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Basic Political Developments
• Merkel-Medvedev talks to focus on investment, Opel - Medvedev, Merkel to focus on investment projects; Magna-Sberbank bid for Opel to figure in talks; Will look for Russian investors for German firms
• Medvedev, Merkel to focus on energy, investment at Sochi talks - Energy cooperation and investment projects are set to dominate talks between Russian President Dmitry Medvedev and German Chancellor Angela Merkel in south Russia's Sochi on Friday.
• Sistema could take stake in Infineon –report: Russian services conglomerate Sistema could take an equity stake in German chipmaker Infineon as part of an alliance between the two firms, several sources told Russia's Kommersant daily on Friday.
• Merkel to Press Human Rights Concerns With Russia
• Germany, Russia and a troubled human rights record - Chancellor Angela Merkel is due in Russia on Friday for talks with President Dmitry Medvedev. This meeting, like the last, comes just days after the murder of a human rights activist in the troubled republic of Chechnya.
• Magna Edges Closer to Opel Deal - GM confirmed Thursday it received a revised offer from the Magna group for a majority stake in its Opel and Vauxhall brands and said it will review the proposal over the next few days.
• Magna, Sberbank Finalize Opel Bid - Magna and Sberbank revised draft agreements on purchasing control of Opel from General Motors on Thursday, clarifying outstanding issues with the U.S. automaker and taking the process one step closer to a final agreement.
• On August 18, 2009, Dmitry Medvedev will meet with Israeli Prime Minister Shimon Perez.
• Peres in Working-State Visit to Russia Next Week - President Shimon Peres is scheduled to travel to Russia on Tuesday morning for a day that combines aspects of a state visit and a working visit
• Relationship between Russian intelligence and Hezbollah has long history, may be used against Israel
• Afghanistan: Us-Russian Transit Agreement Takes Off In September
• Kyrgyzstan: Russian Base Is In Response To Afghan Threat, Says Military Attache
• Detected Russian submarines 'failed' their military mission, report says - "If the United States and Canada really detected the foreign submarines, that means they unmasked them. This represents the failure of their military mission," Russia's Interfax news agency quoted a source close to the matter as saying.
• Russian Nuclear Submarines Approach Canada - The submarines are staying in international waters and do not violate any agreements, RBC news agency said.
• Iceland Didn’t Reject Loan - Iceland didn’t reject a 4 billion euro ($5.7 billion) loan from Russia after the island’s biggest banks collapsed last October, former finance minister Arni Mathiesen said in an interview published Thursday.
• No MiG-35 fighters for India before 2011 - Production of MiG-35 multirole fighters offered for sale to India cannot start before 2013 or 2014, a Russian aircraft maker has said.
• Russia aims to start making MiG-35 fighters for India in 2013 - "We have begun testing the MiG-35 fighter for the Indian tender," said Alexander Karezin, general director of the Sokol company based in Nizhny Novgorod.
• New OSCE Minsk Group co-chairs to trip to region - French co-chair Bernard Fassier will visit the region in early September. Several weeks later, he will visit again together with the newly-appointed two other co-chairs from Russia and U.S.
Yuschenko Considers Medvedev’s Criticism Of Ukraine’s Arms Deliveries To Georgia Baseless - Yuschenko considers Russian President Dmitry Medvedev’s criticism of Ukraine ’s arms deliveries to Georgia to be baseless. This is stated in President Viktor Yuschenko’s letter to his Russian counterpart.
• Lithuania and Russia Resolve Trade Feud - Russian and Lithuanian customs officials have come to an agreement on a dispute over vehicle inspections, both sides said Thursday — after Russia’s agricultural watchdog banned imports of dairy products from four Lithuanian producers.
• Biggest Lithuanian carriers are on the black list by Russia
• Truck lines on Latvia-Russia border continue to grow longer - Although an agreement was reached at a meeting of Lithuanian and Russian Customs Services' in Moscow on Thursday to try to solve the problem of the long truck lines at the Latvian-Russian border that has been forming for over a week now, last night the truck lines on the border grew even longer.
• Finnish Ship Operator ‘Very Worried’ About Crew of Arctic Sea - The Finnish company that operates the Arctic Sea, the Maltese-flagged freighter that disappeared in the Atlantic Ocean, is “very worried” about the fate of the 15 Russian sailors on board.
• Mystery Deepens Over Missing Cargo Ship - Analysts said the 4,000-ton Arctic Sea might have been hijacked, possibly in connection with a Russian commercial dispute.
• Various theories on missing Russian-manned cargo ship
• Thailand to seek Bout's extradition - Thai prosecutors will appeal against a court decision rejecting a US request to extradite a Russian-born alleged arms dealer detained in the capital Bangkok.
Bout to Stay in Jail as Prosecutors Appeal - Thai prosecutors announced Thursday that they plan to challenge a lower court ruling that rejected a U.S. request to extradite suspected Russian arms dealer Viktor Bout.
• Leaders of security services of Russia and Belorussia visit the main cathedral of Kaliningrad - Federal Security Service (FSB) Director Alexander Bortnikov and the head of Belorussia's KGB (State Security Service) Vadim Zaitsev visited Christ the Savior Cathedral in Kaliningrad.
• Attackers on police post in Russia's Dagestan identified - Police have identified some of the militants who killed 11 people during an attack on a police post and nearby health center in Russia's North Caucasus republic of Dagestan last night
• Three militants destroyed in Dagestan - Police have destroyed three militants in Dagestan’s Derbent region. As ITAR-TASS learnt at the law enforcement bodies of the republic, “a shootout occurred in the federal highway Kavkaz not far from the village of Sabnava overnight to Friday.
• Seven women shot dead in Russian sauna - Seven women were shot dead in a sauna in Dagestan and, in separate attacks, eight policemen and two separatists were also killed in Russia's northern Caucasus region late on Thursday, police and media said on Friday.
• 4 Russian police killed, 9 hurt in Chechen clashes - Overnight from Thursday to Friday, Russian forces launched an operation to flush out two guerrilla fighters, holed up in a deserted house in the village of Kerla-Urt in Chechnya's Groznensky district.
• Baku-Tumen railway stops operating due to explosion threat - The Russian media reports say the Russian security services is conducting mine-sweep at the Rostov-Baku railway. Currently, two trains have stopped in stations near the city of Makhachkala.
• Kadyrov Sues Memorial - Chechen President Ramzan Kadyrov sued Memorial’s chief for 10 million rubles ($314,800) in a Moscow court Thursday for allegations that he was involved in the murder of one of the human rights organization’s activists last month.
• Ingush Police Chief Says 2 Key Cases in Last Stages - Ingushetia’s top police official said Thursday that an investigation into the attempted killing of Ingush President Yunus-Bek Yevkurov and murder of Ingush Supreme Court deputy chief justice Aza Gazgireyeva was in its final stages.
• Putin Lets Kostin Take a Vacation - Prime Minister Vladimir Putin on Thursday gave VTB head Andrei Kostin permission to take a week’s vacation after the banker said he was on track to meet and surpass an order to boost the lender’s loan portfolio by 100 billion rubles ($3.14 billion) in three months.
• Has Surkov Given Away the Game in a Novel? - “Close to Zero” is the tale of a Russian publisher operating in a murky political system featuring paid-off media, corrupt officials, dubious politicians and law enforcement agencies on the take.
• Surkov Writes Novel About Corruption - Vladislav Surkov, the Kremlin’s powerful first deputy chief of staff, has written a novel about corruption among senior officials under a pen name, and excerpts have been published to mixed reviews.
• United Grain to Buy Milk - United Grain may handle government purchases of milk from farmers in order to prop up prices, Agriculture Minister Yelena Skrynnik said Thursday, Kommersant reported.
• Workers Paid in Pelmeny - A tractor plant in Minsk will pay its workers with pelmeny and other food from the factory’s cafeteria instead of cash, Khartia 97 reported Thursday.
• Russian Population To Reduce to 110 Million by 2050 - The Russian population will reduce to 110.1 million people by 2050, Itar-Tass news agency reported with reference to a recent research from Population Reference Bureau. The company published the report Wednesday.
• Russian Military Weakness Could Delay Conflict with Ukraine - By: Pavel Felgenhauer
• A New Georgian War Could Destroy Russia the Way Afghan Conflict Did the USSR, Latynina Warns
• Siberia Needs Roads But Moscow Builds Pipelines - In an article in “Novaya gazeta,” Aleksey Tarasov argues that this sad state of affairs reflects the way Moscow elites “use Siberia as exotic islands, for rest, public relations, and enrichment,” preferring to build pipelines from which they can extract wealth instead of roads that would benefit Siberians.
National Economic Trends
• Dubinin: there is no threat of ruble devaluation if oil trades above $50/bbl
• Producer Prices Fall 8th Month - The price of goods leaving factories and mines declined a record 12.3 percent compared with July 2008 after sliding an annual 9.4 percent in June.
• Reserve Fund down to $90bn on 1 Aug
• TABLE-Russia monetary base rises to 4.02 trln rbls
• Russia is going to invest $10 bln of international reserves in IMF bonds
• Strengthening ruble debt demand energizes Russia's primary market - Since the eginning of March, the primary ruble bond market has become increasingly active. According to figures from ING, total placements reached RUB542bn (about $17bn) in the first half of the year, with corporate debt making up 70% of that total volume.
• COMMENT: Russia hits bottom, recovery starts - The bad news is that Russia just went through one of its worst quarters since the fall of the Soviet Union. The good news is that the economy looks like it has passed bottom and things will get better from here.
Business, Energy or Environmental regulations or discussions
• RusHydro, Uralkali and Rosneft: Russian Stock-Market Preview
• VTB completes formation of VTB Capital equity
• Sevmash eyes engagement in Nenets AO - The Sevmash yard has signed a cooperation agreement with the Nenets Autonomous Okrug. The agreement has a strong focus on the Nenets oil resoures, including the Prirazlomnoe field in the Pechora Sea.
• NMTP issues operational statistics for 7M09
• Miners to Delay Study - Kinross Gold and Polyus Gold plan to delay the start of a full feasibility study of the Nezhdaninskoye deposit in Siberia to consider cheaper options, Polyus said Thursday.
• ALROSA Diamond Production +4% in 1H
• IzhAvto Begins Bankruptcy Procedure
• Kalashnikov Maker Stops Production - The Molot factory, one of the major sites of production for Kalashvikov assault rifles, suspended production for the second time this year due to an inability to meet debts, the Kirov region web site said.
• Efes Breweries International to acquire 6.7% in Krasnyi Vostok
• Sibur to build major Russian polyolefins plant
Activity in the Oil and Gas sector (including regulatory)
• Gas flows through Ukraine tumble - Gas transit from Central Asia and Russia through Ukraine towards Europe fell 37.1% in the first seven months of this year compared to the same period a year ago.
• Northwest Russian oil for China - Lukoil’s recent agreement with China’s Sinopec includes three million tons of oil from the Yuzhno Khilchuyu field in the Nenets Autonomous Okrug. That is almost half of next year’s production at the newly opened field.
• Timchenko Can Buy Firm - A company close to Gennady Timchenko’s Volga Resources got regulatory approval to increase its holding in pipeline builder Stroitransgaz to 79.6 percent, Sergei Noskovich, a spokesman for the regulator, said Thursday
• Novatek's pricing power declines further in 2Q09
• NOVATEK: Developments which contributed to 2Q09 IFRS results
Gazprom
• Gazprom Neft Increases Control of Sibir Energy to 75.05%
• Gazprom starts drilling in Kirinskoye field offshore Sakhalin
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Full Text Articles
Basic Political Developments
Merkel-Medvedev talks to focus on investment, Opel
Thu Aug 13, 2009 5:45pm EDT
* Medvedev, Merkel to focus on investment projects
* Magna-Sberbank bid for Opel to figure in talks
* Will look for Russian investors for German firms
By Denis Dyomkin
SOCHI, Russia, Aug 14 (Reuters) - Boosting Russian-German trade at a time of global crisis will be on the agenda when Russian President Dmitry Medvedev and German Chancellor Angela Merkel meet on Friday, a Kremlin source said.
A bid by Canadian automaker Magna MGz.TO and Russia's Sberbank (SBER.RTS: Quote, Profile, Research, Stock Buzz) to buy a stake in Opel, the European unit of General Motors GM.UL, is the most pressing matter for the two nations.
Medvedev has invited Merkel to his official vacation residence in the Black Sea resort of Sochi for their third meeting this year in a gesture showing close political and economic ties between Berlin and Moscow.
"In Sochi, the leaders will discuss details of joint steps to stimulate the diversification of trade and economic ties to make them more stable and resistant to the fluctuations of global markets," a senior Kremlin official told reporters.
"Promoting existing high-tech investment projects and starting new ones is an important part of these efforts," he added.
Trade between Russia and Germany, Russia's biggest trading partner in Europe, reached a record $67.2 billion in 2008. That figure has been cut by more than half in the first five months of 2009, the Kremlin official said, without giving the precise number.
Russian leaders have said the global crisis provided a good opportunity to review the structure of bilateral trade and economic cooperation.
Merkel has backed the Magna-Sberbank bid for Opel over a competing offer from Belgian private equity firm RHJ International (RHJI.BR: Quote, Profile, Research, Stock Buzz).
On Thursday, Magna's co-Chief Executive Siegfried Wolf said agreement in principle had been reached with General Motors to buy the stake. But a GM official later said the race was not over. [ID:nLD633635]
"We plan to discuss in detail the conditions under which the Magna-Sberbank consortium can purchase the Opel assets with benefits for Germany and Russia," the Kremlin official said.
He said Medvedev and Merkel were also expected to discuss finding Russian investors for struggling firms like Dresden chipmaker Qimonda and Germany's fifth biggest shipbuilder, Wadan.
Qimonda, which has 12,000 staff, collapsed this year as chip prices slumped. Efforts to organise a state bailout failed.
Wadan is owned by a Russian investor Andrey Burlakov, who is looking for ways to save the insolvent shipyard.
Ahead of Medvedev's visit to Germany in July, Burlakov's spokesman said Russian metals giant Norilsk Nickel was likely to order 10 ships and marine oil and gas platforms. Norilsk Nickel has denied having such plans.
The Kremlin official said Russia had far-reaching plans to buy into German firms.
"Given proper social and economic reasons and commercial guarantees, such projects can become springboards for strategic alliances between Russian and German hi-tech companies in carmaking, shipbuilding and electronics," he said.
"This will complement the existing and emerging alliances in the energy sector," he added.
Germany is Russia's partner in an ambitious Nord Stream project to deliver Siberian gas under the Baltic Sea to Europe.
Russia wants to boost German support for the project in the face of the concerns of some European states that it could harm the Baltic Sea and strengthen Russia's grip on the continent's energy supplies.
(Writing by Oleg Shchedrov; editing by Michael Roddy)
Medvedev, Merkel to focus on energy, investment at Sochi talks
SOCHI, August 14 (RIA Novosti) - Energy cooperation and investment projects are set to dominate talks between Russian President Dmitry Medvedev and German Chancellor Angela Merkel in south Russia's Sochi on Friday.
The informal summit in the host city for the 2014 Winter Olympics will be the third meeting between the two leaders this year, and follows on from their July 16 meeting in Munich.
Medvedev and Merkel are likely to discuss in depth Canadian automaker Magna's bid, backed by Russia's Sberbank, to purchase a stake in Opel, the European unit of General Motors. Magna's main rival is Belgium-based investor RHJ International, but Merkel stated on Tuesday that she would be prepared to intervene personally in favor of the Canadian company.
"I have a clear preference for Magna and want to make that clear again," Merkel told RTL television. "If it is necessary, I will join in of course."
A Kremlin source told RIA Novosti that the two leaders were likely to "consider terms on which a deal advantageous for both Russia and Germany's economic and social spheres can be concluded."
Another key point at the talks is certain to be the Nord Stream gas project.
The $6 billion-euro pipeline being built jointly by Russia and Germany under the Baltic Sea is designed to eventually pump 55 billion cu m of Siberian gas per year to Western Europe, bypassing traditional transit nations.
However, some European states have expressed concern over a growing energy reliance on Russia, which meets a quarter of the continent' gas needs. Calls for diversified supplies intensified following a bitter price dispute between Moscow and Kiev in early 2009, when Russia cut off gas to Ukraine, affecting consumers across Europe.
