revenue to $26.5 billion, compared with the $25.3 billion forecast in a Reuters poll. [ID:nLDE6AS1W8]Earnings before interest, taxation, depreciation and amortisation (EBITDA) rose 23 percent to $4.55 billion.The company attributed its strong results to higher oil prices, which increased by a third year-on-year to $77 per barrel in the third quarter, and to a $438 million one-off gain "from a successful completion of the legal dispute regarding one of our joint ventures in Kazakhstan."At the same time, our results were affected by increased extraction taxes and export tariff rates, appreciation of the Russian rouble and increase in operating and transportation expenses," the company said. (Writing by Jessica Bachman; Editing by Dan Lalor) Lukoil Third-Quarter Profit Rises 37%, Beats Analyst Estimates Stephen BiermanNov. 30 (Bloomberg) -- OAO Lukoil, Russia’s second-largest oil producer, said profit climbed 37 percent in the third quarter, more than analysts estimated, after crude prices rose. Net income rose to $2.82 billion from $2.06 billion a year earlier, the Moscow-based company said today in a statement. That beat a $2.24 billion average estimate of nine analysts surveyed by Bloomberg News. Sales rose 21 percent to $26.5 billion. State-controlled OAO Rosneft, Russia’s largest oil producer, more than doubled profit in the three months to Sept. 30 after production volumes with tax discounts increased and crude prices rose. Prices for Urals, Russia’s benchmark export blend, rose 11 percent to average $75.64 a barrel in the quarter, according to data compiled by Bloomberg. TNK-BP, Russia’s third-largest oil producer, said net income rose 25 percent in the period. Lukoil is in the initial stages of production from the Korchagin deposit in the Caspian Sea, which the company said may gain exemptions from Russia’s oil export duty as early as December. Houston-based ConocoPhillips is selling its 20 percent share in Lukoil to repay debt and buy back its own shares. To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@. To contact the editor responsible for this story: Will Kennedy at wkennedy3@. Last Updated: November 30, 2010 02:21 ESTLUKoil boosts nine month net profit 29% to $6.82 bln, above forecast 30/11/2010Russia's largest private oil company, LUKoil, increased US GAAP net profit in the first nine months of this year by 29% year-on-year to $6.82 billion, the company said on Tuesday.Revenue in the same period grew 34.3% compared with the same period in 2009 to $76.272 billion, the company said.The results were higher than analysts' forecast of a $6.057 billion net profit on average and revenue of $75.277 billion.MOSCOW, November 30 (RIA Novosti)Sakhalin-1 Budget Approved November 2010The Exxon Mobil-led Sakhalin-1 oil and natural-gas project received approval for an addition to this year’s budget, the Energy Ministry said Monday.The venture, in which Rosneft and ONGC Videsh own 20 percent stakes and Japan’s Sakhalin Oil & Gas Development holds 30 percent, uses the budget as a basis for tax exemptions.Exxon sought to boost the project’s expenditure to $3.5 billion this year while the regulator had only approved a $1 billion plan, RIA-Novosti reported in August. (Bloomberg)Rosneft may report lower profits by end 2011 by Sayan Guha on Tuesday, 30 November 2010 06:28 | Published in Oil & Gasn line with analyst’s expectation, Rosneft may report lower profits for Q3, 2011. The tax exemptions for the Vankor oil and gas fields may end by then, affecting the bottom line.?“Rosneft’s net will come back to earth. They will probably still be more profitable than peers in the upstream because of lower costs”, said Alexei Kokin, an analyst at Uralsib, on Friday.According to calculations made by Bloomberg, the output from Vankor, Russia’s largest oil and gas field to be discovered and brought in to production in the last 25 years, will reach 25 million tons – the upper ceiling for tax exemptions. A spokesman from the company confirmed the forecasts, although he refused to be identified.Prime Minister Vladimir Putin has already confirmed last month that the export duty discounts will end by April end, 2011.Rosneft's board of directors approves construction plans for two refineries in Russia CapitalNovember 30, 2010Event: Yesterday (29 Nov) Rosneft announced that its board of directors has reviewed preliminary results for 2010 and, among other points that were on the agenda, approved plans to build two refineries. One refinery is planned to be built in Grozny, Chechnya, with annual throughput capacity of up to 1mnt, while construction of the second refinery is planned in the Far East near Nakhodka, with annual capacity of 10mnt, in partnership with Chinese company CNPC. Action: We think the news is neutral for Rosneft. Rationale: The Russian downstream sector has historically enjoyed an artificial tax subsidy in the form of a lower export duty on