Russia
Russia 090415
Basic Political Developments
• Russia says not selling missile system to Iran: report
• Russia not supplying air defence systems to Iran - "Nothing is happening. Supplies are not taking place," said Alexander Fomin, deputy head of the Federal Service for Arms Cooperation, at an arms fair in Rio De Janeiro.
• Russia Invites India to Invest in Uranium Plant, Line Reports - The investment would be in lieu of payments for fuel supplied to Russian-built light-water reactors being set up at Kudankulam in southern India, according to the report.
• Larsen, Atomstroyexport Sign Nuclear Reactors Accord - The two companies will cooperate in providing equipment and services to build four new reactors at a nuclear power plant at Kudankulam in southern Tamil Nadu state and other plants at new sites, Larsen & Toubro said in a statement to the Bombay Stock exchange today.
• Typhoon submarines may sail again - Last week, on April 8th, Sergey Stepashin, the chairman of Russian Accounts Chamber visited Severodvinsk and discussed the future of the remaining Typhoon-class submarines with Nikolai Kalistratov, the director general of Sevmash shipyard, reported by Nuclear.ru.
• Putin Touts Nord Stream To Schroeder - "The northern European gas pipeline is in the interests of many European countries, above all Germany and Russia," Putin told Schroeder, who chairs the Nord Stream shareholders' committee and is his longtime ally.
• Russia: Response by Russian MFA Spokesman Andrei Nesterenko to a Media Question Relating to Upcoming Session of Foreign Ministers Council of the Collective Security Treaty Organization in Yerevan
• Zubkov in the Netherlands - First Deputy Prime Minister Viktor Zubkov arrived in the Netherlands on Tuesday for two days of talks and was scheduled to meet with Dutch Prime Minister Jan Peter Balkenende and Royal Dutch Shell CEO Jeroen Van de Veer on Wednesday.
• Pravda: U.S. retargets nuclear missiles to 12 Russian economic facilities
• Tbilisi accuses Moscow of violating “Medvedev-Sarkozy plan” - "The Russian party has systematically and gravely violated the plan signed by it, which is known as the "Sarkozy plan"," Sikharulidze told journalists in Tbilisi on Tuesday.
• HRW: Russia, Georgia should stop cluster bomb use
• Russia's Medvedev grants interview to opposition paper
• Medvedev Chooses Critic for an Interview Debut - Mr. Medvedev spoke with Novaya Gazeta editor Dmitry Muratov on Monday for more than an hour at the president's residence outside Moscow. Topics ranged from democracy in Russia to the latest criminal trial of jailed oil and banking tycoon Mikhail Khodorkovsky.
• Putin Hikes Road Spending by 25% - The government will increase spending on building roads by 25 percent to $16 billion this year, Prime Minister Vladimir Putin said Tuesday on his latest trip to discuss the state's plans to support various industries.
• Just Russia Candidate Kicked Off Sochi Ballot - A Sochi court eliminated A Just Russia's candidate from the city's mayoral election on Tuesday, effectively turning the race into a face-off between United Russia and opposition politician Boris Nemtsov.
• Russian Eco-Regulator Quits to Lead Green Movement - Oleg Mitvol, who was appointed deputy director of Russia's Environmental Protection Agency by the government in 2004, said he was resigning to lead a new "green" movement that would challenge Kremlin candidates in local elections. He said he could focus on the same issues just as well from outside government, harnessing public concern about environmental issues.
• Russia faces $10 billion international ruling over Yukos bankruptcy
• FT on oligarchs: Tension at the top as crisis deepens - While it was a bad year everywhere – $1,400bn in billionaire wealth has vanished globally – Russia’s wealthiest were particularly hard hit by a combination of falling prices for oil and metals, Russia’s main exports, and frozen international credit markets.
• Will Moscow Expand Assistance to Russian-Language Schools in Ukraine?
• Russian Minister of Foreign Affairs Sergey Lavrov Interview to the Interstate Television and Radio Company ‘Mir,’ Ashgabat, April 10, 2009
• Air defence regiment in Polyarny - The Russian television channel Zvezda News has visited one of Russia’s largest air defence units in the closed military town of Polyarny, the Northern Fleet’s largest submarine base, and provides unique video material.
• Vremya Novostei: Russian Army badly needs modern weapons
• What Countries Care About - At a recent meeting of Russia’s Council for Foreign and Defense Policy, experts from across the political and professional spectrum debated the threats facing the country, and what policies would counter them best.
• Reuters PRESS DIGEST - Russia - April 15
National Economic Trends
• Budget deficit is to be reduced: Dvorkovich
• Single Regulator Considered - Arkady Dvorkovich, the top presidential economic aide, said Tuesday that it was "worth thinking about" the creation of a unified financial regulator to cover everything except the banking sector, Interfax reported.
• Kudrin Considers Sovereign Eurobond - Finance Minister Alexei Kudrin said Tuesday that the government would hold an international investment road show this year and consider issuing debt abroad in 2010, tapping foreign markets for the first time in a decade.
• Producer prices index increases 4.1% MoM in March
• Inflation expected at 1.0-1.2% in April vs. 1.4% April 2008
• Russia's PPI up 4.1% in March and 5.1% YTD
Business, Energy or Environmental regulations or discussions
• Russian Stocks Decline, Paced by Sberbank, VTB Group, Lukoil
• Gazprom Neft, Inter RAO UES, Rosneft: Russian Equity Preview
• Rencap Russia: 2Q Outlook - The long road to recovery
• Russia Banks to Be Hit by Bad Loans ‘Avalanche,’ UniCredit Says
• VEB Bought $5 Billion of Russian Stocks, Bonds With State Cash
• Russia's VEB says some firms may struggle to repay
• Magnitogorsk First-Quarter Crude Steel Output Falls 42% on Year
• Russian diamond firm Alrosa posts 1,650% q-o-q net profit rise
• Alrosa posts Q1 loss of about 2 bln rubles (Part 2)
• Globaltrans Profit Up 5%
• More Pork Plants Banned - Russia is halting imports from three U.S. pork facilities, including a John Morrell plant owned by Smithfield Foods, because of problems with export certificates, the U.S. Department of Agriculture said Tuesday.
• Aviva signs agreement to acquire pension fund from ING in Russia
• Malis to be president of Evroset?
• UPDATE 1-Rambler Media appoints new CEO
• Moscow Court Postpones Decision in Telenor Case
• UPDATE 1-Moscow court postpones Telenor hearing to April 30
• Proposal for long-term capacity market to be ready in 2Q09
• OGK-1 optimizes personnel expenses and CAPEX
• TGK-8 board recommends no dividend for 2008
• Moscow And St Petersburg Power Use May Fall Less Than Average
• S.Korea's Hyundai Heavy in Russian farm deal
• Black Earth Eyes First Profit - Black Earth Farming, an owner and developer of agricultural land in Russia, may post its first net profit in 2010 as its farms mature.
• Wal-Mart may enter the Russian market - Reports of out Russia suggest Wal-Mart Stores Inc. may be in negotiations to buy a controlling stake in one of the country's leading “hypermarket” big box retailers.
• Discussions on retail law to be extended until October 2009
• TUI, Billionaire Mordashov, Agree to Form Russia Travel Venture
• UPDATE 1-TUI Travel establishes Russian joint venture
Activity in the Oil and Gas sector (including regulatory)
• Russia seeks Japan help for Sakhalin-1 - The construction costs are projected to total about 500 billion yen ($5 billion), and Russian Prime Minister Vladimir Putin, who is scheduled to visit Japan in May, is likely to propose starting full-scale talks, the Nikkei business daily paper reported, citing an unnamed Japanese foreign ministry official.
• Russia Raises Oil Export Duty to $137.70 a Ton From May 1
• UralSib: OPEC-Russia Dispute to Weaken Oil?
• Rosneft: Tax holidays for offshore regions
• Rosneft completed early repayment of a state bank loan
• TNK to Pay 40% Of Profit in 2009
• TNK-BP Will Not Change the Dividend Policy Despite the Crisis
• TNK-BP shows interest in Sibir Energy
• Sibir Energy Hasn’t Been Approached by TNK-BP (Update1)
• LUKoil to sell 160 gasoline stations in the US
• LUKoil to reduce natural gas production in Uzbekistan
• LUKoil Outlines Expansion Abroad - LUKoil plans to drill three deep-water exploration wells in Africa in the next year as it urges the Russian state to offer more licenses domestically, CEO Vagit Alekperov said in an interview, in which he talked about the oil major's plans for expansion abroad
• Phantom LNG carrier sketched - DESIGN sessions for Russia's first LNG carrier have begun in St Petersburg – even though it is not certain that the ship will ever be built.
• Norwegian terminals seek Russian oil - As the amount of Russian oil exported through Arctic waters increases, several Norwegian ports and terminals now step up their bids for participation in the lucrative oil trade.
• Troika: Oil And Gas Quarterly - Ruble Played Out
• Rencap: Oil and gas dividend forecasts
Gazprom
• Russia Gazprom estimates reserves up 11 pct in 2008
• Gazpromneft to Sell 10 Billion Rubles of Bonds, Banker Says
• Gazprom, Conoco Discuss Alaska Offshore Exploration
• On working meeting between Alexey Miller and Jim Mulva
• Turkmenistan: Gas Deal Negotiations Underway In Iran - In mid-March, Iran and Russia signed a gas swap deal that would see Gazprom assume responsibility for the delivery of Turkmen gas to Iran. Ashgabat would benefit from this arrangement since Russia would purchase Turkmen gas at a premium price. Iran currently pays $140 per thousand cubic meters (tcm); Gazprom is willing to buy the same gas for re-export from Ashgabat for $240/tcm.
• On working meeting between Alexey Miller and Jean de Gliniasty
• Gazprom officials arrive in Libya
• Gazprom delegation visits Libya
• Gazprom Neft wants to develop 8 oil and gas deposits in Iraq
• Turkmen imports down sharply - According to Kommersant, Gazprom reduced its off-take of Turkmen gas by 90% on April 8, the day before an explosion on the main export line between the two countries would have forced such a step.
• Gazprom Turns the Crisis Into an Opportunity -and a New Crisis
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Full Text Articles
Basic Political Developments
Russia says not selling missile system to Iran: report
Wed Apr 15, 2009 3:04am EDT
MOSCOW (Reuters) - Russia has not supplied Iran its advanced S-300 anti-aircraft missile systems, an official in Russia's state arms export service was quoted as saying on Wednesday.
"Nothing is happening. There are no deliveries," Interfax news agency quoted Alexander Fomin, first deputy director of Russia's Federal Military and Technical Cooperation Service, as saying at an arms fair in Rio de Janeiro.
Any possible sale of the S-300 systems to Iran is a sensitive issue in Moscow's relations with the United States.
Senior Russian officials have repeatedly denied media speculation that Russia would sell Iran the systems.
(Reporting by Amie Ferris-Rotman)
Russia not supplying air defence systems to Iran
2 hours ago
MOSCOW (AFP) — Russia is not currently implementing its planned sale of sophisticated S-300 air defence systems to Iran, a top official with the state office for arms sales told Interfax.
"Nothing is happening. Supplies are not taking place," said Alexander Fomin, deputy head of the Federal Service for Arms Cooperation, at an arms fair in Rio De Janeiro.
Russia's plans to provide the systems to Iran have attracted criticism from the United States and Israel, neither of which have ruled out attacks on Iran's controversial atomic facilities.
The comment came after an unnamed official at the same agency said last month delivery of the defence systems, intended to shield key areas from attack, would depend on the "developing international situation and the decision of the country's leaders."
Moscow's decision to hold back on the sales partly reflects international pressure but also warming ties between Russia and the United States, a chief adversary of the Islamic republic.
This month Russia also said it was making its first ever purchase of reconnaissance drones from Israel, reflecting closer ties with the Jewish state in the defence sphere.
Russia Invites India to Invest in Uranium Plant, Line Reports
By Archana Chaudhary
April 15 (Bloomberg) -- Russia has proposed that India invest in a uranium enrichment center in Angarsk, Siberia, in return for guaranteed supplies of the radioactive fuel, the Hindu Business Line reported, without citing anyone.
The investment would be in lieu of payments for fuel supplied to Russian-built light-water reactors being set up at Kudankulam in southern India, according to the report.
The center is being built under the supervision of the International Atomic Energy Agency, the newspaper said. The proposal was made during a visit to the plant on April 9 by Anil Kakodkar, chairman of India’s Atomic Energy Agency, the newspaper said.
To contact the reporter on this story: Archana Chaudhary in Mumbai at achaudhary2@.
Last Updated: April 14, 2009 23:53 EDT
Larsen, Atomstroyexport Sign Nuclear Reactors Accord (Update1)
By Gaurav Singh
April 15 (Bloomberg) -- Larsen & Toubro Ltd., India’s biggest engineering company, signed a preliminary agreement with Russia’s ZAO Atomstroyexport for nuclear power reactors.
The two companies will cooperate in providing equipment and services to build four new reactors at a nuclear power plant at Kudankulam in southern Tamil Nadu state and other plants at new sites, Larsen & Toubro said in a statement to the Bombay Stock exchange today.
Indian power equipment makers are forming partnerships with overseas companies as the world’s second fastest-growing major economy targets 60,000 megawatts of nuclear generation by 2030 to help reduce outages. Toshiba Corp.’s Westinghouse Electric Co. said on Jan. 16 it will tie up with Larsen & Toubro to build nuclear power equipment in India.
Larsen shares gained 2.3 percent to 845.6 rupees at 11.47 a.m. in Mumbai trading, while the Bombay Stock Exchange’s benchmark Sensitive Index advanced 0.1 percent.
To contact the reporter on this story: Gaurav Singh in New Delhi at gsingh31@.
Last Updated: April 15, 2009 02:30 EDT
Typhoon submarines may sail again
2009-04-15
The world’s biggest nuclear powered submarines, the Typhoon-class, can again be put into ordinary operation. The two submarines Severstal and Arkhangelsk, today in reserve, can in the future be sailing for the Northern fleet.
Of the originally six submarines of the giant Typhoon-class, only one remains operational. This submarine, Dmitry Donskoi, is used as a test platform for the new Bulava sea based intercontinental missiles, as previous reported by BarentsObserver. Three submarines of the class are scrapped.
The two last Typhoon-class submarines, Severstal and Arkhangelsk, remain in reserve at a Belomorsk naval base in Severodvinsk. Now, the debate has started about their future use.
Last week, on April 8th, Sergey Stepashin, the chairman of Russian Accounts Chamber visited Severodvinsk and discussed the future of the remaining Typhoon-class submarines with Nikolai Kalistratov, the director general of Sevmash shipyard, reported by Nuclear.ru.
During his visit to Severodvinsk Stepashin also visited to the nearby Belomorsk naval base where he stayed on board Severstal.
All the Typhoon-class submarines were built at the Sevmash yard in Severodvinsk and the constructors today believe both Arkhangelsk and Severstal can be put into operation in the Northern fleet again.
The 175 meter (574 feet) long and 24,000 tons heavy vessel is the largest nuclear powered submarine ever built. During the Cold War the six Typhoon-class submarines were based at the naval base in Zapadnaya Litsa, only some 50 kilometres from the border to Norway. Three of the six Typhoon-class subs are decommissioned.
Putin Touts Nord Stream To SchrЪder
15 April 2009 The Moscow Times
Completing the Nord Stream pipeline will give Germany a new status as a "major transporter" of Russian gas, Prime Minister Vladimir Putin told former Chancellor Gerhard SchrЪder in St. Petersburg on Tuesday.
"The northern European gas pipeline is in the interests of many European countries, above all Germany and Russia," Putin told SchrЪder, who chairs the Nord Stream shareholders' committee and is his longtime ally.
Putin's comments appeared to refer to the pipeline consortium's desire to bring in Gaz de France as an investor. The pipeline, which would run from Russia to Germany under the Baltic Sea, is 51 percent controlled by Gazprom, with Germany's BASF/Wintershall and E.On Ruhrgas each holding 20 percent and Dutch Gasunie holding 9 percent.
Stanislav Tsygankov, head of Gazprom's external relations department, said Friday that the consortium had entered into talks with GDF. Gazprom said Tuesday that CEO Alexei Miller met with French Ambassador Jean de Gliniasty for energy talks. De Gliniasty "noted the importance of the successful completion of the Nord Stream project for Europe's energy security," Gazprom said in a statement.
Russia: Response by Russian MFA Spokesman Andrei Nesterenko to a Media Question Relating to Upcoming Session of Foreign Ministers Council of the Collective Security Treaty Organization in Yerevan
Question: A session of the Foreign Ministers Council of the Collective Security Treaty Organization will take place in Yerevan this week. What is the agenda of this event?
Answer: The CSTO Foreign Ministers Council will meet in ordinary session on April 16-17 in Yerevan, capital of Armenia, the country currently holding the chairmanship of the Collective Security Treaty Organization.
The session is slated to discuss a communication of the CSTO Secretary General on foreign policy cooperation among member states on topical international security issues and on the main directions of their interaction with international regional organizations, with emphasis on streamlining the mechanism of coordination of their approaches to global problems.
It is planned to endorse a Memorandum on Cooperation between the CSTO and UN Secretariats with a view to formalizing and fostering practical interaction between the two Organizations.
A communication of the Secretary General on the outcomes of the consideration in the sessions of the Defense Ministers Council in November 2008 and of the Committee of Secretaries of Security Councils in December 2008, of the prospects for military cooperation to 2020 and for increasing the effectiveness of multilateral cooperation in combating the new challenges and threats is due to be heard.
The interim outcomes of the work on carrying out the decisions of the extraordinary session of the CSTO Collective Security Council on February 4, 2009 and the creation of a Collective Operational Response Force of the CSTO feature prominently on the agenda.
Guidelines will also be discussed for the joint activities of the CSTO member states in helping stabilize the situation in Afghanistan and in countering the narco-threat emanating from IRA territory, particularly by collaboration with interested countries and international and regional organizations.
Meeting participants will agree on the time and venue for the next FMC session.
Zubkov in the Netherlands
15 April 2009
First Deputy Prime Minister Viktor Zubkov arrived in the Netherlands on Tuesday for two days of talks and was scheduled to meet with Dutch Prime Minister Jan Peter Balkenende and Royal Dutch Shell CEO Jeroen Van de Veer on Wednesday.
Van der Veer met with Gazprom chief Alexei Miller in Moscow last week. Gazprom said after the meeting that Shell had "very good chances" of winning a tender to become their partner at Sakhlin-3. Shell has a stake in the nearby Gazprom-controlled Sakhalin-2 project.(MT)
U.S. retargets nuclear missiles to 12 Russian economic facilities
15.04.2009
The USA is developing a new nuclear doctrine. American experts believe that today’s system of U.S. nuclear forces is out of date. Now they are going to change nuclear targets on the territory of Russian federation. The U.S. is going to retarget their nuclear missiles from large Russian cities to 12 most important Russian economic facilities. According to the U.S. experts destruction of these facilities will paralyze Russia’s economy and Russia will not be able to maintain military resistance.
