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Basic Political Developments

• Russia to resume sea-based ICBM tests - Russia is due to resume the Bulava sea-based ICBM tests. The Russian Navy Commander-in-Chief Vladimir Vysotsky has said that the next, 13th, missile is due to be fired from the Dmitry Donskoi nuclear-powered submarine in the Barents Sea later this week.

- Commander in Chief of the Navy: The next launch of Bulava missile is expected to have during the current week.

- Commander in Chief of the Navy: Bulava launches will take place this week

Russia has no biological weapons – Onishchenko: Research centers of the Federal Service for Consumer Rights and Human Well Being have a stock of dangerous virus strains, but their concentration does not present a serious threat, Onishchenko said.

• Oct 18–19: President Dmitry Medvedev to meet with French President Nicolas Sarkozy, German Chancellor Angela Merkel in France for security talks

• Russia's season for summits - By way of avuncular counsel, arguably, the Kremlin received two communications from the West in the weeks preceding President Dmitry Medvedev's September 26-28 state visit to China. One was an invitation for Medvedev to attend the forthcoming summit of the North Atlantic Treaty Organization (NATO) in Lisbon on November 19-20. The second, a week later, was an invitation from French President Nicolas Sarkozy to Medvedev to participate in a tripartite summit along with German chancellor Angela Merkel at the luxury French beach resort of Deauville from October 18-19.

• “I’m not sure if Russia needs Europe but Europe needs Russia” – French historian: Europe is struggling to stay in the international arena and will not be able to hold on without Russia’s help, believes French historian and author Helene Carrere d'Encausse.

• Russian, Ukrainian leaders to talk cooperation, attend forum - Russian President Dmitry Medvedev and his Ukrainian counterpart Viktor Yanukovych will on Monday discuss energy and nuclear cooperation, and aircraft construction at a meeting in the southern Russian town of Gelendzhik.

• Russia, Ukraine pres to discuss energy, high-tech cooperation - That will be the ninth meeting of Medvedev and Yanukovich since March 2010, Prikhodko said. “We view this meeting as another step in preparation for the November 26 meeting of the Russia-Ukraine Interstate Commission,” he said.

• Nezavisimaya/Russia Today: The upcoming audit of the Black Sea Fleet - The presidents of Russia and Ukraine will discuss the financing terms of the Crimean development programs

• U.S. security advisor to attend conference in south Russia - General Jones will "travel to Sochi, Russia, October 4-6 to attend the Sochi Security Conference," U.S. National Security Council spokesman Mike Hammer said in a statement.

• Hugo Chavez to start visit to Russia on October 11 - "I am leaving for Russia October 11... and then I am going to head for China," AVN quoted him as saying.

• Venezuela's Chavez to visit China, Russia, Belarus, Iran

• 'Minsk was ready to recognize Georgia’s two breakaway regions' - Belarus President, Alexander Lukashenko, said Minsk was ready to recognize Georgia’s two breakaway regions of Abkhazia and South Ossetia, but did not do so because Moscow refused “to share” negative consequences, expected for Belarus from the West in case of such decision.

• The senseless period of tension in relations with Belarus is certain to come to an end - New entry on Dmitry Medvedev's blog concerns relations between Russia and Belarus.

- Lukashenko is trying to present Russia as enemy of his country – Medvedev

- Lukashenko tries to set Russia, Belarus at loggerheads – Medvedev

- Medvedev hopes tensions in Russia-Belarus relations will end

- Russian president assails Belarusian leader

• Lavrov to attend ASEM summit, Russia to join ASEM - Russian Foreign Minister Sergei Lavrov goes on Monday to Brussels where he will take part in a summit of the Asia-Europe Meeting. During a two-day session Moscow will be formally inducted into that organisation.

- Lavrov to attend ASEM summit in Brussels - The Russian Foreign Ministry has meanwhile said in a statement that Russia’s joining the unique mechanism in question will reaffirm the ASEM members’ interest in promoting partnership relations with Moscow, which is a bridge between Europe and Asia.

• Russian-Norwegian delegation visits US to talk about nuclear decommissioning - A group of Russian and Norwegian nuclear scientists, regulators and activists is visiting Vermont and Massachusetts to learn about nuclear decommissioning.

• Syria considers Tupolev after U.S. derails Airbus buy

- Syria ready to buy in Russia 6 Tu-204 planes - “The United States has placed an embargo on (Airbus and Boeing) exports to Syria. The Russian option is real and very serious,” Syrian Transport Minister Yarub Badr told Reuters in an interview. Initially, the Syrian side was ready to sign a contract with the French-German company EADS on the purchase and lease of 54 planes up to 2028, including the supply of 8 planes in 2009.

• Russia relaunches Arabic newspaper in the UAE - Dubai High-ranking Russian media and diplomats celebrated the relaunch of Anbaa Mosku — an Arabic-language newspaper covering Russian affairs — at a special gala function last night.

• First hearing on new charges against Viktor Bout due in Thailand

- Russian Accused Arms Dealer Back In Thai Court For Extradition Case

- Reputed Russian arms smuggler in Thai court for crucial hearing as US awaits extradition

- Alleged Russian arms smuggler in Thai court for crucial hearing as US awaits extradition

• TU-154 wreckage under cover by 10 October - The remains of the presidential TU-154 which crashed in Smolensk on 10 April is to be covered by a shelter within five days.

• Russian Aircraft Intruded South Korea's Air Defence Safety Zone 11 Times This Year - Intrusions by Russian aircraft into South Korea's air defence safety zone have increased to 11 times as of September this year, and the rise may be linked to the March sinking of a South Korean warship, Yonhap news agency reported, citing a ruling party lawmaker as saying on Monday.

• Bomb scare grounds Moscow-Singapore flight in Kolkata - A Moscow-Singapore flight landed in Dumdum airport a few minutes after midnight on Sunday forced by a mid-flight bomb scare. The emergency  sent the entire airport in a tizzy with all senior officials rushing to the airport to handle the crisis.

• SIA 777 diverted to Kolkata after reported bomb threat - A Singapore Airlines (SIA) aircraft flying from Moscow to Singapore was diverted to Kolkata early today after a reported bomb threat on board.

• US Bill to ban visas for Russians linked to lawyer's death - US lawmakers have introduced a Bill that would prohibit the US State Department (DOS) from issuing visas to individuals, or their family members, who are connected to the death of Russian lawyer Sergei Magnitsky.

• U.S. poultry conforms to sanitary norms - Russia's chief doctor

• Russian, U.S. sanitary officials to inspect U.S. poultry plants - Russian and U.S. sanitary officials will begin a joint inspection of 33 U.S. companies that want to supply poultry to Russia, the agricultural watchdog Rosselkhoznadzor said.

• Harold Nicholson accused of conspiring with son to spy for Moscow - Nicholson will go on trial again in Portland, Oregon, next week on conspiracy charges after his son, Nathaniel, 26, pleaded guilty to acting as a go-between for his father and Russian agents who gave him $US47,000 to deliver to his father during encounters around the globe.

• Labor migrants rally in front of the Kyrgyz Embassy in Moscow - A rally in support of voting rights of labor migrants was conducted in front of the Kyrgyz Embassy in Moscow on October 3, 2010, KGinfo analytical portal informs.

• Russian cultural fest in Mongolia - The 50th Russian cultural festival kicks off in the Mongolian capital, Ulan Bator on Monday

• 400 police killed in 5 years in Russian province - Yunus-Bek Yevkurov, the president of the province of Ingushetia west of Chechnya, said at a rally Saturday that more than 3,000 civilians have been wounded in attacks by militants in the region over the same period, a statement on his administration's official website said Sunday.

• Female Militants Killed in Dagestan - Security forces killed five suspected Islamist militants in coordinated sieges of two housing blocks in Dagestan's capital, Makhachkala, news agencies reported. Two women were among four insurgents killed in a gunbattle on Ulitsa Engelsa on Saturday, the reports said, citing the National Antiterrorism Committee. Two passers-by were wounded, Interfax reported.

• Sobyanin’s Star Rises at Mayor Talks - "According to Kommersant's information, he is not very excited about this. But the party — or at least its leader — could say: 'It is necessary,'” the newspaper said, quoting a Soviet-era slogan in an apparent reference to Putin, who heads United Russia but is not a card-carrying party member.

• Moscow ex-mayor not planning legal battle: report

- Luzhkov to form own political movement

- Ousted Moscow mayor explains why he won't appeal dismissal -"I don't believe the Supreme Court can make a ruling contradicting the presidential decree [on the dismissal]," the website quoted Luzhkov as telling Russian magazine The New Times.

- Luzhkov to risk jail in a bid to boost democracy - And he’s doing so in the face of the law, he claimed. Asked if he was aware it could lead to a criminal case against him, he replied: “Certainly. I’m not a child.”

• Medvedev Looks More Like the Next President - By Vladimir Frolov

• Putin’s Latest 'Corporate Takeover' - Most of the commentary regarding the firing of Yury Luzhkov can be summed up as, “The jackals have eaten one of their own.” Unfortunately, that conclusion is based on a large misconception. In fact, President Dmitry Medvedev and Prime Minister Vladimir Putin have always been at odds with Luzhkov.

• Vremya Novostei/Russia Today: A report on racism - Moscow continues to hold the lead in the number of crimes motivated by xenophobia, racism and radical nationalism. This conclusion follows from a monthly report which was published late last week by the SOVA Center for Information and Analysis, which specializes in research on racism and xenophobia.

• Russia Profile Weekly Experts Panel: Will a Russian DARPA Help Modernize Russia? - President Dmitry Medvedev said last week that he wants the Defense Ministry to create a unified research agency, similar to the U.S. Defense Advanced Research Projects Agency (DARPA) created by the U.S. Defense Department in 1958 to ensure American technological superiority in weapons systems. America’s DARPA pioneered many cutting-edge military and dual use technologies, including creating a prototype of the Internet. Will all these grand plans work? Is it a good idea to imitate something that was first created 50 years ago? What does this move tell us about Medvedev’s approach to governance?

• Gay activists will keep trying to hold rallies in Moscow - "I doubt that the position of the new administration of the city will be different from the previous administration's principles. However, we will continue seeking sanctions for our rallies regardless of this and we will contest denials in court," Alexeyev said.

• Russia may impose total tobacco ads ban by 2012 - paper

• Ireland asks Abramovich to foot bill for INBC bank bailout

• PRESS DIGEST - Russia - Oct 4

- Russia's Foreign Ministry has criticised a move by U.S. senators to ban 60 Russian officials and judges allegedly involved in the death of lawyer Sergei Magnitsky from entering the United States, the paper reports.

- On Saturday, Russian federal forces killed five rebels during two armed operations in the volatile, mainly Muslim Dagestan region, the paper writes.

- Russian gas export monopoly Gazprom (GAZP.MM) has decided to increase the 2011 gas price for Belarus to $220 per 1,000 cubic meters, from $185 in 2010, the paper reports.

- Tobacco advertising and marketing in Russia may be banned by 2012, while smoking in public places may be prohibited by 2015 as part of a new state initiative, the daily reports.

- Russian Prime Minister Vladimir Putin told President Dmitry Medvedev on Friday that he will discuss new candidates for the ruling United Russia party, as well as a successor for Moscow's mayor, the paper writes.

- Medvedev will discuss issues surrounding the Black Sea fleet reform with his Ukrainian counterpart Victor Yanukovich, the daily says.

- A Russian plane flying between Moscow and the Chechen capital Grozny, carrying 73 passengers, made an emergency landing on Sunday after an anonymous caller said there was a bomb on board, the daily writes.

- Russian President Dmitry Medvedev has made a breakthrough in foreign policy, negotiating with the U.S. to join the World Trade Organization, the paper writes.

National Economic Trends

• Medvedev Orders Review of Russia Grain Export Ban at Harvest End - Russian President Dmitry Medvedev ordered a review of the country’s grain export ban at the end of this year’s harvest, the Kremlin press service said today in an e-mailed statement.

• Russia's Current Account Drops in 2Q10

• Reserve Fund untouched in September - On Friday (1 Oct), the Ministry of Finance published monthly sovereign fund statistics. As of 1 Oct the Reserve Fund was at RUB1.26trn (or $41.4bn) and the National Welfare Fund was at RUB2.72trn (or $89.5bn). The Ministry of Finance explains these numbers by FX revaluation of sovereign funds.

• Manufacturing Growth Slows to a Crawl as Exports Decline - The Purchasing Managers’ Index slid to 51.2 from 52.9 in August, HSBC said, citing data compiled by Markit Economics. The index considers growth to be anything above 50, and contraction any figure below.

• Medvedev tells companies to slow down on bond issues on back of record low yields - The Kremlin has told companies to ease off on bond issues after they issued a record number of bonds at record low yields, with international debt markets snapping up Russian paper.

• Medvedev Curbs Company Bond Sales as Yields Sink: Russia Credit

• Rouble falls to fresh 8-month low of 42.03 vs euro

Business, Energy or Environmental regulations or discussions

• Novatek, Novolipetsk, PIK Group: Russian Equity Market Preview

• Russia’s Micex Advances for Fourth Day on $81 Crude, China

• Russian stock market daily morning report (October 04, 2010, Monday)

• Foreigners to need permit to buy into Russian financial infrastructure firms

• UAE firm inks $300m Russian deal - Luxury developer Damac Properties will invest $300 million in Prominvest, the investment arm of Russian Technologies. The agreement is to create a joint company to manage foreign direct investment in infrastructure and the real estate sector and was signed in the Black Sea city of Sochi in the presence of Vladimir Putin, Prime Minister of Russia.

• VimpelCom Board Voting On Merger With Sawiris Assets - Vedomosti

• Vimpelcom near $7bn telecoms merger

• Polymetal planning to acquire three licenses in Kazakhstan

• Rusal Signs US$4.58 Bln Loan Facility To Refinance Debt

• Steel giant NLMK makes Q2 net profit of $459 mln

• Novolipetsk Says Second-Quarter Profit $459 Million (Correct)

• Severstal confirms gold division IPO plans

• Severstal to roll out Finesmelt technology

• Severstal Gets Foothold in South Africa

• Russia's Evraz unit plans $650 mln Eurobond-source

• Monocrystal aims to sparkle on roadshow

• JP Morgan values Russia's Alrosa at $7.3-9 billion before IPO

• Alrosa may raise $2.3 bln in 2011 IPO –paper

• Russians issue record number of bonds - While many western borrowers are finding it harder to tap the international credit markets, Russia's banks and companies have already issued more bonds this year than ever before. "The equity market is trading sideways, but the bond market is on fire," says David Longmuir, a trader with Troika Dialog in Moscow.

• Daimler-KAMAZ JV starts assembling Mercedes-Benz trucks in Russia

Activity in the Oil and Gas sector (including regulatory)

• Russian output hits high - Russian oil output hit a new record of 10.16 million barrels per day in September as fields returned from maintenance, beating the last all-time high in July.

• Russian Oil Production Reaches Post-Soviet High on Rosneft Field

• Economics Ministry reportedly wants to extend Vankorskoye tax breaks

• Russian licenses to shelf projects - The two state-controlled companies Gazprom and Rosneft have submitted 43 bids for offshore field licenses, among them to the Yuzhno-Russkoye field in the Barents Sea.

• Russia-Germany Nord Stream natural gas pipeline under way 

• TNK-BP is preparing a deal - The Board of Directors of TNK-BP has allowed management to make BP a formal proposal to buy assets in Vietnam and Venezuela, it may come this week, said a source close to TNK-BP.

• TNK-BP will be engaged in trading

• TNK-BP prepares bonds

• Lukoil CEO Buys $1.4 Billion of Notes Related to Company Stock

• Alekperov Purchases $1.4bn of UniCredit Bank Notes Convertible into 2.99% LUKOIL Stake

• SOCAR and Nizhnekamskneftekhim has reached a preliminary agreement on co-operation in world markets

• Development of Shtokman deposit not to damage Barents Sea ecology - “There will be no compromises with safety at all stages of construction and development of the project,” said for instance representative of the Shtokman Development AG Frank Otefolt. His colleague Marat Sharifullin noted that Rostekhnadzor (Federal Service for Supervision of Environment and Technology) already approved the positive findings of the state ecological examination of design documentation.

• Russia to supply China with gas but no deal on price - Russian gas monopoly Gazprom signed a deal with China National Petroleum Corporation (CNPC) extending the terms of Russian gas supply to China on 27 September but the two sides have still not struck a deal on price. Meanwhile, Russia said it wants to supply its energy hungry neighbor with all its natural gas needs.

Gazprom

• Gazprom and Timchenko moved shares

• IP gas pipeline laying deal: Gazprom invited to participate - Pakistan has formally invited Russia's Gazprom, the largest extractor of natural gas in the world, to participate in laying gas pipeline under Iran-Pakistan (IP) gas pipeline deal

• Gazprom May Increase Maximum Dividend Payment

• Gazprom to complete design for Shtokman LNG port by year-end

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Full Text Articles

Basic Political Developments

Russia to resume sea-based ICBM tests



|Oct 4, 2010 12:18 Moscow Time |

Russia is due to resume the Bulava sea-based ICBM tests. The Russian Navy Commander-in-Chief Vladimir Vysotsky has said that the next, 13th, missile is due to be fired from the Dmitry Donskoi nuclear-powered submarine in the Barents Sea later this week. Bulava was last tested in December 2009, but the test proved a failure due to a malfunction in the missile’s third stage. Bulava is Russia’s state-of-the-art three-stage solid-fuelled missile, capable of carrying up to 10 hypersonic nuclear independently targetable warheads. The warheads can change their flight trajectory and hit targets at a distance of 8,000 kilometres.   



Commander in Chief of the Navy: The next launch of Bulava missile is expected to have during the current week.

GOOGLE TRANSLATION

04.10.2010, Moscow 11:07:40 The next launch of Bulava missile from the missile cruiser "Dmitry Donskoy" has been planned for the current week. Chief of Navy Vladimir Vysotsky told RBC. Answering the question whether the rocket will fly, the commander in chief said that he hoped for it. "If I was not sure, would not even have to plan these activities. I do not rule out the safeguards do not give. But we hope that will fly" - he said. Vladimir Vysotsky said that gospriemka this missile was tightened.

"I will not shoot from the cruiser Yury Dolgoruky, will be held until the successful testing of the" Don ", - said the commander in chief.

Missile complex Bulava-30 "- a ballistic missile, placed on submarines. Three-stage rocket, the first two stages are equipped with solid-fuel engines, the third - a liquid that provides the necessary speed and maneuverability in the final stage of flight. The missile is capable of carrying six nuclear units hypersonic individual guidance. The total throw-weight - 1 thousand 150 kilograms. Radius - 8 thousand km. The launch is carried out of plumb, and at an angle that allows the missile to fire "on the fly." Developed rocket Moscow Institute of Heat, who also created the "Topol M". C June 2004. December 2009. was carried out 12 trials of the Bulava, seven of which failed.



GOOGLE TRANSLATION

04.10.2010   11:20

Commander in Chief of the Navy: Bulava launches will take place this week

Regular test launch of an intercontinental ballistic missile, the Bulava is planned for the current week. This was reported by the commander in chief of the Navy, Admiral Vladimir Vysotsky.

Responding in an interview with ITAR-TASS news agency on the issue, will fly a rocket, the commander in chief said that he hoped for it. "If I was not sure, would not even have to plan these activities. I do not rule out the safeguards do not give. But we hope that will fly" - said Vysotsky.

The decision to develop the newest Russian three-stage solid-fuel rocket was made in 1998 after three unsuccessful launches of strategic missile systems "Bark."

Bulava is designed at the Moscow Institute of Thermal Technology. The missile can carry up to ten hypersonic maneuvering independently targetable nuclear units, capable of changing the flight path of adjustment and the course and hit targets at a distance of 8,000 kilometers.

According to official figures, since the beginning of test missiles in September 2004 from 12 test launches of Bulava only five were found to be successful or partially successful.

Representatives of the General Staff of the Russian Navy noted that alternatives to rocket there, but they are faced with the worst - floating glitch in the rocket. That is, each time a failure occurs at the new location. Starting with the twelfth crash gave the third stage rocket. Faulty nozzle was the third stage rocket.

October 04, 2010 11:09

Russia has no biological weapons – Onishchenko



MOSCOW. Oct 4 (Interfax) - Russia does not have any biological weapons, Chief Public Health Official Gennady Onishchenko told NTV on Sunday.

"Luckily, Russia does not have biological weapons. I am sure that is so," he said.

Research centers of the Federal Service for Consumer Rights and Human Well Being have a stock of dangerous virus strains, but their concentration does not present a serious threat, Onishchenko said.

"These are regular stains. We have a state collection [of viruses], but these are not biological weapons," he said.

"Nothing will happen," Onishchenko said in an answer to the question what might happen if any virus strain were stolen from a laboratory.

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Oct 18–19: President Dmitry Medvedev to meet with French President Nicolas Sarkozy, German Chancellor Angela Merkel in France for security talks



DIARY - France to Oct 30

Monday October 18, 2010

DEAUVILLE, Normandy - President Nicolas Sarkozy meets

German Chancellor Angela Merkel and  Russian President Dmitry

Medvedev to discuss security concerns and relations between the

three nations. The three leaders will also discuss the upcoming

G20 in Seoul and France's G20/G8 objectives.

Russia's season for summits



By M K Bhadrakumar

By way of avuncular counsel, arguably, the Kremlin received two communications from the West in the weeks preceding President Dmitry Medvedev's September 26-28 state visit to China. One was an invitation for Medvedev to attend the forthcoming summit of the North Atlantic Treaty Organization (NATO) in Lisbon on November 19-20. The second, a week later, was an invitation from French President Nicolas Sarkozy to Medvedev to participate in a tripartite summit along with German chancellor Angela Merkel at the luxury French beach resort of Deauville from October 18-19.

Both invitations concerned joint security concerns of the West and Russia. Western media reported that the NATO invitation was a "bid to enhance security cooperation" over Afghanistan and Iran, among other things. The Kremlin was more explicit about the proposed summit at Deauville, which it said would give the three countries a "chance to have an in-depth exchange of views to develop their partnership for forming a common European security and cooperation space, responding to the common challenges in this area, and enhancing response mechanisms".

The West was destined to become an activist in the Russia-China strategic partnership and it seems that point has been reached. This is not because Russia or China is putting an anti-Western orientation on their mutual cooperation. Far from it. On the contrary, for both Russia and China enhancing ties with the United States remains and will remain for the foreseeable future a priority in foreign policy.

What emerges is that the trajectory of Russia-China cooperation is beginning to substantially impact on the Western countries' core interests, and the latter cannot but aspire to try to deflect it. The US reset with Russia already has an unobtrusive objective of incrementally eroding the Russia-China strategic understanding so as to isolate China, especially in Central Asia and Afghanistan.