products vs crude, which led to over-refining. There are more signs that the government is close to at least reducing this subsidy, which should significantly decrease the profitability of downstream operations. In our view, making investment commitments in this environment, without a clear understanding of the future tax regime, may be premature and more driven by the political agenda of the Russian government than the commercial interests of the company. We are sure, however, that the company's expertise and efficiency would allow it to build both refineries on reasonable terms, while the potential involvement of Chinese CNPC in the Far Eastern refinery could minimize cash outflows for Rosneft. Ildar DavletshinDeal snapshot: RUSSIAN TATNEFT TAKES FULL CONTROL OF TATEX on: Mon, 29 Nov 2010 11:01:19 ESTNov 29, 2010 (MANAVIGATOR via COMTEX) -- Russian oil and gas company Tatneft (MCX:TATN) said it had acquired the remaining 50% of Tatex, which has licenses for oil fields in Tatarstan, and thus gained full control of the oil producer. Country: , Russia Sector: Petroleum/Natural Gas/Coal Target: Tatex Buyer: Tatneft OJSC Vendor: Texneft Inc Type: Corporate acquisition Status: Closed Comments on this story may be sent to info@TNK-BP to Trade Oil From Geneva November 2010BloombergTNK-BP, the Russian oil venture owned by BP and a group of billionaires, said Monday that it planned to open a trading unit in Geneva in the third quarter of next year as it expands outside the country.The addition of the trading division in Switzerland will support TNK-BP’s international growth, said Graham Sharp, a vice president at the Moscow-based company.TNK-BP’s billionaire shareholder and interim chief executive officer, Mikhail Fridman, aims to build foreign operations so at least half of the company’s output comes from outside Russia. The company agreed last month to buy BP stakes in some Vietnam and Venezuela projects for $1.8 billion and is looking at a potential bid for BP assets in Algeria.The Geneva division may handle 2 million barrels a day of crude and oil products in three to four years, with about half of that from TNK-BP’s production, said Sharp, who will head the trading unit. It will take over TNK-BP’s trading operations, which now amount to about 1.2 million barrels a day, he said.TNK-BP, owned 50-50 by BP and Russian investors, produces about 1.9 million barrels of oil equivalent a day and accounts for about a quarter of BP’s output and a fifth of reserves.Geneva estimates that the city handles a third of global petroleum trading and 75 percent of Russian oil exports. Litasco Group, owned by LUKoil, Russia’s second-largest oil producer, and Gunvor Group, a closely held energy trader co-founded by Russian businessman Gennady Timchenko, have offices in the city. Switzerland has attracted oil and commodity trading companies with tax breaks.Fridman said in an interview in September that TNK-BP should “expand broadly in the world.” The push will be supported by the Russian government, Stan Polovets, chief executive officer of the billionaire partners’ holding company AAR, said in October.Profit From the Russian Gas Crisis No One’s Covering: Kent Moors November 29, 2010Greetings from Mother Russia, where some unusually warm temperatures have given way to a frigid spell. Not unusual this time of year, but the weather outside seems to be just beginning to offset the rising temperatures within.There is a disagreement brewing inside the Russian establishment. And playing its results will make investors some good money back in the States.I am in Moscow to address an annual ministerial planning conference. My appearances at these meetings have taken place since 2004. The occasion always marks one of my several trips each year back to Russia. The sessions allow me to renew old acquaintances, visit places I used to frequent when I was living here, and they provide an opportunity to investigate the latest developments in what remains one of the most interesting places on Earth.My presentation comes tomorrow (November 30th). Its scheduling will also allow me to travel out to western Siberia (a delightful place to be in December!), and I will bring you there for the next Oil & Energy Investor installment coming Friday (December 3rd).You see, there are significant developments coming from the best Russian oil majors few people in the West ever consider. I will be out there to talk to company folks and review some field data. If my suspicions are correct, something is about to hit that will be of great interest to individual investors.But first things first…The Future Price of OilMy address to the planning sessions in Moscow considers what the pricing market for crude oil will look like as we move into a supply-constricted global market.What happens when pricing in the oil market begins to reflect a concern over whether there is sufficient supply to meet rising