This information was provided in the Natural Resources Defense Council (NRDC) report calling for fundamental changes to U.S. nuclear war planning, a vital prerequisite if smaller nuclear arsenals are to be achieved.
"From Counterforce to Minimal Deterrence - A New Nuclear Policy on the Path Toward Eliminating Nuclear Weapons" calls to abandon the almost five-decade-long central mission for U.S. nuclear forces, which has been and continues to be "counterforce," the capability for U.S. forces to destroy an enemy's military forces, its weapons, its command and control facilities and its key leaders.
"The current rationale for maintaining an arsenal of nuclear weapons no longer exists." said Ivan Oelrich, vice president of the Strategic Security Program at FAS and one of the report authors. "And to get future reductions in the number of weapons, we have to eliminate the missions they are assigned."
Talk of efforts to control nuclear arms typically focuses on sheer numbers of warheads and their explosive power.
But with President Obama and his Russian counterpart, Dmitry Medvedev, putting nuclear arms control back on the Washington-Moscow agenda, a new study looks beyond simple comparison of numbers and types of weapons to the more harrowing question of just what those weapons are targeted to strike.
During the Cold War, they were aimed at Russia's hardened silos, bomber bases and military installations. Later, similar sites in China were added. Now, potential nuclear facilities of other regional countries are on the list, as well as chemical and biological weapons facilities.
"From Counterforce to Minimal Deterrence”, takes a close look at "strike options," giving their view of the role nuclear intercontinental ballistic missiles and strategic bombs play in today's post-Cold War world.
Instead of just comparing numbers among the nuclear powers, the authors representing the Federation of American Scientists and Natural Resources Defense Council focus on what the United States is targeting and whether this approach should change, the Washington Post reports.
The study points out the obvious -- that "nuclear weapons are horrific things and nuclear war would be an unimaginable disaster." But it says current Pentagon plans for using strategic nuclear weapons include "individual strike options that probably range from using just a few weapons to using more than 1,000."
The authors also note that political and military leaders argue "that nuclear weapons are not really intended to be used, but are meant only to deter, and therefore detailed war plans and alert forces increase the credibility of the deterrent and make an attack less likely."
Tbilisi accuses Moscow of violating “Medvedev-Sarkozy plan”
Today, 11:05 | Interfax-Ukraine
Georgian Defense Minister David Sikharulidze has accused Russia of breaching a plan intended to help settle the Georgian-South Ossetian conflict that was agreed upon by the Russian and French presidents following the August events in South Ossetia.
"The Russian party has systematically and gravely violated the plan signed by it, which is known as the "Sarkozy plan"," Sikharulidze told journalists in Tbilisi on Tuesday.
"We have systematically observed increases in the amount of weapons and hardware deployed in the occupied territories, which once again confirms violations of this agreement by Russia and steps to obstruct the Geneva talks," the defense minister said.
The Georgian authorities again underscore two factors they view as a matter of concern, Sikharulidze said. "They are the disregard for the Sarkozy plan and threats facing security and stability in the region as a whole," he added.
HRW: Russia, Georgia should stop cluster bomb use
By DPA
Apr 14, 2009, 13:11 GMT
Geneva - Advocacy group Human Rights Watch called on Russia and Georgia, who both employed cluster bombs in their conflict last summer, to end the use of the controversial weapon, in a new report released in Geneva Tuesday.
The report showed that 18 civilian towns were affected by cluster munitions during the conflict last August, in violation of international law.
At least 16 civilians were killed by cluster bombs and dozens more were wounded. Unexploded sub-munitions were said to still be affecting farmers in several regions, with de-miners not expected to finish work on clearing the potentially lethal devices until late next year.
The use of the munitions in civilian-populated areas was a violation of the laws of war, said Bonnie Docherty who authored the report, entitled A Dying Practice.
Last year, 96 states signed a treaty banning cluster bombs. The largest military powers and weapons producers, like the United States, Russia, China and Israel, did not sign the treaty.
'Cluster munitions are too dangerous to be used,' Docherty said, adding that they 'should be banned.'
Russia denies that it used clusters, in spite of hard evidence to the contrary, while Georgia says it was investigating incidents where its use of the weapon apparently violated international law.
The HRW report was released as negotiations, being pushed ahead largely by states which did not sign last year's treaty, were underway at the United Nations in Geneva on a protocol to the Convention on Conventional Weapons, which was seen as a compromised version of the total ban.
The convention on cluster munitions completely prohibits the use, production, transfer, and stockpiling of all such bombs.
By contrast, a draft text of the protocol allowed states to continue to use cluster bombs, drawing harsh criticisms from HRW which called for the new negotiations to be abandoned and countries to instead join the existing treaty.
Cluster munitions have also been used this decade by Israel in Lebanon in 2006 and in Iraq and Afghanistan.
'We have not found an instance when (cluster bombs) were used in compliance with international humanitarian law or have given the military advantage they are advertised to do,' noted Mark Hiznay, a researcher with HRW.
Since 1997, over 100 states have also joined the convention banning landmines and most have begun to take action to clear affected areas.
Russia's Medvedev grants interview to opposition paper
Wed Apr 15, 2009 3:26am EDT
By Oleg Shchedrov
MOSCOW (Reuters) - Russian President Dmitry Medvedev has given a fiercely critical publication his first Russian newspaper interview, in what the Kremlin said was a gesture of solidarity with a newspaper which has seen two of its reporters murdered in the past three years.
The interview, to be published on Wednesday, is with Novaya Gazeta, where investigative journalist Anna Politkovskaya was working when she was shot dead in 2006. Another Novaya Gazeta reporter, Anastasia Baburova, was murdered in January.
"Novaya Gazeta has suffered many losses," Kremlin spokeswoman Natalya Timakova told reporters on Tuesday. "(By giving the interview) the president wanted to express his moral support to it... The decision was the president's initiative."
The newspaper admonished former President Vladimir Putin for crushing freedoms and he never give it an interview. It did however have an interview with Putin's predecessor, Boris Yeltsin, who left office in 1999.
Medvedev promised the interview after meeting the paper's editors in January and expressing condolences over the murder of Baburova, who wrote about neo-Nazi and skinhead groups and was shot just a few kilometres (miles) from the Kremlin.
Putin angered some reporters at Novaya Gazeta in 2006 by saying that Politkovskaya's work had little impact on Russian politics. Politkovskaya had sharply criticized Putin over the war in Chechnya Russian officials say her murder was ordered abroad to discredit the Kremlin.
No one has yet been convicted for the murder of Politkovskaya. In February a Moscow court acquitted a group of suspects accused by Russian prosecutors.
The Kremlin spokeswoman said the interview will touch upon civil society, the fight against corruption and reform of the judiciary, issues Medvedev has flagged as priorities.
A third reporter at Novaya Gazeta, Igor Domnikov, was killed in 2000 and a fourth, Yuri Shchekochikhin, died in 2003 from a mysterious illness. The newspaper has lampooned officials for corruption and human rights abuses.
(Editing by Jonathan Wright)
Medvedev Chooses Critic for an Interview Debut
APRIL 15, 2009
By ALAN CULLISON
MOSCOW -- Dmitry Medvedev gave his first interview to a Russian newspaper as president, choosing a sharply critical publication whose staff has been targeted with murders and harassment.
Mr. Medvedev spoke with Novaya Gazeta editor Dmitry Muratov on Monday for more than an hour at the president's residence outside Moscow. Topics ranged from democracy in Russia to the latest criminal trial of jailed oil and banking tycoon Mikhail Khodorkovsky.
Mr. Medvedev's choice of Novaya Gazeta -- a paper that specializes in investigative journalism and has criticized the growth of Kremlin control over politics and media -- contrasts with the practice of Vladimir Putin, who generally blacklisted critical publications in his eight years as president. It appears to be Mr. Medvedev's latest effort to strike a liberal pose in the rarefied world of Kremlin politics.
Kremlin spokeswoman Natalya Timakova said Mr. Medvedev chose to meet with Novaya Gazeta because after the deaths of journalists on its staff, "the president wanted to express his moral support. It was his initiative." She said Mr. Medvedev has decided to meet with newspapers more in the future.
Nevertheless, in the interview to be published Wednesday, Mr. Medvedev revealed little new and gave lawyerly answers. The newspaper provided a transcript of the interview in advance.
Asked whether it was time to revive democracy in Russia, Mr. Medvedev rejected the question's premise. "I don't think that democracy needs any kind of rehabilitation," he said. "Democracy was, is and will be."
Mr. Medvedev denied that mayoral elections in the southern Russian city of Sochi set for later this month are "imitations." The race is important because the Black Sea resort is to host the 2014 Winter Olympics, and a fierce Kremlin critic, Boris Nemtsov, is in the running. Another critic -- an owner of Novaya Gazeta -- has been excluded from the mayoral contest on technical grounds.
Mr. Medvedev said he didn't know "who or how anyone was taken out, but in any case there is a real political skirmish going on. And it's a good thing that different political forces are taking part."
Mr. Medvedev declined to predict an outcome of the latest criminal trial in Moscow of Mr. Khodorkovsky, saying that as president it would be against the law.
Four of Novaya Gazeta's reporters have been murdered or died under mysterious circumstances over the past nine years, with the latest death in January. In 2006, Mr. Putin called the shooting death of the newspaper's reporter Anna Politkovskaya an "unacceptable crime that cannot go unpunished," but famously added that "her ability to influence political life in Russia was extremely insignificant."
Mr. Medvedev has said he wants to revamp Russia's corrupt court system, and earlier this year revived a long-dormant human-rights council. His moves have stirred hopes the Kremlin will relax some of its control over society. But critics say Mr. Medvedev is making token gestures to lessen tension at a time when Russians are suffereing deep economic troubles.
Yevgenia Albats, a radio talkshow host and editor of the Moscow newspaper New Times, said Mr. Medvedev sent "a very significant message" by meeting with Novaya Gazeta. "Now the question is whether there will be any follow-up," she said. "We know he can speak nicely, but can he act?"
Write to Alan Cullison at alan.cullison@
Putin Hikes Road Spending by 25%
15 April 2009
By Anatoly Medetsky / The Moscow Times
The government will increase spending on building roads by 25 percent to $16 billion this year, Prime Minister Vladimir Putin said Tuesday on his latest trip to discuss the state's plans to support various industries.
Putin traveled to St. Petersburg, home to one of the country's most ambitious road programs, to announce that private investment has slid on the project and to discuss the outlook for the rest of the transportation sector.
He said the state will boost spending to support jobs and future economic growth.
The state will make up for private investors in the construction of the 50-kilometer toll road in St. Petersburg, Putin's native city, by allocating 20.6 billion rubles ($617 million) this year and next, Putin said.
"Unfortunately, private investors are not an option in modern conditions," Putin said.
The city of St. Petersburg said it would spend 6.6 billion rubles as previously promised on the road over the same two years.
The road -- called the Western High-Speed Diameter -- is scheduled for completion in 2013, contractors told Putin at the meeting, Interfax reported. Estimated to cost 213 billion rubles, it will be the first toll road in the country.
Construction started in 2006 and was originally planned to end in 2011.
A call to St. Petersburg's construction company Mostotryad No. 19, which leads a consortium of private contractors for the projects, went unanswered Tuesday afternoon.
As a measure to stimulate economic growth at a time when private investors are rolling back spending, the government increased the budget for road building by 100 billion rubles to 550 billion rubles this year, Putin said.
Similar measures will apply to a range of other industries as the state taps its huge cash reserve from the past oil boom, the Reserve Fund.
Putin has used meetings with representatives of various sectors -- such as Tuesday's event -- to announce efforts to support the economy. He has met aerospace, coal and oil managers and workers in recent weeks. Next in line is the nuclear power industry, which will come under discussion in the Tver region on Wednesday.
Putin said Tuesday that the government was considering proposals to provide an additional 100 billion rubles to the state-owned Russian Railways company for upgrading its rolling stock.
"There are various opinions and various approaches," Putin said. "However, we have to find some kind of solution. This would mean additional orders for domestic equipment makers and the preservation of thousands of jobs."
The government has already decided to increase the company's capital by 50 billion rubles as compensation for a partial freeze on transportation rates this year.
Participants at Tuesday's meeting included Deputy Prime Minister Sergei Ivanov, Transportation Minister Igor Levitin and company executives such as Russian Railways chief Vladimir Yakunin.
Just Russia Candidate Kicked Off Sochi Ballot
15 April 2009
By Natalya Krainova / The Moscow Times
A Sochi court eliminated A Just Russia's candidate from the city's mayoral election on Tuesday, effectively turning the race into a face-off between United Russia and opposition politician Boris Nemtsov.
Sochi's Central District Court ordered that candidate Viktor Kurpitko be struck from the ballot for failing to properly fill out his registration paperwork, Nikolai Levichev, head of A Just Russia's faction in the State Duma, told The Moscow Times.
Levichev accused the court of bowing to pressure from regional authorities to eliminate rivals of United Russia's candidate, acting Sochi Mayor Anatoly Pakhomov.
Levichev said Kurpitko's papers had been filled out correctly, noting that they had been accepted by the city's election committee. Kurpitko will appeal, he said.
Repeated calls to the press office of the regional administration went unanswered Tuesday.
The same court also expelled wealthy businessman Alexander Lebedev from the race on Monday for purportedly failing to fill out his registration properly. Lebedev has vowed to appeal.
The two court rulings came in response to complaints by another mayoral candidate, Krasnodar businessman Vladimir Trukhanovsky, whom Levichev called a "technical candidate" whose "only task" was to eliminate competitors from the race.
Also Tuesday, the court rejected a request by the Communist Party's candidate, Yury Dzaganiya, to invalidate the registration of Pakhomov, of United Russia, Interfax reported.
Kurpitko has also asked the court to reject Pakhomov's bid.
The Sochi election, slated for April 26, has turned into the country's most intriguing political battle of the year. Sochi is to host the 2014 Winter Olympics, a project for which the federal government has earmarked billions of dollars, and the next mayor will have a strong say over how the government will spend the money.
Former presidential hopeful Andrei Bogdanov dropped out of the race Monday, leaving eight candidates if Kurpitko and Lebedev successfully challenge the court's decisions to disqualify them.
Nemtsov, a former deputy prime minister and leader of the Solidarity movement, told reporters Monday that the government wants Pakhomov to win the election "at any price."
"The Sochi elections are 100 percent lawlessness and 100 percent fraud," he said.
APRIL 15, 2009
Russian Eco-Regulator Quits to Lead Green Movement
By ANDREW OSBORN
MOSCOW -- A prominent Russian environmental regulator known for his fierce campaign against Royal Dutch Shell PLC resigned to lead a political opposition movement, complaining that his bosses had lost their appetite for his high-profile attacks on environmental violators.
Oleg Mitvol, who was appointed deputy director of Russia's Environmental Protection Agency by the government in 2004, said he was resigning to lead a new "green" movement that would challenge Kremlin candidates in local elections. He said he could focus on the same issues just as well from outside government, harnessing public concern about environmental issues.
"The ecological sphere must be politicized," Mr. Mitvol said. His new movement, Green Alternative, plans to field at least 100 candidates in municipal elections in October, he said. One Green Alternative candidate has already won the job of mayor of a town outside Moscow after thrashing the ruling United Russia party last month.
Mr. Mitvol, 42 years old, sprang to global prominence in 2006 when he accused Royal Dutch Shell of a string of environmental failings at its giant Sakhalin II oil and gas project in Russia's Far East. Under pressure from Mr. Mitvol and other Russian officials, Shell, which had a 55% stake in the project, sold control to state-controlled OAO Gazprom. Shell now owns a 27.5% stake in the project.
Shell denied Mr. Mitvol's allegations; when Gazprom took charge, his campaign ended, fueling suspicions that the battle had been political, not ecological, analysts say.
Mr. Mitvol strongly denies that his decisions at the agency have ever been Kremlin-orchestrated. He says Kremlin officials warned him more than once that his high-profile criticism of multinationals was scaring off foreign investors and that he should desist.
The Environmental Protection Agency is part of the ministry of natural resources. The ministry said through a spokesman that it accepted Mr. Mitvol's resignation. The spokesman declined further comment.
Mr. Mitvol's supporters in Russia's green movement say they are grateful to him for bringing previously ignored environmental issues to national prominence.
"Overall, his role has been quite positive," says Igor Chestin, director of the World Wildlife Fund in Russia.
Alexei Yablokov, widely regarded as the founding father of Russia's green movement, describes Mr. Mitvol as politically ambitious but says he's acquired real expertise in environmental matters.
Neither man was optimistic about the prospects for Mr. Mitvol's new movement.
"He [Mr. Mitvol] thinks that money and public-relations spin can achieve anything," says Mr. Yablokov. "But he'll come up against the Kremlin and big business."
Russia faces $10 billion international ruling over Yukos bankruptcy
Vedomosti
A number of Spanish investment funds, holders of Yukos Oil Company American Depositary Receipts (ADRs), have secured a major victory in an international arbitration against Russia - the decision on jurisdiction by the Arbitration Institute of the Stockholm Chamber of Commerce (SCC).
The Spanish holders are seeking damages arising from the Russian government's uncompensated expropriation of the bankrupt Russian oil firm's assets. Russia will face a $10 billion worth of claims if it loses the case.
The fund Renta 4 S.V.S.A. represents the consolidated position of the affected parties, according to Covington & Burling LLP, the legal firm acting on behalf of the plaintiffs.
Baker Botts, the lawyers representing Russia, declined to make a comment to Vedomosti. A Justice Ministry official confirmed the receipt of the arbitration documents which were "being studied."
Information of the lawsuit by seven Spanish funds against Russia was leaked to the media back in 2007. According to the website, the court eventually took jurisdiction of only four claims, while the other three funds' legal status was not confirmed under Spanish legislation. Neither the full list of the plaintiffs, nor the size of their claims was disclosed then.
"This case will have significance for Yukos ADR holders in all countries that have BITs with Russia. The losses of Yukos ADR holders in such countries exceed $10 billion," Covington & Burling said in a statement.
The Covington arbitration team in 2005 was led by partner O. Thomas Johnson, Jr., who presented a $9 million claim of 11 individuals and the company FCT America Ltd in the U.S. District Court for the District of Columbia against the Russian Federation, the country's top officials, Gazprom, Rosneft and Baikalfinansgroup. The claim was not set to hearing.