How Russia and China safeguard their growing strategic partnership from Western pressures will become clearer in the coming period. But safeguard it they will. For Russia, strengthening its partnership with China gains it more strategic space, since it concurrently acquires the leverage to compel the West to negotiate with it. Looking at it another way, the growing strategic partnership with China enhances Russia's capacity to withstand Western pressures.

An oily embrace

China, for its part, feels the compulsion to keep Russia on its side at a juncture when stresses have appeared in its relations with the US. To be sure, Beijing regards Moscow's support for what China calls its "core interests" (in the Asia-Pacific region in particular) as invaluable. Beijing can be expected to go the extra league to cement the strategic understanding with Russia, especially in coordinating their stances on international and regional issues.

Medvedev's visit to China provided ample theater for some of these trends to manifest. Energy cooperation was the leitmotif of the Russian president’s journey east. The completion of the long-awaited pipeline from eastern Siberia to northeastern China "linking the world's largest oil producer with the world's largest energy consumer" was bound to be a happening of high drama.

After a prolonged period of uncertainty, the construction of the 999-kilometer pipeline began last year. That it took shape at all underscores the changed character of Chinese-Russian economic ties. The pipeline is part of a bilateral US$25 billion loan-for-oil deal struck in February 2009, when Russia was struggling to cope with its financial crisis. Under the deal, China lent the money while Russia would supply it with 300 million tons of oil through pipelines over a 20-year period starting from 2011.

Clearly, China is getting its hands on an assured source of Russian oil that doesn't have to be shipped through the Malacca Strait (which the US controls), while Russia gets much mileage by diversifying its oil exports away from the traditional European market. Truly, it is a win-win situation. From the Western perspective, though, a new competitor appearing in the East courting Russia's favors means the strengthening of Moscow's hand in its energy dialogue with its European buyers.

China has opened its highly lucrative retail market to Russian companies. This has been a longstanding Russian demand in European markets, too. When China obliges Russia, can Europe fall far behind?

The "loan-for-oil" China-Russia deal isn't a shot in the dark, either. On August 31, Beijing signed an agreement providing Russia with loans amounting to $6 billion in exchange for coal supplies from Russia's far east. Over the coming 25-year period, China will be importing at least 15 million tons of Russian coal annually. The Chinese loan will go towards mineral exploration projects, development of road and rail networks in Russia's far east for transportation of coal, and for export of mining equipment from China. The two countries will also set up joint ventures to develop Russian coal reserves in the Amur region.

For China, this is smart thinking since Russia is a next-door supplier and the price is much lower than for imported Australian coal ($87 vs $111 per ton). And elevating Russia as the fourth largest coal-supplying country (after Australia, Indonesia and Vietnam) means taking another leap in the overall energy partnership that inevitably brings China nearer to the European Union in its importance as a market for Russian energy exports.

However, from the Western perspective, the single-biggest "energy statement" to come out of Medvedev's visit was attributed to Russian Deputy Prime Minister Igor Sechin, who told journalists in Beijing, "Russia is ready to satisfy China's natural-gas demand in full volume." The import of these dozen words will be closely studied in the period ahead. During Medvedev's visit, Gazprom and the China National Petroleum Corporation signed a document that "coordinates all the main issues of Russian gas supplies to China, except the price".

A senior Gazprom executive has since been quoted as saying that "under the current road map, not later than July 1st, 2011 the sides will sign a contract on Russia's gas supplies to China that will outline the routes, the amounts and the price". According to Sechin, the supplies might start in 2015.

End of great game?

This is going to be a nail-biting finish. The West's best hope is that differences over pricing will cloud a Russian-Chinese deal. The conventional wisdom is that Russia's bargaining strength has weakened vis-a-vis China insofar as: world gas prices have fallen; China's import options have grown; Central Asian gas prices are much lower than the European prices that Russia may insist on; and China is seriously developing its shale-gas reserves. All in all, therefore, a final gas deal may elude the two countries.

The specter that haunts Europe is that instead of it diversifying its gas imports from Russia - as strongly urged by successive US administrations in the post-Soviet era - Russia is successfully diversifying its gas exports and a point may come when Europe will need to bargain hard to retain its status as Russia's prime energy partner. And China can turn out to be a serious competitor for Russian gas. The Russian energy industry is badly in need of fresh investments and China is in a position to make the sort of infusion that Russia requires.

The point is, as Sechin (who accompanied Medvedev) explained at a press conference in Beijing on Monday, that Russia may not have to scout around for markets anymore. "There are practically no limits to the growth of gas consumption in China. The Russian Federation has enough gas for the development of the Chinese economy."

Meanwhile, China is drawing Russia deeper into cooperation in the field of nuclear energy as well. During Medvedev's visit, Russia secured a deal for the construction of two more 1,060-megawatt units at the Tianwan nuclear power station outside Shanghai. In turn, China secured a $5 billion contract for the construction of a high-energy steam generator with a 490-megawatt capacity at the Russian city of Yaroslavl.

This expanding Russia-China energy cooperation strengthens Moscow's hand in its Caspian diplomacy on the whole. Most certainly, Russia is inching closer to securing participation in the management of the Ukrainian gas pipelines, which has been a highly contentious issue involving the US and European Union. Again, simply put, Western Europe will be gratified that Moscow is pressing ahead with the Nord Stream and South Stream gas-pipeline projects, both of which are expected to be operational during the period 2011-2015.

Equally, Europe may not have the stomach to create unpleasantness vis-a-vis Russia by bulldozing its way with the rival Nabucco project. Nabucco may now have to stand on its own economic legs as a viable project.

But, as Russian Prime Minister Vladimir Putin pointed out recently, "The main problem with Nabucco is the absence of guaranteed volumes of necessary product in this pipeline as there is no source for filling the system. Russia will not make any supplies there. The fields in Iran have not been developed yet. Azerbaijan has small volumes. Besides, Azerbaijan has signed a contract for gas supplies to Russia. There is Turkmenistan, but its volumes are not clear yet because a gas pipeline has been built from Turkmenistan to China for 30 billion cubic meters of gas. I think it would be hard to build the [Nabucco] system in this situation, to put it mildly, not to say impossible."

This brings us to the threshold of a tantalizing prospect: is the great game over Caspian oil withering away? How relevant are US-Russia energy rivalries with the appearance of China in the equation as an energy guzzler that can keep buying all that Russia can supply? This is a new ball game, so to speak, where from the US angle the great game is no longer about driving a wedge between Russia and Western Europe. Instead, it will be about offering incentives to Russia to hold it back from diversifying away from Western energy markets towards China.

China is strengthening its energy security by tying up supplies from Russia that are not dependent on the overstretched transportation routes (sea lanes) that largely pass through what American strategists euphemistically call the "global commons", meaning the great oceans that the US traditionally dominates. The geopolitical implications are quite profound.

Mutually-assured dependence

What all this adds up to is that Russia is practicing its own version of a reset with the US, just as the latter has been doing with Russia. Medvedev's visit to China underlines emphatically that Moscow will be loath to allow the Russia-China strategic partnership to be eroded by its reset with the US. With this in mind, there is immense geopolitical significance to the fact that Russia has appeared by China's side over the current tensions in the Asia-Pacific region involving Japan.

While in China, Medvedev made some strong statements about the Soviet-Chinese alliance in China's war against Japan (1937-1945). He said:

• "Friendship with China is Russia's strategic choice, it's a choice that was sealed by blood years ago."

• "The friendship between the Russian and Chinese peoples, cemented by the military events, will be indestructible and will do good for our future generations."

On the eve of Medvedev's visit to China and in the thick of the Sino-Japanese diplomatic row that erupted recently, Russian Foreign Minister Sergei Lavrov penned an article in China's Renmin Ribao where he robustly hailed the Russia-China strategic partnership and implicitly criticized the US-Japanese defense pact. He wrote:

Our [Russia-China] partnership serves the fundamental interests of both the nations, and is required for stability in its regional and global dimensions. Its deepening is one of the most important guarantees that the objective process of the formation of a polycentric international order will not be artificially impeded.

Our countries concur that the Asia-Pacific region should be stable and prosperous. The processes occurring here have far-reaching consequences not only for the region's countries, but also for the future of the world order as a whole. In many countries, bloc structures are rightly being viewed as a threat to national security and a source of dividing lines, mutual distrust and suspicion.

Significantly, Chinese President Hu Jintao openly called for the deepening of the bilateral mechanism of "strategic security negotiations while supporting each other on issues concerning their respective core interests". Among other statements that Hu made:

• "China and Russia will maintain international peace and stability and promote the overall recovery, health and stable development of the world economy."

• "It is China's unswerving policy to constantly consolidate and enhance its strategic partnership of cooperation with Russia."

In sum, Medvedev's visit to China underscores that despite the huge historical backlog of Sino-Russian ties, the two countries are succeeding in dovetailing their strategic partnership with their respective requirements - strategic, political and economic. Of course, they share certain notions about the world order: "multipolarization" of the global system, democratization of the international order and economic globalization. But then, these concepts are also in the two countries' long-term strategies. In short, they happen to share a lot of common interests.

Medvedev could have spoken for both sides when he said in an interview with the People's Daily that the basic principles of Russian foreign policy were pragmatism, openness and the use of non-confrontational methods to promote Russia's own interests and its multi-directional diplomacy.

But Moscow could hardly have any misconceptions regarding the resilience of Sino-American ties, either. After all, the day after Medvedev's departure from Beijing, the official China Daily proposed that stalled Sino-American military ties "should be brought back on track for the better development of bilateral relations as well as world peace. Neither government is taking the other as enemy and neither wants a military confrontation. Sino-US relations should be based on mutually assured dependence."

Russia will have good use for the "China card" at the forthcoming summits in Deauville and Lisbon while navigating its relationships with the Western alliance, the US and the major European powers. But the Russian approach is diametrically opposite the one adopted by the US vis-a-vis its major interlocutors such as Russia or India.

Whereas Russia displays its expanding and deepening strategic ties with China, Washington tries to distract business and political elites and public opinion in Moscow and New Delhi from the essence of the US-China relationship, giving it an altogether exaggerated shade of antagonism. But in reality it is a very profound relationship, rooted well in the global market, which all but precludes any scope for mutually debilitating confrontation.

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.

(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

“I’m not sure if Russia needs Europe but Europe needs Russia” – French historian



04 October, 2010, 09:58

Europe is struggling to stay in the international arena and will not be able to hold on without Russia’s help, believes French historian and author Helene Carrere d'Encausse.

Doctor of history and humanities, permanent member of the French Academy of Sciences and the woman who predicted the break-up of the Soviet Union in 1978 in her book “The Collapse of an Empire” spoke to RT about Russia’s role in today’s global politics, and why the country is so often misunderstood in the West.

RT: Thank you very much, Madame d’Encausse. It’s a great pleasure to have you with us. In your latest book “La Russie entre deux mondes” you speak about Russia. Judging by the title of the book, Russia has not yet decided what its position in the world should be?

Helene Carrere d'Encausse: Not exactly. What the book says is that Russia has made this kind of decision, but over the past ten years it has been pursuing two different paths, rather than one. What I have been trying to explain is that, after the Soviet Union disintegrated, Russia rushed to Europe. But as Europe did not offer a warm welcome, since the beginning of this century Russia’s foreign policy has been focusing on two directions rather than on one. On the one hand, it focuses on the West, while on the other hand – because of its geographical position – it has decided to position itself as an Asian country. It gives it greater prestige and influence in the world. It has been pursuing this policy for more than ten years now and it has brought great success. At the end of the 20th century Russia’s international reputation around the world was not very good. But now after the past decade it us obvious that it is being reckoned with. It’s a big change. Russia has taken a very important step forward. And in my opinion, this process is irreversible. Russia has become a world power.

RT: The introduction to this book raises the question of whether Europe should or should not be afraid of Russia. Does it mean that the stereotypical fear of the Russian Empire, and then of the Soviet Union, still exists in Europe?

HCD: Not only in Europe. The collapse of the Soviet Union was not anticipated, it happened overnight. Many countries, primarily those who were under Soviet influence – the Eastern European countries and countries that used to be part of the Soviet Union but are now independent states – did not understand Russia and were afraid of it. As Eastern European countries have become EU members, they have shown their fears and passed them onto the EU saying that Russia used to be an empire. So, why should it cease being an empire and can we trust it now that its imperial past has been forgotten? By now people have already understood that Russia is pursuing its own path. But time has shown that Georgia for example, which has always been saying that it wants to save itself from Russia, that is why it wanted to access NATO – it feared that Russia will dominate Georgia again. I think that such fears originate from some kind of misunderstanding of the break-up of the Soviet Union, because it was so sudden. No one could adjust themselves to it immediately. All the European empires have collapsed. But they collapsed after decades of “preparation”. Even Russia itself was not ready.

RT: So, you don’t believe that Russia has imperial ambitions now?

HCD: Right, I don’t believe it. I would rather say there is some kind of nostalgia, but that’s a completely different thing. What country can forget overnight that it used to be a powerful empire? But Russia has common sense, despite the fact that some Russians say it used to be so good and that it’s a shame it’s forgotten about. But still Russian people and specifically those in power have common sense, and they understand too well that it’s over and that Russia’s future is not to be an empire, but rather to build up its reputation and influence via soft power, rather than by force.

RT: What major stereotypes does Russia face every day?

HCD: Russia has the legacy of the Soviet Union, and it will be marked by this stigma for a long time. I come from a country, in which the collapse of the empire was a difficult one with bloodshed in the 50s and 60s.

Yeltsin said: “Take as much independence as you can swallow.” And another day he said: “You are free. Get out of here.” Many things about Russia were forgotten. People forgot that the Soviet system was dominating and instilled fear, and then got scared of the country that had neither the power, nor the ability to speak as poignantly with other countries. All this was forgotten. And this new Russia was not understood, as I see it.

RT: Is your fatherland being cautious with Russia?

HCD: I don’t know what to say to that.

RT: But that’s what Sarkozy himself said during his election campaign, when he said that it’s more pleasant for him to be shaking hands with Bush, than with Putin. Who would you personally shake hands with?

HCD: First of all, I feel uncomfortable talking about my president. He has changed a great deal. He was in love with America. It was an example for him. He did not know Russia. He is of Hungarian origin, and Hungary was affected by the Soviet Union to a certain extent, and even by Russia. He has come a long way and he chose Russia. And I agree with him. It is in Europe’s interests, and in France’s interests. France has always had its interest in relations with Russia.

RT: And why has this change occurred?

HCD: It is simply because he realized what’s right; he is a very smart guy, really. I should not be calling my president “a guy”. Well, he is a very smart person. He is very active. When he thinks something over, he comes to understand things correctly. He took a look at the world and has realized a lot of things over two years. He realized first that Russia wasn’t a terrible country. It was a country to be spoken to, not lectured. He established close relations with the Russian president and prime minister. He realized that dialogue, for a European country, is the most important thing to build relations with Russia. He also realized Russia was a European country, which he didn’t understand very well at first. He also realized that Europe was no longer strong – it was falling out of the history of global relations. His current position, which I think is very smart, is not that Russia should be part of Europe: Russia is too vast for Europe, it would not adapt. What we need, he thinks, is a model for relations.

RT: Why does Europe need Russia?

HCD: Russia is needed because the entire history of international relations is moving away from Europe. It’s played out in Asia. Even the US, a Pacific country, is refocusing its foreign policy on Asia. Where are the huge countries that will play the big roles located? In Asia. And Latin America, but that’s a different question. Now what’s the current state of European-Asian relations? Europe is of no interest to Asia. If we view Europe as a landmass that reaches the Pacific Ocean – Russia and Europe are not a whole. But if we picture them as an alliance then we can say Europe reaches the Pacific. This is the reason Europe needs Russia. I am not sure if Russia needs Europe but Europe, at the moment, needs Russia.

RT: You mentioned Poland’s role in one of your interviews saying it could become a link between Europe and Russia. Could you elaborate? Also, what’s your evaluation of the current dynamics of Polish-Russian relations?

HCD: Until very recently it seemed like a crazy idea, but now rapprochement between Russia and Poland has actually happened. I think however that some politicians – smart politicians – foresaw this. Even Prime Minister Donald Tusk; he was bringing Poland closer to Russia before the plane crash. Poland has always been the final frontier of Europe. Russia began after that frontier. It is also in close contact with Ukraine. The question of Ukraine is very delicate: giving it EU accession without accepting Russia would upset Russia. Poland is a bridge of sorts, between Russia and Europe. It’s a bridge to Russia because it is at the same time a Slavic and a European country which could serve for bringing countries closer, Russia and Europe, Poland and Russia and Ukraine and Russia. So Poland could play a historical role, if it understands the situation it’s in.

RT: You predicted the fall of the Soviet Union. Can you say what will happen to modern Russia? A forecast?

HCD: No, I don’t make forecasts. When I was writing about the Soviet Union I didn’t even see it as a forecast. I looked at the country and saw so many negative elements that I couldn’t help but ask myself – “how long will it last?” I don’t make forecasts, as a rule. I’m a historian. I look at the past and try to figure out what’s happening in the present. I think Russia has come a long way over the past 20 years. It is having some difficulties, as countries do. It’s not easy to introduce democracy or capitalism. It took Western Europe centuries to do that. Doing it within 20 years isn’t so easy. I think Russia is following the path it chose in 1991. There have been ups and downs but I don’t see any discontinuity so I think we can be calm about Russia’s future. It’s starting to look more and more like a normal country.

RT: If you were asked to describe modern Russia in three words, what words would you choose?

HCD: The first one would be “mighty”, which it wasn’t ten years ago. The second important aspect is that modern Russia makes multi-nationality actually work. Multiple nationalities was what killed the Soviet Union. The third word would be “dynamic”.

RT: Thank you very much Madame d’Encausse.

HCD: Thank you.

Russian, Ukrainian leaders to talk cooperation, attend forum



01:57 04/10/2010

Russian President Dmitry Medvedev and his Ukrainian counterpart Viktor Yanukovych will on Monday discuss energy and nuclear cooperation, and aircraft construction at a meeting in the southern Russian town of Gelendzhik.

Russian presidential aide Sergei Prikhodko said the two leaders will also attend an interregional cooperation forum dedicated to transport infrastructure development, border trade and environmental problems.

He added that Monday's meeting, which is the ninth between the two presidents, is a stage in the preparation process for the November session of the Russian-Ukrainian intergovernmental commission.

Medvedev and Yanukovych are also expected to discuss economic cooperation.

Bilateral trade in January-July 2010 almost doubled year-on-year to $19 billion.

MOSCOW, October 4 (RIA Novosti)

Russia, Ukraine pres to discuss energy, high-tech cooperation



04.10.2010, 00.52

MOSCOW, October 4 (Itar-Tass) - Presidents of Russia and Ukraine Dmitry Medvedev and Viktor Yanukovich will meet in Gelendzhik on Monday to discuss energy and high-tech cooperation, Medvedev’s aide Sergei Prikhodko said on Friday. The Russian leader will go to Gelendzhik for one day.

“The first Russian-Ukrainian inter-regional economic forum will be held in Gelendzhik,” Prikhodko said. He reminded reporters that the presidents had agreed “on holding such forums on a regular basis at a meeting with the leaders of border regions in Kharkov on April 21”.

“They will focus on economy, energy, transport and ecology as primary areas of Russia-Ukraine cooperation,” he said. Aircraft building and space exploration will also be on the agenda, Prikhodko added.

“It is not planned to raise the gas problem at the meeting, as it is being handled by the government and Gazprom,” Prikhodko said. “While discussing energy issues, the presidents will concentrate on enhanced political support to interaction in atomic energy industry,” he stressed.

That will be the ninth meeting of Medvedev and Yanukovich since March 2010, Prikhodko said. “We view this meeting as another step in preparation for the November 26 meeting of the Russia-Ukraine Interstate Commission,” he said.

Prikhodko said that regions’ leaders are expected to discuss at the forum the development of trade in the border regions, joint use of trans-border waters, their ecology, the development of transport infrastructure and innovation development.

Besides, the governors will be able to exchange experience in connection with Ukraine’s preparations to host Euro 2012 and Russia’s preparations to host Sochi Olympic Games in 2014.

A number of documents will be signed at the forum, such as a program of interregional and border cooperation for the period of 2011-2015, a protocol of cooperation between Russian and Ukrainian Unions of Industrialists and Entrepreneurs, and a cooperation agreement between the Russian Krasnodar territory and the Ukrainian Zaporozhye region.

“Political instability in Ukraine and the world financial turmoil complicated interregional relations in 2009, and trade dipped by over 50%,” Prikhodko said. “The latest drastic improvement of bilateral relations, restored friendship and strategic partnership, gave a significant boost to trade and economic relations this year.”

“In January-July 2010 trade between Russia and Ukraine almost doubled as compared with the same period last year,” reaching $18.99 billion, Prikhodko said.

The Russian-Ukrainian state border goes through five Russian and five Ukrainian regions. The border is 2,245 kilometers long. The share of 20 Russian regions in overall trade with Ukraine amounted to 89.5% in the first half of this year, including 37.8% for Moscow, 10.7% for the Belgorod region and 7.8% for the Tyumen region.

Head of the Russian presidential administration Sergei Naryshkin, presidential aides Sergei Prikhodko and Alexander Abramov, Regional Development Minister Viktor Basargin, Energy Minister Sergei Shmatko, Transport Minister Igor Levitin, Economic Development Minister Elvira Nabiullina, Border Service head Vladimir Pronichev, Federal Migration Service head Konstantin Romodanovsky, Federal Customs Service head Andrei Belyaninov, Federal Border Services Agency head Dmitry Bezdelov and heads of Bashkortostan, Tatarstan, St. Petersburg, Krasnodar territory, Bryansk, Voronezh, Kursk, Leningrad, Lipetsk and Sverdlovsk regions will be accompanying Medvedev on his trip.

Nezavisimaya/Russia Today: The upcoming audit of the Black Sea Fleet



The presidents of Russia and Ukraine will discuss the financing terms of the Crimean development programs

By Tatiana Ivzhenko (Kiev)

On Monday, the presidents of Ukraine and Russia will meet during a business forum in Gelendzhik in the Krasnodar region. Informed sources in Kiev argue that Yanukovich and Medvedev will discuss the “Crimean issues” starting with the construction of a bridge over the Kerch Strait and ending with the specification of conditions of the deployment of the Black Sea Fleet. There are no official reports on whether or not any documents will be signed following the talks, but experts agree that the heads of state will only align their positions. After all, in the last six months there have been many changes in the Crimean dimension of Ukrainian-Russian relations, and new lines of conflict have emerged.

Read more

Previously, Kiev officials told the press that in April, the heads of state agreed to prepare supplements to the documents regulating the deployment of the Russian fleet on Ukrainian territory by the fall. Generally, the aim was to annul the stiff restrictions that were adopted under Yushchenko’s presidency.