demand?Russia is all about producing and exporting oil and natural gas. The country’s central budget depends upon the largesse gained from tax receipts on both, while the exporting of hydrocarbons to places like Western Europe and, more recently, Asia comprises a rising component of Russian foreign policy.And that is where the disagreement has settled in during these meetings. The essential issue is whether the largest natural gas company on the face of the Earth will revise how it sets up export contracts to Europe.There are two overriding considerations here. The first concerns the tax proceeds to Moscow.The second points toward an improving opportunity for investors to make some money off of the changing situation.Gazprom (OGZPY.PK) is the world’s largest natural gas provider, Russia’s largest company, and the largest source of export tax proceeds to the government. It has monopolistic control over export pipelines, owns more of the world’s known conventional natural gas resources than any other company, and provides the bulk of extractions inside Russia.Should be a readymade revenue machine.And it has been, at least until recently. The European Union (EU) certainly has had concerns for some time over Gazprom being its primary source for imported gas.That concern has been heightened by an ongoing two-year-old gas crisis between Russia and Ukraine, leading to cuts in Russian exports to Europe. Most of that gas crosses Ukraine on its way west, and when the disagreement hit, either Ukraine or Russia stopped the flow (depending on which side you talk to). Russia is now busy pushing two pipeline projects to circumvent Ukraine.But the EU remains concerned about relying too much on one source for gas, regardless of how it gets to Europe.Two new departures have emerged. One, the EU has begun a separate pipeline project (the Nabucco Pipeline) to source gas from central Asia and Iraq, bypassing Russia. That project still has insufficient commitments of volume, and its 2014 introduction is considered unlikely because of that.It is the second development, however, that is already a game changer. It is also the 800-pound gorilla (or Russian brown bear) in the room that nobody wants to discuss (at least not in public) during the current sessions. On the other hand, it makes for some interesting sidebar conversations.The rapid import of liquefied natural gas (LNG) into Western Europe is changing the face of negotiations with Gazprom and putting both the company and government revenues in jeopardy.Usually, natural gas exports are dependent upon where pipelines go. However, LNG cools the gas to a liquid, allowing it to move by tanker – anywhere. This is already the most important development in global energy trade in decades. Major producers, such as Qatar, are moving all of their production from conventional pipelines to LNG.And Europe is benefiting with rapidly increasing LNG imports from North Africa and the Persian Gulf. The new Rotterdam Gate LNG terminal, one of the largest in the world, is open. Several on the Spanish and Italian coasts are already in operation, three are open in the UK, and another is almost completed on the Polish Baltic.All of these are fundamentally changing the gas market in Europe, lowering import costs, but straining Gazprom’s strategy. The Russian exporter insists on signing only long-term contracts for its piped gas that contain “take or pay” provisions. That means a customer must take a minimum amount of a contracted volume (usually 70%) or pay for it anyway.When Gazprom was the only game in town, Europe had no choice. With the rapid introduction of LNG, however, things have changed. Already, the LNG coming into Rotterdam has begun to set up a real local spot market (where deliveries take place within 72 hours instead of requiring long-term commitments).And that spot market price is now about $20 per 1,000 cubic meters (the standard contract volume in most of the world other than North America – where we use 1,000 cubic feet) below the price of Gazprom’s conventionally delivered gas.Gazprom has been quietly scurrying to re-negotiate contracts, but Europe has a new bargaining chip, and it is changing the dynamics of Russian export potential. The EU will still need to import Russian gas, even with the rising LNG imports, because demand remains higher than current LNG receiving terminal capability. But the terms will be changing.There will be a further expansion of European LNG import capacity. And here is where the opportunity comes in for investors.Go Long US and Canadian Shale Gas ProducersI have already discussed the likelihood that the accelerating production volume in US shale gas will end up allowing the export of LNG, especially from the Cove Point, Maryland, terminal (the largest LNG facility on the East Coast), and especially to Europe (see “A Solution for North America’s Natural Gas Surplus” from November 