Baker & McKenzie Partner Vladimir Khvalei from the Firm's Moscow office predicts that Russia stands a 90% chance of losing the case, after the Stockholm Arbitration Institute's decision on jurisdiction. Further disputes will focus on the size of compensation, he added.
The court will include very influential arbiters, and the case is expected to have important implications for future investment arbitrations against Russia on behalf of Yukos ADR holders in Spain, Denmark and Britain.
Tension at the top as crisis deepens
By Charles Clover
Published: April 14 2009 15:59 | Last updated: April 14 2009 15:59
Russia’s ruling classes have always been uniquely precarious. Kondrati Rileev, the 19th century poet, even referred to his homeland derisively as a country run by vremenshchiki or “temporaries”.
His words were prophetic: over the past century Russia has been a revolving door for some of the most routinely unfortunate elites in the world: first the 1917 revolution dispossessed the tsarist aristocracy, then dictator Joseph Stalin purged an entire generation of apparatchiks in the 1930s and again in the 1940s.
Hyperinflation and privatisation in the 1990s replaced the old Soviet nomenklatura, or ruling class, with the flashy, blingy “new Russians” of which the topmost echelon became known as the oligarchs.
This generation of the Russian elite may face a premature demise too, because of the global economic crisis. A year ago, Moscow was the top city in the world for billionaires, according to Forbes magazine, edging out New York at 74 to 71. But in this year’s rankings, Russia has tumbled farther than any other country, losing an astounding two-thirds of its 2008 crop, or 55 of the total 87 billionaires.
While it was a bad year everywhere – $1,400bn in billionaire wealth has vanished globally – Russia’s wealthiest were particularly hard hit by a combination of falling prices for oil and metals, Russia’s main exports, and frozen international credit markets.
As a result of the financial paralysis, the rouble has sunk almost a third in just six months and the stock market has fallen by more than three-quarters.
Even before the global financial crisis, the “new Russians” had been gradually surrendering ground to even newer ones since the election of Vladimir Putin as president in 2000.
Several 1990s oligarchs have gone into exile, and one who dared challenge the Kremlin politically, Mikhail Khodorkovsky, languishes in prison. Many may yet go bankrupt and hand over their empires to their creditors – or to the state, which lent them billions in bail-out loans last autumn.
The government has said it does not want to nationalise the assets, although a strong faction favours greater state control. Already, some metals groups such as Rusal, the over-leveraged aluminum giant, are in trouble. Oleg Deripaska, Rusal’s majority owner, was Russia’s richest man last year, but he may become the biggest casualty of the crisis.
“When we are at the bottom we shall see some very serious bankruptcies,” says Pyotr Aven, president of the well-connected Alfa Bank. Masha Lipman, a political analyst at the Carnegie Centre in Moscow, says: “The 1990s had one big wave of redistribution. Then, under Putin, came the redistribution in favour of another group of hand-picked elites. This process has never stopped and it is continuing today amid the crisis.”
Those waiting to step into the shoes of the old oligarchs are a much less flashy type of capitalist. In fact, they are not really capitalists at all. They are bureaucrats who run state monopolies and giant state corporations. They do not drive Lamborghinis and Humvees, they do not dress in cravats or velvet jackets or wear Steve Jobs trainers.
They are not the buccaneers of the 1990s; they are the dour-faced, serious men, whose main asset is their good relationship with their dour-faced, serious prime minister, Vladimir Putin.
A clique of former spies and security men – like Putin, himself a former KGB officer – they are known as the siloviki,“strong ones”, epitomised by Igor Sechin, the deputy prime minister and chairman of Rosneft, the state oil company, Vladimir Yakunin, head of Russian railways, and Sergei Chemezov head of Rostechnologia, the state arms and aerospace giant.
The siloviki have been very successful in extending their control over the economy but, if they pay attention to history, they may fear their seats on the board of Russia Inc may be just as temporary as the last group’s.
Already, the crisis is aggravating divisions in the government. Cabinet factions are squabbling over policy remedies, with “liberals” advocating a hands-off approach clashing with “statists” in favour of greater state controls.
Business groups, meanwhile, are fighting one another to keep their share of a shrinking economic pie.
While the popularity of the ruling tandem of President Dmitry Medvedev and Prime Minister Putin remains practically undented, the crisis could yet test the two men’s thus far cordial relationship. Mr Putin stepped down as president in 2008, anointing his long-time friend Mr Medvedev as his heir apparent, who succeeded him in a carefully managed election and began ruling in May 2008.
Fyodor Lukyanov, editor of the journal Russia in Global Affairs, says: “The dual leadership approach is appropriate to a more prosperous age. As long as you can say ‘yes’ to everyone, it runs smoothly. But the moment you have to say ‘yes’ to one person and ‘no’ to another, these are the seeds of a conflict”.
Peoples’ willingness to give the Kremlin the benefit of the doubt does not extend to United Russia, the party headed by Mr Putin. It is the embodiment of Kremlin power in the regions, but that is where its popularity has been badly dented.
In the far eastern city of Vladivostok, there were riots in December and, in the northern province of Murmansk, a governor was removed after he backed an opposition mayoral candidate last month.
Human rights activists say there has been a crackdown on political dissent.
In a sign of renewed pressure on the regime’s opponents, Mr Khodorkovsky, having landed in jail after charges of tax evasion in 2005 – which most people saw as a political vendetta by the Kremlin – now faces another prosecution on roughly the same grounds.
A number of unsolved attacks on human rights activists and opposition journalists in recent months seems to signal a campaign of intimidation, although no one is sure by whom.
In January, Stanislav Markelov a human rights lawyer working for the newspaper Novaya Gazeta, and Anastasia Baburova, a trainee journalist at the same newspaper, were murdered in an assassination-style shooting in central Moscow. Lev Ponomarev, a well-known human rights activist was badly beaten. The perpetrators of these crimes, and many others like them, have not been found.
Newspapers and TV stations have been officially discouraged from reporting on the economic crisis, a sign of how much fear it generates in ruling circles.
On the policy front, the Kremlin’s response has been to put off painful decisions in the hope that it will see the end of the tunnel first. The central bank, under pressure from the Kremlin, for example, refused to devalue the rouble. But its attempts to defend the currency cost up to $200bn and it still depreciated by a third.
Rather than make deep cuts in the budget to match lower revenues, Mr Putin said last month the government would fund the record deficit – 7.4 per cent of gross domestic product – out of reserves, which it can afford to do for three years, according to Igor Shuvalov, the first deputy prime minister.
There is evidence to justify the views of the optimists. Despite the plunge in oil prices, Russia still runs a current account surplus, and while it has spent huge sums defending the rouble, it still had reserves of $385bn at the beginning of the month, the third largest in the world.
Alexei Kudrin, the finance minister, says he expects growth to resume in the fourth quarter and, after a one-third slide since the summer, the rouble seems to have stabilised.
Capital flight, which amounted to $33bn in the first two months of the year, had all but stopped in March, according to Andrei Klepach, the deputy economy minister.
The bad news, however, is as dire as the good news is good. The rouble’s stability was accomplished by raising interest rates, which could harm economic growth, and by instituting “currency control in all but name”, according to Chris Weafer of Uralisib, the Moscow investment bank.
Credit markets continue to be frozen and most businesses – aside from the banks’ “tier one” customers – say it is almost impossible to get finance. Accounts payable have shot up, as have wage arrears, as enterprises borrow instead from their workers and their suppliers.
About $130bn in foreign loans mature in 2009, and not all of them will be paid back: a wave of defaults and bankruptcy work-outs – and possibly, nationalisations – could come in the autumn, when state bail-out loans come due.
Some see a silver lining in the crisis. Mr Shuvalov says that low prices for oil and gas might be a blessing in disguise for the Russian economy, too long dependent on metals and oil exports and in need of structural reform.
“The longer we have low commodity prices, the sooner we will have a new model for our economy,” Mr Shuvalov told the FT last month.
“Even now, people say: ‘Don’t worry, in a year all the prices will come up again and you’ll have your annual budget completely full of money and you will carry on’. But that’s not good. It’s better if we have two, three, five years as a difficult period.”
Stephen Jennings, chief executive of Renaissance Group, the Moscow investment bank, says that in the current decade Russia has managed impressive structural economic reforms, such as slashing tax rates. But, he says, more remains to be done, such as partially privatising the pension system as a way of making capital markets more resilient.
“The problem with the Russian market is that there is not broad enough ownership. It’s a very narrow group and 99 per cent can sell. So when you pull the plug, all the water goes out of the bath.” He advocates a comprehensive pension programme similar to those of Australia and Chile as a way to stabilise the stock market.
Like the economy, most Russians see foreign affairs as another area which has come dangerously close to disaster and needs to be brought back into balance.
Relations with Washington hit a fresh low, as the US stepped in to back Georgia in its war with Russia last August. Since then, relations with the new US administration of President Barack Obama have been on the mend. Joe Biden, US vice-president, said in February that Washington wanted to “press the reset button” in its relations with Russia.
Sergei Lavrov, foreign minister, told the FT last month that this was a positive sign. “There is always a place for hope and, certainly, when we hear signals from Washington that they want to ‘reset’ relations, meaning that they want constructive engagement and co-operation and partnership on so many issues which we really can usefully co-operate on, we welcome this.”
Many areas of tension under the last US administration, such as the prospect of Nato enlargement to Ukraine and Georgia, and the installation of a ballistic missile shield in eastern Europe, are being quietly defused by the Obama presidency.
“Everything that was creating tension in 2008 has gone from the front burner to the back burner,” says Dmitri Trenin of the Carnegie Moscow Centre. But he adds pessimistically: “Mentally, we are back in the Soviet days of the Washington-Moscow relationship. Now, as then, you have periods of détente, and periods of tension.”
Additional reporting by Catherine Belton
Will Moscow Expand Assistance to Russian-Language Schools in Ukraine?
April 14, 2009
Paul Goble
Vienna, April 14 – A Russian activist has written President Dmitry Medvedev asking that the Kremlin help Russian regions provide assistance to Russian-language schools in Ukraine, an effort that recalls Soviet-era projects, threatens Kyiv’s control of its schools, and unintentionally calls attention to the absence of Ukrainian-language schools in the Russian Federation.
Anatoly Lisitsyn, who heads a charity foundation, wrote Medvedev to say that he had been asked by students at one Russian-language school in Ivano-Frankivsk to provide assistance, given the difficulties that school has had in obtaining Russian-language instructional materials.
In his letter, which was reported today by Novosti and other Moscow news outlets, Lisitsyn said that the request which arrived by email on his foundation’s website had convinced him that Russia’s regions should take responsibility for providing such help to Russian-language schools in Ukraine more generally.
The students said in their message, Lisitsyn continued, that they “would like Russia to devote more attention” to their desire to study in Russian, especially since “the Poles are making massive efforts to introduce Polish language in [Ukrainian] schools,” even to the point of paying for computerization and trips to Poland.
If Poland can do that, the students said and Lisitsyn agreed, then Russia should be able to do at least as much. Lisitsyn told journalists that he would like to see Medvedev back a program in which “all regions of Russia through various charitable foundations and organizations” would “support Russian-language schools in Ukraine.”
According to Lisitsyn, he has already met with Russian Foreign Minister Sergey Lavrov who supports the idea as do the pro-government United Russia Party in the Duma, especially since many of Russia’s regions have already “assumed responsibility for providing schools and other institutions in Ukraine with some aid.
Such aid, RUpor.ru noted, “frequently can assume a political character,” and the news agency noted that last year, Russian special services had promoted the activities of Ruthenian separatists in the Transcarpathian districts of Ukraine “under the aegis of the Orthodox Church of the Moscow Patriarchate.”
And Ukrainian officials are clearly concerned that Lisitsyn’s proposal represents another attempt by Moscow to increase Russian influence in Ukraine and undermine the authority of Kyiv. Ukraine’s education minister, Ivan Vakarchuk, for example, said that there currently are “no especial problems” with Russian-language schools in his country.
“Today more than 17 percent of Ukrainian pupils and the same percentage of university students study in Russian,” he pointed out. And he noted that in Ukraine there are also schools “in the languages of other national minorities,” including Hungarian, Polish, Moldovan, Crimean Tatar, and Romanian.
And Vakarchuk observed that while Russians and others the opportunity to study in their native languages in Ukraine’s educational system, “in Russia there is not a single Ukrainian school financed by municipal governments.” As a result, “children of ethnic Ukrainians” in Russia – and there are several million Ukrainians there – have access only to “Sunday schools.”
“I have raised this question at bilateral meetings” Vakarchuk added, “but the Russian side still has not been willing even to bring it up for discussion.” He implied but did not say that once the economic crisis in Ukraine passes, perhaps Kyiv will follow Moscow’s example and offer to provide outside assistance to Ukrainian-language programs in the Russian Federation.
Russian Minister of Foreign Affairs Sergey Lavrov Interview to the Interstate Television and Radio Company ‘Mir,’ Ashgabat, April 10, 2009
Question: Before your recent visit to Baku, you said a CIS anti-crisis plan to 2020 will be presented at a session of the CIS Council of Heads of Government in Astana on May 22. How acceptable can the unified anti-crisis plan turn out to be for the Commonwealth countries?
Foreign Minister Lavrov: There is no special anti-crisis plan to 2020 being contemplated. We have the CIS Economic Development Strategy to 2020, which remains fully valid. Actually, the CIS Council of Heads of Government on May 22 will consider the Stage 1 Plan of Implementation of this Strategy 2009-2011. In preparing the Plan for the next three years, the events in world financial, economic and currency markets are being taken into account. But the goals of the CIS Strategy to 2020 remain unchanged.
Speaking of anti-crisis efforts of the countries which form the Commonwealth of Independent States, I will, of course, mention the decision of EurAsEC to set up a billion Anti-Crisis Fund. The upcoming session of the EurAsEC Interstate Council in early June is slated to definitively approve the parameters determining the operation of this mechanism. By decision of the Heads of State, EurAsEC is also setting up a High Technology Center to help our countries step up work in this direction and prepare for exit from the crisis so that our competitiveness not only does not suffer, but also increases. The complex of these measures, adopted with regard for what is happening in the world’s financial and currency markets, will help retain unchanged the goals that are set into the CIS Socioeconomic Development Strategy to 2020.
Question: What should Russian foreign policy in Central Asia be primarily directed at?
Foreign Minister Lavrov: As in any other adjacent region to us, we are interested in seeing friendly, stably dynamic states in Central Asia. We presume that our relations must rest on equality and mutual respect and benefit. That’s exactly how these relations are evolving, bilaterally and within different structures. EurAsEC incorporates practically all countries of Central Asia. There is also the Shanghai Cooperation Organization, which comprises together with Russia Uzbekistan, Tajikistan, Kazakhstan, Kyrgyzstan and in whose activities Turkmenistan shows interest. The leadership of Turkmenistan participates in the SCO as a guest. We welcome this, and Turkmenistan’s growing interest in the CIS. Ashgabat serving as the CIS FMC venue indicates this. An Agricultural Producers Forum is also slated here for the autumn. Turkmenistan becomes actively involved in different CIS projects and in the humanitarian collaboration sphere.
Returning to Central Asia, I shall also say that we have enough grounds to be certain that our collaboration will only grow deeper. There exists a whole array of joint energy projects, including the Caspian Gas Pipeline. This project is being implemented by Russia, Kazakhstan and Turkmenistan. Together with Uzbekistan our three countries are also realizing the idea of modernizing the North Asia-Center Gas Pipeline. We have good prospects. I am certain that we will cooperate ever more deeply.
Question: What is the position of Russia on the question of water resources in Central Asia?
Foreign Minister Lavrov: We are interested in seeing the EurAsEC work on the creation of a Concept for developing the water energy resources of the Central Asian region completed as soon as possible. The question is not simple because there is a need to consider the interests of the countries possessing considerable water resources and countries which experience a shortage of these resources. Undoubtedly, mutually advantageous compromises need to be found and we will help the Central Asian states arrive at such arrangements.
Question: How is it possible to assess the refusal of Kyrgyzstan to provide the Manas military base for the Americans?
Foreign Minister Lavrov: The decision of Kyrgyzstan to close the US base at Manas was taken by the leadership of the country independently, bears a sovereign character and we consider that it should be treated with respect.
The background of the American and other foreign military presence in Central Asia is well known. After the events of September 11, 2001, and the start of the antiterrorist operation in Afghanistan, Central Asian states to some or other degree provided their infrastructure for its support. At that stage, this undoubtedly helped reinforce stability and security in the region. The American colleagues then told us and our Central Asian partners that they needed such assistance for the period of active struggle against terrorism.
In 2005 a SCO summit adopted a recommendation calling on the countries of the international coalition to set the dates for stationing of their troops in the Central Asian states. In so doing the SCO members were guided by the fact that the hot phase of the antiterrorist operation was already over, which American representatives then also indicated, by the way. At the end of 2005, by decision of the leadership of Uzbekistan, the US base at Khanabad was closed. So the issue of Manas is not something exceptional. Support in tackling the continuing tasks of the world community in Afghanistan can be rendered in other forms. In particular, Russia provides together with Central Asian countries the possibilities for transit of nonmilitary cargo.
We pay special attention to combating the narco-threat. CSTO member states, which annually conduct special antinarcotics operations called Kanal, have repeatedly invited the NATO nations as the backbone of the coalition in Afghanistan under the UN mandate to forge interaction for the purpose of intercepting and destroying narcotics. This proposal remains on the table and we expect that it will be accepted.
Question: What possibilities exist for Russian-American cooperation in the post-Soviet space?
Foreign Minister Lavrov: There is already some cooperation experience available in this sphere. Russia and the United States collaborated in tackling the problems inherited from the former USSR, associated, in particular, with the issues of nuclear security, the storage and utilization of nuclear materials, and adaptation to the new condition of obligations under some disarmament accords.
Speaking of the present day, economic projects are being realized in a number of CIS countries involving Russian and US capital as well as the capital of the receiving countries. We are open for such cooperation. We understand the interests of the United States in this space, interests of developing cooperation with the countries which are ready for this. We want this interest of the United States or any other extra-regional country to be realized by understandable transparent and legitimate methods, with no geopolitical games being played here, that there be respect, first of all, for the interests of the candidate CIS countries themselves for proposed cooperation and that the countries not be placed before the wrong choice of “you’re either with us or against us.” Unfortunately, our partners did make such attempts. We are against this. We want this unnecessary legacy to be left in the past.
Russian President Dmitry Medvedev in his recent article, which was published on March 31 in The Washington Post, came out for us taking a new approach towards cooperation and trying to find ways for its development which would unite us, would be in the interests of the CIS countries, and would create no unnecessary problems and suspicions for anyone.