“To simplify the redeployment and border crossing agreements, introduce preferential customs clearance for shipments of supplies to the fleet, and provision the possibility of replacing the outdated samples of equipment and ships,” said one of the officials, giving a quick summary of the documents that are being prepared. He specified that Ukraine is ready to make some concessions, but has a number of proposals as well. Kiev, according to Nezavisimaya Gazeta’s (NG) source, is offering to not only specify the organizational, but also the financial issues, related to the fleet.

The fact that the latter issue worries Ukraine was recently announced by the chairman of the Sevastopol City Council, Valery Saratov.

“The situation concerning the Black Sea Fleet enterprises, of course, does not benefit us in any way,” he said. “This year, they have cut about 12% of jobs. Thus, less money was allocated for the budget. Things are especially bad with the Construction Directorate of the Black Sea Fleet, which began filing for bankruptcy, as well as with the 13th Factory of the Black Sea Fleet: it has practically zero orders. We have made a decision and will be sending letters to the Black Sea Fleet Commission, because, to my great regret, honestly speaking, our expectations from the Kharkov agreements have not been justified.”

One of the city officials confirmed that despite April’s presidential agreements, the fleet continues to be one of the largest debtors.

“It was planned that Russia will allocate money for the socioeconomic development of Sevastopol, but instead, its fleet is accumulating debt with utility companies, the Pension Fund, and thousands of citizens who are not receiving their salaries from the fleet’s companies,” the official said. “The fleet’s presence has been extended, but jobs continue to get cut, and there are no funds for development.”

While explaining the situation, Sergey Zgurets, an expert with the Center for Army, Conversion and Disarmament, recalled that since 1997, when the Black Sea Fleet agreement were signed, Russia has been paying rental fees of up to $100 million each year. This amount is deducted from Ukraine’s gas debt to Russia, which had accumulated prior to the signing of the fleet agreements. Meanwhile, Sevastopol’s costs related to the stationing of the fleet should be covered by the state budget of Ukraine. Despite the fact that the city’s authorities have always expressed latent discontent in regard to the amount of compensation, the Sevastopol budget has been receiving the funds.

“Another thing is the fact that the fleet became a chronic debtor to the city’s utility services, and deductions to the Pension Fund,” said Zgurets. “Residual financing of these items was formed when the deadline for the fleet’s withdrawal was set for 2017, but even now, after the Kharkov agreements were signed by Yanukovich and Medvedev, the situation has obviously not changed.”

Two weeks ago, the minister-counsel of the Russian Embassy in Ukraine, Vsevolod Loskutov, told the Ukrainian media that Russia had allocated money for Sevastopol’s development in the past, and is willing to continue to do so. He specified that he is talking about a part of the rental fees which Russia pays for the deployment of the Black Sea Fleet, as well as the special programs for construction of housing and creation of infrastructure for the Black Sea Fleet officers in Sevastopol. Loskutov confirmed that the funding may be increased after the signing of the supplements to the framework Ukrainian-Russian agreements.

Incidentally, the announcement of the commander-in-chief of the Black Sea Fleet Vladimir Vysotsky, regarding Russia’s intention to supply one to two new ships to the Black Sea Fleet starting 2013 was made at about the same time.

A member of the Crimean parliament, Leonid Pilunsky, believes that the Ukrainian-Russian negotiations are reaching a breaking point. “In all the years the fleet has been stationed in Ukraine, financing has been absolutely non-transparent,” he said. “The rental fees toward the gas debt, transfer of sums for operational expenses and utilities, and funding of development programs in Sevastopol – these are all absolutely different commitments. No one in Ukraine will say how much money and how, through which budgets, was transferred to cover one or another expense item. I do not doubt that, in general, these would be large sums – perhaps in the billions of dollars. One could only guess as to how much of this money went into the pockets of the government officials.”

The deputy said that it is possible that the Russian government is finally ready to examine the issue and that Medvedev and Yanukovich plan to discuss the procedure and the mechanism of the audit prior to holding talks on further funding of programs related to the Black Sea Fleet’s presence in Crimea.

Pilunsky believes that the Ukrainian president, too, will not arrive in Gelendzhik empty-handed. In the summer, a special interdepartmental group on land issues worked in Crimea at the request of Yanukovich – it investigated violations that directly affect the interests of the fleet. According to statements made to the press by Igor Sizov, an expert with the commission for verification of legality of land management by the former leadership of the Sevastopol City Administration, it turns out that by the end of Yushchenko’s presidency, the local authorities had sold to companies and individuals about 400 hectares of land in Sevastopol which, in the documents, is listed as the land rented by the Black Sea Fleet.

The Rosbalt news agency has published supporting documents and a list of lots, the overall square area of which amounts to 10% of the land, which is de jure leased by the fleet. The agency’s experts concluded that the former Ukrainian leadership did not consider the possibility of the extension of the Black Sea Fleet’s stay in Sevastopol. Recently, media reports have surfaced on a lawsuit that has been initiated by Russia for the illegal sale of land.

Pilunsky believes that the same people who managed the funding for Sevastopol’s development programs may be involved in the land schemes. “All of this has turned into a cluster or corruption, in which, I think, certain Russian and Ukrainian officials were involved,” said the deputy. “For them, the fleet was only a cover – as was the project for the construction of a bridge across the Kerch Strait – nothing more than a convenient guise for making money: there is still no technical documentation, but different sums that are allegedly needed for construction are already being requested.”

While commenting on the possibility of starting a large-scale audit of all programs and cash flows, Pilunsky noted that the scope of the problem is even greater, as inventory of all the land and the fleet’s property will need to be conducted. Several years ago, former head of the State Property Fund Valentina Semenyuk-Samsonenko tried to conduct this work. But in an interview with NG, she admitted that a Ukrainian-Russian group of experts was unable to conclude their work due to political opposition, which came from middle management, and not the central authorities.

Recently, the head of the Crimean government, Vasily Dzharty, confirmed that one of the presidents’ main topics of discussion this Monday will be the construction of the transport corridor across Kerch. Crimean officials note that documents may be signed by the end of October; after all, the plan has been to join Crimea and Kuban before the 2014 Olympics. This will allow cutting the travel distance at the Kherson-Novorossiysk stretch by 450 kilometers, as well as create the shortest ground route from London to Shanghai. Previously, Russian Ambassador to Ukraine Mikhail Zurabov said that the passage will also unite the Ukrainian and Russian resort zones. So this was not only a road interchange, but a large-scale investment project.

The Ukrainian-Russian business forum on investment cooperation will be held in Kiev in a couple of weeks. Officials predict that the meeting will be dedicated to the next session of the Ukrainian-Russian Economic Cooperation Committee under the leadership of the prime ministers. Vladimir Putin and Nikaly Azarov’s talks have been scheduled for October 26. Meanwhile, the next meeting of presidents, who are likely to revisit the issue of funding for programs associated with the fleet, will be held in November.

Read the article on the newspaper's site

U.S. security advisor to attend conference in south Russia



04:37 04/10/2010

United States National Security Advisor General James Jones will arrive in the southern Russian resort of Sochi on Monday to attend a security conference.

The Russian Security Council said Sochi will host a meeting of security council secretaries, national security advisors, prime ministers and ministers from some 40 countries on October 5-6.

General Jones will "travel to Sochi, Russia, October 4-6 to attend the Sochi Security Conference," U.S. National Security Council spokesman Mike Hammer said in a statement.

"General Jones will address the 34 country security conference, which will cover 21st century security challenges facing all states, including natural and industrial disasters, transnational crime and converging threats, and cyber security," Hammer said.

"As part of the visit to Sochi, General Jones will meet with Russian Security Council Secretary Nikolai Patrushev to continue the U.S.-Russia Security Council Dialogue, which focuses on how our governments can cooperate productively to reduce shared threats," he said.

WASHINGTON, October 4 (RIA Novosti)

Hugo Chavez to start visit to Russia on October 11



07:35 04/10/2010

Venezuelan leader Hugo Chavez will head for Russia on October 11, Venezuelan news agency AVN reported.

Chavez's visit to the Russian capital - his ninth - will be part of his international tour.

"I am leaving for Russia October 11... and then I am going to head for China," AVN quoted him as saying.

The outspoken Venezuelan leader last visited Moscow in September 2009, when he announced that his country recognizes the independence of the former Georgian republics of South Ossetia and Abkhazia.

Earlier Latin American media reported that Chavez's visit agenda includes Belarus and Ukraine. Reuters said he also plans to drop in at Iran.

MOSCOW, October 4 (RIA Novosti)

Venezuela's Chavez to visit China, Russia, Belarus, Iran



Posted: 04 October 2010 0932 hrs [pic]

CARACAS: President Hugo Chavez said Sunday that he will travel soon to Russia, Belarus, China and Iran; four countries with which Venezuela has sought close political and economic ties in recent years.

Chavez did not immediately offer specific dates.

"In a few days, I will be travelling to Russia. We have important projects with Russia," Chavez said.

A bilateral finance bank to which Russia and Venezuela agreed two years ago could be ready to launch on time for the visit, he said.

"A few days ago, I received a letter from the Russian president (Dmitry Medvedev) in which he was insisting that we iron out the technical and financial details of the bank. It is very likely that when I get to Moscow it will be ready," Chavez said.

China and Venezuela have also boosted their economic cooperation; they have a 12-billion-dollar joint finance fund. Beijing has said it will spend 16 billion dollars on a heavy crude well in the Orinoco delta area, in the east of Venezuela, an OPEC member and South America's biggest oil producer. -AFP/ac

'Minsk was ready to recognize Georgia’s two breakaway regions'



Mon 04 October 2010 05:54 GMT | 7:54 Local Time

Belarus President speaks on recognition of Georgia's regions.

Belarus President, Alexander Lukashenko, said Minsk was ready to recognize Georgia’s two breakaway regions of Abkhazia and South Ossetia, but did not do so because Moscow refused “to share” negative consequences, expected for Belarus from the West in case of such decision.

“Taking into consideration our relations – between Belarus and Russia – of course we should have recognized [South] Ossetia and Abkhazia; no matter what it [Russia] is our ally,” Lukashenko said at a news conference held for the Russian journalists on October 2.

“From this point of view, we should have done that. Frankly speaking, we were ready to do that,” he was quoted by the Belarus and Russian media sources.

“I was meeting with one western politician and he told me: ‘Do you really want to recognize Ossetia and Abkhazia?’ I responded: ‘And why does it make you so uneasy? We are allies [with Russia]’ and then he laid out those relations, which we would have had with Europe and the United States [in case of recognition of Abkhazia and South Ossetia]… You should know that we have slightly more trade [turnover] with the European Union, than with Russia; it’s billions of dollars.

When Russia pushed us out from market, Europe did not dare to do that... So with the long list of possible disasters, which could have embraced Belarus, I met with your President [Dmitriy Medvedev] in Sochi and we discussed this problem, during which he was citing my solemn pledge [to recognize Abkhazia and South Ossetia]. I am not rejecting [making such pledge]. But I told him: ‘There will be consequences [for Belarus from the West in case of recognition]; are you ready Mr. President, dear friend, to share these consequences together with us? Are you ready to put your shoulder?’ I quote [Medvedev’s response]: ‘Let’s stop this horse-trading. This is one issue and that’s another’. So I told him: ‘Thanks, the issue is now closed, there is no continuation to this conversation’,” Lukashenko said.

It was reported in February, 2009, that then EU foreign policy chief, Javier Solana, had warned the Belarus President against recognizing Abkhazia and South Ossetia.

On August 3, 2010, Russian President, Dmitriy Medvedev, said that at one of the summits of CIS leaders, following the August, 2008 war with Georgia, Lukashenko promised in presence of other leaders of CIS to recognize Abkhazia and South Ossetia.

At the news conference on October 2, Lukashenko said that he was the only President present at the meeting, who “supported Russia”. “Let him [Medvedev] publish transcript of my speech and those of others as well. You should have looked at that expression on his face,” Lukashenko said.

“Maybe Russia does not want us at all to recognize Ossetia and Abkhazia? Maybe [Russia uses the issue] just as a pretext to bow us down?” he said.

In his remarks Lukashenko also mentioned President Saakashvili’s interview, which was aired by the Belarus state television in July, 2010 and which was described in Russia as “an unfriendly step” of Minsk towards Moscow.

Lukashenko said that he had an impression from that interview that the Georgian leader was sending a message to the Russian leadership about the need to build relations. “That’s the first time I see this kind of Saakashvili,” Lukashenko said. “He gave 7-minute long interview; so what?”

The senseless period of tension in relations with Belarus is certain to come to an end



October 3, 2010, 21:45

New entry on Dmitry Medvedev's blog concerns relations between Russia and Belarus.

Russia’s relations with other states have already been the subject of my video blog. I have discussed the direction our cooperation with the United States is taking and explained why I think it is vital for our country to take part in the meetings of the twenty leading economies in the world. During what was perhaps one of the most dramatic moments in our relations with Ukraine last summer, I shared with you my thoughts on why our attempts to establish a dialogue with President Yushchenko had been exhausted.

Today I want to talk about what is happening in the relationship with our closest ally: Belarus. I want to address both the Russian and Belarusian people. After all, we are all citizens of the Union State.

It is my deep conviction that our country has always treated and will continue to treat the Belarusian people as our closest neighbour. We are united by centuries-old history, shared culture, common joys and common sorrows. We will always remember that our nations - and I always want to say  “our single nation” - have suffered huge losses during the Great Patriotic War. Together we survived terrible hardships of the collectivisation, famine and repressions.

Now Russia and Belarus are partners in the Union State. Both of our countries are also actively involved in the creation of the Customs Union, in the development of the EurAsEC, CSTO and the Commonwealth of Independent States. We intend to fully expand our cooperation with Belarus within the framework of these organisations. We will continue to consistently develop modern forms of economic interaction in full accordance with international practice of relations between such close allies as our countries.

Proceeding from this, we have always helped the people of Belarus. In fact, since the collapse of the Soviet Union almost 20 years ago, the volumes of this support, whatever they say, have been huge. Only this year our help to Belarus in the form of favourable oil supply terms amounted to almost two billion dollars. There are comparable subsidies in the supply of Russian gas to Belarus. We do all this because we firmly believe that our nations are inextricably linked.

It is therefore particularly surprising that the Belarusian leadership has recently adopted an anti-Russian rhetoric. The election campaign there is built entirely on anti-Russian slogans, hysterical accusations of Russia’s unwillingness to support the Belarusian people and the Belarusian economy, and curses addressed at the Russian leadership. What we can discern behind all this is a clear desire to cause discord between the states and, accordingly, the nations.

The inclination to create an image of an external enemy in the public consciousness has always distinguished the Belarusian leadership. In the past this role was assigned to the United States, Europe and the West in general. Now Russia has been declared one of the main enemies.

In his comments, President Lukashenko goes far beyond not only diplomatic protocol but also basic human decency. However, this was nothing new to me. I remember my surprise when during our first bilateral meeting, instead of concentrating on Russian-Belarusian ties, he expounded in great detail and in a highly negatively vein on my predecessors as presidents of Russia, Boris Yeltsin and Vladimir Putin. I had to remind my colleague at the time that we had entirely different issues on our agenda.

Mr Lukashenko demonstrated this original understanding of our partnerships in the issue of Belarus’ recognition of South Ossetia and Abkhazia as independent members of the international community. I have said repeatedly: it is a sovereign right of each state to recognise the two new nations or not to recognize them. We never exerted any pressure on anybody in this issue even though it was an important matter for us.

The President of Belarus declared his readiness to do so in the presence of his colleagues, five presidents of other states. To be perfectly open, there is a corresponding entry in the minutes of a CSTO meeting. Later this issue become a permanent instrument of political bargaining.

But Russia does not sell out its principles. Such conduct is dishonest, and partners do not behave like this. And, of course, we will bear this in mind when building relations with the current President of Belarus.

A flood of accusations and abuse has been directed against Russia and its leadership. Mr Lukashenko’s entire election campaign is based on that. He is concerned about a great number of issues: restoring order in our economic relations, the communication of Russian media with the Belarusian opposition, and even the fate of some of our high-ranking officials, retired and dismissed.

The President of Belarus should concern himself with his country’s internal problems, including, finally, the investigation of numerous cases of disappearances. Russia, like other countries, is not indifferent to that.

Of course, this is not what defines the relations between nations and individuals. I am certain of this as President of the Russian Federation. I am also sure that this senseless period of tension is certain to come to an end.

I would just like to say this openly: Russia is ready to develop allied relations with Belarus. Moreover, no matter who leads Russia and Belarus, our peoples will forever be fraternal. We want our citizens not to live in fear, but in an atmosphere of freedom, democracy and justice. And we are ready to pursue this together with our Belarusian friends.

October 3, 2010, 21:45

October 03, 2010 22:19

Lukashenko is trying to present Russia as enemy of his country – Medvedev



MOSCOW. Oct 3 (Interfax) - Russian President Dmitry Medvedev has accused Belarusian President Alexander Lukashenko of trying to present Russia as a key enemy of his country.

"Attempts to paint the picture of an outside enemy in the public mind have always distinguished the Belarusian leadership. In the past this role was given to America, Europe, the West in general. Now Russia has been declared one of the key enemies," Medvedev said in his video blog.

The recording is posted on the official website of the Kremlin.

"In his statements President Lukashenko goes far beyond not only diplomatic rules but regular decency," Medvedev said.

Lukashenko tries to set Russia, Belarus at loggerheads – Medvedev



Oct 4, 2010 09:27 Moscow Time

Dmitry Medvedev has accused the Belarusian leader of attempts to make Russia one of Belarus’s main enemies.

The Russian President has written in his video blog that Alexander Lukahsenko’s statements are beyond the scope of diplomatic proprieties and elementary decency.

He levelled criticism at the Minsk leadership for resorting to anti-Russia rhetoric.

Medvedev says that Lukahsenko should have focused on his country’s internal affairs.

The Russian leader voiced certainty that the current period of pointless tension would draw to a close with no damage to the two peoples’ fraternal relations.  

Medvedev hopes tensions in Russia-Belarus relations will end



03.10.2010, 23.54

MOSCOW, October 3 (Itar-Tass) - Russian President Dmitry Medvedev in his videoblog on Sunday expressed confidence that a senseless period of tensions in Russian-Belarussian relations will certainly end.

“I would like to say frankly – Russia is ready to develop allied relations with Belarus,” he said. “Moreover, irrespective of who will rule Russia and Belarus, our nations will always remain fraternal. We would like to see our citizens living not in fear, but in the atmosphere of freedom, democracy and justice, we are ready to go along this path hand in hand with our Belarussian friends.”

“Russia will always consider Belarus its closest neighbour”, as they are tied up by age-old history, joint culture, common joys and sorrows, Medvedev said. “We will always remember that our people – and all the time I want to say our single nation – suffered great losses during WWII and together lived through disastrous years of collectivization, famine and repressions.”

The Russian leader reiterated that Russia and Belarus are partners in the Union State, in the EurAsEC, the Collective Security Treaty Organization and the CIS.

“We plan to the full extent expand our cooperation with Belarus within the framework of these organizations and of course, we will insistently introduce modern forms of economic interaction, notably in strict compliance with the global practice of relations between close allies such as our countries,” he said.

Medvedev reiterated that Russia has always helped Belarus. “Since the collapse of the Soviet Union, this is almost 20 years, the volume of our support – whatever they say – was huge. This year alone our support to Belarus through preferential oil supplies comprised almost 2 billion U.S. dollars; equitable subsidies are provided through gas supplies,” he said.

“We do all this, because we are confident that our nations are inseparably tied up,” Medvedev said.

Russian president assails Belarusian leader



By VLADIMIR ISACHENKOV

MOSCOW

Russia's President Dmitry Medvedev on Sunday sharply criticized his Belarusian counterpart, signaling mounting tensions in relations between the two ex-Soviet neighbors.

Medvedev in a video blog entry posted on the Kremlin Web site accused Belarusian President Alexander Lukashenko of trying to cast Russia as his nation's main enemy while running for re-election.

Russia has a union agreement with Belarus and provided generous subsidies to help keep Belarus' Soviet-style economy afloat, but their ties have turned sour recently amid economic and political disputes.

Medvedev said that Lukashenko has "gone beyond not only diplomatic rules, but elementary rules of behavior" in his recent public statements. He accused the Belarusian leader of building his campaign for re-election in December's vote on "hysterical anti-Russian rhetoric."

There was no immediate comment from Lukashenko's office late Sunday.

Medvedev said that Lukashenko had reneged on his promise to follow Russia's example in recognizing the independence of Georgia's breakaway provinces of Abkhazia and South Ossetia.

Russia has recognized the two regions as independent states following a 2008 war with Georgia, but only Venezuela, Nicaragua and the small South Pacific island nation of Nauru have followed suit so far.

Medvedev said that Lukashenko had promised during a recent meeting of ex-Soviet leaders to recognize the two provinces independence, but later turned the issue into a "subject for political bargaining."

"No, Russia isn't trading in principles, and such conduct is dishonourable," Medvedev said in his blog. "Partners don't behave like that. And we will take that into account while maintaining our relations with the incumbent Belarusian president."

Russia in June partially cut natural gas supplies to Belarus for three days over its debt for previous deliveries, finally forcing its neighbor to pay. Moscow also has rejected Lukashenko's push for lower duties for Russian oil supplies to Belarus under a customs union between the neighbors.

Russia's Kremlin-controlled television stations recently have run several documentaries containing fierce criticism of Lukashenko and exposing his alleged abuses -- the propaganda barrage that is likely to intensify in the coming months.

Russia hasn't yet cast its support behind any of the Belarusian opposition leaders in the election campaign, but some observers expect the Kremlin to make its preferences clear later

Lavrov to attend ASEM summit, Russia to join ASEM



04.10.2010, 01.38

MOSCOW, October 4 (Itar-Tass) - Russian Foreign Minister Sergei Lavrov goes on Monday to Brussels where he will take part in a summit of the Asia-Europe Meeting. During a two-day session Moscow will be formally inducted into that organisation.

Forty-five states successfully cooperate within its framework on issues of politics and security, financial-economic and social-cultural spheres. Moscow’s joining that “unique mechanism will confirm the interest of ASEM participants in deepening partnership with Moscow – a ‘bridge’ between Europe and Asia,” Russian Foreign Ministry sources stress.

“We make a major step in implementing the course outlined by Russian President Dmitry Medvedev towards the strengthening of positions in the Asia-Pacific region, building up participation in multi-lateral regional agencies”.

According to Russian Foreign Ministry spokesman Andrei Nesterenko, within the framework of the forum Russia will come out with concrete offers, the implementation of which is necessary in present-day conditions. The diplomat has confirmed Moscow’s bid to create “transparent and equal security architecture that would be based on collective principles, norms and principles of international law, regard for legitimate interests of all countries of the region”.