Germany is Russia's biggest European trading partner, and trade between the two countries hit a record $67.2 billion in 2008 before slumping after the onset of the global economic crisis.
As well as energy and investment, Merkel is also likely to discus with Medvedev the recent murders of a number of human rights activists in Russia.
The head of an organization working to help children in Chechnya was found shot dead along with her husband in the republic earlier this week. The deaths follow the killing of Memorial activist Natalya Estemirova, who was abducted and murdered in similar circumstances in Chechnya last month. January 2009 saw rights lawyer Stanislav Markelov and journalist Anastasia Baburova gunned down in broad daylight in central Moscow. No arrests have been made in any of the cases.
Sistema could take stake in Infineon –report
Fri Aug 14, 2009 6:53am BST
MOSCOW, August 14 (Reuters) - Russian services conglomerate Sistema (SSAq.L: Quote, Profile, Research) could take an equity stake in German chipmaker Infineon (IFXGn.DE: Quote, Profile, Research) as part of an alliance between the two firms, several sources told Russia's Kommersant daily on Friday.
"Discussions about a possible future partnership are taking place at a high political level," an Infineon spokesman told the newspaper, adding German economy minister Karl-Theodor zu Guttenberg has discussed the matter with Russian colleagues. One of the sources also said German Chancellor Angela Merkel and Russian President Dmitry Medvedev would discuss the issue at Friday's meeting in the Black Sea resort of Sochi.
A Kremlin source told Reuters on Thursday the two leaders were expected to discuss a range of joint investment deals, including the bid by Russia's state-owned Sberbank (SBER03.MM: Quote, Profile, Research) and Canadian automaker Magna MGz.TO for a stake in Opel. [nLD188576]
A Kommersant source said the talks would focus on the fate of the insolvent Qimonda (QMNDQ.PK: Quote, Profile, Research) memory chip unit, in which Infineon holds a 77.5 percent stake.
The article did not provide any information regarding the volume of any Russian investment in Infineon.
The Infineon spokesman said there were no direct talks ongoing with Sistema, and a source at the Russian company confirmed this, the paper said. Sistema's press department declined to comment, Kommersant said.
In a June interview, Sistema President Leonid Melamed told Reuters his company's Sitronics (SITRIq.L: Quote, Profile, Research) subsidiary could be a key player in the Russian government's plan to develop its microelectronics sector through international partnerships. [nL4338869]
Reports also appeared earlier in the German press stating Qimonda's insolvency administrator was in talks with potential investors in Taiwan and Russia in order to obtain financial support. [nLQ90863]
(Reporting by Alfred Kueppers; Editing by Dan Lalor)
((alfred.kueppers@; Tel +7 495 775 1242; Reuters Messaging: alfred.kueppers@@)) Keywords: INFINEON
Merkel to Press Human Rights Concerns With Russia
By JUDY DEMPSEY
Published: August 13, 2009
BERLIN — When Angela Merkel became German chancellor nearly four years ago, some in the West and in Russia itself harbored high hopes that her support for human rights would lead to greater media freedom and restoration of civil liberties being curtailed by the then-president of Russia, Vladimir V. Putin.
On the cusp of what she hopes will be a second term as chancellor, Mrs. Merkel goes on Friday to her annual summer meeting with the Russian president — Dmitri A. Medvedev, Mr. Putin’s ally and successor — with those hopes unmet. Equally unrealized are the fears of German industrialists that Mrs. Merkel’s outspokenness would risk their burgeoning business ties with Russia.
On her first visit to Moscow as chancellor in January 2006, Mrs. Merkel’s criticism of human rights violations, which she discussed publicly with Mr. Putin, and her meetings with human rights activists stood in sharp contrast to her predecessor, Gerhard Schröder, a Social Democrat.
Mr. Schröder, a close friend of Mr. Putin, was reluctant to broach such issues, at least in public. Instead, he stressed closer economic ties, believing that a stronger, more prosperous Russia would eventually modernize and reform political institutions, a policy that most analysts say has yielded few results.
For all her ability to speak Russian, or draw on her experience of growing up and working in Communist East Germany, Mrs. Merkel also has little to show for speaking out on human rights.
That will not stop her from voicing concern about recent killings of activists in Chechnya, said a government spokesman. This week, the bodies of Zarema Sadulayeva, a human rights campaigner, and her husband were found in the trunk of a car in Chechnya. Last month, Natalya Estemirova, a human rights campaigner, was kidnapped and killed; even Mr. Medvedev expressed dismay.
“The chancellor can keep criticizing, and bringing up the murders of human rights activists such as Anna Politkovskaya or Natalya Estemirova,” said Hans-Henning Schröder, a Russia expert at the German Institute for International and Security Affairs, referring to the journalist murdered in Moscow in 2006. “But nothing happens. There seems to be no influence.”
The United States, which has been reassessing relations with Russia, has had little influence either. Given Germany’s status as Russia’s biggest trading partner and the centuries-old cultural, economic and political ties between the two, human rights organizations had hoped Mrs. Merkel might have an effect.
Some analysts say the historic high energy prices of recent years imbued the Kremlin with new confidence and conviction that it did not need outsiders to give it lectures about human rights.
Others say that, leaving aside Mrs. Merkel’s outspokenness, her government of conservatives and Social Democrats actually did not deviate from previous German policy toward Russia.
“Even with this government, there has been a continuity in policy,” said Gernot Erler, the Social Democrat deputy foreign minister. “There is no other choice when it comes to dealing with Russia. Our interest is establishing a strategic partnership with the aim of modernizing Russia, diversifying its economy and integrating it with Europe, at least from the economic aspects.”
Amid global financial crisis, Germany is doing everything to support economic ties with Russia.
“There is a lot at stake,” said Peter Danylow, director of the East and Central Europe Association, which advises German businesses. “Just look at the recent trade figures and you see how bilateral trade over the first five months has fallen by over 30 percent.”
“The financial crisis could be an opportunity for Medvedev to start modernizing the economy in order to produce goods that are more competitive on world markets. That means tackling the infrastructure, especially the transportation system, which is catastrophic, the bureaucracy and corruption.”
Last month, Mrs. Merkel and Mr. Medvedev met in Munich and several potentially lucrative contracts were signed. Siemens will build 200 modern sleeping cars for Russian Railways and establish a joint venture with Sinara, a Russian transport manufacturer, for a new generation of locomotives. The Frankfurt airport operator, Fraport, will participate in modernization of the airport at St. Petersburg. Germany and Russia agreed on a €500 million, or $700 million, credit line to finance joint projects like machine building.
Another accord establishes a joint energy efficiency agency. “This is a big step,” said Stephan Kohler, director of the German agency involved in that venture. “With low, subsidized energy prices in Russia becoming a thing of the past, Russia’s potential for saving energy is huge. With German experience in saving energy, this new agency could play a big and important role.”
In Sochi, Mrs. Merkel and Mr. Medvedev will continue to mull the future of Opel, the troubled German carmaker. Mrs. Merkel supports a bid by the Russian-backed Canadian auto parts maker, Magna International; Sberbank, the largest Russian bank; and GAZ, the second-largest Russian automaker. The two leaders will also discuss the possibility of Russia taking a stake in Wadan Yards MTW, a German shipbuilder.
Germany, Russia and a troubled human rights record
14.08.2009
Chancellor Angela Merkel is due in Russia on Friday for talks with President Dmitry Medvedev. This meeting, like the last, comes just days after the murder of a human rights activist in the troubled republic of Chechnya.
Head of the Let's Save the Generation children's charity Zarema Sadulayeva and her husband Alik Djibralov were found dead on Tuesday following their abduction by armed men the day before. They had been shot and their bodies dumped in the trunk of a car in the Chechen capital, Grozny.
The case, like the alarming number which precede it, has drawn statements of condemnation from all quarters. German Foreign Minister Frank-Walter Steinmeier said he was "shocked" by the murders and denounced what he described as an "act of cowardice."
He called for a quick investigation to serve justice on both the killers and the masterminds behind the assassination.
Yet just how likely it is that that will ever happen remains to be seen. Following the July murder of Natalya Estemirova, an activist who worked for Russia's Memorial rights group, Medvedev assured the German government that everything possible would be done to get to the bottom of the crime.
Peter Franck, a Russian Expert for the German arm of Amnesty International, says he doesn't hold out much hope that Moscow will make good on its pledge.
"Over the years we have witnessed the murder of our colleagues in Russia, but only very few of the cases are ever solved and never those in the north Caucasus."
The wrong signal
And that is a critical mistake. Not only because it ignores justice and the pain of victims' relatives, but because it is a missed opportunity to send out the signal that perpetrators will be made to account for their crimes.
"Currently we have a situation in which it seems that investigations are called off when the people conducting them feel that to continue would put their own lives at risk," Franck told Deutsche Welle. "That is a climate we need to change."
And although securing such change will take a long time, Franck says there are some small signs that President Medvedev is at least thinking in the right direction.
"He didn't only churn out standard phrases in the wake of Estemirova's murder, he also praised the work of human rights activists," Franck said, adding that Amnesty had welcomed the shift in rhetoric.
Talking the talk
There is no doubt that Medvedev wants his Russia to be a major player on the world stage and equally no doubt that relations between Moscow and Berlin are becoming increasingly important to both countries.
So how does the spate of murders for which nobody has claimed responsibility but which many blame on the Chechen authorities, affect bilateral ties?
Henning Schroeder, Head of the Russian/CIS Division of the German Institute for International and Security Affairs says there is no correlation between the two. "Western states have no influence on Russian domestic issues," he said, adding that when Angela Merkel meets Medvedev in the Black Sea resort of Sochi on Friday, she will say what her position, her electorate and the media expect of her, but nothing more.
"I'm sorry to have to say this, but it's all staged," Schroeder said.
Soft diplomacy vs. outright criticism
But professor for political science at Berlin's Free University, Klaus Segbers, says given the fact that there is no hard evidence about who is behind the recent murders in Chechnya, there is little Merkel can do when she meets the Russian president on Friday but condemn them.
He believes the way to encourage Russia to better protect its citizens is through soft diplomacy, something which he says is already happening. "Western representatives should use official meetings and higher level political meetings to show Russia that these reports have a bad effect on its reputation."
Segbers says Russia doesn't seem to have grasped the idea that good behaviour is in its own interests. But he believes foreign investors could play a decisive - albeit inadvertent - role in helping to make Russia a safer place. "If they start to feel the problems they become hesitant to do business there," he told Deutsche Welle.
But soft diplomacy and investor jitters are not enough to reassure Russian and Chechen journalists and activists that they are out of harm's way. Neither is it enough for Peter Franck, who says it is time for the West to stop mumbling and send a clearly worded message to Moscow.
"There has been too little solidarity with the victims," he said. "It is time to speak loud and clear, to call what is happening by its name: a scandal."
Author: Tamsin Walker
Editor: Rob Mudge
AUGUST 14, 2009
Magna Edges Closer to Opel Deal
GM Confirms Revised Offer for Majority Interest in Its European Arm
By NICO SCHMIDT and SHARON TERLEP
FRANKFURT -- A consortium led by Canadian car-parts maker Magna International Inc. on Thursday appeared to move a step closer to securing a deal to acquire the majority of General Motors Co.'s European arm after it tried to address GM's criticisms of its initial proposals.
GM confirmed Thursday it received a revised offer from the Magna group for a majority stake in its Opel and Vauxhall brands and said it will review the proposal over the next few days.
The German government, which must provide financial guarantees and financing for any deal, also received the new proposal, but hasn't yet decided on the funding package it will provide, according to GM Group Vice President John Smith, the company's lead Opel negotiator.
The German government, which has so far favored Magna over rival bidder RHJ International SA, declined to comment.
The terms of the revised Magna proposal weren't disclosed.
Magna is being backed by Russian savings bank OAO Sberbank and Russian car maker OAO GAZ. In either Opel proposal, GM will retain a stake in the car maker and its sister British brand, Vauxhall, as will the German government and unions.
GM had signaled it had issues with Magna's initial proposal. The U.S. car maker feared that a deal with Magna could essentially hand over advanced engine and transmission technology to Russia and stymie the auto maker's ability to compete in that country down the road.
A Magna spokeswoman said all outstanding issues between GM and the Magna bidding group had been resolved. Among other things, the spokeswoman said, Magna and its partners agreed that if Sberbank later decides to sell its 27.5% stake in the Opel and Vauxhall business, it couldn't sell it to any party other than Gaz or the Russian state development bank VEB without GM's approval.
GM Chief Executive Frederick "Fritz" Henderson on Thursday stopped short of saying the revised Magna bid fully addressed GM's concerns.
"We are evaluating it [the Magna proposal], and we will spend the next few days evaluating it," Mr. Henderson said at an event to show off a new battery facility near Detroit. The CEO said he expects to brief the GM board next week on the revised offer.
In an interview earlier in the week, GM's Mr. Smith said the company expects to have an agreement with one of Opel's bidders by the time German elections heat up during the last week in August.
In their earlier proposal, Magna and Sberbank each wanted a 27.5% stake in Opel in return for €500 million ($710 million) of capital. GM would retain a 35% stake and 10% would be placed in the hands of employees.
At the end of May, the German federal governments and states with Opel locations said they would provide €1.5 billion in an emergency credit line as well as €4.5 billion in state guarantees.
RHJ has said publicly it wants to invest €275 million in Opel, but requires a lower amount of state backing than Magna. RHJ asked for state guarantees of €3.8 billion, but media reports reccently put the amount at less than €3 billion. It wasn't immediately available to comment.
Fred Irwin, spokesman for the Opel trust, which will have the final say, said "the trust was informed that Magna will present GM with an improved offer."
Write to Sharon Terlep at sharon.terlep@
Magna, Sberbank Finalize Opel Bid
14 August 2009By Maria Antonova / The Moscow Times
Magna and Sberbank revised draft agreements on purchasing control of Opel from General Motors on Thursday, clarifying outstanding issues with the U.S. automaker and taking the process one step closer to a final agreement.
Siegfried Wolf, Magna Europe’s co-chief executive, was confident Thursday. “We have agreement on all points between our partners Sberbank, Magna and General Motors,” he told Bloomberg, calling the agreement “a contract that can be signed.”
General Motors last week publicly expressed hesitation regarding Magna’s bid — long considered the front-runner — because it was not excited about having a third corporate party in the talks, much less a Russian state bank.
The Detroit-based company had 30 outstanding issues with Magna’s bid early last week, GM Group vice president John Smith — the company’s chief negotiator in the Opel sale — wrote on his blog Aug. 6. “One key point for GM is intellectual property, and this transaction should not become a pipeline, shipping valuable intellectual property to destinations unknown,” he wrote.
The Russian government has vocally backed the bid as a way to revitalize the country’s struggling domestic automakers with an influx of knowledge and technology.
In a statement Thursday, however, GM said “progress has been made in clarifying issues from the best and final offers received two weeks ago” and the company said it received new documents from Canada-based Magna.
GM has also requested that a task force formed by the German government outline the financial package that is being prepared by Berlin and other European governments, the statement said. When the outline is available, the GM board of directors will review options for Opel and make its recommendation to the Opel trust board.
The U.S. automaker, which recently left bankruptcy, is selling off 55 percent of its loss-making European unit as part of its restructuring.
The five-person Opel trust board has two General Motors representatives, a representative for the German federal government, a representative for the four German states with Opel plants, and a nonvoting, independent member.
There are two bidders in the running for Opel, after China’s BAIC withdrew its offer last month. GM’s Smith has previously called a proposal from Belgian private equity firm RHJ International “the simpler of the two,” although he also said there was little difference between that bid and the Magna consortium’s in terms of their “industrial concept.”
A GM Europe spokeswoman declined to comment on how Magna and Sberbank changed their position or any deadline for the German government regarding the financing outline.
RHJI did not return a call for comment.
The German government and the country’s labor unions have long been vocal in their support of Magna’s proposal. The head of the influential IG Metall union, whose representatives are part of the Opel supervisory board, told Prime Minister Vladimir Putin in Moscow last month that the union considered the Magna-led bid the best option.
Berlin promised a 1.5 billion euro ($2.1 billion) bridge loan and another 3 billion euros in guarantees to help during the handover of Opel, which has four plants in Germany. Although RHJI requested a smaller government funding package of 3.8 billion euros, it is not clear whether the government would make the money available to the equity firm.