Question: The elections in the Republic of Moldova were recognized by all observers, but the situation got out of control. Will the CIS FMC session adopt a joint statement on this issue today?
Foreign Minister Lavrov: At the CIS FMC session we will certainly discuss this situation. The Republic of Moldova is a member of the Commonwealth and we are not indifferent to what is happening in that state. It causes anger what happened – violence, pogroms, the defilement of the parliament building as a symbol of democracy and of the presidential office, and looting. We have already said, but I consider it necessary to re-emphasize that the fact that these vandals went on a ransacking spree under the flags of Romania and the European Union, of course, makes it necessary for Europe to clearly voice its position. The slogans under which all this was done were unequivocally directed at undermining statehood and democratic processes. I think that all CIS countries share this position.
Question: What is your vision of an agenda that can serve to create, as you put it, a “polycentric system of global governance”?
Foreign Minister Lavrov: In the first place, we must all of us proceed from reality. And the reality is such that there have appeared many centers of economic growth and financial power in the world. With economic and financial clout, of course, comes political influence. Therefore now, when a crisis has broken out, everybody is concentrated on real problems. These are being considered and tackled by recognizing that no one can solve them single-handedly or double-handedly. It is necessary to look for solutions which will be the fruit of collective wisdom, of collective initiatives and will present a consensus of the entire world community as to how to move further so that the world economy and world finance no longer experience such upheavals and so that reliable mechanisms are created to enable governing the financial-economic architecture with regard for the interests of all countries. That all of us have had in this period of crisis to concentrate on the real problems offers the hope that in world politics there will be less temptation to engage in virtual problems, to plunge into various geopolitical projects, but that there will be more understanding of the need to be concerned with essential things, in particular, such issues as international security, restrictions on strategic offensive arms, and the proliferation of weapons of mass destruction. As in the economy, solutions of security problems must rest on the opinion of all states and on the consideration of their interests. This is the aim behind the initiative of President of the Russian Federation Dmitry Medvedev for a European Security Treaty which would make it possible to avoid drawing new dividing lines in the Euro-Atlantic area and would create a new security architecture instead of the one that now exists and is patchy. It is not about dissolving NATO, the European Union, OSCE, CSTO or CIS. It is necessary that all these organizations, each of which is concerned with security problems to some or other degree, should find a common denominator, forms which would enable them to secure their members in such a way that no one’s security outside this or that organization is placed in jeopardy. We do not claim having any ready-made recipes, but are convinced that such dialogue is a must. The reaction to our proposals even by countries that are so far in doubt shows that the problem does exist.
Air defence regiment in Polyarny
2009-04-15
The Russian television channel Zvezda News has visited one of Russia’s largest air defence units in the closed military town of Polyarny, the Northern Fleet’s largest submarine base, and provides unique video material.
The regiment is equipped with the long range surface-to-air missile systems S-300, SA-10 in NATO reporting name. The S-300 system was developed in the late 1980’s, but has still got unique capacities. The missile can hit targets moving at up to 10 000 km/h, including ballistic missiles moving at the stratospheric border. The command wagon is like a bunker – it is self-supporting with air, water and electricity and gives protection from nuclear, biological and chemical weapons. Aiming, firing and movement to another position is done on less than half an hour.
Commander of the division, Lieutenant Colonel Nikolay Markovkin tells Zvezda News that the division’s main task is to protect the Northern Fleet’s bases and vessels. The fleet’s main base Severomorsk is located only some tens of kilometers away.
The air defence regiment in Polyarny has an excellent geographical location – close to the border with Norway and NATO.
See material from Zvezda News.
Russian Army badly needs modern weapons
Vremya Novostei
The main threat to Russia's security comes from its technological backwardness in the area of offensive and defensive precision weapons.
More than six months have passed since the August operation to force Georgia to stop the conflict in South Ossetia. The conflict exposed the lack of modern weaponry in Russia, but the Russian army has failed to draw the proper conclusions.
It is said that the conflict highlighted the flaws in of the Russian armed forces, but this is not true. These drawbacks were a common fact 10 years ago. Inefficient reconnaissance equipment affects the effectiveness of Russian weapons, putting it at 60%, and prevents the swift use of intelligence data. The army also lacks automated command and control equipment, especially at the tactical level.
In March 2009, President Dmitry Medvedev, who is also the commander-in-chief of the armed forces, said that Russia had a unique opportunity to create a highly effective armed forces despite the economic and financial problems. He said a large-scale rearmament program would begin in 2011.
Defense Minister Anatoly Serdyukov complained that modern systems comprised only 10% of the weaponry in the Army. Ex-defense minister Sergei Ivanov said the figure was 20% in 2003. If this is true and the number of modern weapons is falling by 10% every five years, there must be a systemic flaw in the state rearmament programs.
In fact, these modernization programs are limited to expensive repairs of obsolete weapons. The current system of manufacturing weapons is insufficient to ensure quality and a high rate of rearmament. The policy of consolidating defense companies into holdings has proven ineffective. When 15-20 nearly bankrupt companies with obsolete equipment that lack skilled personnel are brought together in a super holding, this can only create a huge, unwieldy, ineffective and problem-ridden monster.
April 14, 2009
What Countries Care About
Comment by Alexander Arkhangelsky
Special to RIA Novosti
To Get the Balance of Future Development Right, We Need to Think About Future Generations
At a recent meeting of Russia’s Council for Foreign and Defense Policy, experts from across the political and professional spectrum debated the threats facing the country, and what policies would counter them best. But while soldiers worried about missiles, and demographer—about future population shifts, each group of experts arguing for priority spending in their chosen field, the delegates overlooked the most important question: what kind of world do we want our children to live in?
A regular session of the Council for Foreign and Defense Policy (CFDP) took place this past weekend just outside of Moscow. The CFDP is a non-governmental organization; its members include liberals, conservatives, nationalists and cosmopolitans, along with fighters against the murderous chekists, former FSB and SVR (the Service of External Intelligence) generals, hardened anti-Soviets and the heads of Soviet delegations at disarmament talks, whose logic is still the same: not a step backward. That’s a very useful system. Any healthy society (or one that at least hopes to become healthy) should have neutral stages where everyone must listen to everyone, not where it’s just a conversation of insiders among themselves. The condition is very simple: as long as a person is serious and reasonable, they can participate.
Many different things were discussed, but three speeches were especially memorable.
The current minister of foreign affairs stated that we cannot allow ourselves to have another false start in resetting the relations with the United States: he does not exclude the possibly of strengthening the dialogue with NATO, and, maybe for the first time ever, he publicly acknowledged the fact that the West may also have its own interests in the CIS countries, as long as these interests don’t contradict those of the countries themselves.
This also had its own logic—the logic of careful compromise for the sake of surviving in the situation of the current crisis.
The former deputy minister of defense clearly drew the diagram of Russia’s missile defense. He explained why the United States is the real target of our “defense initiative,” while China (for the time being) is just a conditional target. He was also rather convincing in proving that the only reason why other countries still reckon with us, at least in some areas, is the potential threat we pose for America.
This had its own logic, too. One of the experts grumbled, though: in order to realize this plan, we need to increase the budget of the Ministry of Defense at least by three times. But even if that’s true (let’s suppose that we don’t and can’t have any opinions of our own on this matter), so what? There are situations when you need to tighten your belts – for the sake of self-preservation; there are other situations that can be resolved only with the help of a Bulava missile, but sometimes you can ride the Bulava missile right into bankruptcy. The only question is what the real threats to a country are, in what name must it sacrifice a considerable part of its prosperity, and whether it’s true that this is something that absolutely can’t be done without.
In his turn, one outstanding demographer described the near-term outlook for the increase of the Asian population. He spoke about the fact that in the 21st century our planet will grow on account of Pakistan, Bangladesh and, in part, India. Their population is already incredibly dense, but it will become even denser. This will create colossal problems for everyone – including us. Fighting for territory, wars for control of water and resources will very soon become a reality. In this state of affairs, do we have the right to pay attention to minor frictions with America? To see it not as an ally, but as a geopolitical opponent? Or is the real threat seeping in through other cracks, and they can be filled only together with the West?
Undoubtedly, there was logic in this, too. Very obvious logic. Although some people did object to the demographer, saying that it would not be right to move toward the United States alone, while there was no obvious desire for a compromise expressed by the other side. A different desire was evident, however – the desire to break things roughly.
It was nice for the old Rabbi in that popular joke to answer to everyone: “you’re right,” “and you’re right,” “and you, woman, are also right.” But what’s a political practitioner to do when he’s surrounded and constrained by problems? A practitioner who’s told by military men (and intelligent military men at that, not like the late-Soviet generals), very convincingly, that technological rearmament is essential, even if it means cutting down on expenses for education, culture and social services – all those budget outcasts. And the demographers are no less convincing when they demonstrate the map of global challenges that implicate economizing on ambitious defense and turning toward an allied (i.e. not completely equal, because the specific weight of the economies is incomparable) relationship with the United States. And the diplomats carefully cover their backs, but their gazes are silently questioning: what is our long-term policy? What is the strategic objective our tactical words need to suit, the words we’ll use to weave our diplomatic lace?
It will not be possible to combine everything with everything. Unlike during the CFDP assembly, in practical politics the sheep and the goats cannot be reconciled and heard with equal cordiality—somebody will inevitably feel deprived. It may be that the only possible way for making sound decisions is to take into consideration the interests of – no, not the military men, not the human rights activists, nor the diplomats, nor the scientists, nor the education professionals – of our children. What kind of world should they live in? Which of our tabs will they have to pick up? What dividends will they collect? It is the answer to this key question (and not the distribution of the available forces, nor the mutual ambitions of the Western and the Eastern leaders) that determines how many missiles and mines we need, what budget needs to be assigned for the Ministry of Defense and what budget – for the Ministry of Education.
If we run on the assumption that our children will have to be at war with America anyway, like the children born in 1910s and the 1920s were inevitably destined to be at war with Hitlerism, we must already start that war now. Without minding the costs. But if we’re sure that they are threatened by something else, something that implies an alliance with the West per se, with all of its flaws, then we need to step over our personal dislikes and we need to form a strategic alliance in the name of our children. And then – we need to keep moving, maneuvering, compromising, backing off from declared goals and then returning to them. But most importantly, we’ll keep moving with a clear understanding of where we’re heading and in what name.
Reuters PRESS DIGEST - Russia - April 15
Wed Apr 15, 2009 3:00am EDT
MOSCOW, April 15 (Reuters) - The following are some of the leading stories in Russia's newspapers on Wednesday. Reuters has not verified these stories and does not vouch for their accuracy.
KOMMERSANT
kommersant.ru
- The newspaper has an interview with Ukrainian President Victor Yushchenko on Russian-Ukrainian relations.
- Russia's SOK group has sold Izhavto a 75 percent controlling stake for $200 million to the management of the Izhavto car plant. The daily says it may result in the plant's bakruptcy.
- Debt-burdened Russian oligarch Oleg Deripaska halved the staff of his Basic Element holding group. This may save $30 million to $90 million per year, the daily writes.
- The daily issues an interview with the Vladimir Dmitriev, the CEO of state-controlled VEB bank, on the cost of anti-crisis measures.
VEDOMOSTI
vedomosti.ru
- Russia wants to borrow 5 billion roubles ($149.5 million) from foreign investors, the daily reports.
- One of the most popular social networking web sites in Russia, Odnoklassniki.ru, introduces more paid services. Its profit in 2009 may reach 690 million roubles ($20.63 million), the daily writes, citing experts.
- The daily publishes an interview with the Alexander Shokhin, the President of the Russian Union of Industrialists and Entrepreneurs, the country's main Russian business lobby.
- U.S. company Moncrief Oil International wants to sue Russian gas export monopoly Gazprom for 110 million dollars, the daily says.
- More than 700,000 square meters of office buildings were built in Moscow in 2009, and around 62 percent of it stands empty, the daily wites.
ROSSIISKAYA GAZETA
rg.ru
- Russian President Dmitry Medvedev promised that pensions for the elderly in 2010 will be higher than the minimum cost of living, the daily says.
VREMYA NOVOSTEI
vremya.ru
- Ukraine's broadcasting council urged national cable television providers to exclude Russia's state-controlled First Channel from their broadcasting networks, the daily writes.
National Economic Trends
Budget deficit is to be reduced: Dvorkovich
14 April, 2009, 16:34
Tuesday’s meeting of Senior Finance Ministry officials reviewed results of 2008 and plans for the coming years, with anti crisis measures in focus.
Budget deficit:
Russia’s federal budget deficit should not amount to 5% of GDP in 2010, according to Russian Presidential aide, Arkady Dvorkovich.
“The State budget deficit is expected to be at least 8 percent this year. Speaking of next year's deficit, I don't think that a level of 5% is acceptable. It should be lower – or the country will face an excessive level of risk.”
Borrowing plans:
Deputy Prime Minister and Finance Minister Alexei Kudrin said Russia may raise foreign loans in 2010. Kudrin thinks it would be worthwhile to go to international capital markets in 2010, and to conduct a road show, without raising borrowing, this year, in order to inform investors about Russia’s goals and plans.
The country's State foreign debt shrank by $4.3 billion in 2008 and totaled $40.5 billion on January 1. Eurobond issues account for a large share of this debt. The share of foreign debt in Russia's overall national debt declined to 44.3% in 2008 from 45.8%. It’s the first time Russia has resumed issuing bonds almost in a decade. The country last issued bonds in August 2000, when it placed $21.2 billion worth of bonds with maturity in 2030.
Out of the crisis. When?
Finance Minister Kudrin also noted that emerging from this economic crisis could be more difficult than the 1998 emergence because of the gloomy global economic outlook.
“The recession in U.S. economy will last for at least 16 to 18 months. The way out of the crisis may stretch for several years. Thus we should not be expecting external market conditions to be favorable as they were in 1999, after the crisis ten years ago.”
Economics minister Elvira Nabiullina, however, says an upturn is possible towards the end of this year.
“According to our estimates an upturn is possible toward the end of the year under the influence of growing export revenues and import replacement, including that encouraged by the Rouble's devaluation.”
Other issues:
The Ministry also discussed cuts in budget spending and the need for a better distribution of budget liabilities.
Single Regulator Considered
15 April 2009
Arkady Dvorkovich, the top presidential economic aide, said Tuesday that it was "worth thinking about" the creation of a unified financial regulator to cover everything except the banking sector, Interfax reported.
Speaking at a Finance Ministry meeting, Dvorkovich said the Central Bank should maintain its oversight role for banks, the news agency said.(MT)
Kudrin Considers Sovereign Eurobond
15 April 2009
By Ira Iosebashvili / The Moscow Times
Finance Minister Alexei Kudrin said Tuesday that the government would hold an international investment road show this year and consider issuing debt abroad in 2010, tapping foreign markets for the first time in a decade.
Kudrin outlined the proposals at a Finance Ministry meeting attended by Deputy Finance Minister Sergei Storchak, marking his first appearance in an official capacity since being released from jail last October.
"In this crisis period, conditions will persist that are not as favorable as they were in preceding years," Kudrin said. "We should look into the possibility of going to the external markets next year and holding a road show this year."
Konstantin Vykhovsky, the head of the ministry's debt department, told reporters that Russia could sell up to $5 billion in eurobonds with maturities of three to five years.
"The important issue here is not so much to receive funds to cover the budget deficit but to create a benchmark for corporate borrowers," he said.
Later in the day, however, Kremlin aide Arkady Dvorkovich said the actual size of the offering had not been determined.
"I wouldn't start naming specific figures just yet," Dvorkovich said when asked about an estimate by Citi that the government would be able to borrow up to $10 billion by issuing bonds. "I think that if the demand is for $10 billion and we issue only $5 billion, it means the prices will be very good."
Russia has made significant efforts to clean up its foreign debt since the 1998 ruble collapse and default and has not issued a eurobond since 2000. Russia's investment-grade rated sovereign debt stands at $28.4 billion.
Russian companies, meanwhile, have about $423 billion in foreign currency debt. Several state-controlled companies have announced that they will be floating eurobond issues, including VEB and Gazprom, which is issuing a $2 billion bond.
A government eurobond issue could be snapped up fairly quickly, despite a lack of liquidity in global markets, said Nikolai Podguzov, an analyst at Renaissance Capital.
"There has been a definite lack of sovereign Russian debt in the European bond markets, and this will generate some demand," Podguzov said.
"But," he added, "it would probably be more suitable for Russia, as a major world economy, to try to develop its own, internal credit markets."
Kudrin also said the ministry planned to issue 10 billion to 20 billion rubles in debt in late April.
Kudrin called the government's forecast that the economy would shrink by 2.2 percent this year "optimistic" and said a recovery would not come as quickly as it did after the 1998 crisis, when the economy was spurred by rising oil prices.
He said the 2010 budget would be cut from 10 trillion rubles down to 9 trillion, and the regions might face subsidy cuts and additional taxes.
The crisis will force the government to "treat each kopek more scrupulously," and federal ministries should be held to a strict yearly budget and not turn to the Finance Ministry for more funding when they receive new assignments, Kudrin said.
He said all current expenses should be inventoried and new expenses taken on selectively.
Storchak made no comments at the meeting, his debut back at work after an extended vacation following his October release from custody, pending trial. Storchak was jailed in November 2007 after being accused of attempting to defraud the state of $43.4 million in a scheme involving Russia's decision to write off Algerian debt.
His supporters say his arrest is the result of an internal power struggle in the government involving the siloviki clans.
Kudrin has staunchly defended Storchak and kept him on as deputy even while he was in custody.
Investigative Committee head Alexander Bastrykin said in February that the state's investigation of the case was nearly complete.
An Investigative Committee spokeswoman would not comment Tuesday when asked when Storchak's trial would take place.
Producer prices index increases 4.1% MoM in March
Rencap
April 14, 2009
According to Rosstat (13 Apr), the Russian Producer Price index (PPI) increased 4.1% MoM in Apr 2009, while headline PPI remained negative (although less so) at -2.8% YoY in Mar 2009.
A significant price increase was registered in the mining sector, where PPI added 22.9% MoM in Mar 2009. Headline deflation in the mining sector declined to 21% YoY in March from 45% YoY in February. At the same time, in manufacturing, PPI was slightly negative at -0.1% MoM and -1.2% YoY in March. Utility PPI increased 9.1% MoM in Mar 2009, purely reflecting a 15% MoM increase in electricity prices in March. Headline utility PPI remains the highest among all industries, and equalled 16.4% YoY in March.
Inflation expected at 1.0-1.2% in April vs. 1.4% April 2008
Alfa
April 15, 2009
According to Economic Development Minister Elvira Nabiullina, inflation is expected to reach 1.0-1.2% this month vs. 1.3% in March and 1.4% in April 2008. This should put y-o-y inflation at 13.7-13.9%.