“It is necessary to move towards that aim through the development of all-round network diplomacy, the establishment of partnership system of organisations and forums,” the sources said.

The central issue of the summit in Brussels is “improving the quality of life”. Its participants will discuss ways to overcome the aftermath of the financial crisis, fight against terrorism, as well as energy security and human rights. The final document (already with Russia’s participation) will outline ways towards a more efficient world economic management.

ASEAM was set up in March 1996, and it is the main multilateral channel for communication and dialogue between Asia and Europe. The 45 ASEM partners represent half of the world’s GDP, almost 60 percent of the world’s population and 60 percent of global trade.

At the present moment the organisation has 45 participants – 27 EU countries, the European Commission and 16 Asian states (ten ASEAN member countries, China, Japan, South Korea, India, Pakistan and Mongolia), as well as the ASEAN Secretariat. Australia and New Zealand will join the forum apart from Russia.

Lavrov to attend ASEM summit in Brussels



|Oct 4, 2010 09:40 Moscow Time |

The Russian Foreign Minister Sergei Lavrov is leaving for Brussels to attend the 8th summit of the Asia-Europe Meeting, or ASEM. Russia’s topmost diplomat is due to sign documents on this country’s joining the organization. The Russian Foreign Ministry has meanwhile said in a statement that Russia’s joining the unique mechanism in question will reaffirm the ASEM members’ interest in promoting partnership relations with Moscow, which is a bridge between Europe and Asia. The ASEM summit will focus on boosting welfare standards and ensuring dignified life for all citizens.  

Russian-Norwegian delegation visits US to talk about nuclear decommissioning



By The Associated Press (CP) – 15 hours ago

SOUTH ROYALTON, Vt. — A group of Russian and Norwegian nuclear scientists, regulators and activists is visiting Vermont and Massachusetts to learn about nuclear decommissioning.

The group is meeting with anti-nuclear groups, including the New England Coalition and Citizens Action Network, as well as visiting the Vermont Law School to meet with students and faculty in the school's environment and energy programs.

The delegation is not meeting with officials at the Vermont Yankee nuclear plant, which has been embroiled in debate in recent years over whether it is setting aside enough money to pay for its eventual decommissioning.

The Russian members of the delegation are working to develop plans for decommissioning that country's older nuclear plants.

Syria considers Tupolev after U.S. derails Airbus buy



By Khaled Yacoub Oweis

LATAKIA, Syria | Sun Oct 3, 2010 9:36pm EDT

(Reuters) - The Syrian government may turn to Russia to buy planes as U.S. sanctions disrupt a mega Airbus purchase aimed at boosting Syria's tiny civilian passenger fleet, the transport minister said on Sunday.

The government is considering buying up to six medium range Tupolev Tu-204 planes on behalf of flag carrier Syrianair, which has a fleet composed of five functioning aircraft, Yarub Badr told Reuters.

"Nothing happened regarding the Airbus deal," Badr said when asked whether there has been any change since he announced in January that Washington had declined a request by Airbus for an exemption to sell planes to flag carrier Syrianair.

Relations between Washington and Damascus have improved since and the U.S. government granted Boeing Co permission to overhaul two grounded Syrianair 747 aircraft.

But President Barack Obama, who began a rapprochement with Syria soon after he took power last year, has kept renewing the sanctions, with major political differences remaining between the two countries.

The United States imposed the sanctions in 2004 for Syria's role in Iraq and Lebanon and support for militant groups.

"The United States has placed an embargo on (Airbus and Boeing) exports to Syria. The Russian option is real and very serious," Badr said.

Moscow and Damascus have signed at least two memoranda of understanding for plane orders in the last five years, but no purchases happened. Badr hinted that a deal with Tupolev, which is linked to the Russian government, may not be imminent.

"Buying aircraft is not as simple as buying a kilo of bread. It needs time," said Badr, who was speaking on the sideline of a Syrian-Turkish political forum in the port city of Latakia on the Mediterranean.

"We recently asked the Russian side to assign a single entity to negotiate the sale with Syrianair. The talks have to be direct, with no middle men or commissions," he added.

PICKING UP THE SLACK

Badr said airlines from countries with good ties to Syria, especially Turkish Airlines, have been operating extra flights to Damascus and picking up the demand generated by Syrianair's capacity shortfall.

France, among the first to advocate detente with Damascus, has also been in favor of business deals in Syria, supporting a letter of intent signed two years ago between Syrianair and Airbus, a subsidiary of Franco-German company EADS, for a multibillion dollar order.

The agreement involved the possible lease and purchase of a total of 54 aircraft until 2028, including 8 in 2009, and help by Airbus to restructure Syrianair.

Airbus needs an export license to sell to Syria because its planes tend to have U.S. components.

The company has kept mum about its business contacts with Syria, a sensitive issue considering that EADS is competing along with a U.S. partner against Boeing for a U.S. Air Force tanker refueling deal worth up to $50 billion.

Boeing has already brought up contacts by an Airbus subsidiary with Iran, an ally of Syria also under U.S. sanctions, and said the contacts should be taken into account when awarding the contract.

(Editing by Lincoln Feast)

Syria ready to buy in Russia 6 Tu-204 planes



04.10.2010, 10.17

BEIRUT, October 4 (Itar-Tass) - The Syrian government is considering the possibility of buying in Russia six Tupolev Tu-204 planes for Syrian Air, as the American government refuses to lift economic sanctions from Damascus.

“The United States has placed an embargo on (Airbus and Boeing) exports to Syria. The Russian option is real and very serious,” Syrian Transport Minister Yarub Badr told Reuters in an interview. Initially, the Syrian side was ready to sign a contract with the French-German company EADS on the purchase and lease of 54 planes up to 2028, including the supply of 8 planes in 2009.

According to Reuters, the Syrian government may turn to Russia to buy planes as US sanctions disrupt a mega Airbus purchase aimed at boosting Syria's tiny civilian passenger fleet, the transport minister said on Sunday. The government is considering buying up to six medium range Tupolev Tu-204 planes on behalf of flag carrier Syrian Air, which has a fleet composed of five functioning aircraft.

“Nothing happened regarding the Airbus deal,” Badr said when asked whether there has been any change since he announced in January that Washington had declined a request by Airbus for an exemption to sell planes to flag carrier Syrian Air.

Relations between Washington and Damascus have improved since and the US government granted Boeing Co permission to overhaul two grounded Syrianair 747 aircraft. But President Barack Obama, who began a rapprochement with Syria soon after he took power last year, has kept renewing the sanctions, with major political differences remaining between the two countries.

The United States imposed the sanctions in 2004 for Syria’s role in Iraq and Lebanon and support for militant groups.

Moscow and Damascus have signed at least two memoranda of understanding for plane orders in the last five years, but no purchases happened. Badr hinted that a deal with Tupolev, which is linked to the Russian government, may not be imminent. “Buying aircraft is not as simple as buying a kilo of bread. It needs time,” said Badr, who was speaking on the sideline of a Syrian-Turkish political forum in the port city of Latakia on the Mediterranean. “We recently asked the Russian side to assign a single entity to negotiate the sale with Syrian Air. The talks have to be direct, with no middle men or commissions,” he added.

Mon, Oct 04, 2010, 06:41 GMT

Russia relaunches Arabic newspaper in the UAE



Gulf News

Anbaa Mosku distributes 49,000 copies across the country, its latest market in the region

Dubai High-ranking Russian media and diplomats celebrated the relaunch of Anbaa Mosku — an Arabic-language newspaper covering Russian affairs — at a special gala function last night.

The newest paper in the United Arab Emirates, Anbaa Mosku now distributes 49,000 copies across the country.

The UAE is the latest market in the region for the newspaper, in addition to 13 countries across the Middle East and North Africa, the UK [London] and Russia [Moscow], with a total monthly circulation of 190,100.

“An Arab paper with a Russian soul is very much in demand,” said Alexander Yu. Babinsky, deputy editor-in-chief of RiaNovosti, the Russian news agency that publishes the newspaper. “This is just the beginning for us.”

Next step

In an interview with Gulf News, Babinsky said that if the newspaper performs well financially in the UAE and beyond, it could beef up its production schedule from publishing twice a month to a new weekly edition.

“The next step for us would be a weekly edition,” he said.

The newspaper launch was attended by officials such as Raed Jaber, Anbaa Mosku Editor-in-Chief, as well as Tibor Zabirov, Senior Counsellor, Department Head of the Russian Embassy in the UAE.

The newspaper launch at the Fairmont Hotel in Dubai featured an exhibit tracing the history of Anbaa Mosku since 1969 when the newspaper was established as an Arabic-language edition of The Moscow News.

Printing of Anbaa Mosku stopped shortly after the collapse of the Communist regime in 1991 but resumed again in October 2009 to help bridge long-standing ties between Russia and the Arab world.

Supplied picture

Alexander Yu. Babinsky

publishing

By Derek Baldwin?Business Features Reporter

First hearing on new charges against Viktor Bout due in Thailand



04.10.2010, 06.18

BANGKOK, October 4 (Itar-Tass) - The first hearing on new charges of the USA against Russian businessman Viktor Bout will take place at the criminal court of Bangkok on Monday.

Judges will have to decide whether to launch new proceedings or agree with the drop of charges requested by the plaintiff and dismiss the case thus removing legal obstacles for his extradition to the USA.

If the court rules to drop the charges, the decision on Bout’s extradition will rest with the prime minister of Thailand. Prime Minister Abhisit Wechachiwa said on Friday he would base the final decision on possible extradition of the Russian businessman to the United States on Russian-U.S. agreements and interests of Thailand. He earlier urged Moscow and Washington to begin direct negotiations on the Bout case.

Bout was detained in Bangkok in March 2008 upon the request of the USA. The United States accuses the businessman of illegal weapons trade as well as other crimes. Within two years the Thai court has not received evidence of his guilt. On August 20, the Thai Court of Appeal ruled to extradite Bout.

Moscow's reaction to the decision of the Thai court to transfer Viktor Bout to the United States was sharp, and it said it would continue providing assistance to the Russian citizen.

“Moscow is extremely surprised and disappointed with the August 20 judgment of the Thai Court of Appeal, which says that Russian citizen Viktor Bout will be transferred to the United States on suspicions of illegal arms trade. The judgment looks rather dubious, as the Thai Criminal Court denied the transfer in August 2009 due to the insufficiency of evidence,” the ministry said.

Russian Accused Arms Dealer Back In Thai Court For Extradition Case



October 04, 2010

A court in Thailand's capital, Bangkok, is holding another hearing in the case of Russian alleged arms dealer Viktor Bout, who is fighting his extradition to the United States.

Bout arrived at the court on October 4 wearing a bullet-proof vest and guarded by armed Thai commandos. He told reporters he did not expect he would be able to receive a fair trial in the United States if he is extradited there.

The extradition of Bout, who was arrested in Thailand as part of a U.S.-led operation in 2008, has been delayed since U.S. prosecutors filed extra charges of money-laundering and fraud against him.

The United States has since asked that the new charges be dropped to speed Bout's extradition. The Russian government, meanwhile, continues to oppose the extradition of the alleged arms dealer, who would face trial in the United States on charges of conspiring to kill U.S. nationals and providing support for a foreign terrorist organization.

Bout, who could face life in prison if convicted in the United States, has denied any wrongdoing.

compiled from agency reports

Reputed Russian arms smuggler in Thai court for crucial hearing as US awaits extradition



By Kinan Suchaovanich (CP) – 1 hour ago

BANGKOK — Alleged Russian arms smuggler Viktor Bout arrived at a Bangkok court Monday in a bulletproof vest for a crucial hearing that could finally determine if he will be extradited to the United States.

Bout, a 43-year-old former Soviet air force officer, is reputed to be one of the world's most prolific arms dealers. He has been jailed in Bangkok since March 2008 when a U.S.-led sting operation ended years of searching for the elusive Russian who has been referred to as "The Merchant of Death."

The case has plunged Thailand into a diplomatic dilemma, with Washington demanding Bout's extradition to face terrorism charges and Moscow demanding his release, saying Bout is an innocent businessman. Experts say Bout has knowledge of Russia's military and intelligence operations and Moscow does not want him to go on trial in the United States.

Bout arrived at court Monday with armed commandoes, apparently reflecting new concerns for his safety. He wore a flak jacket for the first time in several court appearances, in addition to his standard ankle shackles. The Russian was also driven to court in his own security van, rather than riding with other prisoners.

Asked if he expected a fair trial in the U.S., Bout shouted to reporters from a holding cell: "No! For sure no! Which fair trial are you talking about?"

An Appeals Court ordered Bout's extradition on Aug. 20, reversing a lower court's decision from a year earlier. But a second set of charges filed by the U.S. between the two rulings have caused a legal bottleneck that blocked his immediate extradition.

Thai prosecutors Monday are formally requesting the extra charges be dropped, at Washington's request. The Bangkok Criminal Court must then rule whether or not to dismiss the new charges of money laundering and wire fraud.

There's one possible twist: Under Thai law a defendant has the right to object to charges against him being dropped. That means Bout could object to dropping the charges as a way to stall his extradition, a stance that his lawyer has said he will take.

If that happens, Bout could delay the extradition or — if a legal process drags on — scuttle it entirely.

When the Appeals Court cleared the way for Bout's extradition in August it said the extradition must take place within three months, or roughly by Nov. 20.

Bout's high-profile arrest at a Bangkok luxury hotel in March 2008 was part of an elaborate sting in which U.S. agents posed as arms buyers for the Revolutionary Armed Forces of Colombia, or FARC, which Washington classifies as a terrorist organization.

Bout was subsequently indicted in the U.S. on four terrorism-related charges and faces a maximum penalty of life in prison if convicted.

The head of a lucrative air transport empire, Bout long evaded U.N. and U.S. sanctions aimed at blocking his financial activities and restricting his travel. He has denied any involvement in illicit activities and said he ran a legitimate business.

The 2005 movie "Lord of War" starring Nicolas Cage is loosely based on Bout's life. He allegedly supplied weapons that fueled civil wars in South America, the Middle East and Africa, with clients including Liberia's Charles Taylor, Libyan leader Moammar Gadhafi and both sides of the civil war in Angola.

___

Associated Press Writer Jocelyn Gecker contributed to this report.

Alleged Russian arms smuggler in Thai court for crucial hearing as US awaits extradition



11:05 AM Oct 04, 2010

BANGKOK (AP) - Alleged Russian arms smuggler Viktor Bout has arrived at a Bangkok court in a bulletproof vest for a crucial hearing that could finally determine if he will be extradited to the United States.

Bout, a former Soviet air force officer, is reputed to be one of the world's most prolific arms dealers.

He was arrested in Bangkok in 2008.

An Appeals Court ordered Bout's extradition on Aug. 20, reversing a lower court's decision from a year earlier.

But a legal bottleneck that blocked his extradition.

Monday's hearing is to determine if the new charges will be dropped to clear the way for Bout's extradition.

TU-154 wreckage under cover by 10 October



04.10.2010 09:10

The remains of the presidential TU-154 which crashed in Smolensk on 10 April is to be covered by a shelter within five days.

A fence around the wreckage as well as a shelter is to be built by 10 October, when family members of the Smolensk catastrophe victims is set to arrive at the site for a pilgrimage commemorating the April plane crash which killed President Lech Kaczynski and 95 high-ranking Polish citizens.

Andrey Evseyenkov, spokesman of Smolensk Governor Sergey Antufiev told Polish Radio that a tarpaulin shelter over the remains should be constructed within five days.

Meanwhile, the Smolensk Governor’s spokesman has also said that no-one is allowed to enter the site of the crash and approach the plane wreckage until the shelter has been constructed.

The announcement comes after a number of Polish journalists were detained by the Russian military after allegedly trespassing in a military no-go zone. They have since been released.

The journalists had gone to Smolensk to see whether anything was being done to protect the plane wreckage after a video released last month had shown the TU-154 wreckage unguarded despite Russian assurances to the contrary. (jb)

October 04, 2010 16:10 PM

Russian Aircraft Intruded South Korea's Air Defence Safety Zone 11 Times This Year



SEOUL, Oct 4 (Bernama) -- Intrusions by Russian aircraft into South Korea's air defence safety zone have increased to 11 times as of September this year, and the rise may be linked to the March sinking of a South Korean warship, Yonhap news agency reported, citing a ruling party lawmaker as saying on Monday.

Kim Ock-lee of the ruling Grand National Party however, said it was unclear if the violations were intentional but military authorities believed that the intrusions were aimed at monitoring movements of South Korean and U.S. forces in the wake of the sinking.

Citing data by the Joint Chiefs of Staff, Russian aircraft have entered the Korea Air Defence Identification Zone (KADIZ) without prior notifications 11 times as of September this year, compared with three times each in 2009 and 2008, respectively.

The KADIZ was designated by the commander of the U.S. Pacific Air Force Command in 1951 to prevent air clashes between nations surrounding the Korean Peninsula.

Although the area is not South Korean airspace, the country's military supervises the zone and a foreign aircraft must receive approval from the military 24 hours prior to entering the zone.

In May, Russia's state media RIA Novosti reported that two Russian long-range Tu-95MS strategic bombers on a patrol mission over the Pacific Ocean and the East Sea were trailed by South Korean and Japanese air force jets.

An international investigation concluded in May that a North Korean submarine torpedoed the Cheonan warship in late March, claiming the lives of 46 sailors. The North Korea denies any involvement.

-- BERNAMA

Bomb scare grounds Moscow-Singapore flight in Kolkata



Saptarshi Banerjee, Hindustan Times

Kolkata, October 04, 2010

A Moscow-Singapore flight landed in Dumdum airport a few minutes after midnight on Sunday forced by a mid-flight bomb scare. The emergency  sent the entire airport in a tizzy with all senior officials rushing to the airport to handle the crisis.

According to airport sources, there were 265 passengers and crew on board the flight SQ2345.

A bomb squad was rushed to the airport immediately as the flight landed and taken to an isolation bay.

Airport sources said Central Industrial Security Force personnel surrounded the aircraft as soon as it landed. Fire engines and ambulances were kept to deal with any emergency and help any passenger who may fall ill due to stress.

The pilot had reportedly informed the New Delhi airport about the scare, but was denied permission because of the heightened security due to the Commonwealth Games that was inaugurated on Sunday evening. Permission was then granted to land in Kolkata.

According to airport sources, the initial alert came around 11 pm when the flight was in mid-air. However, it couldn’t be confirmed what was the distance of the flight from Kolkata when the call for help came in.

The Singapore Airline flight was heading from Moscow to Singapore.

As the aircraft had a bomb scare, it was taken to an isolation bay after it landed.

Close to midnight senior officials of the airport including the director confirmed that there was emergency at hand but couldn’t provide details as they spent every moment preparing to handle the fast developing situation.

Airport sources couldn’t recall whether Dumdum airport ever witnessed any incident of an international flight being forced to land by an on-board bomb scare.

SIA 777 diverted to Kolkata after reported bomb threat



By Ghim-Lay Yeo

DATE:04/10/10

SOURCE:Air Transport Intelligence news

A Singapore Airlines (SIA) aircraft flying from Moscow to Singapore was diverted to Kolkata early today after a reported bomb threat on board.

The airline, which operates Boeing 777-300ER aircraft on the flight, says flight SQ 61 was diverted due to a "security issue" and arrived in Kolkata at about midnight.

Local reports say there was a bomb threat on board the aircraft. An SIA spokesman declines to comment on the reports, adding that the airline does not provide details on safety and security issues.

The aircraft, which had more than 220 passengers on board, is scheduled to depart Kolkata later today, says SIA.

US Bill to ban visas for Russians linked to lawyer's death



Published in: Legalbrief Today

Date: Mon 04 October 2010

Category: Legislation

Issue No: 2658

|[pic] |

US lawmakers have introduced a Bill that would prohibit the US State Department (DOS) from issuing visas to individuals, or their family members, who are connected to the death of Russian lawyer Sergei Magnitsky.

A Jurist report notes that Magnitsky, who was arrested on allegations of tax fraud and held for over a year without a trial after representing London-based hedge fund Hermitage Capital in a suit against Russian officials, died last November in a Moscow prison. Magnitsky's family and employers have made allegations that, on several occasions, he was denied medical treatment that could have saved his life and his death has been labelled a 'murder' by Russian human rights leaders. The report quotes Senator Benjamin Cardin, who introduced the Bill, as saying it was necessary for the US to take action because the Russian judicial system had failed to hold anyone accountable for Magnitsky's death.

U.S. poultry conforms to sanitary norms - Russia's chief doctor



08:01 04/10/2010

U.S. poultry delivered to Russia after the two countries agreed on the long-disputed issue of chlorine content is in line with sanitary norms, the chief Russian sanitary doctor said.

"The first batches of poultry meat processed in line with technology conforming to Russian laws have arrived. This is a landmark event in itself," Gennady Onishchenko said.

"This is one of the few cases when the Americans agreed with safety requirements adopted in other countries, in particular, Russia, and rearranged their production," he said.

U.S. poultry accounted for almost 80% of poultry imports to Russia. The U.S. import quota amounts to 600,000 tons in 2010.

On January 1, Russia introduced new sanitary standards, banning the treatment of meat with chlorine of a higher concentration than in drinking water.

A difficult negotiating process between Russia and the United States began, while Russia was also negotiating poultry supplies with other states as well as trying to increase domestic production.

The talks resulted in the permission for 78 U.S. enterprises to supply poultry to Russia.

MOSCOW, October 4 (RIA Novosti)

Russian, U.S. sanitary officials to inspect U.S. poultry plants



11:25 04/10/2010

Russian and U.S. sanitary officials will begin a joint inspection of 33 U.S. companies that want to supply poultry to Russia, the agricultural watchdog Rosselkhoznadzor said.

U.S. poultry accounted for almost 80% of poultry imports to Russia before Moscow introduced new sanitary standards on January 1, banning the treatment of meat with chloride of a higher concentration than in drinking water.

A long negotiating process between Russia and the United States subsequently began, while Russia was also negotiating poultry supplies with other states, as well as trying to increase domestic production.

In June 2010, Russian President Dmitry Medvedev and U.S. President Barack Obama agreed to lift the ban.

Since then, Russia has permitted poultry supplies for 83 out of 87 U.S. plants whose production processes met Russian requirements.

Rosselkhoznadzor spokesman Alexei Alexeyenko said the Russian and U.S. veterinary officials would carry out random inspections at 33 out of the 83 companies.

The latest joint inspections at U.S. poultry companies were carried out a year ago, he added.

The U.S. import quota amounts to 600,000 tons in 2010.

 

MOSCOW, October 4 (RIA Novosti)

Harold Nicholson accused of conspiring with son to spy for Moscow



THE US Government thought it had put paid to Harold Nicholson's espionage activities in 1997 when he was jailed for 23 years for passing secrets to Russia.