Magna’s offer would evenly split the 55 percent stake between Magna and Sberbank, while Opel workers would keep their 10 percent and GM would retain 35 percent. The partners are offering to invest 500 million euros ($715 million) into Opel.
Oleg Deripaska’s automaker GAZ would be brought in as an industrial partner.
A GAZ representative declined to comment on the bid’s progress Thursday, referring questions to Sberbank.
Sberbank did not respond to a request for comment.
German Chancellor Angela Merkel is scheduled to visit Sochi on Friday to meet with President Dmitry Medvedev, and the subject of Opel is expected to come up.
Alex Anishyuk contributed to this report.
August 13, 2009
18:30
ANNOUNCEMENT.On August 18, 2009, Dmitry Medvedev will meet with Israeli Prime Minister Shimon Perez.
Peres in Working-State Visit to Russia Next Week
Reported: 03:01 AM - Aug/14/09
() President Shimon Peres is scheduled to travel to Russia on Tuesday morning for a day that combines aspects of a state visit and a working visit.
Russian Federation President Dmitry Medvedev has invited President Peres to be a guest at his summer palace in Sochi, on the Black Sea, where Medvedev is spending his summer vacation. According to a statement from Peres's office, the two leaders will hold a working meeting during which they will discuss the strengthening of the strategic relations between Israel and Russia, Russia's involvement in promoting regional peace, the negotiations between Israel and the Palestinian Authority and the Iranian nuclear issue.
In addition to his meeting with Medvedev, Peres will also hold a series of meetings with senior Russian government officials. He will also utilize his visit to widely disseminate information on Israel in the Russian and international media.
Relationship between Russian intelligence and Hezbollah has long history, may be used against Israel
13.08.2009
The Russian intelligence service may be providing valuable information to Hezbollah about Israeli activities, prompting concern in Tel Aviv that any future military initiative against the group may not come as a surprise, WorldNet Daily reports. It notes that to date, Israel’s officials have not officially commented on reports of the Russian Federal Security Service (FSB)-Hezbollah cooperation. However, sources say that without the intelligence provided by the Israeli spy network in Lebanon, the Israeli Air Force would not have knocked out Hezbollah medium-range missile launchers during the 2006 war between Israel and Hezbollah.
The prospect of cooperation between the FSB and Hezbollah has led to one unconfirmed report from the Israeli website DEBKAfile claiming that the Russian intelligence service assisted Hezbollah in uncovering an alleged Israeli spy ring in Lebanon, WorldNetDaily reminds. Called the Al-Alam spy ring, it reportedly operated primarily in southern Lebanon, leading to the arrest of some 70 people of varying national origins. In addition to Lebanese, the alleged spies also were said to be Palestinian and Egyptian citizens.
Russia's FSB may be providing intelligence based on intercepts it is acquiring from its enlarged presence in the Middle East, especially at a new base in Tartus, Syria, according to informed sources, Joseph Farah's G2 Bulletin says. The Syrians have allowed Russia to enlarge facilities at Tartus to increase its naval presence. Tartus is only 25 miles from Lebanon's northern border with Syria. Russia's increased presence in Syria is meant to dampen any notion to attack either Syria or Lebanon. At the same time, it has permitted the Russians to introduce sophisticated surveillance systems capable of blanketing all of Lebanon and Syria.
Russians have not commented on providing information to Hezbollah. Nevertheless, the relationship between the Russians and Hezbollah has a long history as far back as 1972.
Afghanistan: Us-Russian Transit Agreement Takes Off In September
8/13/09
A transit agreement between America and Russia in support of the US-led war in Afghanistan will come into force on September 6.
The agreement, which allows American planes to use Russian airspace, was signed in July. Up to 12 transport carriers will fly over Russia on a daily basis, Russian media reports say.
"This agreement is a very important [. . .] it proves that we can find solutions where we have common interests. Despite the existence of many legal and financial issues, a solution was found," US Assistant Secretary of Defense Alexander Vershbow told Russian news agency Interfax on August 12.
Russian forces may also become involved in the training of Afghan police, Vershbow added.
Kyrgyzstan: Russian Base Is In Response To Afghan Threat, Says Military Attache
8/13/09
Kyrgyzstan is living up to its "allied duty" by allowing Russia to open a new base in the south of the country, Moscow’s military attache in Bishkek says.
The proposed facility is "directly linked" to regional security needs, Alexander Gerasev said.
"We do not threaten any country; on the contrary, we are strengthening the [Collective Security Treaty Organization’s] southern frontiers," Russian newspaper Nezavisimaya Gazeta quoted him as saying on August 13.
"Kyrgyzstan, true to their allied duty, is aware of the threats originating from Afghanistan where there’s a gang of international terrorists, and is ready to give Russia the opportunity to deploy its troops in the south of the republic," he added.
Gerasev declined to comment on the size or location of the new base but earlier reports suggest it will be one battalion in either Osh or Batken.
Detected Russian submarines 'failed' their military mission, report says
MOSCOW — Agence France-Presse Last updated on Friday, Aug. 14, 2009 03:17AM EDT
Two Russian attack submarines are considered to have failed their secret mission in international waters after being detected by the United States and Canada, a report said yesterday.
"If the United States and Canada really detected the foreign submarines, that means they unmasked them. This represents the failure of their military mission," Russia's Interfax news agency quoted a source close to the matter as saying.
"It's unlikely the submarine crew will be congratulated under the circumstances," the source said.
"One of the markers of the crew's successful completion of a military mission on board a nuclear-powered submarine is the secrecy of the undertaking."
Interfax gave no further details concerning the source's identity.
Canadian aircraft that once hunted Soviet submarines during the Cold War are tracking the two Russian submarines, which moved north after being detected last week off the east coast of the United States.
"They're in international waters" in the North Atlantic, said a spokesman for Defence Minister Peter MacKay. "They're allowed to be there. But our job is to ensure that our coastal perimeter and waters are respected."
The Pentagon last week said one of the two Russian nuclear-powered Akula class vessels had taken up station in international waters 320 kilometres off the U.S. coast. The exact location of the other was unclear.
U.S. officials said their presence was not cause for concern and they posed no threat to the United States.
The episode echoes the cat-and-mouse manoeuvres of the Soviet and U.S. militaries during the Cold War when Moscow and Washington routinely used submarines to gather intelligence and track the movements of each other's navies.
Russian Nuclear Submarines Approach Canada
13.08.2009
The Russian nuclear submarines, which previously were noticed not so far from the US East Coast, have now approached Canada. Canadian Air Force began to monitor their navigation, the nation’s Defense Minister Peter McKay said.
The submarines are staying in international waters and do not violate any agreements, RBC news agency said.
"The submarines have not done anything threatening," Dan Dugas, spokesman for Canadian Defense Minister Peter MacKay, told AFP.
"They're in international waters" in the North Atlantic, he said. "They're allowed to be there. But our job is to ensure that our coastal perimeter and waters are respected."
Pentagon officials told reporters last week that two Russian nuclear submarines were patrolling the US East Coast. The officials did not express any concerns about it, although they said that it was the first time since the Cold War when the submarines of a “potential enemy” approached the US territory so close.
Anatoly Nogovitsyn, a senior spokesman for the General Staff of the Russian Federation, said that the fact that Russian nuclear submarines appeared near the USA and Canada was absolutely normal. Russian sources said that the submarines had never stopped patrolling international waters. “ Any drama about that is inappropriate ,” the official said.
Project 971 (Shchuka-B, 'Shchuka' meaning ‘pike,’ NATO reporting name "Akula"), is a nuclear-powered attack submarine (SSN) first deployed by the Soviet Navy in 1986. The class is sometimes erroneously called the "Bars" class, after one of its members. Note that Akula ("shark") is the Soviet designation of the ballistic missile submarine class designated by NATO as the Typhoon class submarine.
There are three sub-classes or flights of Shchuka, consisting of the original seven "Akula I" submarines which were built between 1982 and 1986, five "Improved Akula" submarines were built between 1986 and 1991, and two "Akula II" submarines were built from 1991. This information is disputed, however, as the distinction between the Improved Akula and the Akula II class is debated by authoritative sources. The Russians simply call all of the submarines Schuka-B, regardless of modifications, and it is rumoured that no two are alike.
The Akula incorporates a double hull system composed of an inner pressure hull and an outer "light" hull. This allows more freedom in the design of the exterior hull shape, resulting in a very hydrodynamic submarine compared to western counterparts at the time.
The distinctive "bulb" or "can" seen on top of the Akula's rudder houses its towed sonar array, when retracted.
All Akulas are armed with four 533 mm torpedo tubes which can use Type 53 torpedoes or the SS-N-15 Starfish missile, and four 650 mm torpedo tubes which can use Type 65 torpedoes or the SS-N-16 Stallion missile.
Russia currently has 14 Akula class submarines. The last one of them was launched in 2001. Russia is currently building the K-152 Nerpa sub, which made headlines last autumn after 20 people were killed during a test process on board.
Iceland Didn’t Reject Loan
Iceland didn’t reject a 4 billion euro ($5.7 billion) loan from Russia after the island’s biggest banks collapsed last October, former finance minister Arni Mathiesen said in an interview published Thursday.
“As far as I’m aware, loan negotiations are still underway,” Mathiesen told the newspaper. “We didn’t reject any loans from Russia.”
Russia’s ambassador to Iceland, Viktor Tatarintsev, said Wednesday the island had declined to take the loan offered by his government, turning instead to the International Monetary Fund. (Bloomberg)
No MiG-35 fighters for India before 2011
First Published : 14 Aug 2009 10:21:48 AM IST
IANSLast Updated :
NIZHNY NOVOGORD: Production of MiG-35 multirole fighters offered for sale to India cannot start before 2013 or 2014, a Russian aircraft maker has said.
"We have begun testing the MiG-35 fighter for the Indian tender," Alexander Karezin, general director of the Sokol company based in Nizhny Novgorod, said Thursday.
Russia's MiG-35 Fulcrum-F, an export version of the MiG-29M OVT (Fulcrum F), is a highly manoeuvrable air superiority fighter, which won high acclaim during the Le Bourget air show in France last year.
Six major aircraft makers -- Lockheed and Boeing from the US, Russia's MiG, which is part of the UAC, France's Dassault, Sweden's Saab and the EADS consortium of British, German, Spanish and Italian companies -- are in contention to win the $10 billion contract for 126 light fighters to be supplied to the Indian Air Force (IAF).
Six major aircraft makers -- Lockheed and Boeing from the US, Russia's MiG, which is part of the UAC, France's Dassault, Sweden's Saab and the EADS consortium of British, German, Spanish and Italian companies -- are in contention to win the $10 billion contract for 126 light fighters to be supplied to the Indian Air Force (IAF).
Sokol earlier said that the first two MiG-35 aircraft would be delivered to India in August for test flights prior to the award of the tender. In late 2009, Russia will conduct a series of flight tests with live firing for an IAF delegation at a testing ground in Russia.
The fighter is powered by RD-33 OVT thrust vectoring engines. The RD-33 OVT engines provide superior manoeuvrability and enhance the fighter's performance in close air engagements, its manufacturers say.
Moscow said if MiG-35 wins the tender, Russia is ready to transfer all key technology to India's Hindustan Aeronautics Ltd. and provide assistance for the production of the aircraft in India.
Russia aims to start making MiG-35 fighters for India in 2013
NIZHNY NOVGOROD (central Russia), August 13 (RIA Novosti) - Production of MiG-35 multirole fighters offered for sale to India cannot start before 2013 or 2014, a Russian aircraft maker said on Thursday.
Russia's MiG-35 Fulcrum-F, an export version of the MiG-29M OVT (Fulcrum F), is a highly maneuverable air superiority fighter, which won high acclaim during the Le Bourget air show in France last year.
"We have begun testing the MiG-35 fighter for the Indian tender," said Alexander Karezin, general director of the Sokol company based in Nizhny Novgorod.
Six major aircraft makers - Lockheed and Boeing from the United States, Russia's MiG, which is part of the UAC, France's Dassault, Sweden's Saab and the EADS consortium of British, German, Spanish and Italian companies - are in contention to win the $10 billion contract for 126 light fighters to be supplied to the Indian Air Force.
Sokol earlier said that the first two MiG-35 aircraft would be delivered to India in August for test flights prior to the award of the tender. In late 2009, Russia will conduct a series of flight tests with live firing for an Indian Air Force delegation at one of the testing grounds on the Russian territory.
The fighter is powered by RD-33 OVT thrust vectoring engines. The RD-33 OVT engines provide superior maneuverability and enhance the fighter's performance in close air engagements.
Moscow said if MiG-35 wins the tender, Russia is ready to transfer all key technology to India's Hindustan Aeronautics Ltd. and provide assistance for the production of the aircraft in the country.
New OSCE Minsk Group co-chairs to trip to region
14 August 2009 [12:16] - Today.Az
Co-chairs of the OSCE Minsk Group are going to trip to the region of the Nagorno-Karabakh conflict soon.
French co-chair Bernard Fassier will visit the region in early September. Several weeks later, he will visit again together with the newly-appointed two other co-chairs from Russia and U.S.
The visits aim to discuss further ways of resolving Nagorno-Karabakh conflict with Azerbaijani and Armenian leadership.
U.S. Co-Chair of the OSCE Minsk Group Matthew Bryza has completed its term as mediator. Russian co-chair of the Minsk Group Yuri Merzlyakov has also reportedly terminated his office as mediator. Name their successors have not yet been disclosed.
Yuschenko Considers Medvedev’s Criticism Of Ukraine’s Arms Deliveries To Georgia Baseless
14/08/2009 10:50 (01:40 minutes ago)
The FINANCIAL -- Yuschenko considers Russian President Dmitry Medvedev’s criticism of Ukraine ’s arms deliveries to Georgia to be baseless.
This is stated in President Viktor Yuschenko’s letter to his Russian counterpart.
«Allegations about Ukrainian arms deliveries to Georgia are groundless. Unfortunately, despite of numerous clear and detailed explanations Ukraine provided about its legal operation on the arms market, Russia has been spearheading a campaign to create Ukraine ’s image as a country which breaks international norms and regimes in military-technical cooperation,» Yuschenko’s letter said.
The Ukrainian President has reminded Dmitry Medvedev that the UN Security Council, the Organization for Security and Cooperation in Europe, the European Union and other international organizations have never imposed any sanctions or embargo against Georgia on delivery of weapons, military equipment or dual-use commodities.
At the same time Yuschenko has emphasized that Russia’s proposal to introduce such restrictions within OSCE after the Russian-Georgian conflict were not supported.
Yuschenko believes that Ukraine ’s NATO integration strivings must not be a subject of Russia’s political blame because this is Ukraine ’s own right to ensure its national security.
As Ukrainian News reported, in his statement of August 11 Russian President Dmitry Medvedev criticized Ukraine for arms deliveries to Georgia emphasizing that civilians and Russian peacekeepers had been killed in Tskhinvali by Ukrainian weapons.
Lithuania and Russia Resolve Trade Feud
14 August 2009By Nadia Popova / The Moscow Times
Russian and Lithuanian customs officials have come to an agreement on a dispute over vehicle inspections, both sides said Thursday — after Russia’s agricultural watchdog banned imports of dairy products from four Lithuanian producers.
Hundreds of trucks have been waiting on the Lithuanian-Russian border in lines that have stretched dozens of kilometers since August, when Russian customs officials tightened inspections on Lithuanian trucks after finding numerous customs violations.
“We have agreed that we will submit the list of the most reliable transport companies to the Russian customs authorities on Friday, so that they have a facilitated access to the Russian territory,” a Lithuanian customs department spokeswoman said after the talks on Thursday.
“We will also exclude 29 transportation companies that have violated the TIR system,” she said. The TIR Treaty is an international convention that provides for a unified system of road transport.
An agreement on the new regulations was signed on Thursday by Lithuanian Ambassador Antanas Vinkus, the head if the Lithuanian customs department and Russian Federal Customs Service chief Vladimir Malinin.
“An agreement has been reached on the Lithuanian side introducing tighter control over access to the TIR system for cargo vehicles,” the Federal Customs Service said in the news release.