2nd).Given the virtual certainty the shale gas (and, to a lesser extent, unconventional production from coal bed methane) will result in a continuing surplus on the American market, an LNG outlet to Europe and elsewhere allows for increasing production profits on one side of the Atlantic from LNG sales on the other.This is going to allow investors to “play” the rising differential between LNG and piped gas in the European market by investing in US and Canadian shale gas producers. (Here are several ideas from a recent Oil & Energy Investor.)Meanwhile, back in Moscow, the Gazprom export strategy is coming under fire, resulting in divisions among policy makers creating quite a bit of heat beyond the public eye. It is apparent from who is not at this annual meeting. Despite being the major exporter of energy and provider of revenue to the government, Gazprom is not even here.All of this is introducing a new mix in Russian production and a mad dash to develop pipelines to Asia, offsetting the rising uncertainty in future European sales.Unlike Gazprom and Europe, the Asian opportunity is a major topic of discussion at the meetings in Moscow. How likely this is, however, is another matter, as are the returns to the government. This will center on whether companies other than Gazprom can pull off a significant switch in Russian production priorities.And that is why I need to go out to Siberia and talk to some folks. More on that Friday…Dr. Moors has appeared over 1,400 times as a featured television and radio commentator in North America, Europe and Russia, including ABC, BBC, Bloomberg TV, CBS, CNN, NBC, Russian RTV and regularly on Fox Business Network.A professor in the Graduate Center for Social and Public Policy at Duquesne University, where he also directs the Energy Policy Research Group, Moors has developed international educational programs and he runs training sessions for multiple U.S. government agencies. And until recent revisions in U.S. policy, Dr. Moors was slated to be the deputy director of the Iraq Reconstruction Management Office (IRMO) in Baghdad.Please visit him at GazpromUPDATE 1-Gazprom in talks over Qatar gas move – Medvedev IST(Adds background)DOHA, Nov 30 (Reuters) - Russian gas export monopoly Gazprom (GAZP.MM: Quote, Profile, Research) is in talks about expanding in Russia and into rival gas exporter Qatar, deputy chief executive of Gazprom, Alexander Medvedev, said on Tuesday."We are discussing opportunities in Russia and in Qatar," Medvedev told reporters on the sidelines of a gas conference in the Qatari capital Doha.Russia, the world's biggest energy producer, has seen its gas sales in key export market Europe fall in the last year, largely because of a surge in liquefied natural gas (LNG) exports from Qatar -- the world's largest LNG exporter.The emir of Qatar met Russian Prime Minister Vladimir Putin at the start of November to discuss joint gas production projects. [ID:nLDE6A123J]Qatar is home to the headquarters of the Gas Exporting Countries Forum (GECF), which has so far failed to co-ordinate production to support prices as the Organisation of Petroleum Exporting Countries (OPEC) influences oil markets.(Reporting by Amena Bakr and Regan Doherty, writing by Daniel Fineren) Gazprom in discussion with Shell over Sakhalin assets swap 29/11/2010Gazprom and Royal Dutch Shell are preparing a joint memorandum on their participation in each others' assets, including Shell's share of oil and gas deposits off Russia's Pacific island of Sakhalin, Gazprom's Deputy Chairman Alexander Medvedev said on Monday."We are preparing a memorandum, under which Shell and Gazprom will determine cooperation on a wide range of issues not only in Russia, but also abroad. Our principle remains unchanged. We are happy to invite foreign partners to develop our fields if, in exchange, we get access to our partners' high-profile projects abroad," he said."We know that Shell possesses good assets, which could interest us. If we find an acceptable decision for both parties, such cooperation could be expanded and include cooperation in Sakhalin," Medvedev told Russia Today international news TV channel.MOSCOW, November 29 (RIA Novosti)Gazprom, Naftogaz, RosUkrEnergo come to terms , 30.11.2010, Moscow 10:44:54.Gazprom, Naftogaz of Ukraine and RosUkrEnergo have signed a set of documents to resolve all gas issues dating back to 2008-2009, the Russian gas giant's press office said yesterday evening. Among other things, the agreements stipulate for the repayment of RosUkrEnergo's debt of $810m to Gazprom.??????Naftogaz, in turn, will return 12.1bn cubic meters of gas to RosUkrEnergo under the Stockholm Arbitration Tribunal's ruling. Likewise, RosUkrEnergo will repay $1.7bn to Naftogaz. ??????Notably, the agreements reached help Ukraine maintain its gas balance and do without extra borrowings in the 2010-2011 heating season. Ukrainian Naftogaz to Restore Gas to RosUkrEnergo (Update1) Daryna KrasnolutskaNov. 