Now it transpires that the former CIA agent continued his contact with Moscow all along, sneaking out messages on screwed-up paper napkins to his son as he visited him in prison, bypassing the agency's high-tech attempts to monitor all his communications.

Nicholson will go on trial again in Portland, Oregon, next week on conspiracy charges after his son, Nathaniel, 26, pleaded guilty to acting as a go-between for his father and Russian agents who gave him $US47,000 to deliver to his father during encounters around the globe.

"Nathaniel was excited about the prospect of acting in a clandestine fashion like his father," prosecutors wrote in a pretrial memo. That excitement having apparently worn off with discovery and the prospect of jail, Nathaniel Nicholson is expected to appear as the state's key witness against his father as part of a plea bargain to avoid incarceration.

Harold Nicholson, now 59, was the most senior CIA agent to have been caught spying for a foreign government when he was jailed in 1997. He pleaded guilty to passing secrets to Russia in return for $300,000.

According to pretrial documents reported in The Oregonian, Nicholson began grooming his son, a disabled former paratrooper, four years ago to help to collect his "pension" for spying on behalf of Russia.

From 2006 to 2008, Nathaniel Nicholson regularly visited his father, smuggled out notes and took them to meetings with Russian agents in San Francisco, Mexico City, Lima, Peru, and Nicosia, Cyprus, where they handed over cash in return for his father's continued pledges of support.

Nicholson's notes reportedly expressed thanks for the money, reassured the Russians that his son was trustworthy and described his two older children's debts. In return, the Russian agents wanted to know how much US authorities had learnt about their operations during their investigation of Nicholson. According to The Oregonian, prosecutors allege that Nicholson's notes also revealed secrets from his days in the CIA.

Nathaniel Nicholson pleaded guilty to conspiracy to act as an agent of a foreign government and conspiracy to commit money laundering last year. He has yet to be sentenced.

His father has pleaded not guilty to the same charges, arguing that although the pair hatched a plan to get money from the Russians that did not in itself constitute a crime.

Labor migrants rally in front of the Kyrgyz Embassy in Moscow



04/10-2010 08:51, Bishkek – 24.kg news agency , by Daniyar KARIMOV

A rally in support of voting rights of labor migrants was conducted in front of the Kyrgyz Embassy in Moscow on October 3, 2010, KGinfo analytical portal informs.

According to them, around 150 labor migrants participated in the rally. They consider that the number of citizens of Kyrgyzstan, residing in Russia and registered in the consulate, is lower than the real number for several times. The participants of the rally suppose many labor migrants from Kyrgyzstan will be deprived of the opportunity to vote.

The protesters have handed over a letter for Kyrgyz President of transition period Roza Otunbayeva. They request her to provide all labor migrants from Kyrgyzstan, residing in Russia, with an opportunity to participate in the parliamentary elections.

Russian cultural fest in Mongolia



|Oct 4, 2010 10:29 Moscow Time |

The 50th Russian cultural festival kicks off in the Mongolian capital, Ulan Bator on Monday in an annual event which will this year focus on Russia’s Altai region. The program includes an array of concerts by the Altai region-based Cossack choir, plus the demonstration of movies directed by iconic Soviet actor and filmmaker Vasily Shukshin.

400 police killed in 5 years in Russian province



(AP) – 10 hours ago

MOSCOW — More than 400 police officers and other law enforcement agents have been killed by militants over the past five years in just one of Russia's restive southern provinces, its leader says.

Yunus-Bek Yevkurov, the president of the province of Ingushetia west of Chechnya, said at a rally Saturday that more than 3,000 civilians have been wounded in attacks by militants in the region over the same period, a statement on his administration's official website said Sunday.

Yevkurov himself was badly wounded by a suicide bombing of his convoy in June 2009.

Ingushetia and other provinces in Russia's restive North Caucasus region have been plagued by Islamic militant attacks, which spread across the region after two separatist wars in neighboring Chechnya. Rights groups say that police abuses against civilians have fueled violence.

In another volatile Caucasus province, Dagestan, a police officer was killed late Saturday when unidentified gunmen shot him from a passing car, regional police spokesman Vyacheslav Gasanov said Sunday.

And on Sunday, a passenger jet flying from Moscow to Chechnya's provincial capital, Grozny, was diverted after an anonymous caller claimed it had an explosive device on board, Russian news agencies reported.

The Yak-42 plane landed safely in Volgograd, a southern city on the Volgra River, its 73 passengers were evacuated and the authorities checked the plane for explosives but found none, the local branch of Russia's Federal Security Service said in a statement carried by Russian newswires.

Female Militants Killed in Dagestan



04 October 2010

Combined Reports

Security forces killed five suspected Islamist militants in coordinated sieges of two housing blocks in Dagestan's capital, Makhachkala, news agencies reported.

Two women were among four insurgents killed in a gunbattle on Ulitsa Engelsa on Saturday, the reports said, citing the National Antiterrorism Committee. Two passers-by were wounded, Interfax reported.

It was the second shootout of the week in which female fighters died in Dagestan. A woman was among the 15 insurgents killed in raids by authorities in Makhachkala and the town of Kaspiisk on Wednesday, the most successful operation in weeks for law enforcement officers, who suffered no casualties.

In a separate incident, an Islamist militant was killed in a shootout in Makhachkala on Friday.

Regional Interior Ministry spokesman Vyacheslav Gasanov said police shot the militant dead after he holed up in a house in the region.

The militant was identified as a 21-year-old local man who was on a wanted list on suspicion of killing military and police officers, Itar-Tass reported.

The extremists apparently fought back late Saturday, killing a police officer from the economic crimes department in Makhachkala, Interfax reported.

Unidentified assailants pelted the man's car with bullets before escaping in their own car, the report said. An investigation has been opened.

On Sunday, a regular flight from Moscow to Chechnya's capital, Grozny, was interrupted by a bomb scare, Interfax reported, citing a law enforcement source.

The plane, which carried 73 passengers, had to land in Volgograd after an anonymous caller told officials at Moscow's Vnukovo Airport that a bomb had been smuggled aboard, the report said.

No one was hurt in the incident. The plane had to be parked in a isolated spot as its engines cooled off before being searched by bomb technicians, a Vnukovo representative said late Sunday. It was not immediately clear whether there was a bomb on board.

Meanwhile, Ingush President Yunus-Bek Yevkurov reported that more than 400 police and other law enforcement agents have been killed by militants over the past five years in Ingushetia.

Also, more than 3,000 civilians have been wounded in attacks by militants in the region over the same period, Yevkurov said Saturday at one of a string of rallies against terrorism that gathered about 3,500 people across the republic.

Yevkurov's statement was posted on his administration's official web site Sunday. Yevkurov himself was badly wounded by asuicide bombing of his convoy in June 2009, months after his appointment to the region, and spent several months in the hospital.

(MT, AP, Reuters)

Sobyanin’s Star Rises at Mayor Talks



04 October 2010

By Alexandra Odynova

Prime Minister Vladimir Putin fueled speculation about the identity of Moscow's next mayor by holding a United Russia meeting Friday with only one of the potential candidates in attendance.

Sergei Sobyanin, Putin's deputy and chief of staff, was promptly tagged by the media as the main favorite after attending the meeting to discuss mayoral nominees at Putin's residence outside Moscow.

The 52-year-old Sobyanin is not seeking the job, but his chances to get it anyway have increased, Kommersant reported Saturday, citing unidentified officials.

"According to Kommersant's information, he is not very excited about this. But the party — or at least its leader — could say: 'It is necessary,'” the newspaper said, quoting a Soviet-era slogan in an apparent reference to Putin, who heads United Russia but is not a card-carrying party member.

Sobyanin, a former governor for his native Tyumen, headed the Kremlin administration from 2005 to 2008 when Putin was the president.

But Nikolai Petrov, an political analyst with the Carnegie Moscow Center, said Sobyanin was unlikely to become the frontrunner because Putin needed him too much in his current position.

“Putin will have to look for a person to replace Sobyanin, who is now in charge of the government's communications with the governors,” Petrov said by telephone Sunday, saying Sobyanin's potential appointment would be a big sacrifice for Putin.

Pictures from the meeting in Novo-Ogaryovo featured Sobyanin sitting on Putin's right, facing senior United Russia officials. Also in attendance were Kremlin first deputy chief of staff Vladislav Surkov and party officials Boris Gryzlov, Andrei Vorobyov, Oleg Morozov and Vyacheslav Volodin.

Gryzlov, the State Duma speaker who heads United Russia's faction in the lower chamber, told journalists after the meeting that the new mayor would have “experience managing big projects,” United Russia said on its web site.

Gryzlov also pledged that the new mayor would retain social benefits for Moscow residents, including city-sponsored payments for pensioners, who formed the backbone of Luzhkov's support base.

United Russia must present its mayoral candidates to President Dmitry Medvedev by Tuesday. Yury Luzhkov was fired by Medvedev over a “loss of confidence” last Tuesday.

Putin hosted the party officials after meeting with Medvedev briefly earlier Friday. Putin told Medvedev that he would start talks on the mayorship later the same day, the Kremlin said in a statement. The prime minister usually ignores party consultations over the appointment of regional leaders.

It remained unclear Sunday whether United Russia had finalized its list of candidates. All discussions on the next mayor are going on behind closed doors, and no officials have proposed considering the opinion of Muscovites.

Analysts say the party needs a loyal mayor to secure victory in 2011 State Duma elections.

Other mayoral candidates listed by the media include Emergency Situations Minister Sergei Shoigu; Alexander Khloponin, a former business executive who now serves as the presidential envoy to the turbulent North Caucasus Federal District; former Luzhkov deputy and Nizhny Novgorod Governor Valery Shantsev; and Vladimir Kozhin, head of the Office of Presidential Affairs.

Meanwhile, acting Mayor Vladimir Resin has appointed Vladimir Shukshin as a deputy mayor in charge of investment issues and cooperation with the law enforcement agencies, Interfax reported Saturday.

The appointment was an apparent attempt to fill a vacancy left by deputy Mayor Alexander Ryabinin, who resigned after being questioned by investigators in a bribery case pending since March.

Ryabinin, who oversaw construction and land issues, remains at liberty. The Investigative Committee promised earlier to wrap up his case “soon.”

Meanwhile, Resin confirmed in televised remarks Saturday that the scandalous construction of a storage facility for Kremlin museums near the Kremlin had been frozen amid criticism over the project's architectural design. But, Resin said, the matter was decided by federal authorities and was not related to Luzhkov's dismissal.

Moscow ex-mayor not planning legal battle: report



2:48am EDT

MOSCOW (Reuters) - Moscow's ex-mayor Yuri Luzhkov told a magazine on Monday he will not contest his high-profile sacking in court, but would stay in the political arena and push for more democracy.

"I did not take such a decision and I will not do so," Luzhkov, 74, told opposition magazine New Times in his first interview since President Dmitry Medvedev dismissed him on September 28 after an escalating spat with the Kremlin.

Luzhkov's close friend, the famous singer Iosif Kobzon, had told the Interfax news agency last week that Luzhkov would challenge his dismissal in court.

"I do not believe that the supreme court will make a decision which would contradict with the president's decree," Luzhkov said in the extensive interview. Luzhkov, who was ousted after 18 years of power, said he wanted to forge democracy in Russia -- in an evident jab at the Kremlin.

"Going into politics means working on the establishment of the laws of a democratic society. Today our society has laws that are not democratic," he said.

He said he would form a political movement.

(Reporting by Amie Ferris-Rotman and Ludmila Danilova; Editing by Matthew Jones)

Luzhkov to form own political movement



08:51 04/10/2010

Former Moscow mayor Yury Luzhkov, axed by President Dmitry Medvedev last week, has no intention of leaving politics, he said in an interview.

However, Luzhkov told the Moscow-based The New Times magazine that he had no intention of forming a political party.

“I am going to form my own political movement,” he told the magazine.

He did not rule out that the organization could be linked to the Russian Movement for Democratic Reform organization, created in 1991.

Luzhkov, who left the ruling United Russia party just two days before his dismissal, also denied that he had been offered the post of the head of the upper house of parliament to resign as mayor.

The former mayor earlier said that he had no intention of throwing his hat into the ring for the 2012 presidential elections.

Commentators say Medvedev's sacking of Luzhkov, formerly one of the most powerful politicians in Russia, may have been a bid to boost his authority ahead of the 2012 presidential polls.

Relations between the long-serving Moscow mayor and Medvedev are believed to have soured after a September article by Luzhkov in the government daily Rossiiskaya Gazeta hinted at criticism of the leadership tandem of Medvedev and Prime Minister Vladimir Putin.

According to some reports, the Kremlin was also angered by Luzhkov's opposition to Medvedev's decision to halt the construction of a controversial highway to St. Petersburg cutting through a forest north of Moscow.

MOSCOW, October 4 (RIA Novosti)

Ousted Moscow mayor explains why he won't appeal dismissal



03:46 04/10/2010

Ex-Moscow mayor Yury Luzhkov has named the reason why he will not appeal his dismissal in the Russian Supreme Court.

"I don't believe the Supreme Court can make a ruling contradicting the presidential decree [on the dismissal]," the website quoted Luzhkov as telling Russian magazine The New Times.

President Dmitry Medvedev fired Luzhkov, who had been mayor for more than 18 years, on September 28, citing "loss of confidence." The decision came after an unprecedented smear campaign by state-backed TV, accusing Luzhkov of negligence, callousness and corruption.

The Kremlin had reportedly given 74-year-old Luzhkov the opportunity to resign on his own before he was given the ax, but he had refused to.

Commentators say Medvedev's sacking of Luzhkov, formerly one of the most powerful politicians in Russia, may have been a bid to boost his authority ahead of the 2012 presidential elections.

Relations between the long-serving Moscow mayor and Medvedev are believed to have soured after a September article by Luzhkov in the government daily Rossiiskaya Gazeta hinted at criticism of the leadership tandem of Medvedev and Prime Minister Vladimir Putin.

According to some reports, the Kremlin was also angered by Luzhkov's opposition to Medvedev's decision to halt the construction of a controversial highway to St. Petersburg cutting through a forest north of Moscow.

MOSCOW, October 4 (RIA Novosti)

Luzhkov to risk jail in a bid to boost democracy



by Andy Potts at 04/10/2010 11:00

Like a sitcom character who can’t face telling his family he’s been fired, Yury Luzhkov turned up at City Hall again on Monday morning.

Ostensibly the former mayor was collecting his last few bits and pieces, but his arrival at 8 am continued a tradition which has continued every working day since his sacking on Tuesday.

So it’s not surprising that his first interview following his departure from Moscow’s mayoralty had him pledging to remain active in politics rather than retire to the Alps.

Speaking to the New Times he said he was willing to defy prosecution and set up his own movement.

 

Martyr of democracy

Many will be surprised that Luzhkov – notorious for his tough staff on protests from opposition groups, sexual minorities and others who didn’t take his fancy – is ready to risk jail for his newly democratic beliefs.

However, after 18 years as head of his own fiefdom in Moscow he is preparing to rally support among pensioners and the intelligentsia to back his pro-democracy movement.

And he’s doing so in the face of the law, he claimed. Asked if he was aware it could lead to a criminal case against him, he replied: “Certainly. I’m not a child.”

But he added: “I’m not ready to go to jail. I’m not going there because I was working and we can speak of the mayor and say he worked honestly.

“Nobody has a legitimate reason to send me to jail.”

 

Washing his hands

A tough stance on protest marches – particularly the Agenda 31st gatherings which were routinely driven out of Triumfalnaya Ploshchad by riot police – was not down to Luzhkov, the ex-mayor said.

“I did not give orders, I am not a representative of law enforcement,” Luzhkov said when asked if the crackdown was a mistake.

“If the actions of protestors do not interfere with the live and work of other people, it is their right to demonstrate.”

 

No court case

Following his dismissal, Luzhkov reportedly considered taking legal action to reverse the presidential decision to oust him.

And Moscow lawyer Anatoly Lemeshev has already filed a suit at the Supreme Court on the ex-mayor’s behalf.

But Luzhkov told The New Times he won’t be appealing, saying that he doubted the Supreme Court would contradict Dmitry Medvedev.

Medvedev Looks More Like the Next President



04 October 2010

By Vladimir Frolov

The surprising news about Yury Luzhkov’s unceremonious dismissal by President Dmitry Medvedev is that it has made Prime Minister Vladimir Putin’s return to the presidency in 2012 somewhat less likely.

With Luzhkov’s departure from the political scene, along with the earlier retirements of Tatarstan President Mintimer Shaimiyev and Bashkortostan President Murtaza Rakhimov, Putin’s team has completely consolidated its hold on power, eliminated potential sources of mutiny and is now in perfect position to rule Russia for decades to come.

Moscow’s mayor is the third most-powerful position after the president and the prime minister in terms of raw economic, financial and electoral power. If not properly controlled, he who runs Moscow could very well run the country.

As mayor, Luzhkov was endowed with an outsized ego that was matched only by his ambition. He clearly had never been just another brick in the vertical power wall and often allowed himself considerable political leeway. When Putin was president, he had a direct line to him, bypassing the Kremlin administration. His flamboyant “I’ll be back” style of departure only confirmed the suspicion that he had indeed been a dormant threat.

Putin’s team now has complete control of the country. For the most part, the titles of prime minister and president are irrelevant since Putin retains ultimate power.

In this sense, the political annihilation of Luzhkov may suggest that Putin is leaning toward maintaining the tandemocracy after 2012, letting Medvedev run for a second term, while remaining prime minister for a while. This is what Putin hinted at in August in his wide-ranging interview to Kommersant when he said he was tired of foreign policy and liked what he was doing as prime minister.

Were Putin to pass the 2012 deadline, it would mean that he would not be returning to the presidency again, barring some catastrophic event. Because the presidential vote in 2012 would be his only window of opportunity, it appears that he has other plans and other options.

When Medvedev serves out his second presidential term in 2018, another member of Putin’s team will step forward to take the reins of power, but with Putin still having the last word on crucial decisions.

Vladimir Frolov is president of LEFF Group, a government-relations and PR company.

Putin’s Latest 'Corporate Takeover'



04 October 2010

By Yevgeny Kiselyov

Most of the commentary regarding the firing of Yury Luzhkov can be summed up as, “The jackals have eaten one of their own.” Unfortunately, that conclusion is based on a large misconception. In fact, President Dmitry Medvedev and Prime Minister Vladimir Putin have always been at odds with Luzhkov.

Throughout the 10 years that Putin has been in power, Putin’s regime has done nothing but imitate real government. Russia has imitation elections, an imitation multiparty system, an imitation parliament, imitation political opposition and imitation press freedoms. There is one more sham you can add to the list: the 10-year “good relationship” between Putin and Luzhkov. Luzhkov pretended to be loyal and devoted to Putin, and Putin feigned a reserved respect for Luzhkov.

Luzhkov was indeed the archetype of the numerous former Soviet technocrats who became ministers, governors, mayors and directors of countless enterprises in the early 1990s. They were required to be not so much fiery orators for democracy as skilled specialists who could ensure that homes continued to receive heating during the winter, garbage was collected regularly and the metro kept running. Putin stuck with Luzhkov, however reluctantly, because he wasn’t sure that he could find someone from his team who could have filled Luzhkov’s shoes and run a city the size and complexity of Moscow.

But beneath the surface, there was a fierce hatred between them.

Luzhkov has had a chip on his shoulder ever since Putin in 1999 prevented him from rising to the new political heights. Shortly thereafter, Luzhkov was pressured to give up the Fatherland-All Russia party, which he co-founded, and merge it with the pro-Putin party Unity to form United Russia in 2001.  In addition, Luzhkov sharply disapproved of Putin’s decision in September 2004 that deprived Luzhkov of the right to be re-elected by Muscovites. Luzhkov, who was elected mayor by 95 percent of the vote in 1996, 69.9 percent in 1999 and 75 percent in 2003, knew he would be re-elected by a large margin in a direct election a fourth time in 2007. He resented that his popular mandate was taken away by Putin, and he didn’t want to be seen as another Putin lackey appointed from above.

For his part, Putin hates Luzhkov for his mishandling of national emergencies that occurred in Moscow, from the Dubrovka theater siege to a blackout that shut down more than half the city. Putin also deeply resents and regrets the fact that he was all but “forced” to appoint Luzhkov to a fourth term in 2007 because he had no alternatives.

Today, few remember that Luzhkov was also a thorn in the side of President Boris Yeltsin and his close associates during the first half of the 1990s, when Luzhkov had only just gained popularity in Moscow. Yeltsin sensed that Luzhkov was potentially his most dangerous competitor. Several attempts were made to force the mayor to resign. According to one theory, the March 1995 murder of popular television anchor Vladislav Listyev was allegedly a conspiracy to pin the killing on Luzhkov. At Listyev’s funeral, Yeltsin unexpectedly blamed his death on the Moscow authorities whom, he said, allowed gangs of hired assassins to roam freely in the capital.

The long-running feud ended years later when Yeltsin had become so weakened politically that he seemed unable to find a loyal successor, and an emboldened Luzhkov began boasting that he could easily become the country's next president or prime minister. But at the last moment, Putin popped up from out of nowhere, joined the election campaign and steadily gained five to 10 percentage points per week in the ratings until he finally left no chance at all for Luzhkov.

Characteristically, many commentators and bloggers who strongly criticized Luzhkov for his authoritarian leadership style, his overt cronyism, his bad taste in architecture, his heartless attitude toward old Moscow and the bureaucracy and corruption that ran rampant in the capital under his rule. These same people are now ready to pity the city boss for getting canned so unfairly and amid such a dirty smear campaign against him.

Contrary to many popular theories, it seems to me that there is no serious schism between Medvedev and Putin.  This is an expected struggle between the two leaders’ staffs — something that almost always occurs in a country with two centers of power. The members of the ruling tandem are living in perfect harmony, and the elite have no desire to make changes to the diarchy so soon after it has become firmly established. Putin is both prime minister and leader of United Russia, which has a majority of seats in the State Duma and the Federation Council. He enjoys his powers, the constant attention from the media and his consistently high ratings. Putin was convinced that this was the right time to finally put Moscow’s affairs in order after years of Luzhkov ruling Moscow like a king. Putin knew all too well that he who controls Moscow controls Russia.

The Luzhkov affair was just another “corporate takeover” in an entire series of similar Putin-orchestrated operations, including gaining control of Gazprom, three national television stations, the railways and Yukos, as well as consolidating aircraft and ship manufacturing under state unitary companies.

In this light, this was a clear win for Putin, and he is surely enjoying the victory. The only thing that could possibly rain on Putin’s parade is a sharp drop in oil prices.

Yevgeny Kiselyov is a political analyst and hosts a political talk show on Inter television in Ukraine.