“We have detected numerous violations even among those Lithuanian transport companies that were TIR members,” Russian Customs Service spokesman Vladimir Zubkov said. “These certificates are usually given to the most reliable companies and guarantee that TIR returns the money to the customs authorities of the destination country if the cargo gets along the way, which has been widespread among the Lithuanian companies transporting cargo to Russia.”
“Customs duties are paid at the customs service at the destination point, not at the border, so we have lost some money,” Zubkov said, adding that he couldn’t give the exact sum of the debt. “We’ve been facing smuggling from the Lithuanian side.”
The Lithuanian customs department’s spokeswoman said the Russian side’s accusations would be considered by a special working group that had been created. “For now, we just hope the lines on the border will gradually get through within the next two days,” she said. By Thursday afternoon, there were 840 cargo vehicles and 90 cars lined up at the border, Interfax reported.
Lithuanian president Andrius Kubilius on Thursday called the Russian customs service’s actions against Lithuanian transport companies “inadequate” and “discriminating against Lithuanian transport companies.”
On Aug. 13, Lithuanian Foreign Affairs Minister Vygaudas Usackas signed a letter to the European Commission with a request that road carriers not be discriminated against on a national basis. The Federal Customs Office has denied any discrimination.
In another dispute between the countries, Russia has banned butter, sour cream and cottage cheese from four Lithuanian producers because it said it had found tetracycline in the products — a chemical used to treat sick cows. The ban will come into affect on Monday, The Federal Customs Service and the Federal Phytosanitary Inspection Service, the country’s agriculture watchdog, have said the banned products have nothing to do with the customs problem.
Alexei Alexeyenko, the watchdog’s spokesman, said Thursday that it would send a team to Lithuania within a few weeks to inspect some of the Lithuanian farms, milk refineries and the local market regulators, a visit that could result in more restrictions against Lithuanian dairy producers, Alexeyenko said.
The Lithuanian veterinary service said on Wednesday it had followed up the Russian complaint and had traced farms with antibiotic-contaminated milk and imposed stricter controls to prevent future cases, Reuters reported.
Biggest Lithuanian carriers are on the black list by Russia
Danuta Pavilenene, BC, Vilnius, 14.08.2009.
According to the data available to the Lithuanian carriers association Linava, there are some of the largest Lithuanian transport companies among the 29 companies, the drivers from which Russia does not want to permit to enter its territory. The association is also surprised that instead of the previously mentioned sixteen cases of violation, this figure has suddenly exceeded 20. "We do not know what particular companies are meant, however, we have received information that they are the largest Lithuanian carriers. We are also highly surprised that that the number of accusations regarding violations has increases," Linava representative Gytis Vincevicius told ELTA/LETA.
According to him, the number of accusations has increased, because they are being calculated not only for the first half of this year, but also for the past year. However, Vincevicius claimed that last year there were no signals about violations made by Lithuanian carriers received from Russia.
According to him, Linava and the Lithuanian customs are obliged to make a list of trusted Lithuanian companies by Friday. Russians promise to make the entry to the country's territory less strict for the carriers from these companies.
As reported, the officers of the Russian Federal Customs Service have agreed to simplify the inspection of carriers, however, it is demanded in exchange for this that the cars of 29 Lithuanian carrier companies would not be permitted to enter the territory of Russia. This information has been confirmed to ELTA by Gytis Vincevicius, representative of the carriers association Linava.
According to Vincevicius, Linava is currently trying to find out which companies are meant and preparing its position on this matter.
The Russian officers demand not to permit 29 companies' cars to enter the territory of Russia due to their purported violations of the country's law. On Wednesday, Walter Deffaa, CEO of Directorate General of the Taxes and Customs Duties of the European Commission, addressed the Russian Federal Customs Service expressing concern that Russia's customs strengthened cargo control is being applied only to Lithuanian carriers and that this is discrimination actions. Deffaa pointed the attention of Russian customs officers to the point of the EU and Russia's cooperation and partnership agreement which says that "Russia's measures that are being applied to the community should not cause discrimination neither between the member states nor between their nationals or companies."
It is said in the statement that if violations of certain Lithuanian carriers are found in performing the customs formalities, strengthened control of those particular carriers would be more efficient than the application of these measures to all carriers of the EU member state.
Truck lines on Latvia-Russia border continue to grow longer
Alla Petrova, BC, Riga, 14.08.2009 Although an agreement was reached at a meeting of Lithuanian and Russian Customs Services' in Moscow on Thursday to try to solve the problem of the long truck lines at the Latvian-Russian border that has been forming for over a week now, last night the truck lines on the border grew even longer.
The State Border Guard informed LETA that at Terehova and Grebneva – the two border crossing points on the Latvian-Russian border – altogether 1,366 vehicles were backed up this morning, or by 76 vehicles more than yesterday when 1,290 trucks were waiting in line.
Currently, of all the vehicles waiting for the entry to Russia at the border crossing point at Terehova, 845 are trucks; at Grebneva there are 280 trucks waiting in line.
The number of passenger cars waiting in line at the two border crossing points is 126 and 115 respectively.
According to the latest information, Russian Customs Service officers have agreed to simplify the inspection of trucks, however, they demanded in exchange for this that the vehicles of 29 Lithuanian trucking companies, which allegedly have violated Russia's customs regulations, be not permitted to enter the territory of Russia.
The truck lines on Latvian-Russian border began to grow last week, when the Russian Customs Service strengthened control over all cargo transported by Lithuanian carriers. In the last few days, truck lines have started to form also on Russian borders with Belarus and Kazakhstan.
Estimated losses of one day of idle standing for each truck is around EUR 300 to EUR 500 (LVL 211-LVL 351).
Finnish Ship Operator ‘Very Worried’ About Crew of Arctic Sea
By Diana Ben-Aaron
Aug. 14 (Bloomberg) -- The Finnish company that operates the Arctic Sea, the Maltese-flagged freighter that disappeared in the Atlantic Ocean, is “very worried” about the fate of the 15 Russian sailors on board.
“So far I have no news on the vessel,” Viktor Matveyev, managing director of Oy Solchart Management AB, said by telephone in Helsinki today. “I’m very worried about my crew.”
Matveyev declined to speculate about what happened to the Arctic Sea. The Russian navy is searching for the vessel.
To contact the reporter on this story: Diana Ben-Aaron in Helsinki at dbenaaron1@
Last Updated: August 14, 2009 03:58 EDT
Mystery Deepens Over Missing Cargo Ship
14 August 2009By Anna Malpas / The Moscow Times
The mystery deepened over a missing Russian cargo ship Thursday after possible sightings off Gibraltar in the afternoon and in northern Spain a day earlier.
Analysts said the 4,000-ton Arctic Sea might have been hijacked, possibly in connection with a Russian commercial dispute.
The Maltese-flagged ship had a 15-member Russian crew when it set sail from Finland with $1.8 million in timber destined for Algeria. It was supposed to dock in the Algerian port of Bejaia on Aug. 4.
The Arctic Sea was last sighted on July 30 in the Bay of Biscay, off the western coast of France and north of Spain.
The Navy and Federal Security Service started looking for the missing ship earlier this month, but the search kicked into high gear Wednesday when President Dmitry Medvedev ordered Defense Minister Anatoly Serdyukov to take all necessary measures to find and, if necessary, liberate the Arctic Sea.
The Ladny, the Navy frigate leading the Russian search, was chasing a ship resembling the Arctic Sea in the area of the Strait of Gibraltar between Spain and North Africa, Mikhail Voitenko, an expert on piracy and the editor of the SovFracht Maritime Bulletin, wrote on his web site late Thursday afternoon, citing a Defense Ministry source.
The Defense Ministry later dismissed the report, and a Navy spokesman told Interfax that “the information is based on the personal opinions of non-official people and doesn’t correspond to reality.”
Voitenko said that despite the denials about his information, “I can say that I received it from a reliable source.”
The Defense Ministry said in a statement that the Ladny had passed through the Strait of Gibraltar on Tuesday. Three large Russian warships, the Azov, Yamal and Novocherkassk, also sailed though the strait, Interfax reported.
Malta’s maritime authority, which is also looking for the ship, said Wednesday that the ship had made no attempt to enter the Strait of Gibraltar and therefore must have headed into the Atlantic Ocean.
The Defense Ministry is also using satellites to try to locate the ship.
Voitenko wrote on his web site around noon Thursday that he had received a message on his cell phone about the sighting of an “unknown” ship with the same length as the Arctic Sea — 98 meters — in the port of San Sebastian in northern Spain. He described this as “unverified information.”
For several hours, the information remained unconfirmed or denied. At around 3 p.m., an official in the Spanish Navy told Itar-Tass that the Arctic Sea had not entered Spanish waters or a Spanish port.
The ship was boarded by 10 armed and masked men who identified themselves as Swedish police officers on July 24, just a day after it sailed from Finland. The men tied up and assaulted the crew before carrying out what they called a search for illegal drugs on the vessel. Swedish police have denied any connection to the attackers, who left on an inflatable boat after 12 hours.
The Arctic Sea’s last official communication was with British coast guards on July 28.
Observers said the ship had probably been hijacked but stressed that the area was not known for pirate attacks.
Swedish police are investigating whether the ship’s disappearance might be the result of a dispute between the ship’s owner and another party, the BBC reported Thursday.
“The longer it goes on, the more it looks like some sort of dispute between Russian interests,” David Osler, who writes on maritime safety for the Lloyds List newspaper, told the BBC.
The Arctic Sea is operated by Solchart Arkhangelsk Ltd., and Federal Security Service officials are staying at its offices in Arkhangelsk, Itar-Tass reported. All 15 crew members were hired in Arkhangelsk, the report said.
Solchart CEO Viktor Matveyev declined to comment when reached by telephone in Finland on Thursday.
Nikolai Karpenkov, the head of the company’s Arkhangelsk branch, told Itar-Tass that he was glad that top Russian officials had gotten involved in the search.
Karpenkov rejected speculation that the ship might have been carrying a “secret cargo” from Kaliningrad, a drug-trafficking hub where it underwent two weeks of repairs before sailing for Finland for the timber shipment. Karpenkov said customs officials had checked the ship in Kaliningrad and Finland and found nothing suspicious or illegal.
Moscow is “extremely concerned about the fate of the crew of this ship, which is largely made up of Russian citizens,” Foreign Ministry spokesman Igor Lyakin-Frolov told Interfax on Thursday.
It was not possible to immediately reconcile his comments with reports that all 15 crew members are Russian.
The Foreign Ministry is “doing everything possible to clear up the situation and resolve problems” and is working with all the “interested countries” through diplomatic channels, Lyakin-Frolov said.
The relatives of the crew members on Wednesday published an open letter to the Russian government asking it to start a full-scale search and rescue operation and to ask Western European countries to participate.
The unsigned letter was first published on SovFracht Maritime Bulletin on Tuesday, but Voitenko said that the crew members’ relatives were no longer communicating with him.
Various theories on missing Russian-manned cargo ship
2009-08-14 13:30 BJT
The disappearance of a Russian-manned cargo ship in the Atlantic has spawned a variety of theories. Meanwhile, Russia has taken every necessary measure to try to recover the ship.
The Arctic Sea, is a Maltese-flagged cargo ship, with 15 Russian crew on board and a 1.3 million US dollar cargo of timber. It was due to make port in Algeria, but did not arrive and appeared to have changed course.
Speculation about what might have happened has ranges from theories that it might have been carrying a secret cargo to the possibility it fell victim to a rare case of sea banditry in European waters.
The Swedish Daily Metro quoted the ship's captain as saying that the ship was attacked four days earlier in the Baltic Sea off the Swedish island of Oland.
While the Malta Maritime Authority says that on July 24th, up to a dozen masked men in black uniforms boarded. They tied up the 15 crew, questioned them about drug trafficking, and beat them before leaving 12 hours later in a high-speed inflatable boat.
Security experts were wary of attributing the disappearance to bandits.
Graeme Gibbon-Brooks, Dryad Maritine Intelligence, said, "The classical business model for piracy, if you like, relies on a poor security infrastructure, usually crushing poverty in the areas where it exists. This is really unusual but it follows a line of incidents that we've seen in the Mediterranean where organized criminal gangs have got involved in what is essentially piracy because there are big gains to be made." It is also unlikely to be terrorism. The most likely possibility is insurance fraud or a commercial dispute.
The director of the ship's Finland-based operator, Solchart, says there was a possibility that the vessel could have been hijacked
Viltor Matveyev, Dorector of Scolchart Company, said, "Immediately when it happened, I mean the first of August when the ship disappeared. I gave instructions, I instruct the master to proceed to the nearest port of destination in accordance to our knowledge, taking the latest position of the vessel, it was Lisbon, and we gave instruction to the master with a request to reconfirm this instruction to proceed immediately to Lisbon, but there was no answers."
The Russian Ministry of Defence spokesman said President Dmitry Medvedev ordered every effort made to find the missing ship and release the Russian crew.
Finland, France and Britain have also offered to provide assistance.
Thailand to seek Bout's extradition
Thai prosecutors will appeal against a court decision rejecting a US request to extradite a Russian-born alleged arms dealer detained in the capital Bangkok.
Victor Bout, who has been called the Merchant of Death, has been fighting extradition since his March 2008 arrest accused of agreeing to supply missiles to Colombian rebels.
On Tuesday, a Bangkok court said that it did not have the authority to order the extradition of the 42-year-old because the Revolutionary Armed Forces of Colombia (Farc) was not listed as a terrorist group in Thailand.
But according to Sirisak Tiyapan, executive director of international affairs at the
Thai foreign office, the country's state prosecutor formally told the court on
Thursday that he would lodge an appeal against the ruling.
"The prosecutor has told the court that he intends to appeal against the decision. We are in the process of seeking the official ruling," Sirisak told AFP news agency.
Sirisak also said that the prosecutor has 30 days in which to actually lodge the appeal, during which time Bout would remain in prison.
The court had given the government until Friday to say whether it would
appeal.
'Disappointed and mystified'
News of the appeal came after the US said it was "disappointed and mystified" by the court's decision to reject Bout's extradition and hoped that the Thai government would appeal against the decision.
Bout a former Soviet air force officer, was arrested in a sting at a five-star hotel in the Thai capital after allegedly agreeing to supply surface-to-air missiles to US agents posing as rebels from Farc.
He had faced life in prison if sent to the US and convicted there on terrorism charges, including conspiracy to kill US officers or employees and conspiracy to acquire and use an anti-aircraft missile.
He denies the charges and insists that he ran a legitimate air cargo business.
Bout to Stay in Jail as Prosecutors Appeal
14 August 2009The Associated Press
BANGKOK, Thailand — Thai prosecutors announced Thursday that they plan to challenge a lower court ruling that rejected a U.S. request to extradite suspected Russian arms dealer Viktor Bout.
That means Bout, 42, dubbed the “Merchant of Death” for allegedly shipping arms that have fueled conflicts in Africa, the Middle East and Latin America, will spend several more months in a Thai jail pending the appeal. He had hoped for release as early as Friday.
Bout was arrested in March 2008 at a luxury hotel in Bangkok as part of an elaborate sting in which U.S. agents posed as arms buyers for the Revolutionary Armed Forces of Colombia, or FARC, which Washington classifies as a terrorist organization.
The Bangkok Criminal Court rejected the extradition request Tuesday because it deemed FARC a political movement, rather than a terrorist group, which meant that Bout’s alleged crimes were political offenses, ruling out extradition under a U.S.-Thai treaty.
“The prosecutor has filed its intention to appeal the case as requested by the U.S. officials,” said Sirisak Tiyatan, the director general of the attorney general’s foreign division. The appeal must be filed within 30 days.
The United States, which had expressed support for the appeal, had no immediate comment.
Bout’s lawyer Lak Nitiwatanavichan said he was confident the rejection would be upheld on appeal and his client eventually freed.
“Let them appeal. We will fight with the same defense,” Lak said. “They have no case. I don’t see why the court would rule differently.”
Bout, a former Soviet Air Force officer, has been linked to some of the world’s most notorious conflicts, allegedly supplying arms to former Liberian dictator Charles Taylor and Libyan leader Moammar Gadhafi. He has repeatedly denied the accusations.
The United States is seeking Bout’s extradition on charges he conspired to sell millions of dollars worth of weapons to FARC, including more than 700 surface-to-air missiles, thousands of guns, high-tech helicopters and airplanes outfitted with grenade launchers and missiles. He has been indicted on four terrorism-related charges in New York and could face up to life in jail.