29 (Bloomberg) -- Ukraine’s state-run energy company NAK Naftogaz Ukrainy agreed to return 12.1 billion cubic meters of natural gas to trader RosUkrEnergo AG following a Stockholm Arbitration Court ruling. RosUkrEnergo will repay a $1.7 billion debt to Naftogaz and its $810 million debt to Russian gas monopoly OAO Gazprom, according to a joint statement e-mailed by the three companies. Today’s agreement resolves any disputes over gas supplies in 2008 and 2009, according to the statement. The government of former Prime Minister Yulia Tymoshenko signed an accord with Russia in January 2009 that eliminated RosUkrEnergo from the market. Tymoshenko said at the time that Ukraine bought gas that RosUkrEnergo, half-owned by Gazprom, had kept in Ukrainian storage, repaying the trader’s debt to Gazprom. RosUkrEnergo claimed Tymoshenko had effectively confiscated the fuel and appealed to the Stockholm Arbitration Tribunal. The tribunal ruled on June 8 that Ukraine’s Naftogaz should restore 12.1 billion cubic meters of gas, including penalties, to RosUkrEnergo by Sept. 1. Tymoshenko rejects the claim. RosUkrEnergo, which emerged as a sole gas importer to Ukraine in 2006 after a fuel price dispute between Ukraine and Russia, is also owned by Ukrainian businessmen Dmitry Firtash. To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@ To contact the editor responsible for this story: Willy Morris at wmorris@ Last Updated: November 29, 2010 13:13 ESTAlexey Miller and Antero Jannes discuss promising areas for Finnish gas market development Gazprom headquarters hosted today a?working meeting between Alexey Miller, Chairman of?the Company's Management Committee and Antero Jannes, CEO of?Gasum.Meeting participants discussed the status of?hydrocarbons supply to?Finland and considered the promising areas for the Finnish gas market development, including natural gas vehicles.In the course of?negotiations, it?was mentioned that for over 15?years Gazprom had not only been exporting gas to?Finland in?an?uninterrupted manner but also making a?valuable contribution to?the nation's gas industry advancement.Gazprom publishes its first Sustainability Report published its first HYPERLINK "" \t "_blank" Sustainability Report (PDF, 6 MB).The Report unveils correlation of?various aspects of?the Company's production and environmental activities as?well as?social responsibility in?the sustainable development context.The Report cites viewpoints by?key stakeholders on?Gazprom's activities. Among the key stakeholders are Sergey Shmatko, Energy Minister of?the Russian Federation, Guenther Oettinger, European Commissioner for Energy as?well as?leaders of?Russian regions, heads of?research and public organizations.In his message to?the Report readers Alexey Miller, Chairman of?the Gazprom Management Committee says:“The long-lasting history of?Gazprom shows that the strategy pursued by?the Company is?in?line with the sustainable development model which has recently gained wide public recognition. We?believe that the primary challenge in?achieving sustainability is?balanced and efficient use of?production resources to?the benefit of?the present and future generations. The sustainable development benchmarks help us?build the Company's business in?the context of?the global efforts aimed at?addressing such critical international problems as?energy efficiency, emissions reduction and social progress acceleration.Having operations in?over 80?constituents of?the Russian Federation, we?endeavor to?ensure that the sustainable development of?our business contributes to?socioeconomic progress, a?better environmental situation and greater prosperity of?people in?Russia's regions. The large-scale social programs implemented by?the Company are not an?abstract 'social burden' but indispensable investments in?social stability which is?a?prerequisite for long-term business development.”Moody's changes outlook on E+ BFSR of Gazprombank to positive from stable 'sNovember 29, 2010Moody's Investors Service has today changed to positive from stable the outlook on the E+ bank financial strength rating (BFSR) of Gazprombank, and raised its Baseline Credit Assessment (BCA) to B1 from B2. Long-term local and foreign currency debt and deposit ratings of Baa3 were affirmed with a stable outlook, and short-term foreign currency bank deposit rating of Prime-3 was also affirmed. Concurrently, Moody's Interfax Rating Agency (which is majority owned by Moody's) has affirmed Gazprombank's long-term National Scale Rating (NSR) of Aaa.ru. The NSR carries no specific outlook. RATINGS RATIONALE Moody's said that change of outlook to positive reflects the improved capital position of Gazprombank which restored its Tier 1 and Total capital ratios to 9.6% and 14.8%, respectively, at year-end 2009 (year-end 2008: 7.8% and 9.2%) according to audited IFRS financial