This slower price growth seems to reflect the end of the effect of ruble devaluation, since the exchange rate has been stable since the end of January. However, we see at least two reasons to expect inflation to stay at around 13% y-o-y: 1) recent PPI statistics show accelerating price growth; and 2) the schedule for tariff hikes this year implies a gradual increase in gas tariffs rather than a one-off jump in January, as we saw last year. We therefore maintain our annual inflation forecast at 13% for 2009.
Russia's PPI up 4.1% in March and 5.1% YTD
Alfa
April 15, 2009
Producer price inflation was reported at 4.1% in March and 5.1% YTD. In 1Q08 it amounted to only 3%.
March's substantial PPI increase, which came after a 2.8% price increase in February, seems to suggest that after five months, the period of PPI deflation is over. The first reason for this, in our view, is the end of the destocking process: deflation apparently reflected the sale of goods produced or imported before the crisis for which demand was uncertain. Now, companies are able to produce and import at the new price level. The second reason for the PPI increase is that deflation reflected mounting payment arrears. Therefore, some acceleration in price growth can be taken as a sign that the liquidity problem has generally been resolved. Thus, accelerated PPI growth can be seen as a short-term positive sign.
There are, however, additional considerations. The main one is that faster PPI growth may suggest a recovery in import growth, which had previously been frozen as a result of the demand uncertainty mentioned above. The 35% y-o-y decline in imports was a very important positive factor in support of the trade surplus, so any sign of import growth is cause for concern. The second consideration is that faster PPI growth will put upward pressure on the CPI, even if the effect is not rapid or direct. We thus view the PPI increase as negative news for inflation.
Business, Energy or Environmental regulations or discussions
Russian Stocks Decline, Paced by Sberbank, VTB Group, Lukoil
By Bradley Cook
April 15 (Bloomberg) -- Russia’s Micex Index fell, erasing yesterday’s gain, led by OAO Sberbank, VTB Group and OAO Lukoil.
The 30-stock Micex slid 1.5 percent to 905 at 10:35 a.m. in Moscow, the level it opened at yesterday. The ruble-denominated benchmark is heading for the first weekly decline in two months. The dollar-denominated RTS Index declined 0.2 percent at 806.36.
State-controlled Sberbank, the country’s biggest bank, fell 3.5 percent, the most since March 30, to 28.08 rubles. Smaller rival VTB fell 2.7 percent to 3.24 kopeks.
VTB Capital cut its recommendation on Sberbank’s stock today to “sell” from “hold,” citing “rather bearish comments” made by Chief Executive Officer German Gref.
Lukoil, Russia’s biggest non-state oil producer, declined 3.1 percent to 1,489.89 rubles. Crude oil was little changed today, trading near $49 a barrel, after two days of declines.
To contact the reporter on this story: Bradley Cook in Moscow at bcook7@.
Last Updated: April 15, 2009 02:51 EDT
Gazprom Neft, Inter RAO UES, Rosneft: Russian Equity Preview
By William Mauldin
April 15 (Bloomberg) -- The following companies may have unusual price changes in Russia trading. Stock symbols are in parentheses, and share prices are from the previous close.
The 30-stock Micex Index climbed 1.5 percent to 918.61 at the close in Moscow, its fifth advance in the past six days. The dollar-denominated RTS Index sank 0.9 percent to 807.61. The Russian Depositary Index, the dollar-denominated measure of global depositary receipts trading in London, declined 2.4 percent in the first day of trading since April 9.
OAO Gazprom Neft (SIBN RX): Russia’s fifth-largest oil producer, scheduled to report earnings tomorrow, may post a loss of $172 million for the fourth quarter, compared with net income of $1.32 billion a year earlier, as oil prices fell more quickly than costs and taxes, according to the median estimate of seven analysts surveyed by Bloomberg News.
Gazprom Neft rose 1.7 percent to 90.69 rubles on the Micex Stock Exchange in Moscow.
OAO Inter RAO UES (IRAO RX): The Russian power importer and exporter plans to sell new shares to state development bank Vnesheconombank to finance construction of additional capacity, Interfax reported, citing Ivan Saveliev, head of capital markets at the Moscow-based company.
Inter RAO UES climbed 6.4 percent to 1.15 kopeks. A kopek is one-hundredth of a Russian ruble.
OAO Rosneft (ROSN RX): Russia’s biggest oil producer may move after oil in New York erased gains following the close of Russian stock markets. Crude for May delivery sank 1.5 percent to $49.31 a barrel.
Rosneft slipped 0.1 percent to 176.66 rubles.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@
Last Updated: April 14, 2009 22:00 EDT
Russia: 2Q Outlook - The long road to recovery
Rencap
April 14, 2009
On 23 Feb, CDS spreads on Russia were at 776 bpts and the RTS was trading at 517. Eight weeks later, spreads have fallen to below 400 bpts and the RTS has gained 50%, leaving it the second best performing equity market in the world this year. March was the best month for emerging markets in 15 years, and Russia, unsurprisingly, proved to be among the markets with the highest upside. We remain comfortable with our year-end target of 1200 for the RTS, but not with the enthusiasm which has driven the last part of the recent rally. Heading into the summer, we highlight the risks, as much as the potential return.
After a 50% rise in seven weeks, the market will likely be reminded at some point in 2Q that there remains considerable dislocation between Russia's financial sector and the real economy. Much of the adjustment cost associated with the twin shocks of the collapse in commodity prices and the increase in the cost of capital remains ahead. Although the government has been remarkably proactive in providing the indebted private sector with access to its own, much stronger, balance sheet, and has successfully avoided a collapse of both the banking sector and the currency markets, the private sector still faces substantial pain.
We believe non-performing loans (particularly in the consumer sector) will rise rapidly over 2Q09, likely necessitating capital injections into most of the top Russian banks. Similarly, the corporate sector is in the process of renegotiating many of its liabilities to both domestic and international counterparts, because of an inability, and increasingly, an unwillingness, to pay. While renegotiation should help the capital structure of the corporate sector in the medium-term, it could well generate negative news flow in the near-term. We see no reason to decrease our elevated equity risk premium of 10%.
Nonetheless, despite the near-term risks, we see sufficient evidence to suggest the turnaround is more than just a bear-market rally. As noted in the Equity Strategy section of this report (see page 5), commodity markets, PMI indicators, emerging-market debt spreads and currency markets all suggest the worst is behind us. Russian CDS spreads may widen again, but they are unlikely to revert to 1,000 bpts in our view. Similarly, commodity prices may fall, but an oil price level of $40/bbl now seems to be supported by even the gloomiest outlook.
Furthermore, Russia at an oil price of $40/bbl is not such a bad investment environment. A lower oil price allows a more competitive currency, restoring some competitiveness to the non-hydrocarbon economy. Equally, a lower oil price tends to help catalyse the reform agenda, and the reformists in government have certainly had a good crisis so far. They have persuaded the government to work with the market to get through the crisis, and so far their policies have delivered. As a result, their standing both in government, and more widely, has risen and they are in a stronger position to push ahead with a reform agenda. We discuss the government's anti-crisis programme and the mixed record of reform in the Economics section of this report (see page 27).
The problem for Russia is not the level of the oil price, but the direction, and the speed of its decline. A floor under the oil price removes much of the uncertainty. Russia's 2009 budget is based on a $41/bbl oil price, and the lower end of the exchange-rate corridor corresponds with a balanced current account at roughly $40/bbl oil. As risk perception falls and spreads decline, the restructuring of balance sheets becomes a more manageable process.
February appears to have seen the start of the great Russian revaluation. Our recommendation to date has been to gain exposure through eurobonds and the most liquid Russian equity names. We still see value in both, and our recommendations on eurobond exposure are set out in the Fixed Income section of this report (see page 37). In particular, we continue to like longer-dated Transneft and VimpelCom bonds, and, for the more intrepid, shorter-dated Russian Standard and the Raspadskaya issue.
On the equity side, in this quarterly, we focus on the next wave of potential interest into Russian equity (see page 14). Our experience of previous revaluations indicates that there will be plenty of opportunity to arbitrage large inefficiencies as capital moves down the liquidity and credit curves. In particular, we highlight Evraz, Mechel, M.video, CEDC and Bank of Georgia, stocks which have been amongst the most badly mauled, and which have worked on restructuring their balance sheets to allow them to survive and capture market share as Russia moves through the crisis. As we head into the record period for dividends, we also highlight the pref shares with the highest available yield. At 10-20%, the opportunity in some names, particularly among the regional telecoms, remains attractive. We also mention LUKOIL as our top pick among the liquid oils. Finally, we also highlight a couple of names that have perhaps run too far. We do not believe that the backdrop to Russia's consumption story justifies the revaluation of Wimm-Bill-Dann and X5, and would recommend taking profits in both in the short-term.
Russia Banks to Be Hit by Bad Loans ‘Avalanche,’ UniCredit Says
By Emma O’Brien
April 15 (Bloomberg) -- Russia’s banking sector will experience an “avalanche” of bad loans this year with 20 percent of all credits likely to be in or close to default by year-end, according to UniCredit SpA.
“Plunging asset quality is the main threat to the Russian banking industry and in fact to the economy as a whole,” UniCredit banking analyst Rustam Botashev wrote in a research note e-mailed late yesterday. “The root cause is corporate borrowers’ $229 billion falling due over the next 12 months.”
Botashev previously forecast non-performing loans would reach 9.5 percent across the Russian banking sector this year.
To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@
Last Updated: April 15, 2009 03:10 EDT
VEB Bought $5 Billion of Russian Stocks, Bonds With State Cash
By Denis Maternovsky
April 15 (Bloomberg) -- VEB, Russia’s development bank, spent 168 billion rubles ($5 billion) of the 175 billion rubles the government gave it to buy domestic stocks and bonds, VEB Chairman Vladimir Dmitriev said in an interview published in the Kommersant newspaper today.
Moscow-based VEB is still buying and selling bonds, though it stopped transactions with stocks late last year, Dmitriev said. VEB is buying the bonds of companies including OAO Gazprom, OAO Rosneft, OAO Sberbank and VTB Group, he said.
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@
Last Updated: April 15, 2009 01:44 EDT
Russia's VEB says some firms may struggle to repay
Wed Apr 15, 2009 1:44am EDT
MOSCOW, April 15 (Reuters) - Some Russian companies will struggle to pay back government cash borrowed from state bank VEB, leaving the door open for their possible nationalisation, the bank's head was quoted as saying on Wednesday.
As part of Russia's anti-crisis package, VEB has lent around $11 billion to companies struggling to refinance foreign debt.
"For now all (are meeting the payments). But ... we can see that a number of companies can face this problem," Vladimir Dmitriev told the Kommersant business daily in an interview.
Russian Prime Minister Vladimir Putin said earlier this month that VEB will take shares in companies used as collateral if they fail to repay the loans on time.
"In this case the state bank is acting as an agent of the government. I do not want to talk about specific companies but I take (Putin's) words quite seriously, especially as he also heads VEB's supervisory board," Dmitriev said.
Recipients of VEB funds include steel maker Evraz (HK1q.L: Quote, Profile, Research, Stock Buzz), Russia's largest developer PIK (PKGPq.L: Quote, Profile, Research, Stock Buzz) and United Company RUSAL [ID:nLP517460]. The latter was reported to have asked VEB for more time to pay its $4.5 billion loan [ID:nLD644317].
"The state and the supervisory board must make decisions on the fate of this loan," said Dmitriev, adding that under current legislation the loan could be extended but not restructured.
But Russia's largest oil company, state-owned Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz) paid back its $577 million credit more than six months ahead of schedule [ID:nLA564480], and VEB expects that a total of $2 billion will be paid back by its debtors by the end of this month.
VEB was also charged with using state funds to buy domestic stocks and corporate bonds, spending 168 billion roubles ($5.02 billion) to this end last year out of an allocated 175 billion.
"At the end of last year we stopped working with shares. But we think we could continue work with bonds," he said, adding that the list of acceptable investments included state firms such as Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz), Sberbank (SBER03.MM: Quote, Profile, Research, Stock Buzz) and VTB (VTBR.MM: Quote, Profile, Research, Stock Buzz) as well as some privately owned companies.
(Reporting by Toni Vorobyova; editing by John Stonestreet)
Magnitogorsk First-Quarter Crude Steel Output Falls 42% on Year
By Maria Kolesnikova
April 15 (Bloomberg) -- OAO Magnitogorsk Iron & Steel said first-quarter production of crude steel fell 42 percent.
Output declined to 2.07 million metric tons from 3.6 million tons in the same period last year, the Russian steelmaker said in an e-mailed statement today.
To contact the reporter on this story: Maria Kolesnikova in Moscow at mkolesnikova@
Last Updated: April 15, 2009 02:06 EDT
Russian diamond firm Alrosa posts 1,650% q-o-q net profit rise
MOSCOW, April 15 (RIA Novosti) - Russia's largest diamond miner Alrosa said on Wednesday its net profit calculated to Russian Accounting Standards increased 1,650% quarter-on-quarter in January-March of 2009 to 1.86 billion rubles ($55.7 million).
In the fourth quarter, Alrosa posted a net profit of 112.6 million rubles ($3.4 million).
Alrosa accounts for 97% of Russian and 25% of global diamond output. The Russian government holds a 50.9% stake in the company.
| |
Alrosa posts Q1 loss of about 2 bln rubles (Part 2)
MOSCOW. April 15 (Interfax) - Russia's Alrosa posted a net loss of
1.969 billion rubles in the first quarter of 2009, the Yakutia-based
diamond monopoly said in materials.
The company blamed the negative result on higher interest expenses
and "a substantial increase in the exchange rate loss."
Alrosa posted a net profit of 112.57 million rubles in the first
quarter last year.
It was reported earlier that Alrosa, including Alrosa-Nurba (RTS:
ALNU), saw net profit fall to 3.78 billion rubles in 2008, down from the
profit of 14.13 billion rubles in 2007. The company extracted diamonds
totaling $1.82 billion and sales totaled $2.93 billion. The management
board approved the figures at a meeting on April 10.
Alrosa plans to produce $1.87 billion in diamonds in 2009. It
targets sales totaling $2.1 billion.
Alrosa and De Beers agreed in the fall of 2008 to limit deliveries
to the market in order to support prices. Since December Alrosa has only
sold diamonds to state-run Gokhran.
Globaltrans Profit Up 5%
15 April 2009
Globaltrans, Russia's top privately owned freight rail operator, said Tuesday that net profit rose 5 percent in 2008 to $97.4 million but capital expenditure will remain flat in 2009 because of the global crisis.
Freight rail turnover was up about 1 percent year on year. Globaltrans said its freight turnover shrank 15.1 percent in January and 5.9 percent in February -- less steeply than for the Russian sector as a whole, where cargo declined 27 percent in the first quarter.(Reuters)
More Pork Plants Banned
15 April 2009
Russia is halting imports from three U.S. pork facilities, including a John Morrell plant owned by Smithfield Foods, because of problems with export certificates, the U.S. Department of Agriculture said Tuesday.
The ban on meat from the John Morrell plant in South Dakota is effective April 20, the USDA's Food Safety and Inspection Service said. Shipments also were halted from a packaging plant and a warehouse owned by Cloverleaf Cold Storage in Iowa.(Bloomberg)
Aviva signs agreement to acquire pension fund from ING in Russia
14th April 2009
By Staff Writer
Aviva has signed an agreement to acquire ING Group's non-state pension fund business and its holding company in Russia.
The pension fund provides pensions to large multi-national corporate clients and has 17,000 members.
According to Aviva, the acquisition will see the company become the leading foreign-owned provider of non-state pension fund products in Russia, with around a 10% share of the assets under management within the competitive (non-captive) corporate pensions market.
The acquisition has received approval from the Russian anti-monopoly authority and is expected to complete in early May 2009.
Andrea Moneta, CEO of Aviva Europe, said: "This acquisition will grow our market share of the Russian non-state pension fund business significantly, taking us from a top three foreign-owned player to the leading position. The deal provides the opportunity for us to cross-sell other life and savings products to a substantial customer base."
Malis to be president of Evroset?
Rencap
April 14, 2009
According to Vedomosti today (14 Apr) Alexander Malis, VimpelCom director, could become president of Evroset (VimpelCom owns a 49% stake in the company).
The previous president of Evroset, Sergey Yushenko, left at the end of March. Malis was previously CEO of Corbina Telecom, a retail broadband provider, which was acquired by Golden Telecom (acquired in turn by VimpelCom in Feb 2008). Malis has experience in retail business and, in our view, a good understanding of how VimpelCom's distribution network should change in an economic crisis situation and when launching new products (value-added mobile services; mobile and retail broadband). Malis moves to what should be the biggest driver of VimpelCom's retail and growth story in future.
UPDATE 1-Rambler Media appoints new CEO
Wed Apr 15, 2009 3:19am EDT
(Adds details)
April 15 (Reuters) - Rambler Media Ltd (RMG.L: Quote, Profile, Research, Stock Buzz), which operates Russian language Internet sites, said on Wednesday it appointed Olga Turischeva as chief executive, effective April 16.
Turischeva joins Rambler from VimpelCom Group (VIP.N: Quote, Profile, Research, Stock Buzz), Russia's No 2. mobile operator, where she served as director for venture business development.
Rambler had in March named Turischeva as chief executive and said it expected to finalise her appointment in April.
In February, Rambler had said Chief Executive Mark Opzoomer, Chairman Robert Brown III and non-executive directors Nick Hynes and Oskolkov-Tsentsiper would step down, effective Feb. 28, in a management shakeout.
Rambler Media shares closed at 5.7 pence on Tuesday on the London Stock Exchange. (Reporting by Srikanth Srinivasa in Bangalore; Editing by Vinu Pilakkott)
APRIL 15, 2009
Moscow Court Postpones Decision in Telenor Case
By ANDREW LANGLEY and WILL BLAND
MOSCOW -- A Moscow court Tuesday postponed an appeal by Telenor AS to halt a multibillion-dollar damages claim, technically clearing the way for bailiffs to sell the Norwegian telecom group's stake in Russia's No. 2 cellular provider, OAO Vimpel Communications.
Telenor had applied for a stay of execution of the claim, but a judge in the Moscow Arbitration Court put off consideration of the application until April 30, saying representatives from VimpelCom must attend.
The damages -- which total $1.7 billion -- were awarded by a Siberian court, which ordered Telenor to pay compensation for delaying VimpelCom's entry into neighboring Ukraine five years ago.
Telenor has said it won't pay the damages and is appealing them, with a hearing due in a Siberian court May 26. Meantime, bailiffs in Moscow have frozen most of Telenor's shares in VimpelCom so they can be used as collateral while Telenor appeals against the damages.