Bout’s nickname, the “Merchant of Death,” came in 2000 from a minister at Britain’s Foreign Office who was concerned that Bout was ferrying weapons around Africa. He has been the subject of UN sanctions, a Belgian money-laundering indictment and an assets freeze by the United States.
14 August 2009, 11:31
Leaders of security services of Russia and Belorussia visit the main cathedral of Kaliningrad
Moscow, August 14, Interfax - Federal Security Service (FSB) Director Alexander Bortnikov and the head of Belorussia's KGB (State Security Service) Vadim Zaitsev visited Christ the Savior Cathedral in Kaliningrad.
To mark this meeting, the guests presented the Cathedral with the icon of St. George - Great Martyr and Victory Maker, the official website of the Moscow Patriarchate reports.
Bortnikov and Zaitstev held a joint session of FSB and KGB boards.
The foundation of Christ the Savior Cathedral was laid in Kaliningrad in 1996 during the visit of Russia's first President Boris Yeltsyn. A container with the earth taken from the location of Christ the Savior Cathedral in Moscow was put in the foundation of this Cathedral. The construction was initiated by the current Patriarch of Moscow and All Russia Kirill who then headed the diocese of Smolensk and Kaliningrad.
Attackers on police post in Russia's Dagestan identified
MAKHACHKALA, August 14 (RIA Novosti) - Police have identified some of the militants who killed 11 people during an attack on a police post and nearby health center in Russia's North Caucasus republic of Dagestan last night.
"The identity of some of the militants, including their leader, has been established, but will not be disclosed pending an investigation. They are all on the federal wanted list for various crimes," a police spokesman told RIA Novosti.
Initial reports on Thursday said six people, four police officers and two civilians, were killed when gunmen opened fire on a police post in the Caspian Sea town of Buinaksk.
The attackers then broke into a nearby sauna and gunned down seven women.
A police source in Dagestan said some 15 gunmen were believed to have taken part in the attack.
"They are known to have seized a minivan from a local resident in which they arrived at the police post," the official said.
The owner of the minivan has identified two of the militants as Buinaksk residents, the police official said. He also said efforts to trace the attackers were continuing in a wooded area where they had fled.
Also in Dagestan on Thursday, two police officers were wounded in separate sniper attacks in the republic's capital, Makhachkala.
Three suspected militants were killed overnight in the republic's Derbent district when police tried to stop a car for a document check. The people inside opened fire and were killed when police returned fire. Several assault rifles were found in the vehicle.
Sappers are meanwhile continuing to defuse a bomb, a 12-liter bucket filled with explosives, planted near a railroad in Makhachkala's suburbs.
Dagestan, which neighbors Chechnya, has seen an upsurge in militant violence in recent months, with attacks on police and federal forces being a regular occurrence. In June, Dagestan's interior minister was assassinated at a wedding reception.
Three militants destroyed in Dagestan
MAKHACHKALA, August 14 (Itar-Tass) -- Police have destroyed three militants in Dagestan’s Derbent region. As ITAR-TASS learnt at the law enforcement bodies of the republic, “a shootout occurred in the federal highway Kavkaz not far from the village of Sabnava overnight to Friday.
According to law enforcers, a traffic police detail tried to stop a VAZ-2106 car for checking documents. At that moment the car’s passengers opened fire from automatic arms at policemen. As a result of return fire, the car caught fire and all three passengers of the car died from wounds and burns.
At present, experts are trying to identify the dead. Criminal proceedings were instituted.
Seven women shot dead in Russian sauna
Fri Aug 14, 2009 1:59am EDT
MOSCOW (Reuters) - Seven women were shot dead in a sauna in Dagestan and, in separate attacks, eight policemen and two separatists were also killed in Russia's northern Caucasus region late on Thursday, police and media said on Friday.
Growing lawlessness and Islamist violence in Dagestan, Chechnya and neighboring Ingushetia are undermining the Kremlin's control of its southern flank.
The attacks are the latest in a sharp upswing in violence against civilians across the region, where a local minister was shot dead in his office earlier this week.
The seven women were shot by rebels at around the same time as separatists attacked and killed four policemen manning a nearby checkpoint in Buinaksk, a town 41 km (25 miles) from local capital Makhachkala.
"At least four died when they attacked the traffic police. Around the same time they entered the sauna and shot seven women," a spokesman for local police said on Friday. He gave no further details.
Separately, four policemen and two separatists died in a shootout in Chechnya, Russian news agencies reported on Friday.
The Chechen deaths occurred in an abandoned house near the capital Grozny, RIA news agency said.
Five other security force officers were also injured in a separate clash in the republic on Thursday, Interfax reported.
On Wednesday, Ingushetia's construction minister was shot at close range in his heavily guarded office.
In Chechnya three human rights activists have been shot and killed in the past month, two earlier this week and one in July.
(Reporting by Conor Sweeney and Tatiana Ustinova; Editing by Louise Ireland)
4 Russian police killed, 9 hurt in Chechen clashes
1 hr 29 mins ago
MOSCOW (AFP) – Four Russian policemen were killed and nine injured in clashes with rebel fighters in Russia's violence-torn region of Chechnya, Russian news agencies reported Friday.
Overnight from Thursday to Friday, Russian forces launched an operation to flush out two guerrilla fighters, holed up in a deserted house in the village of Kerla-Urt in Chechnya's Groznensky district.
The two gunmen were killed in the operation, a police source told the Interfax news agency.
"As a result, four police officers were killed and four more have been hospitalised with gunshot wounds,"
In a separate clash, five policemen were hospitalised after being wounded in a gunfight with eight rebels earlier Thursday.
An "operation in the woods uncovered eight members of an illegal armed group, who opened fire resisting arrest," a police source told the RIA Novosti news agency Friday.
Deadly clashes between government forces and Islamist rebels are common in Chechnya, a predominantly Muslim region in the North Caucasus mountains.
The region was the site of two wars between separatists and Russia's central government after the collapse of the Soviet Union in 1991, and the insurgency has spilled over with increasing violence in the neighbouring regions.
Baku-Tumen railway stops operating due to explosion threat
14 August 2009 [12:24] - Today.Az
Trains routing through Tumen-Baku and Baku-Tumen will resume operating soon.
|Trains stopped operating in Russia due to the threat of explosion on the railroad, the Azerbaijan Railways said. |
| |
|The Russian media reports say the Russian security services is conducting mine-sweep at the Rostov-Baku railway. Currently, two |
|trains have stopped in stations near the city of Makhachkala. |
| |
|The train is at a safe distance from the site of mine sweep. Trains will be resume operating after the demining completes and |
|the safety of traveling is guaranteed. |
Kadyrov Sues Memorial
Chechen President Ramzan Kadyrov sued Memorial’s chief for 10 million rubles ($314,800) in a Moscow court Thursday for allegations that he was involved in the murder of one of the human rights organization’s activists last month.
The Tverskoi District Court will hear the defamation lawsuit against Memorial chief Oleg Orlov on Aug. 31, Interfax reported.
Orlov accused Kadyrov of involvement in the abduction of Memorial activist Natalya Estemirova in Grozny on July 15. She was found shot dead in Ingushetia later that day.
Kadyrov’s lawyer Andrei Krasnenkov said his client also wanted Memorial to publish a retraction on its web site. (MT)
Ingush Police Chief Says 2 Key Cases in Last Stages
14 August 2009The Moscow Times
Ingushetia’s top police official said Thursday that an investigation into the attempted killing of Ingush President Yunus-Bek Yevkurov and murder of Ingush Supreme Court deputy chief justice Aza Gazgireyeva was in its final stages.
But the Investigative Committee said later in the day that the announcement “wasn’t absolutely correct and premature.”
“The murder of Supreme Court deputy chief justice Aza Gazgireyeva is nearly solved. The investigation into the assassination attempt against the republic’s leader, Yunus-Bek Yevkurov, is moving toward its closure,” Ingush Interior Minister Ruslan Meiryev told Interfax.
Gazgireyeva was shot dead as she dropped her children off at school in Ingushetia’s main city of Nazran on June 10. A car bomber attacked Yevkurov’s presidential motorcade in Nazran on June 22.
“It is true that certain results have been achieved in the mentioned cases, but it’s too early to speak about the disclosure,” the Investigative Committee said in a statement.
Meanwhile, President Dmitry Medvedev signed a decree Thursday that re-instated Yevkurov, who was badly injured in the bombing, to his position of president.
Yevkurov was released from a Moscow hospital on Monday and had planned to return to work after being released from a Moscow region rehabilitation center later this month.
After the attack, Yevkurov was replaced by his deputy, Rashid Gaisanov, as acting president.
Putin Lets Kostin Take a Vacation
14 August 2009By Oleg Nikishenkov / Special to The Moscow Times
Prime Minister Vladimir Putin on Thursday gave VTB head Andrei Kostin permission to take a week’s vacation after the banker said he was on track to meet and surpass an order to boost the lender’s loan portfolio by 100 billion rubles ($3.14 billion) in three months.
“In July, our portfolio’s growth for the month was 6.4 percent, or 84 billion rubles. That is, we completed 84 percent of the quarterly assignment in July,” Kostin said in comments posted on the government web site. “In August, of course, the pace won’t be like that … but by early September we’ll meet and exceed the plan, and then continue on.”
Kostin said VTB was helped by a slow revival in several sectors, including metals and coal, and that the bank was ready to further increase lending. “In the first seven months, we managed to increase lending by 2 percent monthly and we’ll try to keep in line with it till the year’s end,” he said.
The banker warned, however, that VTB might take losses this year because of all the problem assets — including oil and gas reserves, developments in Moscow and land in the Moscow region — on its balance sheet, but that many of the assets could become profitable “in the next few years.”
Putin also asked about complaints of high interest rates, specifically from engine maker Saturn, which was nationalized after the prime minister visited the indebted plant in December.
Kostin said VTB had lowered interest rates for Saturn by 3 percentage points and assured Putin that “we will further develop this trend.”
The government has been driving lenders to push down interest rates to stimulate the real economy, and the Central Bank has cut its benchmark interest rates five times in the past four months, most recently on Aug. 7.
In June, Putin told a meeting of ministers and the heads of the five largest state-controlled banks — Sberbank, VTB, Gazprombank, VEB and Rosselkhozbank — that the lenders must issue at least 150 billion rubles in loans by Aug. 1, with another 150 billion rubles by Sept. 1, and 100 billion to 200 billion rubles more by Oct. 1.
He then told Kostin and Sberbank’s German Gref to make sure they did not take vacations until they set the work in motion to reach those targets.
After hearing Kostin’s report on the new lending Thursday, Putin quipped, “So you mean you’re ready for a vacation, that the process is under way?”
Kostin said that if Putin gave his permission, he would “take a quick week. I probably wouldn’t plan on any more.” Putin approved the request.
The two also discussed VTB’s situation with bad debt. Kostin said his bank, Russia’s second-largest lender, estimated that its amount of problem assets would not exceed 8 percent by year-end, “although that’s still a lot for a bank with a loan portfolio of $100 billion.”
Has Surkov Given Away the Game in a Novel?
14 August 2009By Michael Stott / Reuters
“Close to Zero” is the tale of a Russian publisher operating in a murky political system featuring paid-off media, corrupt officials, dubious politicians and law enforcement agencies on the take.
The short novel was published last month and passed unnoticed until Thursday, when Vedomosti reported that its author was none other than the Kremlin’s powerful first deputy chief of staff Vladislav Surkov, writing under a pseudonym.
In the novel, which advertised itself as “gangsta fiction,” the main character Yegor Samokhodov orders a poet to write verse in the name of the regional governor to make the official look clever and win an award.
Samokhodov, a publisher who does a sideline in political public relations, then tries to bribe a female journalist at an opposition newspaper to “correct” stories about damage to children’s health from a toxic chemical factory owned by the governor’s relative.
A source at the Russky Pioner magazine, which published the novella, confirmed that the story was Surkov’s work.
“Yes, it was him,” the source said on condition of anonymity because of the sensitivity of the issue.
The Kremlin denied that Surkov had authored the novel. “He definitely didn’t write it,” said a spokesman.
But the pseudonym used — Natan Dubovitsky — is almost identical to the name of Surkov’s second wife, Natalya Dubovitskaya.
The author of Russia’s doctrine of “sovereign democracy,” which touts a strong, organized state at the center of the political machine guarding against chaos and foreign meddling, Surkov often rails against Western “lies” in portraying Russia.
“Our partners … tell us about democracy while thinking about our hydrocarbons,” he told foreign journalists in his last news conference with them in 2006.
Andrei Kolesnikov, the editor-in-chief of Russky Pioner, said he had decided to publish the work because of its artistic quality, despite not knowing who wrote it.
“I received the text by e-mail with a request from the author that he was interested in my opinion,” Kolesnikov said. “I really liked the novel. I am convinced it is a work of quality … for the author, it was an act of self-discovery.”
Kolesnikov said the author had told him he had previously contributed to the magazine. In December, the magazine published an article by Surkov about Spanish painter Joan Miro.
In one revealing part of the story, the opposition journalist Nikita Mariyevna tells Samokhodov she hates those in power — a “greasy crowd” of governors, deputies, ministers, security service officials and police.
But the book’s hero replies: “It’s not those in power that you hate, but life.” He goes on to explain that unfairness, the use of force and stagnation are just part of life and urges her to live with this rather than try to destroy it.
The novel has received mixed reviews by Russky Pioner readers, from “boring [expletive]” and “trash with pretensions” to “talented writing” and “really cool.”
Analysts speculated that Surkov might have written the book as a signal to United Russia that times could be changing and they might face greater political competition in future.
Surkov worked as a public relations and advertising consultant in the 1990s before joining the Kremlin. He has written several songs for the rock band Agata Kristi.
Among Russky Pioner’s other columnists are Prime Minister Vladimir Putin and presidential economic adviser Arkady Dvorkovich.
Kolesnikov, who is also Kommersant’s Kremlin pool reporter, has compiled two books based on articles he wrote during Putin’s first presidential term in 2000 to 2004. The books, titled “I Saw Putin” and “Putin Saw Me” were published in late 2004.
In 2000, Kolesnikov co-authored a book titled, “In the First Person: Conversations with Vladimir Putin.”
Surkov Writes Novel About Corruption
13 August 2009By Natalya Krainova / The Moscow Times
Vladislav Surkov, the Kremlin’s powerful first deputy chief of staff, has written a novel about corruption among senior officials under a pen name, and excerpts have been published to mixed reviews.
Russky Pioner magazine, edited by Kremlin pool reporter Andrei Kolesnikov, published fragments from the novel "Okolonolya," or "Around Zero," by Natan Dubovitsky in late June.
A source in Zhivi media group, which owns the magazine, said Dubovitsky was in fact Surkov, widely seen as the Kremlin’s chief ideologist, Vedomosti reported Thursday.
Surkov's wife is Natalya Dubovitskaya.
A Kremlin spokesman said Thursday that he could not confirm or deny Surkov's authorship. No one was available for comment at Zhivi during repeated calls to its office Thursday.
When Russky Pioner published excerpts from the novel in June, Kolesnikov wrote in a commentary that the novel was written by a columnist for the magazine. In December, the magazine published an article by Surkov about Spanish painter Joan Miro.
The novel "explains a lot about why Russia's modern history is going the way it is going and not any other way," Kolesnikov wrote.
Surkov coined the term "sovereign democracy," which has been introduced in a manual for history teachers.
The novel has received mixed reviews by Russky Pioner readers, from "boring [expletive]" and "trash with pretensions" to "talented writing" and "really cool."
Marina Litvinovich, an aide to opposition leader Garry Kasparov, expressed doubt on her LiveJournal blog on Thursday that Surkov had authored the book, calling the information "a PR move."
In addition to contributing to Russky Pioner, Surkov has written several songs for the rock band Agata Kristi.
Among Russky Pioner's other columnists are Prime Minister Vladimir Putin and presidential economic adviser Arkady Dvorkovich.
Kolesnikov, a reporter with Kommersant, has compiled two books based on articles he wrote during Putin's first presidential term in 2000 to 2004. The books, titled "I Saw Putin" and "Putin Saw Me" were published in late 2004.
In 2000, Kolesnikov co-authored a book titled, "In the First Person: Conversations with Vladimir Putin."