statements. In H1 2010, the capital ratios improved further (Tier 1: 10.8%; Total: 16.6%) thanks to strong recurring income as well as reversal of former accounting losses on derivatives transactions incurred in 2008. The change of outlook and the upward adjustment of the BCA to B1 also take into account significant improvements in Gazprombank's standalone risk profile as a result of decreased appetite for market risks whereby derivatives transactions are significantly restricted, as well as the stricter limits of speculative operations on securities markets -- although Moody's cautions that the track record of operating under the lowered market risk appetite is still limited. Furthermore, the bank's funding profile has improved significantly following substitution of substantial Central Bank of Russia (CBR) funding with customer deposits. Moody's also observes that Gazprombank's asset quality remained better-than-average for the banking system, with NPLs accounting for only 3.3% of the total loan portfolio at end-H1 2010 -- much better than system average -- thanks to (i) lower involvement in lending to higher-risk segments (e.g. construction and real estate), (ii) the dominance of large corporates in the corporate loan book and (iii) the significant presence of employees of corporate customers in the retail portfolio. According to Moody's, in order for the positive outlook to translate into upgrade of the bank's BFSR, Gazprombank's total capitalisation and quality of capital should improve on a consistent basis, as a result of: (i) continuing strong income generation and (ii) improvement in asset quality as reflected in decrease in provisions. The positive outlook also incorporates Moody's expectations of an improved track record of capital management and the bank's ability to maintain adequate capital positions against unexpected losses from credit and market risks. Sustainability of reduced market risk appetite -- with no significant rise in credit risks and evidence of improvement in asset quality -- is also likely to lead to an upgrade of Gazprombank's BFSR to the D- level. Concurrently, Moody's has also reconsidered support positions from Gazprombank's parent, state-controlled energy conglomerate Gazprom, to "moderate" from "very high". Such considerations reflect Moody's view that Gazprom's ability to provide ongoing Tier 1 equity is reduced as it needs resources to develop its primary investment projects. Although shareholders provided RUB40 billion (US$1.3 billion) of Tier 2 equity during Q4 2008-2009, the Tier 1 equity requirement was covered only via internal capital generation, and support from Gazprom was not correspondent to the needs of Gazprombank whereby, during this perod, the state had to step in as a first layer of support. At the same time, Gazprombank is the main settlement centre of Gazprom group (servicing over 90% of all group cash flows) and the holder of salary accounts of Gazprom group employees (with branch networks in the locations where Gazprom's operations are present). Therefore, Moody's observes potential for extraordinary support (if state support is absent) remains, as was reflected in the Tier 2 capital contribution and over 50% increase in balances to the bank compared to pre-crisis levels. Moody's notes that the outlook on Gazprombank's long-term ratings is stable because positive pressure on the bank's BFSR will not be sufficient to drive the long-term rating upwards. The previous rating action on Gazprombank was on 21 September 2009, when Moody's downgraded the following ratings: bank financial strength rating (BFSR) to E+ from D-, long-term foreign and local currency deposit and debt ratings to Baa3 from Baa2, as well as the short-term foreign currency bank deposit rating to Prime-3 from Prime-2. The principal methodologies used in rating Gazprombank are "Bank Financial Strength Ratings: Global Methodology", published February 2007, and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", published March 2007. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website. Headquartered in Moscow, Russian Federation, Gazprombank -- the country's third-largest bank -- reported total assets of US$56.0 billion, equity of US$7.3 billion and profit of US$1.1 billion under (unaudited) IFRS at end-H1 2010. The parent, Gazprom, is a monopoly in the natural resources sector, controlled by the government of Russia. Gazprombank is the main settlement vehicle within Gazprom Group, and handles over 90% of the group's settlements. In addition, the bank actively participates in Gazprom's investment projects, and a large share of its deposits (ca. 20% at end-H1 2010) is related to the group. Gazprombank is an important payroll agent for the group, and its branch network is in suitable locations in order to best conduct these operations. ................
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