Vremya Novostei/Russia Today: A report on racism



Moscow continues to lead in the number of crimes motivated by xenophobia

By Mikhail Moshkin

Moscow continues to hold the lead in the number of crimes motivated by xenophobia, racism and radical nationalism. This conclusion follows from a monthly report which was published late last week by the SOVA Center for Information and Analysis, which specializes in research on racism and xenophobia.

“On September, one person was killed and at least 14 injured as a result of violent crime motivated by racism and neo-Nazism,” said Aleksandr Verkhovsky, director of SOVA. “An incident which resulted in one person dead and seven injured took place in the capital.”

Read more

According to him, in September, inter-racial clashes were observed in Rostov-on-Don (five people were injured), and Yakutia (two people were injured).

In total, since the beginning of the year, racially motivated attacks have been recorded in 39 regions of Russia, notes the SOVA report. While citing the previous months, human rights activists are again noting the “leading positions” of Moscow and the Moscow region in the number of crimes motivated by xenophobia, with 11 dead and 94 injured. St. Petersburg and the Leningrad region come in second place: one dead and 35 injured; and in third, Nizhny Novgorod, where two people died at the hands of extremists and 14 were injured.

The authors of the report noted that the victims of mass fights and incidents which happened in the regions of the North Caucasus are not included in these tragic statistics. The main targets of xenophobic attacks continue to be natives of Central Asia and the Caucasus.

The SOVA human rights activists note that in September, compared to August, the number of verdicts for hate crimes declined markedly. If the last month of the summer showed a sharp rise in legal persecution for hate crimes (13 sentences were issued), then in September, only one case ended with a guilty verdict – in which two Kaluga policemen beat natives of Central Asia.

“Another case of the beating of an Indian citizen in Arkhangelsk ended with reconciliation between the parties,” noted the report. Moreover, in mid-September, an investigation on the case of a group of Nazi skinheads, “Lincoln 88,” was completed in St. Petersburg and the case was transferred to court. Twenty-five members of that group are suspected of committing 12 hate crimes.

The beginning of October was marked with the end of a loud trial in Tyumen. On Friday, the Tyumen Regional Court issued a verdict in the case of a group of neo-Nazis headed by 23-year-old Aleksandr Khodyrev. According to SOVA’s human rights activists, nine of Khodyrev’s 14 accomplices were minors. The court found the defendants guilty in committing attacks, as a result of which 14 people were injured (six of the victims sustained severe injuries) and two were killed. It is noted that the investigators were able to prove only 15 crimes committed by the group. As a result, Khodyrev was sentenced to 20 years in prison, and his accomplices got from five years in a juvenile correctional facility to 12 years in “an adult” high-security colony.

Read the article on the newspaper's site

October 1, 2010

Russia Profile Weekly Experts Panel: Will a Russian DARPA Help Modernize Russia?



Introduced by Vladimir Frolov

Russia Profile

Contributors: Vladimir Belaeff, Ethan Burger

President Dmitry Medvedev said last week that he wants the Defense Ministry to create a unified research agency, similar to the U.S. Defense Advanced Research Projects Agency (DARPA) created by the U.S. Defense Department in 1958 to ensure American technological superiority in weapons systems. America’s DARPA pioneered many cutting-edge military and dual use technologies, including creating a prototype of the Internet. Will all these grand plans work? Is it a good idea to imitate something that was first created 50 years ago? What does this move tell us about Medvedev’s approach to governance?

"The country lacks an efficient structure that would deal with demand for the so-called breakthrough research and development (r&d) in the interests of defense and security," Medvedev said at a session of the Presidential Commission for Modernization and Technological Development of Russia's Economy. The decision reflects Medvedev’s frustration with the pace of technological modernization in the Russian defense sector, as well as his desire to use the federal funding for defense r&d projects to generate spillover effects of cutting-edge technologies into the commercial sector. "In a whole range of areas, the Russian defense industry is not capable of reacting to additional orders or increased financing to manufacture high-tech products in sufficient numbers. They are still perfecting Soviet era weapons designs, not producing revolutionary breakthroughs in weapons systems,” Medvedev said at the meeting of his commission. 

Medvedev hopes to use growing defense spending (Russia will spend up to 22.5 trillion rubles ($725 billion) on arms programs by 2020) as a locomotive for the country’s technological modernization, just as the nuclear and space programs were for the Soviet Union in the 1950s and 1960s.

The decision to create a Russian version of DARPA (which will not be a federal government agency, but rather a government-funded venture capital fund, selecting promising technology projects with transformational military applications), will allow for small companies and even individual groups of scientists to get funding for their projects and increase the pool of ideas the military will be able to draw from in its r&d. A Russian DARPA would also unite existing defense industry actors like state corporations, large defense holdings, design bureaus and academic research institutes under one roof and allow the government to focus on promising projects. There is even talk that the Russian DARPA will open a branch at Skolkovo while building a separate and secure r&d and production facility to allow for top secret research.

Will all these grand plans work? Is it a good idea to imitate something that was first created 50 years ago? Could there be newer and perhaps better institutional and managerial arrangements than the American DARPA to coordinate and fund basic research with defense applications? Could the spillover effects into the commercial sector be really that substantial? How can such a new approach to defense r&d square off with the traditional Soviet-era system of lead design bureaus and defense holdings that now enjoy the lion’s share of defense spending on weapons systems? What does this move tell us about Medvedev’s approach to governance? Why has Putin kept silent on the issue?

Ethan S. Burger, Senior Lecturer, Centre for Transnational Crime Prevention, Faculty of Law, University of Wollongong, Australia:

Underinvestment in research and development is frequently cited as a major shortcoming of the U.S. corporate model, because many if not most officers and directors have a tendency to want to boost short-term profits (and increase the value of the corporation’s shares and hence their compensation), rather than think far ahead. Furthermore, even when r&d is performed in the states, corporations frequently locate facilities in locations where the costs of production are low, which is often but not always abroad. This results in a technology transfer that frequently helps foreign countries more than the United States.

Without a doubt, DARPA has had major successes in developing technologies that have achieved real breakthroughs in the defense and civilian sectors (with respect to the latter, one need merely think about the global impact of the Internet, but it would be a mistake to overlook laudable advances in biotechnology). Nonetheless, president Medvedev would be mistaken if he believed that it would be possible to replicate DARPA’s experience in contemporary Russia.

DARPA is a non-hierarchical organization which largely oversees, as opposed to performs, considerable research at universities and private laboratories. Its personnel exude a spirit of entrepreneurship and the vast majority of its personnel are recruited for relatively short stints (four to six years), so that the organization is constantly exposed to new ideas. It is populated by non-conformists, many of whom would not succeed in a corporate environment. I think few specialists would argue that most Russians have a similar mindset.

I am not convinced that Russia has a sufficient number of people with the required attitudes and the necessary skills to successfully develop a DARPA-like entity on Russian soil. Many of the individuals who fit this mold have left Russia to make their mark in more dynamic economies – they are unlikely to uproot themselves and their families if they have been successful there.

Frankly, most Russian managers do not seem to be risk-takers by nature. While this is probably changing with the passage of time, query what percentage of Russian nationals with recently earned MBAs decide to make their mark in their country of origin. There are numerous reasons for this, but one is that Russia does not have a well-developed consumer market – this can be seen in the underdevelopment of the country’s banking sector. Venture capitalists may be willing to take risks (with other people’s money), but they are looking for results in a shorter time-frame that a DARPA-like organization requires.

DARPA got its start shortly after the Soviets launched Sputnik. The U.S. political leadership and the American people feared falling behind in defense related technologies. Most economists will tell you that defense spending generates less economic growth than expenditures in education, health, infrastructure, etc. Fortunately for the United States, many of the technologies that resulted from DARPA programs had civilian applications. Let’s hope that president Medvedev knows this and his emphasis on modernizing the military sector is merely part of a political strategy, rather than a misguided understanding of the DARPA model.

Prime minister Putin's noticeable silence could be attributed to his general lack of interest in economic issues, or perhaps his reluctance to be a catalyst for change in the Russian defense sector, particularly when it is less than clear that such changes will produce the intended results.

Vladimir Belaeff, Global Society Institute, San Francisco, CA:

Weapons development, since the times of Assyrian and Egyptian war chariots, has been a forceful stimulus for general technological innovation and scientific discovery. The Manhattan Project stimulated the development of electric power generation using controlled nuclear fission reactors.

As noted, DARPA has made very substantial contributions to general technological advance world-wide. Much of this advance is not specific to pure military needs. A Russian “DARPA” would definitely contribute to technological innovation both in Russia and outside its borders, much as it happened with the American agency.

The currently prevailing liberal market paradigm (which may soon collapse under the pressure of the economic crisis it provoked) depends strongly on innovation and new product development as fuel for its consumption-oriented economic engines. At the same time, this same free market ideology does not favor large r&d expenditures, because r&d is risky, takes years to complete and does not help with constant quarter-over-quarter profit growth. R&d is overhead expenditure, and the liberal market does not like overhead – “investors” (day-traders and speculators) do not understand real investment as represented by r&d – expenses which may produce revenue in as long as 18 or 24 months, or may fail to deliver a profit altogether.

The situation described above generates a contradiction: r&d is needed to create new products to feed the liberal market business model – yet r&d is to be avoided or minimized because it requires unwelcome expenses. The contradiction is resolved by funneling government money via appropriate federal agencies into commercial and educational r&d centers, which produce the desired results in projects often spanning many years.

In America DARPA is one of the solutions that effectively funnels government funding into industrial r&d activities in fields deemed important for national defense (which always was a very broad concept in the United States.) DARPA is not the only one such agency in the United States (NASA, to mention an example is another of many) – it is though the scientific r&d coordination agency which is most visibly associated with the nation’s military needs.

Russia’s version of DARPA must be tailored to Russian realities and objectives. The key need for any kind of modernization is the transformation of people’s modes of behavior: intellectual, social, economic, scientific, creative, spiritual. This aspect is often noted and repeated, yet it seems that its significance is not always understood or appreciated.

For example, r&d is not a strict “9 to 5, weekends off” activity. It is not usually compatible with “work sessions” in a “banya” embellished with chilled vodka and pickles. R&d requires focus, dedication, vision, drive. Plenty of Russians have those qualities, yet the local social dynamics often defeat these admirable traits. Modernization is expected to clear away the social defects – which is needed in order to achieve modernization.

Thus we have a vicious circle: to achieve modernization one must be already modernized. Systemic solutions, such as a Russian “DARPA” are very much part of an escape from the vicious circle – they are necessary, but not sufficient. The other ingredients that are needed involve the human component: a careful and ruthless selection of the truly best people, without any consideration for someone’s unqualified favorite niece or cousin; patience – Rome was not built in a day; persistence – significant results may appear quickly, but that must not be cause for declaring the program successful and therefore “completed.”

A well-designed and liberally funded Russian “DARPA” institution will definitely contribute to Russia’s modernization.

04 October 2010, 11:21

Gay activists will keep trying to hold rallies in Moscow



Moscow, October 4, Interfax - Representatives of the Russian gay community intend to continue demanding that the Moscow administration allow their rallies, Moscow gay pride parade organizer Nikolay Alexeyev told Interfax.

"I doubt that the position of the new administration of the city will be different from the previous administration's principles. However, we will continue seeking sanctions for our rallies regardless of this and we will contest denials in court," Alexeyev said.

"We are hoping, and I am sure, that the sixth gay pride parade sanctioned by a European court ruling will be held in Moscow in May 2011," he said.

Alexeyev recalled that gay activists conducted their first officially sanctioned rally in central Moscow on Friday.

Russia may impose total tobacco ads ban by 2012 - paper



11:49 04/10/2010

The Russian government may introduce a comprehensive tobacco advertising ban by 2012, a business daily said on Monday.

Russian Prime Minister Vladimir Putin approved on Friday a national anti-smoking program.

The Vedomosti daily said the document envisages a ban on smoking in public places by 2015, with tobacco duties to eventually increase tenfold.

The average pack of Western-brand cigarettes in Russia costs less than $2, about a quarter of the price in Britain, which has among the highest tobacco taxes in the world.

Tobacco producers consider the program too radical, saying a high increase on duties may cause counterfeit tobacco consumption, Vedomosti said.

"The most effective method of fighting against smoking is the promotion of a healthy way of life," Alexander Lyutiy from British American Tobacco told the paper.

"In Russia's case these measures will be the most effective, since bans and restrictions can not change the situation significantly."

Under the current legislation, tobacco advertising is only allowed in some printed press. Outdoor tobacco advertising was banned in 2007, while tobacco adverts on TV and radio have been outlawed since 1996.

According to the latest statistics, there are 43.9 million smokers in Russia, or 40 percent of the population. Russians annually spend $13.3 billion on cigarettes while up to 500,000 people die of smoking-related diseases every year.

MOSCOW, October 4 (RIA Novosti)

Ireland asks Abramovich to foot bill for INBC bank bailout



11:43 04/10/2010

Ireland has asked Russian billionaire Roman Abramovich's Millhouse Capital holding company to pick up the tab for bailing out the Irish Nationwide Building Society (INBC).

Millhouse Capital owns lower Tier 2 bonds in the Dublin-based building society.

The Republic of Ireland's government has already given INBC 2.7 billion euros ($3.7 billion) to deal with its huge property losses, but Finance Minister Brian Lenihan says the cost of a bailout may reach 50 billion euros ($68.7 billion).

Subordinated bondholders in INBC and nationalized lender Anglo Irish Bank should make a "significant contribution" towards cleaning up their debts, Lenihan said on Saturday.

Millhouse Capital said that making bondholders take losses on their securities was unfair and possibly illegal, and urged the Irish authorities to "reconsider their position," according to the Irish Times.

"We are fully prepared to vigorously defend our position using all possible legal means," a statement by the company said.

"We believe that any attempt to force losses on Irish Nationwide lower Tier 2 debt holders will result in a huge reputation loss and ultimately financial cost to the Irish and European sovereigns and financial institutions," Millhouse director Yevgeny Popov told Bloomberg.

Popov declined to disclose how many bonds Millhouse owns.

Millhouse may take legal action over the issue, Popov said, while Lenihan was reported to be seeking support for his case in consultations with lawyers.

MOSCOW, October 4 (RIA Novosti)

PRESS DIGEST - Russia - Oct 4



Mon Oct 4, 2010 7:37am GMT

MOSCOW Oct 4 (Reuters) - The following are some of the leading stories in Russia's newspapers on Monday. Reuters has not verified these stories and does not vouch for their accuracy.

KOMMERSANT

kommersant.ru

- Russia's Foreign Ministry has criticised a move by U.S. senators to ban 60 Russian officials and judges allegedly involved in the death of lawyer Sergei Magnitsky from entering the United States, the paper reports.

- On Saturday, Russian federal forces killed five rebels during two armed operations in the volatile, mainly Muslim Dagestan region, the paper writes.

- Russian gas export monopoly Gazprom (GAZP.MM) has decided to increase the 2011 gas price for Belarus to $220 per 1,000 cubic meters, from $185 in 2010, the paper reports.

VEDOMOSTI

vedomosti.ru

- Tobacco advertising and marketing in Russia may be banned by 2012, while smoking in public places may be prohibited by 2015 as part of a new state initiative, the daily reports.

- Russian Prime Minister Vladimir Putin told President Dmitry Medvedev on Friday that he will discuss new candidates for the ruling United Russia party, as well as a successor for Moscow's mayor, the paper writes.

NEZAVISIMAYA GAZETA

ng.ru

- Medvedev will discuss issues surrounding the Black Sea fleet reform with his Ukrainian counterpart Victor Yanukovich, the daily says.

VREMYA NOVOSTEI

vremya.u

- A Russian plane flying between Moscow and the Chechen capital Grozny, carrying 73 passengers, made an emergency landing on Sunday after an anonymous caller said there was a bomb on board, the daily writes.

TRUD

trud.ru

- Russian President Dmitry Medvedev has made a breakthrough in foreign policy, negotiating with the U.S. to join the World Trade Organization, the paper writes.

National Economic Trends

Medvedev Orders Review of Russia Grain Export Ban at Harvest End



October 04, 2010, 3:07 AM EDT

By Ilya Khrennikov

Oct. 4 (Bloomberg) -- Russian President Dmitry Medvedev ordered a review of the country’s grain export ban at the end of this year’s harvest, the Kremlin press service said today in an e-mailed statement.

The government said when it barred grain exports from Aug. 15 to Dec. 31 that a review would be carried out once the harvest was gathered. First Deputy Prime Minister Viktor Zubkov said Oct. 1 that it doesn’t make sense to lift the ban until July 1, 2011, RIA Novosti reported.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@

To contact the editor responsible for this story: Torrey Clark at tclark8@

Russia's Current Account Drops in 2Q10



Aton

October 4, 2010

The current account surplus amounted to $18.7bn in 2Q10, the Central Bank reported on Friday (1 Oct). This was down from $33.4bn in 1Q10 but up from $8.2bn in 2Q09. In relation to GDP the surplus came in at 5.1%/GDP in 2Q10 compared to 10.1%/GDP in 1Q10 and 2.8%/GDP in 2Q09.

The main reason for the decline in the surplus QoQ was a narrowing of the trade surplus (the main component of the current account) on the back of a flattish oil price (Urals Med averaged $76.9/bbl in 2Q10 compared to $75.2/bbl in 1Q10), while import growth surprised on the upside. More significant, in our view, was the revelation of sovereign stress in the south of Europe in 2Q10. This seems to have had some impact on Russian exports as the Eurozone jumped into crisis management and some countries in the single_currency block experienced a degree of economic slowdown. We expect a FY10 current account surplus of $90bn or 5.8%/GDP.

Reserve Fund untouched in September



Renaissance Capital

October 4, 2010

On Friday (1 Oct), the Ministry of Finance published monthly sovereign fund statistics. As of 1 Oct the Reserve Fund was at RUB1.26trn (or $41.4bn) and the National Welfare Fund was at RUB2.72trn (or $89.5bn). The Ministry of Finance explains these numbers by FX revaluation of sovereign funds.

According to a Ministry of Finance press release, the Reserve and National Welfare Funds were not used in September to fund the budget gap. As spending traditionally accelerates in autumn, we expected the Ministry of Finance to tap the Reserve Fund as early as in September. However, it seems budget spending in September has risen significantly, but other deficit financing sources were used:

- Rouble weakening during a period of stable oil prices (at $75-80/bbl) should have been supportive for budget revenues (especially, export and import duties denominated in roubles)

- The Ministry of Finance raised around RUB150bn (on a net basis) in September on the domestic market

- Commercial banks' repaid RUB35bn in Ministry of Finance deposits

Given these facts, we think monthly expenditures have increased by at least RUB200-250bn in September. YtD budget performance indicates that all official estimates should be beaten by the end of the year. We share this opinion and expect the budget deficit to be 4.9% of GDP in 2010.

Anton Nikitin

Manufacturing Growth Slows to a Crawl as Exports Decline



04 October 2010

Bloomberg

Manufacturing expansion in Russia slowed in September to the weakest pace since March as international demand slacked and new export business declined for a third consecutive month, HSBC Holdings said Friday.

The Purchasing Managers’ Index slid to 51.2 from 52.9 in August, HSBC said, citing data compiled by Markit Economics. The index considers growth to be anything above 50, and contraction any figure below.

“Confirming our concerns last month, domestic growth drivers failed to sustain robust growth in manufacturing in the absence of export demand growth,” Alexander Morozov, HSBC’s chief economist for Russia and the CIS, said in a statement. “Manufacturing growth moderates, while price growth accelerates,” raising the question of whether Russia is heading for “stagflation.”

Russia’s economic recovery from last year’s 7.9 percent contraction, the biggest on record, remains “unstable,” the Central Bank said Sept. 28. The State Statistics Service said in September that inflation accelerated to an annual 6.1 percent in August from 5.5 percent the month before.

Manufacturing firms on average cut work forces for a second time in four months, though the reduction was “marginal,” HSBC said. The overall unemployment rate reached 6.9 percent in August from 7 percent in July.

“Inflationary pressures intensified in September,” driven by metals and food costs, HSBC said.

Inflation may accelerate to 8 percent this year, up from the previous estimate of 7 percent, according to the government. Gross domestic product may expand 3.6 percent in 2010, below the official 4 percent forecast, Deputy Economic Development Minister Andrei Klepach said Sept. 24.

Medvedev tell companies to slow down on bond issues on back of record low yields



bne

October 4, 2010

The Kremlin has told companies to ease off on bond issues after they issued a record number of bonds at record low yields, with international debt markets snapping up Russian paper.

Russia will limit the access its companies have to the Eurobond market to avoid repeating the conditions that lead to such a dramatic collapse of economic growth in September 2008.

The government created a group last week to monitor overseas debt by state companies and "systemically" important financial institutions, reports Bloomberg.

Gazprom, Russia's largest company, and diamond monopoly Alrosa are among state-controlled borrowers planning their first Eurobond sales in at least a year as the economic rebound sends yields to a record low.

"Issuance by major borrowers at the same time could destabilize and worsen market conditions," Deputy Finance Minister Alexei Savatyugin said in an interview on September 30 after his appointment to head the so-called Inter-Agency Working Group for Monitoring the Conditions on the Financial Market.

Yields on Russian corporate bonds fell to a record- low 5.57% on August 19, and were at 5.595% on October 1, compared with 20.4% in October 2008, according to JPMorgan's EMBI+ index. The last time borrowing costs dropped to record lows, in 2007, Russian Eurobond sales surged 33% from the previous year to $28.3bn reports Bloomberg.

Medvedev Curbs Company Bond Sales as Yields Sink: Russia Credit



By Paul Abelsky and Maria Levitov

Oct. 4 (Bloomberg) -- Russia is limiting access to the Eurobond market to prevent a repeat of the surge in foreign- currency indebtedness that triggered company bailouts in 2008 as borrowing costs tumble.

The government created a group last week to monitor overseas debt by state companies and “systemically” important financial institutions. OAO Gazprom, Russia’s largest company, and diamond monopoly ZAO Alrosa are among state-controlled borrowers planning their first Eurobond sales in at least a year as the economic rebound sends yields to a record low.

“Issuance by major borrowers at the same time could destabilize and worsen market conditions,” Deputy Finance Minister Alexei Savatyugin said in an interview on Sept. 30 after his appointment to head the so-called Inter-Agency Working Group for Monitoring the Conditions on the Financial Market.

Emerging-market bond sales surged to a record $196 billion in the third quarter as companies including Vale SA, the world’s biggest iron-ore exporter, and Korea Electric Power Corp., South Korea’s largest electricity producer, took advantage of a plunge in yields to as low as 5.4 percent in August from 6.8 percent, according to data compiled by Bloomberg and JPMorgan Chase & Co.