Repeated calls to Kolesnikov's work phone went unanswered Thursday.
United Grain to Buy Milk
United Grain may handle government purchases of milk from farmers in order to prop up prices, Agriculture Minister Yelena Skrynnik said Thursday, Kommersant reported.
Russia may buy a certain type of pasteurized milk from farmers from April through August, Kommersant reported. Government purchases may replace direct subsidies for producers, the newspaper said. (Bloomberg)
Workers Paid in Pelmeny
A tractor plant in Minsk will pay its workers with pelmeny and other food from the factory’s cafeteria instead of cash, Khartia 97 reported Thursday.
The food will be sold to employees at cost and billed to their future earnings, the news portal reported. (MT)
Russian Population To Reduce to 110 Million by 2050
13.08.2009
The Russian population will reduce to 110.1 million people by 2050, Itar-Tass news agency reported with reference to a recent research from Population Reference Bureau. The company published the report Wednesday.
The population of the Russian Federation made up 141.9 million people in the middle of 2008. The number of newborns per 1,000 people made up 12, whereas the number of deceased individuals was 15, which resulted in the population growth index of -0.3 percent, scientists said.
If the situation does not change for the better, the number of Russian citizens will reduce to 129.3 million people by 2025 and to 110.1 million by 2050. Therefore, depopulation in Russia will make up 22 percent, the experts concluded.
However, the largest natural depopulation process will be registered in Bulgaria – 35 percent. Swaziland and Georgia follow with 33 and 28 percent respectively. The Ukrainian population will suffer a 28-percent reduction. Japan and Moldova will take the fifth and the sixth places with 25 and 23-percent reductions.
Russia's population is predominantly urban, with 73 percent of its population of 141,903,979 citizens residing in urban areas. Russia has experienced a population loss of about 5 million since it peaked shortly after the fall of the Soviet Union. Currently, population growth is nearly stagnant, with an overall population growth of -0.085 percent in 2008.
Russia's area is about 17 million square kilometers (6.5 million sq. mi.). It is the largest country in the world, larger than Canada by more than 7 million square kilometers (2.5 million sq. mi.). Its population density is about 9 persons per square kilometer (22 per sq. mi.), making it one of the most sparsely populated countries in the world. The population is most dense in the European part of the country, centering around Moscow and Saint Petersburg.
Russian Military Weakness Could Delay Conflict with Ukraine
[tt_news]=35404&tx_ttnews[backPid]=7&cHash=ec8929b9cc
Publication: Eurasia Daily Monitor Volume: 6 Issue: 156
August 13, 2009 12:01 PM Age: 16 hrs
By: Pavel Felgenhauer
Russian President Dmitry Medvedev has publicly attacked his Ukrainian counterpart Victor Yushchenko and called his administration's policies deliberately anti-Russian. In an open letter and in a video posting on his official Kremlin blog, Medvedev accused Ukraine of supporting "barbaric attacks" by the pro-Western regime of President Mikheil Saakashvili during the Russian invasion of Georgia in August of last year. Medvedev alleged that "civilians and Russian peacekeepers were killed by Ukrainian weapons," while Kyiv is continuing to supply the Georgian military with more arms and "shares responsibility for the crimes committed." Medvedev accused the Ukrainian leadership of conspiring with the E.U. on natural gas trade issues against Russian interests, blocking the activities of its Black Sea Fleet in Crimea, suppressing the use of the Russian language and the Ukrainian Orthodox Church element that is subordinate to Moscow. Medvedev castigated Ukraine for aspiring to join NATO, "falsifying history" by emphasizing the crimes of totalitarian communist rule, and promoting nationalist leaders that collaborated with the Nazis as well as disrupting economic ties (kremlin.ru, August 11).
Medvedev expressed his disgust with Ukraine in a highly aggressive tone, implying that the Kremlin is fed up in dealing with Kyiv. Tension between Russia and Ukraine, according to Medvedev, is very high. A number of recent tit-for-tat diplomatic expulsions were described as outrageous. After listing the negative Ukrainian actions, Medvedev announced that Moscow will not send the newly appointed Ambassador Mikhail Zurabov to Kyiv until Ukrainian policies change, in effect downgrading diplomatic relations. Medvedev emphasized that the Kremlin's disgust is not against "brotherly Ukrainian people," but Yushchenko and his government. Commentators in Moscow believe that the Kremlin will refuse to have any dealings with Kyiv until there is regime change and Yushchenko is ousted. The Russian policy in dealing with Yushchenko seems to be in essence the same as with Saakashvili. The hope apparently is that the coming Ukrainian presidential election on January 17, 2010 will oust Yushchenko and a pro-Moscow administration will be elected (Kommersant, August 12).
Last year Moscow announced that it had invaded Georgia to defend Russian citizens. Ukraine has the largest Russian and Russian-speaking population outside of Russia itself. Soon after the Russo-Georgian war, the French Foreign Minister Bernard Kouchner suggested that Russia might next move against Ukraine or Moldova under the same pretext (Reuters, August 27, 2008). The former Ukrainian ambassador in Washington Yuri Sherbak believes that Moscow might be contemplating a possible invasion of Ukraine to partition its territory, arguing that Ukraine is a "failed and ungovernable state" (, May 21).
After Medvedev's anti-Yushchenko broadside, the leader of the Eurasia Movement (a Kremlin-connected nationalist think tank) Alexander Dugin told reporters, "The downgrading of diplomatic relations has created a pre-war situation," and that, "Russia is preparing to cease to recognize Ukrainian territorial integrity, as it did with Georgia. An armed conflict may soon begin in Crimea and Eastern Ukraine that will result in these territories becoming a Russian protectorate." According to Dugin, "war has been declared not against Ukraine, but America," that is attacking Russian influence within the post-Soviet space. Yushchenko is not important, stated Dugin, "a sick blister" while the real foe is the United States (RIA Novi Region, August 11).
The Kremlin insists its conflict is with the regimes in Kyiv and Tbilisi, but not with "our longtime Orthodox brothers" - the people of Georgia and Ukraine. A recent public opinion poll by the independent Levada Center showed a strong dislike of Ukraine, with 47 percent of the population having a negative attitude and 44 percent - positive, while Georgia scores even worse with 63 percent negative and 25 percent positive. The U.S. scored slightly better with 40 percent negative and 47 percent positive. The pollsters believe that these public attitudes are the direct result of state policies and propaganda (Kommersant, August 12).
Medvedev has introduced legislation this week to legalize the use of Russian forces abroad "to defend Russian soldiers and citizens, fight piracy and defend foreign nations against threats." Medvedev announced during a meeting with leaders of parliament that the legislation is connected with the Georgia war, "so that in the future these questions will be clearly regulated." Duma leaders promised to pass the amendments as soon as possible (kremlin.ru, August 10). Medvedev in effect acknowledged that the invasion of Georgia was illegal. Under present legislation, Russia did not have the legal right to invade Georgia, since its territorial integrity was not under threat and it did not have any defense treaties with South Ossetia or Abkhazia. The upper house of parliament did not decide to send troops into battle within Georgia, as the constitution demands (Kommersant, August 11).
The legislation that may legalize a possible future invasion of Crimea "to defend Russian soldiers and citizens" could be passed soon and Medvedev's rhetoric sounds warlike, but the Russian military at present is clearly not ready to take on an offensive "liberation" campaign deep within Ukraine. The Ukrainian armed forces are ineffective, but the territory of the possible theater of conflict is vast and densely populated, requiring a massive deployment of well-prepared troops. Russia needs at least three more years of radical military modernization and some rearmament, before it may contemplate a Crimea and Ukraine mission. Now a new bitter gas war with Kyiv is on the horizon, which might once more cut supplies to Europe. While further Russian attempts to influence domestic politics in Ukraine continue, the military threat will linger in the background.
A New Georgian War Could Destroy Russia the Way Afghan Conflict Did the USSR, Latynina Warns
August 13, 2009Paul Goble
Vienna, August 12 – A new war with Georgia, something Russian officials and commentators are increasingly talking about, could have the same impact on the Russian Federation that the invasion of Afghanistan had on the USSR, according to Yuliya Latynina, a Moscow commentator who specializes on the Caucasus.
In an interview posted on the Kasparov.ru portal today, Latynina suggests this risk is all the greater because Moscow does not now control the republics of the North Caucasus within the borders of the Russian Federation and thus does not see how the problems arising from a new Georgian war could spread northward.
Latynina begins by pointing out that in the Caucasus as a whole at the present time “two different processes are taking place: the spread of rumors about a possible new war of Russia with Georgia and the escalation of the use of force at the same time in several republics of the Russian North Caucasus.”
The Russian powers that be, she continues, “constantly declare that [they] are concerned about a new attack by Georgia.” But what this “literally means” is that “’We are not against beginning yet another war.’” And she reminds that these “declarations” are being made when the news from Chechnya, Daghestan, and Ingushetia is truly disturbing.
According to Latynina, with the murder of human rights activist Natalya Estemirova, the situation in Chechnya has radically changed. “If before they killed enemies of the regime who fought against it with arms in their hands and even burned the homes of their families, now, [the powers that be in Chechnya] are beginning to kill the rights activists” who tell what is going on.
“[Russian President Dmitry] Medvedev and [Prime Minister Vladimir] Putin are powerless even to interfere in this situation,” the Kremlin critic says.
Meanwhile in Ingushetia and Daghestan, the security situations are equally dire but different. In the former, a civil war is continuing, one that began under former republic President Murat Zyazikov and that his successor Yunus-Bek Yevkurov has only been a little able so far to overcome.
And in Daghestan, she says, the republic leader Mukhu Aliyev has shown that he “is able ‘to divide up’ but is not able to rule,” with Islamist extremists receiving “large sums directly from the republic budget” and enjoying the protection of both officials and big business in that ethnically diverse region.
As for the breakaway republic of South Ossetia, the ostensible cause of the Russian-Georgian war a year ago, Latynina says that “Russia does not control” its president, cannot force him to stop the thieving or to begin reconstruction, and must deal with a population that has been kept “in the position of constant military hysteria.”
As a result, she suggests, it is tragically not unthinkable that there could in fact be a new war between Moscow and Tbilisi even though she argues that such a conflict would have every chance of “becoming for Russia that which the invasion of Afghanistan became for the USSR,” a step that would lead to the disintegration of Russia itself.
This entire region, she concludes is “like an old piece of fabric which is unraveling in various places.” And “to the extent that the fundamental causes [for this unraveling] are one and the same, then, even if there is no weakening of Russia, they could combine into a single conflagration.”
In her Kasparov.ru interview, Latynina does not mention what may be an even more disturbing reality about the relationship of the North Caucasus and the South Caucasus. Over the course of the last three centuries, Russia has never been able to control the former until and unless it controlled the latter, a pattern that points to still more crises ahead.
Unfortunately, fewer and fewer people are likely to have access to the kind of information they would need to understand that relationship or to do anything to overcome it before it is too late for both Russia and the Caucasus north and south.
On the one hand, as a new poll shows, half of all Russians say they cannot understand why the violence in the North Caucasus is increasing, with those who do either blaming unnamed “outside forces” opposed to Russian influence there or the struggle over oil and other natural resources.
And on the other, fewer news organizations are covering the conflicts on the ground. The latest to pull out is Moscow’s “Novaya gazeta” which, after blasting Moscow for appearing to have given out “a license for murder” to local elites, announced today that it was suspending the work of its journalists in Chechnya.
Siberia Needs Roads But Moscow Builds Pipelines
August 13, 2009Paul Goble
Vienna, August 11 – Vladimir Putin’s latest swing through Siberia, a trip he said was intended to highlight the importance of Siberia for Russia, in fact underscored Moscow’s lack of interest in the people of that enormous region and demonstrated Siberia’s need to move toward decolonization, according to a Moscow reporter who followed in the prime minister’s footsteps.
In an article in “Novaya gazeta,” Aleksey Tarasov argues that this sad state of affairs reflects the way Moscow elites “use Siberia as exotic islands, for rest, public relations, and enrichment,” preferring to build pipelines from which they can extract wealth instead of roads that would benefit Siberians.
And having described his own inability to drive home from Irkutsk westward, Tarasov pointedly notes that “if someone cannot drive home, he will search for another home,” a comment that clearly has less to do with him as an individual than it does with Siberia and its people as a whole.
Putin, the journalist says routinely referred during this trip as he has in the past, the federal highway M-53 which he suggests unites Siberia with Russia, but “despite all the cutting of ribbons and the speeches of the first persons of the state,” Tarasov says, “there is [in many places along its route] no asphalt” or even bridges across relatively small rivers.
Moreover, he points out, “the resolution in Siberia of geopolitical questions depends to a greater extent not on the Kremlin but like even four centuries ago, on rain, snow, ice, rivers, and streams,” which frequently combine throughout the year to make the poorly paved or unpaved roads impassable.
Many Siberians are infuriated not only by Moscow’s preference for its pipelines over the region’s need for roads but also by the fact that during the Putin years, Siberians have been “regularly told about a road which doesn’t exist” or about improvements in existing roads that either have not taken place or have made the situation worse.
In February 2004, Putin “cut the ribbon at a bridge over the Amur” and proclaimed that this was “a very big event not only for the Far East but for the entire country. In 1903,” the then president said, “the TransSiberian railroad was opened. And this [the opening of the road] was an event second only in importance to that.”
But it quickly became apparent that Putin’s words did not reflect reality. Much of the road was either unpaved or even ungraded, many bridges needed had not been constructed, and as a result, travel times on this national highway have increased, sometimes even doubling, since Putin said the highway was open.
Tarasov points to some especially bad stretches of highway between Krasnoyarsk and Irkutsk where three years ago, he says, it took a day to drive but now takes two. And he points to the stretch of 400 versts between Nizhny Ingash and Tulun as the worst of all, with the muddy road having become a cemetery for “thousands of cars.”
(The only positive consequence of these otherwise unfortunate developments in the highways of Siberia and the Russian Far East, the “Novaya gazeta” journalist suggests, is that no one can call the M-53 “a highway of death.” Cars must proceed so slowly that it is extremely difficult “to be killed.”)
In order to profit from the export of oil and gas, however, Moscow has pressed ahead with the construction of pipelines, but “pipelines instead of roads is not even a case of guns instead of butter. When there are guns, it is possible to hope for victory.” But when there are no roads, people are deprived of hope.
Nonetheless, he suggests, there is more than a desire for profits involved: “Good roads, like computers lead to the decentralization of life. Roads are a kind of freedom.” Unfortunately, in Russia, Moscow prefers control via the vertical, with “the powers that be free to do what they want but not even able to cope with theft” by those who are supposed to be building highways.
Moscow might have been able to get away with such an attitude up to now, Tarasov says, but the increasing number of Russians who own cars is going to change that equation. However much you love your village, “if you buy a Mercedes and regularly wash it, that means that you already love yourself a little more.”
And that sense of self-worth among the residents of Siberia that car ownership promotes in turn means that “you will not agree that your life should be structured along pipeline routes rather than roads, by infrastructure for Urals gas and Siberian Light crude but by highways for Ivanov, Petrov, and Sidorov” – or for Siberia as a whole.
National Economic Trends
Dubinin: there is no threat of ruble devaluation if oil trades above $50/bbl
14.08.2009 - RIA NOVOSTI/ Banki.ru
The Russian ruble is under no threat of devaluation as long as Russian oil exports blend Urals trades above $50 per barrel, VTB Capital managing director and former CBR chairman Sergey Dubinin thinks.
According to him, while oil futures trade above the $50/bbl market the inflow of foreign currencies to the country will be higher than the outflow. Consequently, domestic supply of foreign currencies will exceed demand thanks to which the national currency will appreciate against foreign ones.
“Fundamental components (of currency rates) are the state of the balance of payments. If the country sees an inflow of currencies (from export sales) that is higher than its spending abroad (payments for imports), the balance of payments runs a surplus and… the currency firms on the domestic market…We have a surplus of the balance of payments in Russia," he said.
Producer Prices Fall 8th Month
14 August 2009Bloomberg
Producer prices, an early indicator of inflation, slid in July for the eighth consecutive month as industrial production slumped and companies competed by discounting products amid waning demand, the State Statistics Service said Thursday.
The price of goods leaving factories and mines declined a record 12.3 percent compared with July 2008 after sliding an annual 9.4 percent in June.