Telenor said it fears its stake in VimpelCom could be sold before it has a chance to appeal to the Siberian court. The Norwegian company had hoped that the judge in the arbitration court would rule the sale of it is illegal before then. Instead, by adjourning until month-end, the Moscow court has made the sale possible.
"Technically the bailiff can still go ahead with the sale of our VimpelCom shares," said a spokeswoman for Telenor. A spokeswoman for the Federal Bailiff Service, which is responsible for collecting the damages, said the service hasn't seen the court's ruling and can't comment on the current status of the arrested shares. "We can't sell anything. We can only act on the court's decisions," said the spokeswoman.
The case is the latest in a series of lawsuits, which state-controlled Telenor alleges have been masterminded by Russia's Alfa Group conglomerate -- its long-standing partner at VimpelCom. It has sparked political tensions between Moscow and Oslo in recent weeks and has fueled concerns that President Dmitry Medvedev isn't following through on pledges to ensure courts aren't manipulated by powerful local business groups.
The case is the latest in a series of lawsuits, which state-controlled Telenor alleges have been masterminded by Russia's Alfa Group conglomerate -- its long-standing partner at VimpelCom. It has fueled concerns that President Dmitry Medvedev isn't following through on pledges to ensure courts aren't manipulated by powerful local business groups.
—Daria Solovieva contributed to this article.
Write to Andrew Langley at andrew.langley@ and Will Bland at william.bland@
UPDATE 1-Moscow court postpones Telenor hearing to April 30
Tue Apr 14, 2009 5:45pm BST
* Court wants to hear the position of Vimpelcom
* Vimpelcom says no decision yet
* Telenor stock gains 10 percent, Vimpelcom loses 8 percent (Adds share price, details, background, analyst comment)
By Maria Kiselyova
MOSCOW, April 14 (Reuters) - A Moscow court on Tuesday postponed until April 30 a ruling on whether to suspend enforcement of a $1.7 billion lawsuit against Norwegian telecoms firm Telenor (TEL.OL: Quote, Profile, Research), lifting the company's shares 10 percent.
Telenor brought the motion to court in an attempt to suspend enforcement of the award, which the company has been ordered to pay to Russia's No. 2 mobile phone operator, Vimpelcom (VIP.N: Quote, Profile, Research).
"The court has decided to postpone the hearing in order to hear Vimpelcom's position," the judge, Maxim Makhalkin, said after a two-hour hearing in the Moscow Arbitration court.
Telenor shares closed up 9.8 percent at 40.75 crowns. New-York listed shares in Vimpelcom fell 8.2 percent to $8.77 by 1600 GMT, underperforming rival MTS (MBT.N: Quote, Profile, Research), which lost 3.3 percent.
"We have not yet received official notification about the results of today's court hearing. We are planning to decide what action to take after studying the court's ruling," Vimpelcom spokeswoman Yelena Prokhorova said.
The judge said the court would make a decision on April 30 even if Vimpelcom does not present its position.
Telenor declined to comment.
In February, a court in the Siberian city of Omsk ruled in favour of a tiny Vimpelcom shareholder, Farimex, and said that Telenor must pay $1.7 billion in compensation to Vimpelcom for allegedly holding back Vimpelcom's business in Ukraine.[ID:nLK345621]
Telenor views the case as part of a long-running row with Alfa Group, co-owner of Vimpelcom and run by billionaire Mikhail Fridman [ID:nLD3259]. Alfa has denied any link to Farimex.
Telenor, which has a 29.9 percent voting stake in Vimpelcom, appealed the Omsk decision and took the case to the appeals court in another Siberian city, Tyumen. This court will hold the appeal hearing on May 26.
But on April 3, Telenor was served with an order to pay the damages to Vimpelcom within five working days or risk having its shares sold by bailiffs to raise the money.
This led Telenor to request a stay of execution both in Tyumen and in Moscow. Its request was denied by the Tyumen court, prompting Telenor to file an appeal that will be held on April 28 -- two days before the rescheduled Moscow hearing.
"We are hence left in limbo until the next potential trigger on April 28," VTB Capital analysts wrote in a note.
"The events are clearly not unfolding in line with the best case scenario," they said. "Technically ... nothing prevents the execution bailiffs from launching the procedure for selling the stake."
Proposal for long-term capacity market to be ready in 2Q09
Rencap
April 14, 2009
Event: Russia's Deputy Energy Minister Vyacheslav Sinyugin has revealed that his ministry expects to submit a proposal for a long-term capacity market during 2Q09. "The document is well advanced," said Sinyugin, adding that it was not possible to give a precise completion date because discussions were ongoing.
The establishment of a long-term capacity market, with minimum price guarantees should capacity not be needed, has been long-awaited by genco proprietors, most of which have signed contracts to build new plants without knowing how they would be paid for the additional capacity. While the use of price floors is likely to be welcomed by generators, this departure from pure market principles has slowed the process, because generators and wholesale market buyers have each argued that the other should bear the burden of payment guarantees.
OGK-1 optimizes personnel expenses and CAPEX
Alfa
April 14, 2009
According to various media sources, OGK-1 plans to cut its headcount by around 10%, or by about 500 people, by July this year. In addition, the company also wants to cut its planned CAPEX by 10-15% for the construction of three power units: the coal-fired turbine at Kashirskaya GRES (to be launched this year), and two CCGTs at Urengoiskaya GRES and Nizhnevartovskaya GRES. CAPEX could be reduced by cutting spending on raw materials, equipment and construction works.
This news, along with the government's recent decision to support OGK-1's CAPEX plans with state money (by placing around R21 bln under the umbrella of Inter RAO UES, which currently manages OGK-1 shares owned by FGC and RusHydro above 60%), is very POSITIVE for OGK-1's minorities. We like the idea that the company does not plan to stop the construction of part of its new capacity projects, because the latter would hurt its value, as we detailed in our report, "Russian Utilities: The World Without CAPEX" of March 26, 2009.
| |
TGK-8 board recommends no dividend for 2008
ROSTOV-ON-DON. April 15 (Interfax) - Lukoil-controlled Southern
Generating Company (TGK-8) will not pay a dividend for 2008 under a
recommendation to shareholders from the board of directors.
The board of directors voted to recommend no dividend at a meeting
on Tuesday. The board scheduled the annual shareholders' meeting for
June 2, the genco said in a statement.
It would effectively be the second year in a row that TGK-8 has not
paid a dividend. The company paid an interim dividend of 0.0000841102
rubles per ordinary share for the first quarter of 2007, the last time
the company paid a dividend. The genco had a profit of 27.878 million
rubles in 2007 which it retained.
TGK-8 posted a profit of 16.446 million rubles in 2008 under
Russian accounting standards.
The agenda for the AGM includes the standard items: confirmation of
the financials, the 2008 profit allocation, elections to the board of
directors and the audit commission, and confirmation of the auditor.
Shareholders will also vote on new versions of the company's charter and
internal documents.
A company official declined to explain why the board was
recommending no dividend. He also declined to name the candidates for
the board of directors, noting that the recommendations from members of
the board had still not been tallied. "Complete information will appear
at the end of this week or the beginning of next," the official said.
KPMG (Moscow) has been recommended as the company auditor in 2009.
Shareholders of record on May 14 may participate in the meeting.
TGK-8 charter capital is split into 20.663 billion ordinary shares,
each with par value of 0.01 rubles.
TGK-8, registered in Astrakhan on March 22, 2005, includes
generating assets in Krasnodar and Stavropol territories, in Astrakhan,
Volgograd and Rostov regions and in Dagestan.
Lukoil (RTS: LKOH) has consolidated 95.53% of TGK-8 shares.
Moscow And St Petersburg Power Use May Fall Less Than Average
Troika
April 14, 2009
The Energy Ministry forecasts that as a result of the crisis, electricity consumption in Moscow and St Petersburg will fall 1.5% versus a 4.5% y-o-y expected decline for Russia as a whole, Energy Minister Sergei Shmatko stated last Friday. In regions with considerable industrial facilities, the drop in electricity consumption will be 18-20%, but in other regions (such as Krasnodar Region and the Southern Federal District) consumption is growing. Shmatko reminded that an analysis of the progress made in the realization of the investment programs of private OGKs and TGKs will be prepared in April. Thereafter, amendments to the Federal Electricity Program will become possible in terms of timelines and certain reallocation, he added.
We currently expect Mosenergo's electricity output to decline 3.0% y-o-y in 2009 versus a 6.7% anticipated drop for Russia as a whole, so the Energy Ministry's expectations are more optimistic. We reiterate our view that the ministry's readiness to revise the investment programs of private OGKs and TGKs is positive for these stocks. While we do not expect new capacity construction projects to be cancelled, but rather postponed, this would ease the burden of capex over the next few years, lessen the need to locate financing (i.e. debt, which is currently expensive, and large new share issues) and reduce the risk of capacity overbuild in Russia. The TGK-1 BoD has preliminarily approved cutting the company's 2009 investment program from R40 bln to R14 bln (a final decision will be taken in May), while Gazprom will not invest its own funds this year, the Vedomosti daily reports, citing a source close to the genco. No new share issue would be good news for TGK-1 stock, in our view.
S.Korea's Hyundai Heavy in Russian farm deal
Wed Apr 15, 2009 3:12am EDT
SEOUL, April 15 (Reuters) - South Korea's Hyundai Heavy (009540.KS: Quote, Profile, Research, Stock Buzz), the world's top shipbuilder, said on Wednesday it had agreed to buy a 67.6 percent stake in a Russia-based farming firm to grow grains for the import-dependent North Asian country.
Hyundai agreed to buy the stake in Khorol Zerno LLC, an agricultural management company, for $6.5 million, and plans to invest an additional $9 million to expand its farmland to 50,000 hectares by 2012 from the current 10,000 hectares.
Hyundai plans to grow 60,000 tonnes of corn and soybean annually by 2014 on the farm based in the Khorolsky Rion region, near Vladivostok, which would allow the firm to use port infrastructure for exports to South Korea and other countries.
The move comes as South Korea, which depends almost completely on grain imports, has sought to develop overseas farmland to boost food security following grain markets' rally to record highs early last year.
"We expect to help Korean livestock farms by freeing them up from sudden price changes and supply shortages of provender," Hyundai said in a statement, adding the deal was part of its strategy to diversify its business into food and renewable energy.
But the country's recent attempts to secure overseas farmland have not been all successful.
South Korea's biggest feed maker Nonghyup Feed and trading firm Daewoo Logistics agreed last year to jointly develop a 20,000-hectare corn farm in Indonesia starting this year.
But Daewoo saw its separate massive overseas foray to lease over 1 million hectares of Madagascar, an area larger than Qatar, hit a snag last month after the country's new leader cancelled the deal.
Daewoo's long term aim was to replace more than half the corn that South Korea, the world's third-largest corn buyer, imports.
In 2008, South Korea imported 8.7 million tonnes of corn, mainly for animal feed production. [ID:nSEO87526] (Reporting by Miyoung Kim; Editing by Jonathan Hopfner)
Black Earth Eyes First Profit
15 April 2009
Black Earth Farming, an owner and developer of agricultural land in Russia, may post its first net profit in 2010 as its farms mature.
The company may achieve profit before interest, depreciation and amortization in 2009, CEO Sture Gustavsson said. Black Earth, which was founded in 2005, lost $25 million in 2008 on sales of $24.4 million, according to a statement on the company's web site.
Black Earth has tripled its farmland portfolio and is now switching its focus to agricultural production.(Bloomberg)
Wal-Mart may enter the Russian market
14.04.2009
Reports of out Russia suggest Wal-Mart Stores Inc. may be in negotiations to buy a controlling stake in one of the country's leading “hypermarket” big box retailers. An article in the Kommersant newspaper said the ownership stake in Lenta could approach 51%. This follows similar reports in July 2008.
The move would be in keeping with Wal-Mart’s recent international history as the majority of its expansion outside the U.S. has been through initial partial ownership stakes rather than green-field development, according to UBS analyst Neil Currie.
He told clients that the main attraction in acquiring Lenta is its assets and customer loyalty. Meanwhile, penetration of modern food retail formats is uneven in Russia and the food retail market is highly fragmented.
Lenta has 34 hypermarkets with sales of approximately US$2.3-billion in 2008. That figure represents 0.6% of Wal-Mart’s global sales last year and 0.2% of its international sales.
Mr. Currie said valuation discipline will be key to any deal for Wal-Mart now that Russian food retail valuations have contracted as a result of currency weakness and the economic downturn versus a year ago.
His “buy” rating and US$61 price target on Wal-Mart shares remain unchanged. The target represents upside of roughly 16% to Tuesday’s close of US$52.39 per share.
Discussions on retail law to be extended until October 2009
Alfa
April 14, 2009
Today's Kommersant reports that the Ministry of Industry and Trade announced Friday that work on the draft retail law will be extended until October 2009 due to a lack of agreement among ministries on several issues. Along with the Ministry of Industry and Trade, the Federal Antimonopoly Service (FAS) and Ministry of Agriculture are also involved in the preparation of the draft legislation. The latter two authorities are lobbying to include some provisions in the law that could potentially be negative for the public food retail chains. These include government regulation of prices for social products, the reduction of the dominant market share threshold from 35% to 15% in the regions and 5% in Moscow and St. Petersburg, and a requirement for dominant retailers to obtain FAS approval for the purchase of real estate and land plots.
The extension of the discussions of the retail law draft until October 2009 does not remove risk that FAS and the Ministry of Agriculture may include provisions that may prove to be negative for the Russian public retailers. However, as negotiations over this legislation have been evolving since 2007, we qualify this news as NEUTRAL.
TUI, Billionaire Mordashov, Agree to Form Russia Travel Venture
By Maria Ermakova
April 15 (Bloomberg) -- TUI AG, the German owner of Europe’s largest travel company, agreed to form a joint venture with Russian billionaire Alexei Mordashov’s tourism assets to expand in the former Soviet Union.
Mordashov, who owns about 15 percent of TUI, will own 51 percent of the venture through his S-Group holding company and Hanover-based TUI will control the rest, TUI said in a regulatory filing today.
S-Group and TUI each agreed to invest $20 million in the venture this year, including the acquisitions of 75 percent of “certain assets” of Russian tour operator VKO Group and Ukrainian travel company Voyage Kiev and Moscow-based Mostravel, which specializes in trips to Turkey and Egypt, TUI said.
To contact the reporter on this story: Maria Ermakova in Moscow at mermakova@
Last Updated: April 15, 2009 03:21 EDT
UPDATE 1-TUI Travel establishes Russian joint venture
Wed Apr 15, 2009 3:41am EDT
* Agreement with Mordashov's S-Group Capital
* 1st major tour operator to enter Russian market
* To invest up to $20 million
LONDON, April 15 (Reuters) - Europe's biggest travel firm TUI Travel (TT.L: Quote, Profile, Research, Stock Buzz) said on Wednesday it had finalised terms for entering the booming Russian travel market through a joint venture with Oligarch Alexei Mordashov (CHMFq.L: Quote, Profile, Research, Stock Buzz).
The company, which first announced plans to create a joint venture with the Severstal chief executive's S-Group Capital Management last April, said it had now signed a definitive agreement to that effect.
The joint venture, which will be 51 percent owned by S-Group and 49 percent owned by TUI Travel, has agreed to acquire majority stakes in assets owned by two tour operators in Russia and Ukraine, TUI Travel said in a statement.
"TUI Travel will be the first major international tour operator with a significant presence in Russia," said Chief Executive Peter Long.
TUI Travel said the joint venture is expected to invest up to $40 million in the region by the end of 2009.
TUI Travel's share of the investment expected to be up to $20 million, to be paid either in cash or the value of assets contributed to the joint venture.
(Reporting by Matt Scuffham)
Activity in the Oil and Gas sector (including regulatory)
Russia seeks Japan help for Sakhalin-1
Wire services
Russia is seeking Japan's help in building a pipeline and liquefied natural gas export terminal near Vladivostok for its Sakhalin-1 project.
The construction costs are projected to total about 500 billion yen ($5 billion), and Russian Prime Minister Vladimir Putin, who is scheduled to visit Japan in May, is likely to propose starting full-scale talks, the Nikkei business daily paper reported, citing an unnamed Japanese foreign ministry official.
A senior Japanese trade ministry official said the ministry and Russian gas major Gazprom hold regular talks to explore Japanese companies involvement in Russia's energy development programme, but added that "it is not true that Russia is seeking assistance."
The Nikkei said Japan was considering financing a planned pipeline extension from Khabarovsk to Vladivostok through the state-run Japan Bank for International Cooperation.
Russia plans to buy all of the gas produced from Sakhalin-1 and export most of it to Japan and other countries, the paper said.
Exxon Mobil operates Sakhalin-1 along with Russian state oil company Rosneft , Japan's Itochu and Marubeni , and India's ONGC.
Gazprom last year said it would provide for the development of the Sakhalin-Khabarovsk-Vladivostok gas transport system, focusing first on the Khabarovsk-Vladivostok gas link, which it plans to complete in 2011.
Gazprom has long said it needs the gas produced at Sakahlin-1 to cover domestic needs, while Exxon is planning to export the fuel to China.
The project has been producing oil for several years and reached peak production of 11.2 million tonnes in 2007.
It has been producing gas since 2005 and shipping small volumes to continental Russia. It has signed a deal to supply China with 8 billion cubic metres of gas a year and hopes to start the supplies next decade, reported Reuters.
Wednesday, 15 April, 2009, 04:54 GMT | last updated: Wednesday, 15 April, 2009, 04:54 GMT
Russia Raises Oil Export Duty to $137.70 a Ton From May 1
By Torrey Clark
April 15 (Bloomberg) -- Russia will raise its crude oil export duty to $137.70 a metric ton starting on May 1, Alexander Sakovich, the deputy head of the Finance Ministry’s customs payments department, said by telephone today.
The tax was set at $110 a ton on April 1.
Last Updated: April 15, 2009 01:35 EDT
OPEC-Russia Dispute to Weaken Oil?
Chris Weafer / UralSib
April 14, 2009
¯ Markets look set to fall today as investors switch focus back to the real economy and the still deteriorating trend. The S&P Futures is showing an opening drop of 0.9% and the Nikkei is down almost 1.5%. But other Asian shares are trading higher, led by the region's banks.
¯ The main news items today, and the main determinants20of how markets in Europe, Russia and th e US trade later, will be US retail sales and the Goldman Sachs earnings report. X Five will report 2008 results in Russia.