Russian corporate Eurobonds rallied the most in a year in the past three months, recovering from second-quarter losses, as a jump in oil prices helped the world’s largest energy exporter recover from its worst economic contraction last year since the Soviet era. Yields on Russian corporate bonds fell to a record- low 5.57 percent on Aug. 19, and were at 5.595 percent on Oct. 1, compared with 20.4 percent in October 2008, according to JPMorgan’s EMBI+ index.

Rusal Bailout

The last time borrowing costs dropped to record lows, in 2007, Russian Eurobond sales surged 33 percent from the previous year to $28.3 billion. The government spent $11 billion bailing out companies and banks the next year as a 35 percent slump in the ruble against the dollar pushed up the cost of servicing overseas debt. Oleg Deripaska’s Moscow-based United Co. Rusal, the world’s biggest aluminum producer, was forced to restructure $17.8 billion, the most ever for a Russian company, after a $4.5 billion state bailout loan. Alfa Group’s telecommunications unit Altimo received a $1.5 billion rescue.

Companies mostly stayed out of the Eurobond market last quarter, with banks accounting for all $4.4 billion of international bond sales from Russia in the third quarter, according to data compiled by Bloomberg.

Russia’s government has been encouraging companies instead to tap the domestic market. Finance Minister Alexei Kudrin said last December that state companies are a cause for concern because they “sometimes don’t have a clear understanding of currency risks,” adding that he plans to “control” borrowing by state-run companies.

The government plans to reduce foreign-currency debt to 20 percent of total corporate borrowing from about 42 percent by doubling the amount of ruble interest payments eligible for tax deductions, State Duma Deputy Natalia Burykina of Prime Minister Vladimir Putin’s United Russia party said in July.

The government used the domestic bond market to cover most of this year’s public borrowing after initially planning to sell half of its debt abroad, according to Finance Ministry data.

The new group will report annually to President Dmitry Medvedev, who has called for the ruble to become an international reserve currency repeatedly in the past year.

Viable Ruble Market

The group is part of a drive to create a “more viable domestic market for long-term ruble financing,” said Ivan Tchakarov, chief economist for Russia and the Commonwealth of Independent States at BofA Merrill Lynch Global Research in Moscow. “This is a good step as it will reduce external indebtedness and make Russia less susceptible to global shocks.”

Russian companies have cut foreign debt for the past three quarters to $293.9 billion at the end of last year, central bank data published July 6 show. Private companies have repaid a net $80 billion of external debt in the two years to last June, with banks accounting for $70 billion, said Ed Parker, director of emerging Europe sovereign ratings at Fitch Ratings.

“This is about avoiding a potential situation in the future in which state-owned banks and corporates, systemically important institutions or those receiving government support take on excessive debt levels or bunched maturity profiles that might create contingent liabilities to the state or macro- financial vulnerabilities,” Parker said.

Severstal, Alrosa

While Russian companies stayed out of the international debt market last quarter, they may sell as much as $7 billion of bonds overseas in the next three months, said Alexander Kudrin, head of fixed income research at Troika Dialog in Moscow.

Gazprom, the Moscow-based gas monopoly, plans its first sale of Eurobonds since July 2009 in the fourth quarter, Yana Kolosovskaya, head of loans and guarantees, said in an interview Sept. 21. OAO Severstal, the country’s largest steelmaker, based in Moscow, said last week executives plan to meet with dollar bond investors next week for its first international sale since July 2008. Moscow-based VTB Group, Russia’s second-biggest lender, hired banks for its second benchmark dollar bond sale since February on Sept. 30, according to a banker with knowledge of the transaction. Alrosa plans its first bond sale in six years to raise $1 billion in 10-year securities, the Mirny-based company said in statements in March and August.

“If Russia goes ahead with creating its debt office, this will definitely be a very positive step,” said Sergey Dergachev, who helps manage $6 billion of emerging-market debt at Union Investment in Frankfurt. “It will signal to investors that there is a good coordination between sovereign issuance plans, which will be huge in the future, and those of Gazproms or VTBs.”

‘Big Impact’

The working group hasn’t yet contacted VTB, the bank’s press office said by e-mail. Gazprom’s press office declined to comment and Sberbank’s communications department didn’t respond to an e-mailed request for comment.

“Historically, foreign borrowing of government companies had a big impact on Russia’s capital account,” said Elina Ribakova, a Moscow-based economist at Citigroup Inc. “If we can avoid this situation in the future, it would be very good for the country’s economy.”

Russia’s dollar bonds due in 2020 gained on Oct. 1, sending the yield down 6 basis points, or 0.06 percentage point, to 4.45 percent, the lowest since the bonds were sold in April. The yield on the country’s ruble notes due August 2016 slid 6 basis points to 7.29 percent, the lowest since Aug. 25.

Default Swaps

The extra yield investors demand to hold Russian debt rather than U.S. Treasuries fell 7 basis points to 223, according to JPMorgan Chase & Co. EMBI+ indexes. The difference compares with 146 for debt of similarly rated Mexico and 202 for Brazil, which is rated two steps lower at Baa3 by Moody’s.

The yieldspread on Russian bonds is 47 basis points below the average for emerging markets, down from a 15-month high of 105 in February, according to JPMorgan indexes.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps climbed 0.5 basis point to 162 on Sept. 30, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

Credit-default swaps for Russia, rated Baa1 by Moody’s Investors Service, its third-lowest investment grade, cost the same as the contracts for Turkey, which is rated four levels lower at Ba2. Russia swaps cost as much as 40 basis points less on April 20.

‘Warning Lights’

The ruble gained 0.2 percent to 30.4800 against the dollar. Non-deliverable forwards, or NDFs, which provide a guide to expectations of currency movements and interest rate differentials and allow companies to hedge against currency movements, showed the ruble at 30.6913 in three months.

The advisory group may cause concern because of the potential for the government to meddle in company plans, said Neil Shearing, a senior emerging-market analyst at Capital Economics in London.

“Everything will depend on the implementation,” Shearing said. “Greater state involvement always starts red warning lights flashing in this regard.”

The commission may play a largely advisory role, said Peter Szopo, head of research at Alfa Bank, Russia’s biggest lender.

“I do not assume that a working group of this kind could or should interfere in the daily financial decisions of companies,” Szopo said. “Whether this group will be able to prevent the build-up of debt on an aggregate level through, say, administrative restrictions on corporate debt remains to be seen.”

To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@.

To contact the editor responsible for this story: Gavin Serkin at gserkin@.

Last Updated: October 3, 2010 16:00 EDT

Rouble falls to fresh 8-month low of 42.03 vs euro



MOSCOW | Mon Oct 4, 2010 2:36am EDT

MOSCOW Oct 4 (Reuters) - The Russian rouble extended losses on Monday, weakening beyond the mark of 42.02 versus the rallying euro EUR= for the first time since early February 2010.

By 0920 GMT, the rouble weakened to the level of 42.03 per euro EURRUBTN=MCX, from 42.02 seen on Friday and its lowest since Feb. 1, according to Reuters data. (Writing by Lidia Kelly; Editing by Alex Richardson)

Business, Energy or Environmental regulations or discussions

Novatek, Novolipetsk, PIK Group: Russian Equity Market Preview



By Denis Maternovsky

Oct. 4 (Bloomberg) -- The following companies may be active today in Russian trading. Stock symbols are in parentheses and share prices are from the previous close of trading in Moscow.

The 30-stock Micex Index added 1.1 percent to 1,455.63. The dollar-denominated RTS Index rose 1.6 percent to 1,531.91.

OAO Novatek (NOTK RX): Russia’s second-biggest natural-gas producer recorded a 10 percent rise in output to 2.9 billion cubic meters in September, according to preliminary data released by the Energy Ministry on Oct. 2. The shares added 0.8 percent to 236.76 rubles. OAO Gazprom (GAZP RX): The Moscow- based gas export monopoly recorded a 2 percent rise in output to 36.9 billion cubic meters in September.

OAO Novolipetsk Steel (NLMK RX): Russia’s largest steelmaker by market value will report its second-quarter financial results. Company shares gained 0.6 percent to 110.19 rubles.

PIK Group (PIK LI): The London-listed Russian residential developer will report first-half financial results in Moscow. The shares added 2.1 percent to $3.83.

OAO Rosneft (ROSN RX): Russia pumped a post-Soviet record amount of crude last month, beating a previous record set in June, with Rosneft, the country’s biggest oil company, leading the advance on Siberian output, according to Energy Ministry data on Oct. 2. The state-owned oil producer added 3.3 percent to 210.37 rubles.

To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@

To contact the editor responsible for this story: Gavin Serkin at gserkin@

Last Updated: October 3, 2010 22:00 EDT

Russia’s Micex Advances for Fourth Day on $81 Crude, China



By Jason Corcoran

Oct. 4 (Bloomberg) -- Russian stocks advanced for a fourth day, heading for their longest winning streak in almost three months, as oil near an eight-week high boosted the outlook for commodity producers.

OAO Gazprom, the country’s gas export monopoly, increased 1.1 percent, while oil producer OAO Rosneft added 0.8 percent. OAO Severstal, Russia’s biggest steelmaker, rose 0.5 percent. Those movements helped push the Micex Index higher by 0.5 percent to 1,462.89 at 11:04 a.m. in Moscow, the strongest intraday level since April 27.

Oil traded at $81.52 a barrel in New York, near its eight week high. Copper on the London Metal Exchange gained as much as 0.8 percent to $8,162 a metric ton, while lead, nickel, tin and zinc also rose. Investor appetite for riskier assets increased after a report showed China’s non-manufacturing industries expanded and Premier Wen Jiabao said his nation needs to do more to stimulate domestic demand.

To contact the reporter on this story: Jason Corcoran at Jcorcoran13@

To contact the editor responsible for this story: Gavin Serkin at gserkin@

Last Updated: October 4, 2010 03:42 EDT

Russian stock market daily morning report (October 04, 2010, Monday)



By Veles Capital

On Friday the Russian share market continued climbing. The reasons likely are simple – good stats on the U.S. and Europe, along with oil price growth (Brent mix oil type exceeded 83 USD per barrel). All that resulted in oil sector going up having pulled up all the principal exchange indices. Also significant growth among the blue chips was indicated on the shares of Sberbank. Reduction was on the shares of Sistema after output of news on a delay in the process of dividing assets between the company and the state. Also downwards motion was on the shares of O2TV within the frames of technical correction to serious growth that was indicated on the previous trading day.

 

News briefly

Macroeconomy: Consumer trust index in the U.S.

Macroeconomy: Production activity index the U.S.

Macroeconomy: Unemployment in Eurozone.

Oil and gas: Nord Stream might be introduced into operation in 2011.

Oil and gas: Gas extraction was launched at the new area of Yamsoveyskoe deposit.

Oil and gas: Bashneft will fight for the deposits after Trebs and Titov.

Oil and gas: Oil extraction in RF within 8 months of 2010.

Machinery: AvtoVAZ showed growth of output and sale within 8 months of 2010.

Bank sector: Selling of state portfolio in VTB is delayed till 2011.

Foreigners to need permit to buy into Russian financial infrastructure firms



Monday, 04 Oct 2010

Vedomosti business daily quoted Mr Vladimir Milovidov Head of the Federal Service for Financial Markets as saying that Russia is preparing a law requiring foreign investors to get government permission for a purchase of five or more percent in the country's financial infrastructure companies.

He said that "At the Finance Ministry suggestion, we are drafting a law under which we will control nonresidents' acquisitions of over five percent of shares in financial infrastructure companies. We must understand how these deals fit government policy."

Preparation of the draft was triggered by the European Bank for Reconstruction and Development plans to buy 10% of Russia RTS stock exchange from troubled KIT Finance group.

Mr Milovidov and Federal Security Service head Mr Alexander Bortnikov wrote to Prime Minister Mr Vladimir Putin saying that a higher nonresident stake in the RTS would prevent it from merging with the MICEX exchange and as a result from creating Russia International Financial Centre in Moscow, one of President Mr Dmitry Medvedev's favorite projects.

The government has drawn up three options for the RTS stake sale to the Deposit Insurance Agency, KIT Finance creditor to a Russian financial investor or to the EBRD on condition it supports the RTS' merger with the MICEX.

(Sourced from Vedomosti business daily)

UAE firm inks $300m Russian deal



JEDDAH: Luxury developer Damac Properties will invest $300 million in Prominvest, the investment arm of Russian Technologies.

The agreement is to create a joint company to manage foreign direct investment in infrastructure and the real estate sector and was signed in the Black Sea city of Sochi in the presence of Vladimir Putin, Prime Minister of Russia.

DAMAC will invest in real estate projects, including the facilities for the 2014 Winter Olympic Games in the Black Sea resort city of Sochi.

“Damac Properties as the largest private luxury developer in the Middle East, is well capitalized and focused on expansion in the CIS countries. This should be seen as a vote of confidence not only in the Russian economy, but also a sign that the UAE economy is picking up” said Hussain Sajwani, chairman of Damac Properties.

Damac is currently developing luxury projects across the Middle East with developments in the UAE, Qatar, Lebanon, Jordan, Egypt and Saudi Arabia. “Damac is expanding, we are pushing ahead with development, only last month we awarded the construction contract for our Jawharah Tower in Jeddah to Drake and Scull International’s Saudi subsidiary,” said Sajwani.

Enabling works have been completed at the site of the luxurious 42-storey residential Jawharah Tower on the Jeddah Corniche

– Saudi Gazette

OCTOBER 3, 2010, 5:00 P.M. ET

VimpelCom Board Voting On Merger With Sawiris Assets - Vedomosti



DOW JONES--The board of VimpelCom Ltd (VIP) met in Amsterdam on Sunday to vote on a proposed merger with the indebted telecom assets of Egyptian billionaire Naguib Sawiris to form the world's fifth-biggest telecom company by subscribers, Vedomosti reports Monday. A deal may be announced Monday morning.

The parameters of the deal and its $6 billion price tag have changed little since news reports in August, with VimpelCom expected to get Italian mobile operator Wind Telecomunicazioni and Sawiris's 51% of Orascom Telecom Holding SAE (ORTE.CI), the newspaper reports, citing unidentified people familiar with the negotiations. Sawiris may receive only a 20% stake in New York-traded VimpelCom, or less than earlier reports of a stake of some 23%, with additional payment in cash, while some of his assets held by Weather Investments may not end up going to VimpelCom, Vedomosti says.

VimpelCom and Orascom have declined to comment on details ahead of the expected announcement.

In Sunday trading, Orascom shares climbed 4.8% to EGP5.28. VimpelCom shares have declined since reports of the negotiations, which were confirmed by Chief Executive Alexander Izosimov.

-By William Mauldin, Dow Jones Newswires; william.mauldin@

Vimpelcom near $7bn telecoms merger



By Andrew Parker, Lina Saigol and Martin Arnold in London

Published: October 3 2010 19:38 | Last updated: October 3 2010 22:34

Vimpelcom, Russia’s second largest mobile phone operator, is close to finalising a $7bn deal to combine with most of the telecoms assets of Naguib Sawiris, the Egyptian telecoms entrepreneur.

Under the deal, which could be announced as soon as Monday, Vimpelcom would secure most of Mr Sawiris’ telecoms assets in emerging markets, plus Wind, Italy’s third largest mobile operator. The enlarged Vimpelcom group would be the fifth largest mobile operator in the world by number of customers, with a market capitalisation of $24bn. Vimpelcom’s current market value is $19bn.

Weather Investments, Mr Sawiris’ private investment vehicle that controls Wind and the Cairo-listed Orascom Telecom group, could receive about $2bn in cash under the deal, plus a 20 per cent stake in Vimpelcom, worth $4.8bn.

Vimpelcom’s board was due to meet on Sunday evening to approve the deal with Weather, and people familiar with the situation said the transaction could yet founder because of its complexity. Two said Vimpelcom could assume at least $12bn of debt held by Weather.

This year, Mr Sawiris held discussions with MTN, the South African mobile operator, about the possibility of it buying Orascom’s African assets.

However, those talks broke down after Algeria objected to the sale of Djezzy, Orascom’s Algerian business.

Mr Sawiris’ Vimpelcom transaction is due to include Djezzy, Orascom’s biggest profit generator, and Dmitry Medvedev, Russia’s president, is expected to visit Algeria this week – a move that may help seal the deal.

One asset that Mr Sawiris would exclude from the Vimpelcom transaction is Orascom’s 29 per cent stake in a holding company that controls ECMS, Egypt’s leading mobile operator.

Another asset outside the transaction would be Mr Sawiris’ mobile business in North Korea.

Vimpelcom is the product of a peace deal reached last year between Russia’s Alfa group and Telenor of Norway, which agreed to combine their Russian and Ukrainian telecoms assets following a bitter dispute between the two groups.

Alfa, which is controlled by Mikhail Fridman, a Russian billionaire, holds 45 per cent of the voting shares in Vimpelcom. Telenor holds 36 per cent. Their shareholdings would be diluted under the deal with Mr Sawiris.

As well as Russia and Ukraine, Vimpelcom has mobile businesses in other members of the Commonwealth of Independent States. It also has assets in Cambodia and Vietnam. Orascom has mobile businesses in Bangladesh and Pakistan.

The second-largest shareholder in Weather after Mr Sawiris is a consortium of private equity groups – Apax Partners, Madison Dearborn and TA Associates – which bought a 12.5 per cent stake for €1.1bn in 2008.

Additional reporting by Catherine Belton in Moscow

Polymetal planning to acquire three licenses in Kazakhstan



Monday, 04 Oct 2010

Interfax citing Mr Vitaly Nesis chief of Polymetal as saying that the company plans to acquire one silver and two gold licenses in Kazakhstan.

He said that "We've identified three assets [in Kazakhstan] that we think will create value for the company,"

As per report, one of them has not yet been licensed, and could be bought for cash, rather than shares Mr Nesis said. Polymetal has 10% of its shares on its books that could be used as currency for acquisitions.

He said the company aimed to acquire at least one of the licenses in the space of six months.

Polymetal already develops the Varvarinskoye gold copper field in Kazakhstan. It is also interested in two deposits in Ukraine, but it conducting test drills before entering into talks. Mr Nesis declined to name the deposits.

He said the company had no plans to develop fields in Kyrgyzstan.

(Sourced from Interfax)

OCTOBER 3, 2010, 9:33 P.M. ET

Rusal Signs US$4.58 Bln Loan Facility To Refinance Debt



HONG KONG (Dow Jones)--Russian aluminum giant United Co. Rusal PLC (0486.HK) said Monday it signed a US$4.58 billion credit facility with Russian lender Sberbank to refinance debt incurred from the acquisition of a 25% stake in miner OAO Norilsk Nickel (GMKN.RS).

The new facility was drawn down on Sept. 30 to repay the debt and capitalized interest owed by Rusal to Vnesheconombank, another Russian lender, Rusal said in a statement.

The new loan, due Dec. 7, 2013, has an option to be renewed for a further 18 months, with an interest rate of 5% over the London interbank offered rate, it said.

Vnesheconombank's loan to Rusal was agreed in November 2008 and was used to repay another loan obtained in April of that year from a syndicate of foreign banks.

-By Joanne Chiu, Dow Jones Newswires; 852-2802-7002; joanne.chiu@

Steel giant NLMK makes Q2 net profit of $459 mln



12:01 04/10/2010

Russia's third largest steel producer Novolipetsk Steel (NLMK) made a second quarter 2010 net profit of $459 million to US GAAP, turning around a $49 million loss in the second quarter of 2009, the company said on Monday.

January-June net profit amounted to $590 million after a $243 million loss in the same period of 2009.

NLMK's second quarter revenue rose 70 percent to $2.156 billion, above analysts' forecasts of $2.183 billion. Revenue for the first half reached $3.853 billion.

EBITDA amounted to $774 million in the second quarter, up from $386 million in the first quarter of 2010.

The firm attributed the improved results to an increase in domestic sales, whilst costs were held down to first quarter levels.

NLMK expects excessive capacity in the market to hold prices down in the next quarter.

 

MOSCOW, October 4 (RIA Novosti)

Novolipetsk Says Second-Quarter Profit $459 Million (Correct)



By Ilya Khrennikov

(Corrects headline, first paragraph after company corrects second-quarter net income.)

Oct. 4 (Bloomberg) -- OAO Novolipetsk Steel said second- quarter net income was $459 million after a loss a year earlier.

That beat the median estimate of $384 million, according to a survey of seven analysts by Bloomberg News.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@

To contact the editor responsible for this story: Torrey Clark at tclark8@

Last Updated: October 4, 2010 03:20 EDT

Severstal confirms gold division IPO plans



12:17 04/10/2010

MOSCOW, October 4 (RIA Novosti) - Russia's largest steelmaker Severstal confirmed on Monday it plans an Initial Public Offering of its gold division but declined to provide any details of the flotation.

The Financial Times said Severstal is preparing to list its gold division in London this year in a deal expected to value the business at about $4 billion. Severstal, majority owned by Alexei Mordashov, a close ally of Prime Minister Vladimir Putin, plans to retain a 65-70 percent stake in the company.

Nomura analysts have valued Severstal at $3.6 billion, while one of the bankers, taking part in the deal, said the price could rise to $4-5 billion.

The company's gold division consolidates several mines in Russia, Kazakhstan, Burkina Faso, Guinea and several geo-exploration projects in these regions.

Severstal plans to raise its annual gold output to one million ounces by 2013, and produce about 640,000-670,000 ounces in 2010.

Morgan Stanley, Credit Suisse and Troika Dialog have been appointed lead managers for the deal.

Severstal to roll out Finesmelt technology



Severstal has boughta 25,6% stake in IMBS for $17m as part of a transaction that will allow the Russian steel maker to globally roll out the South African-developed and patented Finesmelt technology.

|ALLAN SECCOMBE |

|Published: 2010/10/04 07:28:59 AM|

IRON Mineral Beneficiation Services (IMBS), which has sold a stake in its business to Russian steel maker Severstal, will spend 15m to build the first plant to roll out a technology that promises to benefit the steel sector.

Severstal has boughta 25,6% stake in IMBS for $17m as part of a transaction that will allow the Russian steel maker to globally roll out the South African-developed and patented Finesmelt technology.

Finesmelt can treat fine and superfine iron ore that is normally put on dumps because it cannot be treated in blast furnaces. It creates a metallic iron product that can be turned into briquettes and fed into furnaces, in place of scrap steel. “The global steel industry has been working for years to find an economic source of metallic iron to complement limited supplies of scrap,” Severstal CEO Alexander Grubman said last week.

The first modular plant with a capacity of 50000 tons a year will be built at a cost of up to 15m in the next 24 months in Phalaborwa to take advantage of the 240-million ton magnetite stockpile at Palabora Mining. Talks with Palabora, which is owned by Rio Tinto and Anglo American, about a supply deal are under way, said IMBS CEO John Beachy Head.

seccombea@bdfm.co.za

Severstal Gets Foothold in South Africa



04 October 2010

Combined Reports

Severstal made its first South African purchase on Friday, acquiring a mining technology company, and said it would consider other investments in the country's steel and mining industry.