Prices began declining last December after the recession deepened and energy costs fell during the global slowdown. The Economic Development Ministry expects inflation to range from 12 percent to 12.5 percent in 2009 from last year’s 13.3 percent.
Consumer prices rose in July for the first time in four months, growing 12 percent from 11.9 percent in June.
Cost pressures in Russian service industries remained “subdued” in July, VTB Capital said in its Purchasing Managers’ Index published on Aug. 5.
Reserve Fund down to $90bn on 1 Aug
Renaissance Capital, Russia
Thursday, August 13, 2009
According to the Ministry of Finance (12 Aug), the Reserve Fund (RF) amounted to RUB2,811bn, or $90bn, on 1 Aug, down from $94.5bn on 1 July 2009. In July, RUB191bn ($6.1bn) was transferred from the RF to finance the federal budget deficit (RUB180bn) and to make up the oil and gas transfer (Rub11bn). Part of the RF is due to cross-currency fluctuations that amounted to $12bn on 1 Aug.
The National Welfare Fund (NWF) was at RUB2,859bn ($91bn) on 1 Aug, a slight increase from $90bn on 1 July 2009. In July, the NWF received RUB4.5bn as interest income from deposits placed in VEB (total current deposits within VEB equal RUB436bn).
The RF will be used for budget deficit financing till the end of this year. We estimate that the RF will decline to $45-50bn by YE09. The government has no plans to use the NWF to finance the budget deficit in 2009 and the NWF may be changed primarily due to exchange rate fluctuation. We expect the NWF to be at $88bn at YE09.
TABLE-Russia monetary base rises to 4.02 trln rbls
14-AUG-2009 07:36
Aug 14 (Reuters[pic]) - Russia's monetary base rose to 4,023.5 billion roubles on Aug 10 from 3,985.7 billion roubles on Aug. 3, the central bank said on Friday. It provided the following details for this month.
Date monetary base (bln roubles)
2009
Aug 10 4,023.5
Aug 3 3,985.7
July 27 4,059.6
July 20 4,083.6
July 13 4,055.8
July 6 3,986.6
June 29 3,988.4
June 22 4,007.3
June 15 3,975.8
June 8 3,883.5
June 1 3,857.4
May 25 3,893.9
May 18 3,871.7
May 12 3,848.2
May 4 3,820.2
April 27 3,820.9
April 20 3,825.7
April 13 3,772.0
April 6 3,710.1
March 30 3,729.8
March 23 3,759.6
March 16 3,751.5
March 10 3,741.4
March 2 3,715.9
Feb 24 3,781.8
Feb 16 3,741.2
Feb 9 3,707.5
Feb 2 3,755.4
Jan 26 3,896.1
Jan 19 4,066.2
Jan 12 4,218.7
Jan 1 4,391.7
2008
Dec 29 4,283.1
2007
Dec 24 4,016.6
2006
Dec 25 3,002.0
NOTE - Monetary base comprises cash in circulation and commercial banks' deposits at the central bank. To see more detailed historical data on Russia's monetary base you can go to cbr.ru/eng/main.asp
Keywords: RUSSIA BASE/
(Moscow Newsroom, +7495 775 1242, moscow.newsroom@)
Russia is going to invest $10 bln of international reserves in IMF bonds
13.08.2009 - PRIME-TASS/ Banki.ru
As early as August-September the Russian Federation plans to inject $10 bln into IMF bonds, director of the finance ministry’s department for financial relations, state debt and governmental financial assets Konstantin Vyshkovsky said in an interview with the news agency.
“Currently Russia mulls buying bonds issued by the fund’s (IMF) for up to $10 bln using international reserves of the Bank of Russia. The projected acquisition timeframe is August-September 2009," he said. Vyshkovsky noted that this July the IMF board of directors reviewed and approved the procedure for the fund’s bond circulation (financial terms for bond issuance) and also worked out a standard bilateral agreement for countries willing to make investments by purchasing IMF bonds.
“To date Russia, China and Brazil have already expressed their interest in bond purchases, with China willing to invest up to $50 bln, while Russia and Brazil could acquire fixed-income instruments worth $10 bln each," Vyshkovsky pointed out. He noted that the issue about the sufficiency of the IMF’s credit resources was acutely raised following the deepening of the global financial and economic crisis. Selling debt instruments to IMF member states is one of the ways to replenish these coffers.
Strengthening ruble debt demand energizes Russia's primary market
bne
August 14, 2009
Since the eginning of March, the primary ruble bond market has become increasingly active. According to figures from ING, total placements reached RUB542bn (about $17bn) in the first half of the year, with corporate debt making up 70% of that total volume.
"In fact, June's total placements of more than RBL200bn appear to be a historical high debt offering for a month," says Stanislav Ponomarenko of ING. "This is supported by a strong recovery of ruble debt demand, which is also evidenced by persistently tighter primary auction pricing compared to initial price talks."
Ponomarenko identifies improvements in risk appetite and ruble liquidity as the key drivers behind the local debt demand. Given the RUB2.7 trillion budget deficit expected over the second half of the year, ruble liquidity should get a significant boost in the quarters to come. "This may take additional support from likely balanced capital account flows. As such, we see potential liquidity inflow as sufficiently large to further support activity of the primary ruble debt market," he says.
On the flip side, the positive trends on the ruble debt market remain quite sensitive to the global appetite for risk and the oil price. If the oil price falls to the $40-50/barrel level together with a new wave of risk aversion, Ponomarenko doesn't expect much local debt support from budget liquidity injection. "On the contrary, in this situation increasing ruble liquidity inflow risks intensifying the oil price pressure on the domestic currency and yields," he says.
[pic]
COMMENT: Russia hits bottom, recovery starts
bne
August 14, 2009
The bad news is that Russia just went through one of its worst quarters since the fall of the Soviet Union. The good news is that the economy looks like it has passed bottom and things will get better from here.
Russia's state statistics agency reported on August 11 that the economy shrank by 10.9% in the second quarter form the year-earlier period, slightly worse than the 10.4% forecast and the worst result in 15 years.
The economy has surprised on the downside every month since the financial firestorm swept the world in September last year. At the start of this year, the optimists were predicting that Russia's economy would be flat this year. As late as February, the president's economic advisor, Arkardy Dvorkovich, was still saying the economy would start to recover in May when all it did was sink further into the mire. One terrible month followed another and the numbers have come out below even the most pessimistic predictions every month since then.
But a slew of good economic results in July suggest that the pendulum has reached its zenith and should start to swing the other way in the second half of the year. There was an unexpected up-tick in electricity consumption in July. Widely used as a proxy for economic activity, the 4.2% increase in power consumption in July suggests that firms are working again as they need power to make things.
Likewise, Russian Railways released its July transportation statistics at the start of August, which is another proxy for economic activity. They show that cargo turnover only dropped 11% on year, its best figure this year. The worst month was January when cargo volumes crashed by a third on month and continued to fall by 20% for four consecutive months afterwards as goods simply disappeared from the market.
Bolstering these proxies was VTB Europe's PMI indicator for July, which showed the total activity index was just below the 50 points mark that represents flat GDP activity. "The 11% drop in cargo turnover implies that industrial production only slowed 7-9% year on year, which would also be the best figure this year," says Aleksandra Evtifyeva, a senior economist at VTB Capital. "Cargo turnover has shown an improving trend for three consecutive months, so we can now definitely say that Russian manufacturing has switched onto the track to recovery: an improvement in transportation figures comes in line with the growing utilisation of energy and raw materials."
Inventories
What underpins both these results is manufacturing. During the collapse in growth, companies stopped producing and sold down what they had in stock instead. What the data suggests is that the storeroom shelves are now empty and companies have to turn their production lines back on again.
The big difference to the 1998 crisis is that this time the payment system effectively collapsed in September. In 1998, there was no payment system at all, as the economy was being run on barter in what was dubbed the "virtual economy" at the time. The devaluation of the ruble on August 17, 1998 was actually a boon, as it made rubles cheap and everyone suddenly demanded payment in cash for the first time. The upshot was that money starting flowing and the economy boomed.
This time round exactly the opposite happened. There was lots of money flowing, but too much of it was borrowed from abroad, so when the squeeze came, triggering margin calls on these debts, everyone was desperate for cash and horded every kopek they could lay their hands on.
What caught the Kremlin off guard were companies' reaction to the collapse of the payment system: they simply stopped producing goods or doing anything that would burn up cash and the economy ran into a brick wall. The related liquidity squeeze in the banking sector only made things worse. The halt in economic activity sent banks' non-performing loans skyrocketing, so they also began hording cash in anticipation of rising levels of bad debt.
The fall in inventories accounted for 80% of the drop in GDP in the first three months of this year, according to the Ministry of Economic Development and Trade. The government has been pouring money into the economy trying to get the wheels of commerce turning again: Russia's stimulus package is equivalent to 14% of GDP – the biggest stimulus package ever, according to the Bank of Finland – but all that happens to this money is it also gets horded.
Happily this can't go on forever and it appears that Russia's companies have sold off most of their inventories and now will have to go back to making things again to meet new orders. Once they start working again they will start spending money again and – hey presto! – the economy starts to recover. "The trends in GDP in July are in line with our expectations, and we reiterate our view that the economy will start growing (though moderately) in the second half of 2009. The revival will be supported by increasing gas exports, restocking and gradually improving crediting. Interestingly, expectations of a recovery in in the second half are becoming the consensus among economists. We forecast a GDP decline of around 5% this year," says Troika's chief economist Evgeny Gavrilenkov.
Patchy recovery
The positive signs are welcome, but the end of a recession is not the same as a recovery. Bringing the economy to a standstill for nearly a year has done a massive amount of damage that will take a long time to undo.
Worst hit were the sectors catering to the booming consumer demand and Russia is unique amongst the BRIC countries (Brazil, Russian, India, China) as the only one to see consumer spending contract.
The booming car market has probably been the hardest hit. Automotive producers are still running start-stop work regimes at their plants, forcing their employees to take as many holidays as they can to save cash. Car sales in the first half of this year were down by half and imports were even worse hit, falling 78%.
However, the news is not entirely bad. Leading Russian mobile phone operator MTS released a solid set of results for the first half of the year, with income of $563m beating consensus forecasts by 4%. According to management, local traffic has stabilized at current levels and is seen as resilient, however the company continues to see weakness in roaming, international and intercity calls, as well as SMS and content.
High unemployment will be a big drag on a faster recovery. After spiking to 10% in the wake of the crisis, the number of unemployed fell to 6.3m, or 8.3% of the workforce, in June, but rehiring those laid off will be a long slow process. For example, Avtovaz, the maker of the Lada and one of the country's biggest employers, said recently it was toying with the idea of laying off 27,000 workers in the near future.
And getting the money flowing again will also take time. Banks reported a 0.1% increase in corporate lending in July on month – the first increase since the crisis began – which suggests the Kremlin's rescue package is starting to get some traction. "The take off of the state guarantees programme, coupled with a continuing decrease in the [central bank's] refinancing rate, is fertile ground for a rebound in credit activity in the banking sector. While at this stage the July result appears rather modest, we expect activity to strengthen over the next couple of months, thereby, finally seeing authorities' efforts to revive lending bear fruit," says VTB Capital's banking analyst Dmitry Dmitriev.
The picture is not as rosy with consumer loans, where the amount of bad debt hit 10% of the total loan portfolio. The local bond market has also come back to life with the number off issues defying gravity: since the end of April, there were more than RUB450bn ($15bn) placed in new bonds. But the anaemic lending activity by banks means bonds are currently the only source of funds in Russia and even this is limited to the top tier of companies.
While the good news is more than welcome, investors are still worried about public financing. The massive spending is bound to get things moving, but some worry that the state is just making new problems for itself. Indeed, the International Monetary Fund warned at the start of August that the Kremlin was spending too much. Budget spending is up by a third over 2008, but revenues are down to a half of previous levels. At this rate the Russian government will use up all its reserve funds by the middle of next year, a de facto bet that the economy will be growing again by then.
The issue is whether Russia can afford the inevitable deficit it will run up. Prime Minister Vladimir Putin has set a target of 7.5% of GDP this year, but investors worry the debt will be larger. However, with more than $400bn in the bank and one of the lowest debt/GDP ratios in the world, there is still wiggle room. Russia is going to return to the international capital markets next year with foreign borrowings the main source of budget-deficit financing in 2010-2012. According to Deputy PM and Finance Minister Alexey Kudrin, sovereign Eurobond issuance will amount to $17.8bn in 2010 (RUB613.6bn), $20.7bn (RUB764.7bn) in 2011 and $20bn (RUB784bn) in 2012, taking Russia's debt/GDP ratio up to about 17% - hardly a lot in comparison to the UK or US, which have ratios in the triple digits.
Taken all together, Russia's economy should progress steadily from here and there is even the hope that the recovery will surprise on the upside. How long will it take? Typically, emerging market crises last an average of 3.5 years and we are two years into this one if you take the beginning of the US sub-prime debacle as the starting point. Kudrin is more pessimistic, predicting it will take four to five years for the economy to return to 2008 levels, but says the government is keeping something in reserve if needed. "We haven't used all the reserves earmarked for this year, that wouldn't be efficient everywhere," says Kudrin. "I think we have a good margin of safety to get through the coming years."
Business, Energy or Environmental regulations or discussions
RusHydro, Uralkali and Rosneft: Russian Stock-Market Preview
By Stephen Bierman
Aug. 14 (Bloomberg) -- The following companies may have unusual price changes in Russian trading. Stock symbols are in parentheses and share prices are from the previous close.
The 30-stock Micex Index rose 1.3 percent to 1,100.57, gaining for the second consecutive day. The dollar-denominated RTS Index grew 2.9 percent to 1,054.57.
OAO RusHydro (HYDR RX): Russia’s biggest hydropower utility said it sold investors 3.5 billion of 7.5 billion new shares in a public offering, with the rest acquired by its own unit for a later resale. RusHydro rose 6.5 percent to 1.373 rubles.
OAO Uralkali (URKA RX): Russia’s largest potash producer by market value said second-quarter exports declined 75 percent from a year earlier on a drop in demand. Uralkali rose 1 percent to 123.55 rubles.
OAO Rosneft (ROSN RX): Crude oil rose for a second day in New York after the German and French economies unexpectedly grew and the U.S. Federal Reserve said the recession is easing. Russia’s largest oil producer gained 0.8 percent to 195.63 rubles.
To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@.
Last Updated: August 13, 2009 22:00 EDT
VTB completes formation of VTB Capital equity
MOSCOW. Aug 14 (Interfax) - The Russian Federal Financial Market
Service (FFMS) has registered a primary issue of ordinary shares in VTB
(RTS: VTBR) Capital Holding and the results of its placement.
The company placed 5.44 million shares totaling 5.44 billion
rubles, the FFMS said in a statement.
VTB Capital Holding, formed in June 2009, is registered in Moscow.
Its general director is Yury Soloviev, the head of VTB's investment
banking business. VTB is the sole owner.
Sevmash eyes engagement in Nenets AO
2009-08-14
The Sevmash yard has signed a cooperation agreement with the Nenets Autonomous Okrug. The agreement has a strong focus on the Nenets oil resoures, including the Prirazlomnoe field in the Pechora Sea.
Sevmash leader Nikolai Kalistratov signed the agreement with Nenets AO leader Igor Fyodorov. The agreement includes a wide range of issues from environment, culture and education to health, tourism and youth. However, it is the oil industry which appears to be the main object of the deal.
According to a press release from Sevmash, company leader Kalistratov was amazed by the facilities developed in connection with the Yuzhno Khilchuyu field in the Nenets AO when visiting the region recently. He was convinced about the need for a stronger Sevmash engagement in the region.
The deal stated that Sevmash will provide engineering services to Nenets companies, while the Nenets AO administration will provide “informational and organizational assistance in connection with the development of the Prirazlomnoe field in the Pechora Sea”. The Nenets side will also keep the shipyard updated on the general situation in the regional oil industry.
Sevmash is currently working with the last part of the Prirazlomnaya platform, which is to operate at the field with the same name.
NMTP issues operational statistics for 7M09
Renaissance Capital, Russia
Thursday, August 13, 2009
Event: Yesterday (12 Aug) NMTP reported Jan-July 2009 operating results. Total cargo turnover increased 8.4% YoY (vs a 10.4% increase over Jan-June 2009) vs 6% for Russian ports. The slowdown in July was largely driven by the high base as July 2008 was strong (throughput increased 9% MoM).