¯ Reports from Vienna that OPEC is frustrated with the fact that Russian oil production is not falling as promised (it rose in March). It is believed that Russia assured OPEC, at a December meeting, that oil production would slide steadily all year. That allowed OPEC members to proceed with its internal quota cuts without an immediate cut from Russia, the world's biggest producer. The oil market is heading for a period of weakness due to demand worries and the rising dollar. If Saudi Arabia decides to make life difficult for Russia over the next few months, i.e. to bring pressure to bear to try and force production cuts, then the 2nd Qtr might be even more difficult than expected. Saudi is in a better position to withstand a period of much lower oil to try and force Russian compliance.
¯ sp; Brent and WTI are trading a little lower in Asian exchanges this morning, down 43 cents and sixty nine cents respectively. Brent is trading at $51.7 p/bbl while WTI is now trading at $49.36 p/bbl.
¯ Gold is up slightly (+0.3%) at $898.6 per ounce.
¯ The dollar is up slightly against the euro, trading at $1.3342. The yen is also better today. The dollar fell slightly against the euro yesterday but traders say this was only short covering.
¯ US equities rose over the last h our yesterday with the banks making the strongest gains. The oil stocks were the20weakest sector. The S&P 500 ended up 0.3% while the Dow closed down 0.3% due to the higher weighting of oil shares in that index.
Long banks, short oils still looks safe. The rally in global markets has been strongly supported with a major bounce in bank share prices, especially in the US. Investors believe that the sector that directly led to the global economic collapse will also provide the main indicator to the end of the collapse and the start of recovery. A big test will come with the 1st Qtr earnings reports and the first of those will come with Goldman Sachs later today. That report is expected to be good, because the bank is also expected to try and sell a multi-billion dollar equity issuance, so the main signal may not come until Citigroup's results on Friday. Meantime, however, the "long banks-short oils" trade still looks safe. Sberbank is still the safe sector play in Russia. Oil, as expected given the IEA's demand forecast downgrade, fell to just under $50 p/bbl on Nymex last night and that pulled the US oil major lower while the banks all rose. Lower oil will weigh on the Russian oils again today. The dollar f ell against the euro yesterday but traders put that down to short covering only and e xpect the dollar to again rise against the euro this week. That will also hurt the oil price and oil shares. The price of gold and silver bounced 1.3% and 3.0% respectively yesterday and that will provide some support for Polyus and Polymetal today. MTS rose 2.8% in the US yesterday while Vimpelcom closed down 3.1%. Investor's appear to have regained their preference for the former over the latter again.
IEA demand cut hits oil. The oil price drop and indications of opening weakness in the US equity market took their toll on the local bourses, which had spent the morning with no clear direction. The RTS closed down a modest 0.3% but MICEX, with a longer trading overlap with the US markets, fell sharply over the past hour to end the day down 2.4%. The oil stocks led the way down while the electricity names pushed strongly ahead. Rosneft fell 4.1% on MICEX, despite some tax changes that are marginally positive for its bottom line, and LUKoil lost 3.9%. Gazprom also ended the session with a loss, off 3.4% on MICEX. In the electricity sector, Mosenergo rose 30% on hopes that its volume output will be less affected than the industry average this year. The TGK's all rose on optimism that the industry will be able to slow or defer capital expenditures this year and,20thus, need less capital. TGK-1 lead the pack with a gain of 31%, but a total of seven TGK's rose by 10% or more yesterday (see performance table in the Informer). The banks fared relatively well as, globally, the industry continues to gain from the low valuations of February. Sberbank fell 0.6% and VTB closed down 0.9%.
Rosneft: Tax holidays for offshore regions
UralSib
April 14, 2009
MET holidays for the Okhotsk and the Black Sea greenfields. Yesterday, First Deputy Finance Minister Sergey Shatalov announced that the government plans to introduce Mineral Extraction Tax (MET) holidays for greenfields on the Okhotsk Sea and the Black Sea shelves. This latest initiative completes last year's MET holiday approvals for offshore zones: green fields located in the Arctic shelf, Caspian Sea and the Azov Sea. The zero MET rate will stay in force until cumulative production reaches 35 mln tons for Arctic shelf fields and 10 mln tons for the Caspian Sea and the Azov Sea fields. The duration of the zero tax rate is 10 years for production licenses and 15 years for combined exploration and production licenses. This news is strategically positive as it indicates that the issue of tax breaks for the oil industry is still on the table.
Rosneft - the sole beneficiary. Rosneft (ROSN - Hold) is the only oil company which will benefit from this initiative. No other oil companies have projects on the shelf of these two seas. In the Okhotsk sea, Rosneft is involved in the exploration of Veninsky licensed block of the Sakhalin-3 project, the West-Schmidt licensed block of the Sakhalin-4 project and the East-Schmidt and Kaigansko-Vasyukansky licensed blocks of the Sakhalin-5 project. All of these blocks are being explored under special "carry arrangements", under which the project's foreign partner (BP for Sakhalin 4 and 5 and Sinopec, for Sakhalin 3) bears the costs of the exploration phase. In the Black sea, Rosneft has licenses for the Tuapse Trough and adjacent Val Shatskogo block.
Crisis halts most shelf zone development. We believe that all but the Caspian Sea shelf zone development projects will now be postponed indefinitely due to the current economic conditions. We have tried to reflect this by moving the starting year of production from offshore fields (including those of Rosneft) to after the last year of our DCF forecasted period (2018). As a result, the proposed additional tax holidays will not have any impact on our valuations. Our top pick in the sector remains Gazprom Neft, as it is best placed relative to peers due to its developed downstream segment and proper costs control.
Rosneft completed early repayment of a state bank loan
Monday, Apr 13, 2009
Rosneft completed early repayment of a USD 577 mln loan obtained in Q4 2008 from Vnesheconombank (a Russian state bank).
The loan was provided to Rosneft within the ‘Additional measures to support the Russian financial system’ Federal law to refinance the debt raised from international creditors. The facility was provided for one year at LIBOR+5%.
“Early repayment of the Vnesheconombank’s loan was effected from Q1 2009 free cash flow and reflects Rosneft’s desire to promptly repay the state loans”, – commented Sergey Bogdanchikov, the President of Rosneft.
TNK to Pay 40% Of Profit in 2009
15 April 2009 Bloomberg
TNK-BP, the oil producer half-owned by BP, will pay out about 40 percent of profit to shareholders this year, billionaire Viktor Vekselberg said in comments published on the company's web site.
"There will be no surprises" and no reason to change dividend policy when management meets in June, said Vekselberg, one of the Russian billionaires who control the other 50 percent of TNK-BP.
TNK-BP has generated more than $25 billion of net income and distributed more than $20 billion in dividends since it was set up in 2003, BP chief executive Tony Hayward said March 3. The company supplies about one-quarter of the London- based oil producer's output.
TNK-BP Holding, the venture's traded unit, has paid out nearly all of its profit under Russian accounting standards in dividends since it was created in 2005.
TNK-BP Will Not Change the Dividend Policy Despite the Crisis
April 14, 2009, Tuesday
The oil company TNK-BP is not going to change its dividend policy and will pay full dividends of 2008 to shareholders in spite of the global financial and economic crisis, Viktor Vekselberg, co-owner of TNK-BP and Chairman of the Board of Directors of the Renova group of companies, said today. “In June, at the next meeting of the TNK-BP management, we will discuss and consider all aspects of the matter in accordance with our plans. There will be no surprises,” added he. “We have an established dividend policy, which implies payment of 40% of the net profit. We have no reasons to change it,” stressed Mr. Vekselberg. He assured that the shareholders of TNK-BP, “including minority shareholders, will get all dividends.”
Source: ITAR-TASS
TNK-BP shows interest in Sibir Energy
Rencap
April 14, 2009
The Sunday Times reported on 12 Apr that TNK-BP is preparing a GBP2.3bn offer for Sibir Energy (SBE). According to the newspaper, German Khan, executive director of TNK-BP, has held talks with several UK-based investors to gauge whether they would accept a GBP6.00/share offer, which represents a 243% premium to the GBP1.743/4 price SBE at which last traded before its shares were suspended in February.
While we regard SBE as an attractive takeover target, we believe it would be a better fit with a state-owned Russian oil company, such as Gazprom neft (SIBN) or Rosneft. An acquisition of the company by TNK-BP will further complicate its relationship with Gazprom neft, a minority shareholder in the Moscow refinery, which is majority owned by SBE. TNK-BP and Gazprom neft already share joint control over Slavneft, but, according to Petroleum Argus, SIBN is looking to take outright control of the JV. It appears to us that by showing an interest in SBE, the Russian shareholders of TNK-BP are looking to up the stakes in their negotiations with SIBN. BP will need to approve this deal, and this may prove difficult, particularly given that TNK-BP's CEO has not yet been appointed.
Sibir Energy Hasn’t Been Approached by TNK-BP (Update1)
By Stephen Bierman
April 14 (Bloomberg) -- Sibir Energy Plc, the London-listed explorer that’s suing one of its biggest shareholders, denied press reports that it has received a takeover approach from BP Plc’s Russian venture.
“The Board confirms that it has not received any approach or any offer from TNK-BP,” Sibir said in a statement today.
This week’s Sunday Times reported that TNK-BP, Russia’s third-largest crude producer, was preparing a 2.3 billion pound ($3.4 billion) bid for Sibir Energy.
German Khan, TNK-BP’s executive director, approached investors to check whether they would accept an offer of 6 pounds a share, the newspaper said. Khan held talks with OAO Sberbank and “several U.K. institutions,” according to the report. TNK-BP is a 50-50 venture between BP and a group of billionaires.
“It seems like a more natural buyer would be Royal Dutch Shell or Gazprom Neft because they already have partnerships,” Chirvani Abdoullaev, senior oil analyst at Alfa Bank in Moscow, said by telephone today.
Sibir Energy closed at 174.75 pence on Feb. 18, the day before the shares were suspended. Last week, the oil producer said it was suing Chalva Tchigirinski and former Chief Executive Officer Henry Cameron. It started an internal investigation after claiming Tchigirinski’s interests owed the company $325 million. The claims will probably reach about $400 million, Sibir said.
The lawsuit “underlines our determination to recover on behalf of our shareholders the funds that were taken from the company,” acting CEO Stuard Detmer said in a statement at the time.
Sibir Energy runs the Moscow Refinery with OAO Gazprom Neft and has an oil-production venture with Royal Dutch Shell Plc in Siberia.
To contact the reporter on this story:
Last Updated: April 14, 2009 11:08 EDT
LUKoil to sell 160 gasoline stations in the US
Alfa
April 14, 2009
According to various newspapers today, LUKoil has announced its plans to sell 160 gasoline stations in the United States. The company has almost 1,600 gasoline stations in North America. Considering that demand for gasoline has been declining since last year, a sale of non-performing outlets will free up capital and reduce the cost of overall operation.
LUKoil to reduce natural gas production in Uzbekistan
Alfa
April 14, 2009
Lukoil has announced that it has received a request from Gazprom to reduce the intake of the natural gas produced at its Uzbek venture. Lower natural gas demand in Europe forced Gazprom to partially shift the burden to independent producers. 0.5 bcm of natural gas production will be cut from the previously planned production of 2.7 bcm for 2009. This is an almost 20% cut in production.
LUKoil Outlines Expansion Abroad
15 April 2009 Bloomberg
LUKoil plans to drill three deep-water exploration wells in Africa in the next year as it urges the Russian state to offer more licenses domestically, CEO Vagit Alekperov said in an interview, in which he talked about the oil major's plans for expansion abroad.
"For now, we plan to drill three exploration wells," Alekperov said Monday about the company's plans with Houston-based Vanco Energy in Ghana and Ivory Coast.
LUKoil, with projects in West Africa, Venezuela, Saudi Arabia and Iraq, is seeking to expand internationally as Russia offers fewer licenses. Its "dry hole" exploration costs increased by $174 million to $317 million in 2008, LUKoil said in its year-end financial statement. The company said last year it spent $122 million on drilling that failed to yield results in Saudi Arabia, $93 million in Azerbaijan, $20 million in Kazakhstan and $45 million in Colombia.
"LUKoil has no competitive advantages outside Russia and Central Asia," said Dmitry Lukashov, an oil and gas analyst at UBS. "To prove that there is an edge there, they need to deliver some results."
The offshore Ghana well should take roughly 50 days to drill and cost about $60 million, Vanco Energy vice president Jeffrey Mitchell said by telephone Monday. The venture is in talks to hire rigs to drill the second well off the Ivory Coast as early as the end of this year and the third well there next summer, he said.
The Ivory Coast wells should take less time to drill and cost less than the Ghana well, Mitchell said.
"After the outstanding discoveries made in the recent years on the sea shelf of Ghana, this area is one of the most promising for exploration in West Africa," Andrei Kuzyaev, head of LUKoil Overseas Holding, said in a statement on April 2.
The company is planning to sell 160 filling stations in the U.S.
"The situation today in the U.S. oil-products market is very negative for owners of gas stations," Alekperov said. "We've let some people go and we've sold off some of the assets."
LUKoil acquired 1,300 filling stations in the U.S. when it bought Getty Petroleum Marketing in 2000.
"We're not planning to leave the U.S. market," he said.
LUKoil has said it is ready to bid for licenses to the Trebs and Titov deposits, which are the largest untapped fields in the European part of Russia. The fields are located near LUKoil's Varandei export terminal on the Barents Sea.
Alekperov said that the Russian Union of Industrialists and Entrepreneurs, Russia's big business lobby, would ask the state to offer more licenses to stimulate business.
"We need the government to be more aggressive in offering fields for geological surveys and exploration," the oil executive said. The government should offer large fields that can be rapidly developed in tenders to attract investors Russian and otherwise, Alekperov said.
LUKoil's Saudi exploration showed two deposits with the potential for commercial development, Alekperov said. The reserves will be appraised and LUKoil will hold talks with Saudi officials regarding prices for gas output, Alekperov said.
The deposits hold reserves of roughly 70 million tons of gas condensate and 300 billion cubic meters of natural gas by Russian C1 and C2 classifications, Alekperov said April 9.
Phantom LNG carrier sketched
Daily News
14 Apr 2009
DESIGN sessions for Russia's first LNG carrier have begun in St Petersburg – even though it is not certain that the ship will ever be built.
Planners also have no contract or money for the yard and no LNG cargo to load.
Vladimir Spiridopoulo, general director of leading Russian ship designer Severnoye PKB, said it has agreed with the French designer GTT for LNG vessel technology to help prepare a feasibility plan.
Norwegian terminals seek Russian oil
2009-04-14
As the amount of Russian oil exported through Arctic waters increases, several Norwegian ports and terminals now step up their bids for participation in the lucrative oil trade.
Among them is the company Alexela, which wants its terminal outside Gulen, southern Norway, to become a transit terminal for oil from Murmansk. The company now has requested permission from the Norwegian Pollution Control Authority to handle 2,5 million tons per year, newspaper Bergens Tidende reports.
The company is not the first. Several other companies seek stakes in the Russian export shipping of oil through Arctic waters. From before, the Kirkenes Transit is operating a floating terminal outside Honningsvåg, northern Norway. That is believed to handle primarily oil from Lukoil.
As reported by BarentsObserver, the company ShipCargo has permission for limited reloading of oil near Kirkenes.
Meanwhile, the amount of Russian oil shipped through Arctic waters increase. A new report from AkvaPlan Niva and the Norwegian Barents Secretariat, shows that the amount of Russian oil exported through the north might by 2015 increase to more than 100 million tons. In 2008, the amount of oil shipped in the area was 15 million tons, the report authors maintain.
Russian companies increasingly see the Arctic as a key export route for oil. Lukoil in 2008 opened its Varandey terminal on the Pechora Sea coast which will have an annual capacity of 12 million tons. That will all be exported through the Barents Sea.
Oil And Gas Quarterly - Ruble Played Out
Troika
April 14, 2009
> After the massive Q-o-Q profit recovery in 1Q09 on the back of ruble devaluation and a normalized export duty, we believe that the market has mostly played out this theme; it is time to move forward. Unfortunately, the earnings recovery itself was weaker than we had initially expected on the back of low domestic product prices. The advantage of reduced taxation in the downstream is disappearing and the extra profit is no longer there.
> While we do not exclude the possibility that positive global sentiment could carry Russian oil names further, we have a hard time justifying any significant further upside for some oil companies without raising our Urals price forecasts further from $60/bbl in 2010 and $70/bbl in the long term. While we are willing to cautiously entertain the optionality of oil prices rising by 20% from current levels, we cannot seriously move much beyond that at present. Hence, we downgrade Tatneft and LUKoil from BUY to HOLD. At current oil prices, the latter is trading at a 2009E EV/EBITDA of about 5.9, which is fine for a trough valuation, or in case of high free cash flow, but not if oil prices do not recover further in the short term. The valuation gap between Russian oil companies and global majors is closing.
> While we retain our BUY recommendation on Gazprom, we cannot see how it is going to outperform the sector this year and downgrade our target price on the stock by 15% to $7.20 per share. The company will at best start generating meaningful free cash flow only in 2011 and beyond, we estimate, and only if it perfectly executes on production, exports, capital costs and debt; if the Russian government honors its promises of domestic gas tariff growth; and if oil prices recover by 20-30% from here. There are too many company-specific risks and exogenous uncertainties, and the cash flow profile is too far back ended. The recipe for stock re-rating is simple: introduce progressive dividends, sell non-controlling stakes in some of Gazprom's large projects to cash-rich global majors and deleverage the balance sheet. Unfortunately, the company is moving in exactly the opposite direction. We continue to recommend NOVATEK, which even under a scenario of no production growth is cheaper than Gazprom on next year's multiples.
Oil and gas dividend forecasts
Rencap
April 14, 2009
The Russian government is ready for dividend cuts...The financial crisis has heightened investors' concerns about the timing and size of 2008 dividends. These concerns have been further exacerbated by repeated statements from senior government officials that the government understands the financial difficulties facing companies, and is ready to limit payouts by state-controlled entities to just 10% of RAS net income, or even allow the companies to pay nothing at all.
...while oil and gas companies are sticking to their dividend policies. No Russian oil and gas company has yet reported any changes to its dividend policy. On the contrary, both Rosneft and LUKOIL have said they see no reason for changes. However, only Novatek has announced its 2008 recommended dividend; for all other companies this is still an unknown. We summarise our dividend expectations for oil and gas majors in Figure 3. These estimates are primarily based on 2008 RAS financials, which have already been pre-reported by the majority of companies, so we expect no major surprises here. We show AGM and record dates in Figure 5.
Our key dividend ideas: Surgutneftegas, TNK-BP Holding and Gazprom neft are traditional high-dividend-yield stories in the Russian oil and gas sector (see Figure 4). However, this time we do not expect high 2H08 dividends from TNK-BP Holding, given its very high 1H08 interim payment. Gazprom neft has no official dividend policy, so our DPS estimate, although high, is far from guaranteed. Surgutneftegas (pref) remains the best dividend idea in the sector, in our view. With a guaranteed payout of 7.1% to preferred shareholders and already reported FY08 RAS net income, it still offers a dividend yield of 14%. Tatneft (pref), with a potential dividend yield of 8%, also looks attractive, in our view, although it has not yet reported its FY08 RAS net income.
Gazprom
Russia Gazprom estimates reserves up 11 pct in 2008
Tue Apr 14, 2009 6:43am EDT
MOSCOW, April 14 (Reuters) - Russia gas export monopoly Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz) estimates its end-2008 reserves at 217.3 billion barrels of oil equivalent, the company said in a memo to its Eurobond issue, a copy of which was seen by Reuters on Tuesday.
That is broadly in line with analyst estimates, and represents an increase of 11 percent from 2007, when Gazprom's reserves were 196.4 billion.
"We estimate, that we had Russian reserves classification ABC reserves of 33.1 trillion cubic metres of natural gas, 1,286.8 million tons of gas condensate and 1,598.4 million tons of crude oil," the document said.
(Reporting by Dmitry Sergeyev, editing by Toni Vorobyova)
Gazpromneft to Sell 10 Billion Rubles of Bonds, Banker Says
By Denis Maternovsky
April 15 (Bloomberg) -- OAO Gazpromneft plans to sell 10 billion rubles ($300 million) of 10-year bonds, according to a banker involved in the deal.
The notes will pay a coupon of 16 to 17 percent and contain a put option at 1.5 to two years, the banker said.
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@
Last Updated: April 15, 2009 02:56 EDT
Gazprom, Conoco Discuss Alaska Offshore Exploration
15 April 2009 Combined Reports
The heads of Gazprom and ConocoPhillips met in Moscow on Tuesday to discuss liquefied natural gas projects and Alaskan offshore exploration.
"Gazprom's experience could be useful in realizing new gas projects in the United States," chief executive Alexei Miller said after holding talks with James Mulva, his counterpart at ConocoPhillips.
Both companies met in Alaska in October to discuss broad-based business opportunities in the most northerly U.S. state. Gazprom passed over ConocoPhillips when it was choosing partners to develop the Shtokman gas project in 2007.
Miller said in June that Gazprom had approached ConocoPhillips and BP on joining their Denali pipeline project, which was designed to deliver Alaskan gas to the continental United States. At the same time, Gazprom expressed interest in a rival pipeline project backed by TransCanada.
Gazprom has said it is considering whether to invite international companies, including ConocoPhillips, to examine LNG projects on Yamal peninsula.
Gazprom estimates its end-2008 reserves at 217.3 billion barrels of oil equivalent, the company said in a memo to its eurobond issue.
That is broadly in line with analyst estimates and represents an increase of 11 percent from 2007, when its reserves were 196.4 billion.
"We estimate that we had Russian reserves classification ABC reserves of 33.1 trillion cubic meters of natural gas, 1,286.8 million tons of gas condensate and 1,598.4 million tons of crude oil," the document said.
April 14 2009 13:45
Moscow
On working meeting between Alexey Miller and Jim Mulva
The Gazprom Headquarters hosted today a working meeting between Alexey Miller, Chairman of the Company’s Management Committee and Jim Mulva, Chairman of the Board and CEO of ConocoPhillips.
The parties discussed the prospects for the execution of joint projects on international energy markets, particularly in the LNG sector. Special emphasis was put on the cooperation in the Arctic areas including Alaska. The sci-tech cooperation in the sectors related to the comprehensive field development, hydrocarbon transportation in the Extreme North environment as well as geological exploration offshore Alaska were named as the areas of possible cooperation. As Alexey Miller pointed out: “Gazprom’s track record will be extremely helpful when implementing new gas projects in the USA”.
Based on the meeting results the participants confirmed their interest in cooperation deepening between Gazprom and ConocoPhillips in the energy sector.
Background:
An internationally integrated oil and gas company ConocoPhillips is one of the major players on the USA energy market. ConocoPhillips operates in more than 40 countries of the world and mainly focused on the four main targets: hydrocarbon exploration and production, transportation, oil refining and derivatives marketing; natural gas extraction, processing and marketing; petrochemicals and plastics production and marketing.
Being among the top three (along with BP and Sempra) natural gas vendors in the USA, ConocoPhillips sells domestically some 90 bcm of gas per annum, serving gas distribution companies, power plants and industrial customers.
The company operates one of the first LNG plants based on Alaska and develops a handful of similar projects on a global scale.
Turkmenistan: Gas Deal Negotiations Underway In Iran
4/14/09
A Turkmen delegation has arrived in Iran to fix the price of their gas exports in the second half of 2009.
The team, headed by the chairman of the state-owned Turkmengaz, Baymyrat Hojamuhammedov, will stay in Iran until April 18, the Russian newspaper Vremya reported April 14. Turkmenistan has been supplying gas to Iran since 1997, but exports have never hit the Korpeje-Kurt Kui pipeline’s full capacity of 8 billion cubic meters (bcm) per year, the report claims, adding that exports have not exceeded 6.5 bcm.
Turkmenistan is contracted to send an additional 10 bcm to Iran in 2009. In mid-March, Iran and Russia signed a gas swap deal that would see Gazprom assume responsibility for the delivery of Turkmen gas to Iran. Ashgabat would benefit from this arrangement since Russia would purchase Turkmen gas at a premium price. Iran currently pays $140 per thousand cubic meters (tcm); Gazprom is willing to buy the same gas for re-export from Ashgabat for $240/tcm. [For background see the Eurasia Insight archive].
The sweetener for Russia is access to natural gas supplies in Iran’s South Pars field, which holds an estimated 8 percent of the world’s natural gas reserves.
April 14 2009 16:10
Moscow
On working meeting between Alexey Miller and Jean de Gliniasty
The Gazprom Headquarters hosted today a working meeting between Alexey Miller, Chairman of the Company’s Management Committee and Jean de Gliniasty, the Ambassador Extraordinary and Plenipotentiary of France to Russia.
The discussion centered on the status and prospects for the Russia – France cooperation in the energy sector.
The parties highly appreciated the interaction between Gazprom and Total within the execution of the Shtokman project, the first phase, as well as the efforts of the special purpose company Shtokman Development AG achieved in the preparation of the front-end engineering and design (FEED) and the feasibility study (FS) for the project.
Jean de Gliniasty also highlighted the cruciality of successfully implementing the Nord Stream project for ensuring the European energy security.
In addition, special attention was paid to the modernization of Ukraine’s gas transmission system. The parties expressed a unanimous opinion that this process called for the participation of the key players involved in the European gas market – Russia as the supplier and European companies as the largest Russian gas consumers.
Background:
Gazprom supplies around 29 per cent of gas imports to France.
The cooperation between Gazprom and Gaz de France in the area of gas supply was launched in September 1975. Over this period Gazprom supplied France with more than 290 billion cubic meters of gas, with some 10 billion cubic meters supplied in 2007.
In November 2005 Gazprom and Gaz de France struck the first pipeline gas for LNG swap deal. In early December 2005 a tanker filled with LNG was sold to Shell Western LNG at the Cove Point regasification terminal (Maryland, USA).
In December 2006 Gazprom and Gaz de France signed the Agreement to extend the existing contracts for Russian gas supply to France up to 2030. In addition, an agreement was reached to launch extra gas supplies to Gaz de France via the Nord Stream gas pipeline. The annual gas supply volume will be 2.5 billion cubic meters of gas.
Gazprom also received an opportunity to directly deliver gas to final consumers in France in the amount of up to 1.5 billion cubic meters, starting from October 2007.
Being one of the largest European energy companies, GDF SUEZ was incorporated in 2008 as a result of the merger between Gaz de France and SUEZ.
GDF SUEZ deals with power generation and implements natural gas exploration, production, processing and marketing projects.
On July 13, 2007 Gazprom and Total signed the Framework Agreement on the Main Terms of cooperation in the development of the first phase of the Shtokman gas condensate field. Gazprom and StatoilHydro signed a similar Agreement on October 25, 2007.
Under the Agreements, February 2008 saw the setting up of the special purpose company, Shtokman Development AG. Gazprom holds 51 per cent in the company’s equity capital, Total and StatoilHydro hold 25 and 24 per cent respectively.
Gazprom officials arrive in Libya
Published: April 14, 2009 at 9:58 AM
TRIPOLI, Libya, April 14 (UPI) -- A high-ranking delegation from Russian gas giant Gazprom arrived Tuesday in Libya to discuss cooperation in the oil and gas sector.
Gazprom chief Alexei Miller led the delegation to visit with Libya's National Oil Corp. Chairman Shukri Mohamed Ghanem as part of an effort to expand the gas giant's market base, the company said in a news release.
Gazprom is working in Libya and North Africa to explore offshore blocks in the Mediterranean and onshore areas south of Tripoli.
In 2007 the Russian gas monopoly took a minority share in oil concessions from German companies that include nine additional fields in Libya through 2026.
Miller and his Libyan counterpart discussed trends in the oil and gas sector, saying the current climate suggested more work was needed to improve marketing mechanisms.
Gazprom works in Libya under a specialized company, Gazprom Libya, that is licensed to operate in the country.
April 13 2009 19:20
Moscow
Gazprom delegation visits Libya
A Gazprom delegation, led by Alexey Miller, Chairman of the Company’s Management Committee paid today a working visit to Libya. As part of the visit Alexey Miller met with Shokri Mohamed Ghanem, Chairman of the Management Committee of the Libyan National Oil Corporation.
The parties discussed the issues of interaction within the key production projects of Gazprom and Libya and noted that the project works were been timely implemented in strict compliance with the applicable schedule. Alexey Miller and Shokri Mohamed Ghanem addressed further steps aimed at deepening cooperation in the oil and gas sector.
The current state of affairs on the global oil and gas markets was also discussed at the meeting. The parties were unanimous in their evaluation of the key market trends and noted the necessity to further improve the hydrocarbon marketing structure.
Background:
A key challenge facing Gazprom is access to new markets, expansion of the resource base and diversification of production capacities. While meeting these challenges, Gazprom is active in North Africa and primarily in Libya, where the Company has set up a Tripoli based special purpose company Gazprom Libya.
Between 2006 and 2007 Gazprom obtained through bidding procedures the right to explore for and produce hydrocarbons at the promising licensed blocks 19 (Mediterranean offshore) and 64 (300 km south of Tripoli). The 3D seismic survey has been performed at the blocks and the pre-drilling operations are in progress.
In December 2007, following the asset swap deal with BASF, Gazprom acquired a 49 per cent stake in Libya’s oil concessions C 96 and C 97 owned by Wintershall AG. These concessions are governed by the agreements effective till 2026. The concessions include nine fields with As Sarah as the largest. Current oil production is about 6 million tons of oil per annum. Geological exploration is still in progress and work is underway to maintain the current production level at the concession C 96 and boosting production at C 97.
As part of its Strategic Cooperation Agreement with Italy’s ENI, Gazprom is negotiating the possibility of swapping assets, including assets in Libya.
Gazprom Neft wants to develop 8 oil and gas deposits in Iraq
Tuesday, 14 Apr 2009
RIA Novosti citing Mr Alexander Kolomatsky the head of the company's Middle East projects as saying that Russian energy giant Gazprom's oil arm Gazprom Neft is interested in developing six oil and two gas deposits in Iraq.
He said that "We are participating in a tender with partners, there are six oil and two gas fields there,"
Mr Kolomatsky declined to name the partners citing commercial confidentiality. The tender's results are to be made public in the third quarter of 2009. He said that the world's largest oil and gas companies are also participating in tenders to develop these deposits.
Gazprom Neft is Russia's fifth-largest oil company with 77.66% of its stock held by Gazprom and 20% by Italy's Eni. Gazprom Neft posted a net profit of USD 5.2 billion in the first nine months of 2008.
The Eni head said that Gazprom had agreed to pay the company USD 4.2 billion for a 20% stake in Gazprom Neft.
Gazprom's head Mr Alexei Miller and Eni CEO Mr Paolo Scaroni signed the agreement on the 20% stake in Moscow.
Turkmen imports down sharply
Alfa
April 14, 2009
According to Kommersant, Gazprom reduced its off-take of Turkmen gas by 90% on April 8, the day before an explosion on the main export line between the two countries would have forced such a step. This administrative shutdown was apparently connected to a relatively quiet diplomatic disagreement over Gazprom's participation in building Turkmenistan's new East-West transport line, and it has implications for Gazprom's unspoken strategic aim of preventing the construction of competing export pipelines from Central Asia to Europe by locking up the bulk of the available supplies.
CDU TEK data actually show that transit shipments from Central Asian suppliers for the first quarter of the year were well below normal, down some 75%, as exports to FSU countries have fallen (a large amount of Central Asian gas is contractually designated for sale to Ukraine, which has taken little if any gas this year).
The news is NEUTRAL for Gazprom for the time being, as we expect the disagreement to be ironed out and flows of gas to resume in the near future. Note that although the upshot of taking a smaller amount of expensive Central Asian gas at this time is that it will help match Gazprom's costs to its export revenues, the amount of flexibility available to the company in the contracts is uncertain.
Gazprom Turns the Crisis Into an Opportunity -and a New Crisis
[tt_news]=34850&tx_ttnews[backPid]=7&cHash=23b4a9b07a
Publication: Eurasia Daily Monitor Volume: 6 Issue: 70
April 13, 2009 11:54 AM Age: 2 days
By: Pavel K. Baev
Russia's economy has achieved a modicum of stability after the meltdown that had spread with devastating force from the stock exchange to the financial sector and to industry. Prime Minister Vladimir Putin in his report (rather resembling an instruction session) to the State Duma praised the government's efforts at arresting the recession (skipping conveniently over their too obvious inefficiency) and pointed to the "light at the end of the tunnel" (Nezavisimaya Gazeta, April 7; Vedomosti, April 10). Finance Minister Aleksei Kudrin, in the meanwhile, speaks about the ‘second wave' of the crisis coming in the fall, and deputy Prime Minister Igor Shuvalov ventures a guess that the crisis will continue for three years (Gazeta, Novye Izvestiya, April 9). As confusion reigns in macro-economic forecasting, most over-sized state corporations created within the past two years are paralyzed with bad debt and falling demand -except the almighty gas monopoly Gazprom.
It is certainly hit hard by the crisis as its production of natural gas dropped by 18 percent in the first quarter, and its daily production in April is 32 percent lower that in April 2008 (RBC Daily, April 10). Official estimates for this year project a 10 percent decline from the 550 billion m3 level reached in 2008, though experts predict a 15 percent decline, and the significant (but unspecified) cut in the investment program guarantees that the production will stay on the new plateau for the next 4-5 years (Kommersant, April 10). Gazprom's management is now confident that there is no need to rush the development of the Yamal "green-fields" and puts pressure on the independent producers (including Lukoil) in order to reduce the volumes available for domestic consumers. A key question here is the planned price increase on the internal market, and Gazprom has every reason to expect that desperate lobbying from metal producers and other struggling industries will not move Putin to break his promise.
It is in the European market that Gazprom tries to maintain the momentum of aggressive expansion expecting that economic troubles will force each country and company to fight for their own interests frustrating the efforts of the EU Commission to forge a common energy platform. One important breakthrough is in the making for the Nord Stream pipeline project across the Baltic Sea, which is Putin's personal priority. French "champion" Gaz de France appears ready to join this project and that might finally convince the stubborn Swedes to drop their objections (gazeta.ru, April 10). Another important development is Gazprom's decision to issue Euro-bonds for as much as $2 billion with the help of Credit Suisse (RBC Daily, April 9). That might help in settling current payments with Italian ENI, but more importantly that will increase the ranks of European stakeholders who are interested in Gazprom's success. Yet another significant turn of energy intrigue was the surprise purchase of 21 percent shares in the Hungarian MOL by such a reluctant spender as Surgutneftegaz; according to some experts, Gazprom is the real driving force behind this 1.4 billion Euro deal (Vedomosti, April 10).
Ukraine constitutes a key part of the hidden agenda in Gazprom's European offensive, and in the last fortnight the network of gas "champions" growing from the core partnership between Gazprom and German E.ON was mobilized towards undermining the declaration of intent between the European Commission and Ukraine on modernizing the gas infrastructure. Prime Minister Yulia Timoshenko called Putin last Friday seeking to discharge the conflict but details are unknown as they often are in their bilateral gas bargaining (lenta.ru, April 10). What is clear is that Ukraine has delivered full payment for gas imported in March and can now replenish the reserves in gas storages as the price has been corrected down from April 1 (Kommersant, April 8; Nezavisimaya Gazeta, April 10). An unexpected source of tensions suddenly emerged in Central Asia as an explosion on April 9 on a pipeline near the Uzbek-Turkmen border interrupted the gas flow and caused a political shock as the Turkmen Foreign Ministry issued a statement accusing Gazprom of "irresponsible" behavior (Vremya Novostei, April 10). The first reaction in Moscow was to reject this accusation, though it emerged that technical facts matter little in this blame-game, so Gazprom's seasoned CEO Aleksei Miller confirmed instead that he valued very highly the "strategic partnership" with Turkmenistan (Kommersant-Vlast, April 13).
Gazprom appears determined to secure the behemoth's share of import from Central Asia, as it is ready to pay high prices for every part of the distribution networks in Europe. At this stage of the economic crisis, there is no shortage of opportunities for expansion as investors are risk-averse, while Gazprom can consider the still deep reserves of Russia's Central bank as its war chest. In the respectable Global 2000 list of the largest companies compiled by Forbes, it climbed to thirteen this year (up from 19 in 2008, and 43 in 2007), even if its market capitalization is now less than half of what it was in May 2008 (, April 11). The problem with Gazprom's crisis-exploiting strategy is that it is aimed at reproducing the situation of extra-expensive energy, which in fact was a deviation from the historically median trend and contained in its "irrational exuberance" a crisis of both payments and supply, as Russia was unable to deliver on its too many commitments. Now Gazprom is cutting back on its core upstream assets, while pumping money into politically important projects from the Olympic stadiums in Sochi to half-ready sky-scrapers in Moscow (Kommersant,
Gazprom's future is highly intertwined with the survival of Putin's regime, which is not only tested by the crisis but also increasingly an obstacle in the path of recovery. One focal point of the simmering political discontent is the second trial of Mikhail Khodorkovsky and Platon Lebedev, now approaching the decisive moment. The prosecution did not bother preparing a solid case, and the defense team was able -and was allowed to- expose the Kafkaesque absurdity of the accusations (grani.ru, April 9). Medvedev has tried to distance himself from the case, but there is no way he can avoid the responsibility for the verdict. One particular angle of this process is that Gazprom is a major accomplice in dismembering Khodorkovsky's Yukos -and so is also on trial. April 10).
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