Crude oil volumes were down 7.4% YoY in July, but up 5% MoM. This is the result of the high base.
Petroleum product exports were on the rise again in July, YoY +24% and MoM +7.5%.
Grain volumes are up MoM (+15%), after a slowdown in June and May.
Ferrous metals volumes decreased 17% MoM, after quite promising dynamics over the past three months. We think the decrease was likely driven by the decline in demand in China.
Containers declined MoM 26% after some recovery in May and June, and demonstrated a 46% decline YoY (vs a 37% decrease YtD).
Action: We reiterate our BUY rating on NMTP.
Rationale: Overall, NMTP's volume dynamics were somewhat worse YoY in July, however it is due to high base and MoM dynamics remain solid in our view. The major items (petroleum products, grain) demonstrate strong MoM/YoY dynamics; with crude oil secured by long-term contracts. The ferrous metals and container volumes declined in July after some recovery in the previous couple of months, but in 2H09 the downside is limited, in our view. The stock trades with a 2009E 7.8x EV/EBITDA and 14.0x P/E, which is a 30-40% discount to EM and DM peers. We think the discount is unjustified, as the company has a better growth profile and higher EBITDA margin than its peers.
Miners to Delay Study
Kinross Gold and Polyus Gold plan to delay the start of a full feasibility study of the Nezhdaninskoye deposit in Siberia to consider cheaper options, Polyus said Thursday.
The two companies have a “technical alliance” to assess Nezhdaninskoye and that may extend to other projects in Russia, it said. Kinross, which also owns 75 percent of the Kupol gold deposit, will spend $20 million on the alliance in the next two years from November 2009. (Bloomberg)
ALROSA Diamond Production +4% in 1H
Posted: 08/12/09 10:41
By Avi Krawitz
Russia’s diamond production rose 4.3 percent to 18.349 million carats in the first half of 2009, Interfax reported, citing Finance Ministry data. Production by value grew 0.6 percent to $1.2 billion.
The report noted that ALROSA accounts for approximately 97 percent of Russia’s diamond production, and the figures provide further evidence of the vastly different response that the company had to the economic downturn, as compared with other diamond mining companies. While ALROSA evidently increased production but did not sell any diamonds in the first half of the year, De Beers cut output by 73 percent to accommodate the decline in demand. De Beers rough sales fell 57 percent to $1.4 billion. ALROSA reported in July that it had resumed its rough diamond sales, selling $150 million worth during the month.
IzhAvto Begins Bankruptcy Procedure
14 August 2009By Natalya Vasilyeva / The Associated Press
Carmaker IzhAvto has filed for bankruptcy, leaving abour 5,500 jobs on the line, a court said Thursday.
IzhAvto filed last week, according to documents posted on the web site of the Arbitration Court in Udmurtia, where the company is based.
IzhAvto, the region’s major employer with nearly 5,500 people on the payroll, assembles vehicles for South Korea’s KIA and AvtoVAZ.
An IzhAvto official said the company will try to restructure its financing rather than fold its operations. The official spoke on condition of anonymity because the company is withholding comment until proceedings commence.
A separate source close to the company’s management, who also spoke on condition of anonymity, confirmed that intention.
IzhAvto has been incurring losses since the third quarter of 2008, according to the Audit Chamber, which attributed the company’s poor performance to its management’s “inefficient financial policy.” As of April, its debt stood at 11.3 billion rubles ($354 million). Sberbank, the car plant’s major creditor, is keeping IzhAvto’s controlling stake as collateral.
Some 2,000 people have been paid to leave their jobs at the plant. The company source said that the management hopes to avoid laying off the remaining 3,500.
The local car market — once close to becoming Europe’s largest — appears to be particularly vulnerable. New car sales dropped a staggering 58 percent in July following a 56 percent year-on-year drop in June.
To boost the sales, Industry and Trade Minister Viktor Khristenko unveiled a plan similar to the U.S. “cash for clunkers” program earlier this week. All new car buyers will be offered a 50,000 ruble rebate ($1,570) for a new vehicle when they present an old car to be scrapped, the ministry said Tuesday. Although it has not yet been given final approval, the incentive is expected to be launched next year in selected regions, including Moscow and St. Petersburg.
Meanwhile, IzhAvto’s much larger peer AvtoVAZ reported Wednesday that it had burnt through most of the 33 billion rubles ($1 billion) in emergency loans that it had received from the government earlier this year.
AvtoVAZ, which employs some 130,000 people in Tolyatti, said it had used most of the funds to settle its debts to suppliers and service its loans at Russian banks.
Most Russian car producers were loss-making even before the global downturn because of the vehicles’ relatively poor quality.
The factories’ operations were in most cases uninterrupted as the industry remained largely subsidized by the federal budget.
Kalashnikov Maker Stops Production
14 August 2009The Moscow Times
The Molot factory, one of the major sites of production for Kalashvikov assault rifles, suspended production for the second time this year due to an inability to meet debts, the Kirov region web site said.
The factory has been faced with large debts to banks, tax authorities, electricity suppliers and employees. Production was suspended for the first time in March and resumed after the factory received a 439 million ruble ($13.6 million) cash injection from the government in June.
Molot, which is owned jointly by state arms concerns Izmash and the State Property Agency, will need up to 40 million rubles in additional loans from the government, the web site said. Kirov governor Nikita Belykh told Ekho Moskvy on Wednesday that the factory could receive the money in the next two weeks.
Meanwhile, close to half of the factory’s 5,000 employees are unemployed, while the other half has been given jobs in the public sector at a salary of about 4,330 rubles per month.
Efes Breweries International to acquire 6.7% in Krasnyi Vostok
VTB Capital, Russia
August 13, 2009
minority shareholder exercises put option - valuation looks high given current market conditions
News: Efes Breweries International has issued a statement announcing that the company is ready to buy-out minorities in subsidiary Krasnyi Vostok Group (KV Group, acquired in February 2006). Post deal, Efes' stake in KV Group will increase form the current 92.9% to 99.6%. The company expects the deal to cost USD 30-30.5 mn, with funding to be sourced from cash flow.
Our View: Given KV Group production capacity, the value of the deal appears high. We assume that this is caused by terms (undisclosed) of a put option held by minority stake holder Tradex, which is exercisable until February 2010. On the other hand, the valuation could also have been raised should the deal be inspired by Efes' consolidation of its shares in parent Anadolu Efes (cash offer of USD 11.1/GDR from 17 July 2009).
Sibur to build major Russian polyolefins plant
By Richard Higgs
Posted 14 August 2009 9:00 am GMT
Russian petrochemicals company Sibur plans to launch the first construction phase of a major polyolefins production complex at Tobolsk in Russia's Tyumen region in September.
The two-stage Tobolsk-Polymer project will start with the erection of a 500,000 tpa polypropylene plant close to the existing site of another Sibur offshoot, Tobolsk-Neftekhim. The PP plant and supporting propylene unit are now expected to be completed by next year.
The second stage of the project involves the construction of a 500,000 tpa polyethylene plant and is due to be built and ready for start-up by 2012, according to Tobolsk-Neftekhim. Investment totalling RUB52m will be required to complete construction of the whole scheme.
Earlier this year, the planned PP plant won formal environmental and social impact approval after a study carried out by Branan Environment. Linde-KCA-Dresden (Germany) is engineering the project design, ordering equipment and managing the construction of the PP production unit.
Polypropylene from the new plant is expected to be employed for applications including the manufacture of geo-synthetic materials used in the construction of roads and railways. Base polymer for geo-textile canvas and geo-grid for use in a Tyumen project to build the new railway line linking Salekhard and Nadym will initially be supplied by Sibur's Tomskneftekhim plant in Tomsk.
Currently, Sibur can manufacture up to 3,000 tpa of non-woven material for such products at the group's Geotekstil operation in Surgut, Russia. By next year, Sibur plans to launch two new fibre-bonded PP material lines with an annual capacity of 20,000 tpa along with two other flat PP grid production lines of 6,000 tpa capacity. The group, equipped with modern Western equipment, then aims to satisfy around 20% of Russian demand for geo-synthetic materials.
Activity in the Oil and Gas sector (including regulatory)
Gas flows through Ukraine tumble
Wire services
Gas transit from Central Asia and Russia through Ukraine towards Europe fell 37.1% in the first seven months of this year compared to the same period a year ago.
The State Statistics Committee did not give figures for the volume of gas transported through Ukrainian territory but according to last year's statistics, 74 billion cubic metres of gas was sent through Ukraine.
In the full year of 2008, some 120 billion cubic metres of gas was transited through Ukraine. Russia sends 80% of its gas exports to Europe through its southern neighbour.
Europe and the former Soviet region have slashed their gas consumption this year as the global economic crisis hits their industries and production slows, reported Reuters.
Friday, 14 August, 2009, 08:06 GMT | last updated: Friday, 14 August, 2009, 08:06 GMT
Northwest Russian oil for China
2009-08-14
Lukoil’s recent agreement with China’s Sinopec includes three million tons of oil from the Yuzhno Khilchuyu field in the Nenets Autonomous Okrug. That is almost half of next year’s production at the newly opened field.
According to Reuters, the agreement signed by the companies on June 16 this year, includes three million tons of oil supplies to China. That oil will all come from the Yuzhno Khilchuyu field in the far northern Nenets Autonomous Okrug, the brand new field recently put into production by project partners Lukoil and ConocoPhillips.
The deal is valid from July 1, 2009 to June 30, 2010, "or till the contract will be paid in full," Lukoil said. The cargoes will be shipped by Litasco, a trading arm of Lukoil, Reuters reports.
The Yuzhno Khilchuyu field was put in production last fall by Naryanmarneftegaz, the regional subsidiary of Lukoil and ConocoPhillips. The project which included both field development, pipeline construction and the construction of the Varandey port terminal, is one of the bigger field investments made in the Russian oil and gas industry the last years.
Annual production in the Yuzhno Khilchuyu project now amounts to about seven million tons of oil. The capacity of the pipeline and the terminal is however far bigger – about 12 million.
The Lukoil-Sinopec deal comes as China is increasing its bid for Russian resources. Only last week, Gazprom officially started construction of the Sakhalin-Khabarovsk-Vladivostok pipeline. That is built with the intention to supply gas to China
Timchenko Can Buy Firm
A company close to Gennady Timchenko’s Volga Resources got regulatory approval to increase its holding in pipeline builder Stroitransgaz to 79.6 percent, Sergei Noskovich, a spokesman for the regulator, said Thursday. The Federal Anti-Monopoly Service cleared the purchase of a 10 percent stake in Stroitransgaz by Yubaska Holdings. (Bloomberg)
Novatek's pricing power declines further in 2Q09
Renaissance Capital, Russia
Thursday, August 13, 2009
Event: Novatek issued pre-results guidance yesterday (12 Aug) ahead of its 2Q09 results release scheduled for 18 Aug. The key news was the company's announcement of a change in gas sales terms with one of its largest traders. As a result of this change, Novatek's average natural gas sales price to end-customers in 2Q09 increased 4.8% QoQ (vs a 7.0% QoQ increase in Gazprom's regulated traiff), while its net-back on end-customer sales in 2Q09 decreased 17.2% YoY and 16.9% QoQ. The company stressed that in an environment of uncertain natural gas demand the change in the terms of sale for natural gas has allowed Novatek to maintain natural gas production volumes at 2008 levels, while at the same time increasing stable gas condensate and LPG sales volumes.
Action: We retain our HOLD rating on Novatek.
Rationale: Novatek's 2Q09 results highlight continuing deterioration in the company's pricing power amid increasing competition, as the average premium of its end-user gas price over the regulated price dropped to just 2% in 2Q09, on our estimates, vs 4% in 1Q09 and an 11% average premium in 2008. We have always believed growing competition on the unregulated gas market will result in a gradual deterioration of Novatek's volumes and prices. However, the convergence is occurring faster than we had expected, helped by the overall weakness in the economy and gas demand. We believe this trend may result in Novatek's selling price moving to a discount to the regulated price as early as next year.
NOVATEK: Developments which contributed to 2Q09 IFRS results
UralSib, Russia
August 13, 2009
Increase in gas condensate production and volume of gas sales to endcustomers.
Yesterday, NOVATEK (NVTK - Not Rated) announced that 1H09 and 2Q09 IFRS results will be published on 18 August and highlighted specific events, which had an impact 2Q09 results:
__ In 2Q09, NOVATEK re-negotiated sales conditions with one of its largest gas traders resulting in the growth of sales volumes to endcustomers by 68.3% YoY and 25.6% QoQ to about 5.8 bcm. As transportation tariffs grew by 7% QoQ, the average price of gas sold to end-customers increased by 4.8% QoQ, resulting in a decline in the average price of gas net-back (gas price minus transportation costs) to end-customers by 17.2% YoY (16.9% QoQ).
__ Sales of gas condensate jumped by 71.8% YoY and 67.4% QoQ to 658,000 tons. Strong growth became possible, as "fat gas" production from the Valanginian deposits in the Yurkharovskoye field increased, while production of "dry gas" from the Cenomanian deposits in the East-Tarkosalinskoye field decreased. Given that one cubic meter of "fat gas" from the Valanginian deposits contains up to 100-200 grams of gas condensate (compared to about 1 gram for "dry gas"), NOVATEK maximized profits by accelerating "fat gas" production.
Selling gas condensate is more lucrative for NOVATEK than selling natural gas, since it can be exported to markets in the EU or US.
__ The "cost per ton" for delivering stable gas condensate and liquefied petroleum gas by rail from the Limbey station (located in the Purovsky district of the Yamal-Nenets Autonomous Region) to export markets fell by 7.6% YoY (11.1% QoQ) for gas condensate and 21.6% YoY (31.2% QoQ) for liquefied petroleum, as the Federal Tariff Service reduced rail transportation tariffs on exports from April 2009.
Positive operational outlook. In 2Q09, NOVATEK demonstrated strong operational performance, although demand for gas on the domestic market shrank. According to InfoTEK, NOVATEK's 2Q09 gas production grew by 2.4% YoY to 84 mmcmpd, while Gazprom's declined by 32.8% YoY to 1,023 mmcmpd. Total gas production of oil companies stood at 182 mmcmpd this quarter, up 19.5% YoY. We expect that NOVATEK's gas sales volumes will continue to grow in 2H09 (demand for gas heating is traditionally higher than during a summer period), while NOVATEK's gas production is currently operating at only 86% of total capacity.
Victor Mishnyakov
Gazprom
Gazprom Neft Increases Control of Sibir Energy to 75.05%
By Torrey Clark
Aug. 14 (Bloomberg) -- OAO Gazprom Neft, the oil arm of Russia’s state natural-gas export monopoly, increased its stake in Sibir Energy Plc to 75.05%.
Sibir Energy commented in a statement late yesterday.
Last Updated: August 13, 2009 23:40 EDT
Gazprom starts drilling in Kirinskoye field offshore Sakhalin
Friday, 14 Aug 2009
In Yuzhno-Sakhalinsk Gazprom delegation took part in the celebrations dedicated to the start of exploration drilling in the Kirinskoye field offshore the Sakhalin Peninsula.
The start of geological exploration in the Kirinskoye field is another crucial step towards establishing Gazprom's resource base in the Far East and creating a new gas production area offshore Sakhalin as part of the state Eastern Gas Program. This will be the first project in the Sakhalin offshore carried out solely by Russian companies. To develop Sakhalin potential hydrocarbon resources the Company will make the maximum use of the capabilities of domestic shipbuilding and machine-building companies.
Starting from 2014, the Kirinskoye field will turn into a gas source for the Sakhalin Khabarovsk Vladivostok gas transmission system being constructed to ensure reliable gas supplies to consumers of the Khabarovsk and Primorsky Krais and the Sakhalin Oblast.
Background
Kirinskoye gas condensate field discovered in 1992 is located within the Kirinsky Block of the Sakhalin III project offshore the Sakhalin Peninsula. The subsurface license was granted to Gazprom in line with the Russian Federation Directive No 666-r dated May 6th 2008.
The Kirinskoye field ABC1+C2 reserves account for 75.4 billion cubic meters of gas and 8.6 million tons of gas condensate. The field is slated for commissioning in 2014.
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