“We are interested in steel, mining of base metals, coal, iron ore and gold,” Alexander Grubman, chief executive of the mining giant's Severstal Russian Steel unit, said in an interview in Johannesburg.

Severstal bought 25.6 percent of Johannesburg-based Iron Mineral Beneficiation Services, which has the patent to technology that converts superfine iron ore into high-quality iron units, for $17 million.

“We have a firm belief in this technology,” Grubman said.

Severstal’s billionaire chief executive officer Alexei Mordashov said in June that the steelmaker was interested in expanding in African mining. In May, the company bought 16.5 percent of Core Mining, which has licenses to untapped iron ore deposits in Congo and Gabon, and on Thursday raised its stake in Crew Gold, which operates in Guinea, to 93.4 percent.

“We think that Africa is the place that steel and mining industry players have to be,” Grubman said.

South Africa’s steel sector is dominated by ArcelorMittal South Africa, a unit of the world’s largest steelmaker, which supplies 70 percent of the country’s steel needs. Russia already has a presence in the country’s steel industry through its second largest steelmaker, Evraz, which owns a majority stake in Highveld Steel & Vanadium.

“Everywhere there is always room for competition,” Grubman said, without wanting to directly comment on the country’s steel sector.

Global steel production has recovered to levels prior to the world economic crisis, driven by demand from China, said Mark Camaj, a market analyst at the International Manganese Institute.

(Bloomberg, Reuters)

Russia's Evraz unit plans $650 mln Eurobond-source



Mon Oct 4, 2010 7:32am GMT

MOSCOW Oct 4 (Reuters) - Russian steel maker Evraz (HK1q.L) on Monday started a roadshow for 7-year Eurobonds for its Canadian unit, which is planning to issue $650 million, a banking source told Reuters.

The money will be used to repay back debts to Evraz that the unit has, and Credit Suisse and Barclays Capital will act as bookrunners. (Reporting by Yelena Fabrichnaya; Writing by Toni Vorobyova)

Monocrystal aims to sparkle on roadshow



By Courtney Weaver

Published: October 3 2010 23:16 | Last updated: October 3 2010 23:16

Monocrystal, the largest maker of synthetic sapphire, will kick off a roadshow on Monday for a listing in Moscow that values the company at up to $1bn.

The Russian company – whose sapphire crystals are used in light emitting diode (LED) technology – is seeking to raise $200m to $280m, floating a stake of about 30 per cent.

The listing will be the first of several for Russian companies as they aim to take advantage of a narrow four-week window that closes in mid-November, or risk waiting until next year when their next earnings statements for the full year 2010 are ready.

Okay, a St Petersburg-based grocer, is on track for a roadshow this quarter for a London flotation, while Severstal, the Russian steel company, is preparing to list its gold division in London and gold miner Petropavlovsk is spinning off its iron ore division in Hong Kong. Transcontainer, a Russian Railways subsidiary, announced last month it planned to raise Rb12.8 bn ($412.5m) in an upcoming listing.

Monocrystal produces 20 per cent of the world’s synthetic sapphire, an artificial sapphire created from aluminium oxide. The $5bn synthetic sapphire industry is expected to grow to the size of $50bn over the next 10 years as more emphasis is put on energy-saving technology, such as LED products that are used in everything from lighting to flat-screen televisions to the monitors on the latest laptops and mobile phones.

Monocrystal is the sapphire industry’s market leader, ahead of the NYSE Amex-listed Rubicon, and will use the capital from its flotation to increase production capacity over the next two years to keep up with LED demand.

People close to the deal said that they expected the flotation to generate interest from both Russian and foreign investors given the scarcity of listed Russian technology companies. Morgan Stanley and Credit Suisse are joint bookrunners on the deal.

Bankers not involved with the offering said that all Russian groups would have a tough time, given how poor current market conditions were.

Russian Sea, a seafood company, and LSR Group, a real estate company, both priced at the bottom of their indicative ranges in offerings in April, while Uralchem, the Russian fertiliser group, pulled a London flotation this spring.

JP Morgan values Russia's Alrosa at $7.3-9 billion before IPO



10:57 04/10/2010

MOSCOW, October 4 (RIA Novosti) - JP Morgan investment bank has valued Russian state diamond monopoly Alrosa, which is planning to hold an initial public offering, at $7.3-9 billion excluding debts, with a wider price range estimated at $5-10 billion, Vedomosti business daily said on Monday.

Alrosa has ordered the valuation from the investment bank with the consent of the Federal Agency for State Property Management, Vedomosti quoted source close to the company as saying.

Previous valuations were considerably lower, within the range of $2.4-6.4 billion, the paper said.

Alrosa has stated its plans to hold an IPO more than once. According to the paper's source, it may be held already in 2011-2012.

The company plans to sell 20-25 percent of its shares at $1.5-2.3 billion, the source added. The capital raised will be used for development of underground diamond production.

At the same time, the parliament of the republic of Yakutia where Alrosa's core assets are located is ready to ready to lift the last restrictions on the diamond miner's transformation into a joint stock company, the paper said.

If Alrosa manages to place up to 25 percent of its shares, the stake of the Yakutia administration in the company may fall to 30 percent from 40 percent, however the republic will keep a blocking stake to control all key transactions, the paper quoted one of Alrosa's unnamed employees as saying.

Alrosa may raise $2.3 bln in 2011 IPO –paper



Mon Oct 4, 2010 6:03am GMT

MOSCOW Oct 4 (Reuters) - Russian state-owned diamond company Alrosa may float 20 to 25 percent of its shares in an initial public offering next year in to raise up to $2.3 billion, business daily Vedomosti reported on Monday. The paper, citing unnamed sources in Alrosa and in the banking sector, said JP Morgan valued the company at $7.3 billion to $9 billion.

The raised funds would be used to further develop diamond extraction, the newspaper said.

In September, Alrosa said its full-year sales would amount to $3.34 billion in 2010. [ID:nLDE685102] (Writing by Lidia Kelly; Editing by Will Waterman)

Russians issue record number of bonds



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Ben Aris in Moscow

October 4, 2010

While many western borrowers are finding it harder to tap the international credit markets, Russia's banks and companies have already issued more bonds this year then ever before.

"The equity market is trading sideways, but the bond market is on fire," says David Longmuir, a trader with Troika Dialog in Moscow.

While sales of foreign-currency bonds by Russian borrowers have dropped 27% from 2008, issuance in rubles has jumped 36% to a record RUB524bn ($17.1bn), twice the amount of local debt sales in Brazil or Mexico, according to data compiled by Bloomberg, which has been tracking Russian bond issues since the last crisis in 1998.

As part of the Russian government's strategy to make it less vulnerable to the vagaries of the global economy, the Central Bank of Russia is encouraging borrowers to source more money from the domestic market and has cut interest rates over a dozen times since the current crisis began. The state has also reduced the amount it plans to borrow abroad from over $17bn a year over the next three years to about $7bn per year.

Russia's strong fundamentals and accelerating economic growth have made yield-hungry investors hot for Russian debt. While the Russian economy contracted by 7% in 2009, it is expected to put in growth of over 4% this year, which could rise to 5-6% next year (depending on what oil prices do). And the state has gone back to accumulating reserves, which have risen by more than $130bn over the last year from a crisis low of $340bn to $476bn as of September 1, maintaining Russia's position as third-richest country in the world in terms of cash in the bank.

"The Russian economy is recovering after being hit hard by the global financial crisis," says Ed Parker, head of the European emerging markets section of Fitch Rating's sovereign credit team. "Fitch believes that the decline in inflation, shift to a more flexible exchange rate policy, sizable repayments of private sector external debt, stabilization of the banking sector, and rising foreign exchange reserves should serve to reduce the country's financial vulnerabilities."

Russian corporates have found it easier to borrow after the Russian state issued a landmark $5.5bn Eurobond in April, its first issue in a decade, with a record low 5.08% yield, which has set the benchmark for everyone else. "The spreads [on the sovereign issue] were very low indeed - lower than many Western European countries can command at the moment (let alone the likes of Greece)," said VTB Capital in a note at the time.

Money flows

There has been a lot of talk about capital shifting from the traditional western markets and into the fast growing markets of the east, and Russia's bond market is in the vanguard of this trend as fund managers pour money into Russian bond funds.

The fund tracker EPFR reports that unlike with most of developed market equity and bond funds, which attracted less money during the first half of 2010 than they did during the second half of 2009, emerging market equity and bond funds took in more money during the first half of 2010 than they did during the latter half of 2009.

By mid-August, EPFR said emerging market bond funds had extended their year-to-date record inflows to $32.8bn, which trounced the previous full-year record inflow of $9.7bn set in 2005. "Emerging market products account for 29% of all flows into bond funds from European investors in 2010, with a further 27% moving into global products," another fund tracking company, Lipper, said in a report. "Assets have grown at a compound annual growth rate of 30% since the end of 2001. The growth rate since the low-point at the end of 2008 is nearly 70%."

Leading commercial bank Alfa Bank was a pioneer Russian issuer, tapping the international Eurobond market in the middle of the last decade to raise cheaper, long-term funds that it used to finance its retail lending business. Once again the bank has led its peers back into the international debt markets with two big bonds over the last year. The bank offered a $600m, five-year Eurobond in March that was well received and a second $1bn, seven-year Eurobond in September that was three times oversubscribed. Key was the first bond came with a yield of 8.00% and the second one was priced at 7.875%: both bonds were cheaper than the 9.00% the bank had to pay with its last pre-crisis $500m bond issued in June 2008, which at the time set a new record low yield for the bank.

Still, the debt markets – both international and domestic - are only mainly open for blue-chip and large state-owned Russian firms. "The capital markets are open for the blue chips and first-tier companies, but remains closed for everything else," says Ed Kaufman, Alfa Bank's CEO. "It will be a long time before we go back to the no-name Russian regional banks raising $100m-$150m that we saw before the crisis in the last boom."

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Daimler-KAMAZ JV starts assembling Mercedes-Benz trucks in Russia



11:25 04/10/2010

MOSCOW, October 4 (RIA Novosti) - Mercedes-Benz Trucks Vostok, a joint venture between German and Russian car producers Daimler AG and KAMAZ , has assembled its first Mercedes-Benz Actros 1841 LS truck at its plant in Naberezhnye Chelny, the companies said in a joint statement on Monday.

"This is the first time Mercedes-Benz vehicles have been produced in Russia. It shows how much we are interested in boosting our share of the Russian market," said Mercedes-Benz Trucks Vostok chief executive officer Boris Billich said.

Mercedes-Benz Trucks Vostok was established in early 2010 as a general importer of Mercedes-Benz trucks to Russia. Daimler and KAMAZ each own 50 percent of the joint venture and have each contributed 5.9 million euros to its capital.

Mercedes-Benz Actros and Axor heavy-duty trucks are assembled in Naberezhnye Chelny on the Volga, where KAMAZ manufactures its trucks. The plant's annual capacity amounts to 4,500 vehicles.

"As the market leader in Russia, our partner KAMAZ has extensive expertise and a wide-ranging sales network that will provide us with optimal conditions for successfully expanding into a market that promises to grow rapidly once the global crisis is over," head of Mercedes-Benz Trucks Hubertus Troska said.

Besides Actros and Axors, the plant will produce Mercedes-Benz Ategos and specialised Zetros and Unimog trucks, when demand is strong enough. It also plans to launch the production of restyled Axor and Atego trucks as early as 2011.

Activity in the Oil and Gas sector (including regulatory)

Russian output hits high



Russian oil output hit a new record of 10.16 million barrels per day in September as fields returned from maintenance, beating the last all-time high in July.

News wires  04 October 2010 01:54 GMT

Oil output had slumped to 10.06 million barrels per day in August, largely due to maintenance at Sakhalin-1, an ExxonMobil-led project off Russia's Pacific coast.

The dip in August followed seven months of consecutive records that reached 10.14 million bpd in July.

Output of Sokol crude - on the basis of a production sharing agreement (PSA) - was halted for all of August. The resumption of production boosted the contribution of PSA operators by more than 50%.

Production was up in September throughout the Russian oil industry, except at LUKOIL, where output fell 1.1% from August.

Among individual oil companies, the biggest gains month-on-month and year-on-year were reported for mid-sized producer Bashneft, the oil unit of Russia's Sistema conglomerate, which last year consolidated oil assets once held by the government of the province of Bashkortostan.

Bashneft is widely viewed by analysts as the leading contender for the biggest new fields remaining in the state's portfolio - the Arctic Trebs and Titov fields - with 200 million tonnes of reserves. An auction is expected in December.

The ministry data confirmed oil loadings at Russia's key ports fell by over 6% as pipeline monopoly Transneft conducted maintenance work.

Gas output showed a seasonal recovery to 47.94 billion cubic metres in September, up more than 10% from August output of 43.32 bcm and up more than 5% from September 2009.

Gazprom's output rose 12.5% month on month, making up the bulk of the recovery. Gazprom's production was up 2.8% from year-ago levels, reported Reuters.

Published: 04 October 2010 01:54 GMT  | Last updated: 04 October 2010 01:55 GMT

Russian Oil Production Reaches Post-Soviet High on Rosneft Field



By Jason Corcoran

Oct. 2 (Bloomberg) -- Russia, the world’s largest energy supplier, pumped a post-Soviet record amount of crude last month as state-run producer OAO Rosneft increased output at a new field in Siberia.

Output advanced 1 percent from the same month last year to 10.16 million barrels a day, according to Bloomberg calculations based on Energy Ministry data released today. That beat the previous record of 10.15 million barrels a day in June.

Rosneft led the advance as it boosted output at its Vankor field 78 percent to 264,000 barrels a day. That pushed Rosneft’s total output to 2.27 million barrels a day, excluding its share of the Tomskneft venture with OAO Gazprom Neft. Smaller rival OAO Lukoil’s output fell 2.7 percent to 1.79 million barrels.

Russian natural-gas production climbed 14 percent to 1.6 billion cubic meters a day, according to preliminary data. State-run OAO Gazprom increased output in September an annual 2 percent to 36.9 billion cubic meters. OAO Novatek’s output rose 10 percent to 2.9 billion cubic meters.

To contact the reporter on this story: Jason Corcoran at Jcorcoran13@

To contact the editor responsible for this story: Gavin Serkin at gserkin@

Last Updated: October 2, 2010 05:48 EDT

Economics Ministry reportedly wants to extend Vankorskoye tax breaks



Troika Dialog

October 4, 2010

Interfax on Friday reported that the Economics Ministry has proposed to Prime Minister Vladimir Putin that the preferential export duty on oil from Rosneft's Vankorskoye field remain in place until 2014, citing an unnamed source within one of the government ministries. The Finance Ministry remains opposed to any extension of the preferential export duty beyond this year.

To us, this suggests that the chances of some preferences being extended for Vankorskoye oil in 2011-12 have just shot up. If one ministry is advising Putin to extend the tax breaks for three years, and another is telling him to not extend them at all, then there is a possibility that he will seek a compromise and extend them for at least a year or two. The market (and our model) currently price in no extension at all, so any preferences should be supportive of Rosneft's stock.

If Vankorskoye oil continues to be subject to the same reduced export duty that it enjoys now, the accretion to EBITDA will reach $3.0 bln in 2011 and $3.5 bln in 2012, a 20-23% boost.

Oleg Maximov

Russian licenses to shelf projects



2010-10-04

The two state-controlled companies Gazprom and Rosneft have submitted 43 bids for offshore field licenses, among them to the Yuzhno-Russkoye field in the Barents Sea.

Talking at an oil and gas conference in Sakhalin last week, a high-ranking official in the Russian Ministry of Natural Resources confirmed that Gazprom and Rosneft have submitted applications to 43 offshore structures, B- reports. Among the licenses which now are soon ready to be granted to companies is reportedly the Yuzhno-Russkoye field in the Barents Sea.

The official, Denis Khrapov, also said that Gazprom in the period 2009-2010 had been granted four new offshore licenses, while Rosneft in the same period had got only one.

Khromov also said that a total of 45 licenses have until now been granted. Of them, Rosneft has got 11 licenses, Gazprom – nine, Lukoil – six and five on production sharing agreements in the Sakhalin region.

Russia-Germany Nord Stream natural gas pipeline under way 



SITUATION: Russia has succeeded in getting funding for the Nord Stream gas pipeline (formerly North European Gas Pipeline, NEGP), which will go under the Baltic Sea to Germany . It obtained environmental approvals from the littoral states concerned rather easily and earlier this year began to lay the pipes undersea.

ANALYSIS: The deal is another indicator of ever-growing German-Russian cooperation and reorientation of German diplomacy, even as this takes place against the interests of Germany ’s EU partners.

• Russia obtained funding from European financial institutions with surprising ease. It was accomplished through Germany ’s lobbying of the EU to include the pipeline as a “project of European interest” within one of the Trans-European Energy Network corridors. That designation was then regarded as a political seal of approval. Once it was accomplished, the littoral states of the Baltic Sea , through whose waters the pipeline must run, treated their national approval of the rights-of-way as a purely administrative issue and issued the requisite permits in due course.

• The German companies BASF SE/Wintershall Holding GmbH and E.ON Ruhrgas originally held the remainder in equal shares but were forced by Gazprom (which refused to give up any pat of its majority 51% stake) to dilute their participation when they wanted to bring in two French firms. Now the two German firms each hold 15.5%, while Gasunie and GDF Suez each have a 9% share. The German metallurgical industry also gained from the deal, because only Germany possesses the industrial process technology and skilled labor necessary for manufacturing the pipes to the exacting technical specifications required.

• In the winter months of January 2006 and March 2008, due to disputes between Gazprom and Naftohaz Ukrainy , Russia had decreased supplies to Ukraine , through which gas transits to Europe . The Nord Stream pipeline is designed to circumvent dependence upon Ukraine for transit of Russian gas to Europe . Also Germany is even using trying to use EU regulations to block Poland’s intended construction of a terminal for liquefied natural gas (from Qatar) that would be in competition with Russian gas resold by Germany.

BOTTOM LINE: What Germany gains economically from the deal (besides what former chancellor Gerhard Schroeder gained personally after jumping, literally weeks after leaving the country’s highest political office, to head the Shareholders Committee of Nord Stream, which his government had strongly supported) is to become sole supplier of Russian gas to Central and Northern Europe. There is, however, a deeper significance. Thus, for example, Germany plans to sell to Poland , from the west, the gas that it is accustomed to receive from Russia , to the east. Belarus would also be affected, in addition to Ukraine .

Germany and Russia have a long tradition of diplomatic cooperation, from the three partitions of Poland (late 18th century), through the coalitions against Napoleon (early 19th) and the Three Emperors’ League (late 19th), to the Rapallo Treaty (early 20th), to mention but a few of the more notable points. Even during the Cold War, the USSR had deep relations with East Germany , its Warsaw Pact and COMECON ally. The KGB service of current Russian Prime Minister Vladimir Putin in the German Democratic Republic is a living reminder of those relations.

Today Germany far outstrips other European countries as an importer of Russian goods, and occupies first place in foreign direct investment of capital in Russia , recalling the Tsarist period. Germany ’s recent energy-industrial cooperation with Russia reaches back into the late Brezhnev era of the Soviet regime, but the present deepening of Germany ’s special relationship with Russia accentuates the post-Cold War dynamics of international relations in Europe .

With the relocation of its capital eastward from Bonn to Berlin, the Federal Republic of Germany began to think, and has lately begun to act, more as a traditional Central European power, and less as the pillar of European integration that it was during the Cold War. This is also evident in the recent hesitation by German financial elites - and the outright refusal of the country’s political elites - to underwrite any bail-out for Greece or any other EU member, or indeed any assistance mechanism for the European debt crisis in general. The post-Cold War phase of Germany ’s energy cooperation with Russia expresses that evolution.

Source: .

TNK-BP is preparing a deal



/Google translation/

The Board of Directors of TNK-BP has allowed management to make BP a formal proposal to buy assets in Vietnam and Venezuela, it may come this week, said a source close to TNK-BP. Defined plug the offer price, according to Interfax. BP's assets in those countries - 16,7% Petromonagas, 40% Petroperija, 26,6% Boqueron (Venezuela, the total production - about 6.4 million tons per year), 35% offshore block 01/06, 32.7% in the pipeline from block to the ground terminals and 1 / 3 power plant Phu My-3 (Vietnam), the total cost estimate - about $ 1,8-1,9 billion (Bank of Moscow and ING). In addition, we discuss the Algerian assets BP.

TNK-BP will be engaged in trading

TNK-BP creates a trader in Geneva, who will work with the volumes of third-party companies. The issue was approved on Friday by the board of directors of TNK-BP, said the publication Energy Intelligence. Prime-TASS

TNK-BP prepares bonds

The Board of Directors of TNK-BP has approved the decision to issue three-year bonds at 7.5 billion rubles., The company said. Organizers - Alfa-Bank, VTB Capital and Raiffeisen Bank. Interfax

Lukoil CEO Buys $1.4 Billion of Notes Related to Company Stock



By Torrey Clark

Oct. 4 (Bloomberg) -- OAO Lukoil’s Chief Executive Officer Vagit Alekperov’s Redruth Investments Ltd. bought $1.4 billion of notes from UniCredit Bank AG that relate to 25 million American depositary receipts of the Russian oil producer.

The notes, which Redruth bought on Sept. 28, may be exchangeable into ADRs, Moscow-based Lukoil said in a regulatory filing.

To contact the editor responsible for this story: Torrey Clark at tclark8@

Last Updated: October 4, 2010 01:34 EDT

Alekperov Purchases $1.4bn of UniCredit Bank Notes Convertible into 2.99% LUKOIL Stake



Aton

October 4, 2010

According to Vedomosti today (4 Oct), on 28 Sep Redruth Investments, owned by LUKOIL's President Vagit Alekperov, purchased convertible notes from UniCredit Bank AG for $1.4bn. These notes can be converted into 2.99% of LUKOIL's shares, but the conversion terms were not disclosed. On 22 Sep, Redruth Investments pledged 9% of LUKOIL's shares to borrow $2.4bn. Vedomosti also reported that on 28 Sep, LUKOIL purchased UniCredit Bank notes for $980mn which can be converted into 2% of LUKOIL's shares (the conversion terms were also not disclosed).

Bottom line

The news is neutral for LUKOIL's shares in our view. The latest report specifies the number of shares that could potentially be owned by Alekperov via bond conversion (2.99%), while previous stories only stated that he had purchased a portion of the 4.99% stake. Furthermore, we cannot estimate the potential impact of the deal on the stock's price because the terms of the bond conversion have not been provided.

SOCAR and Nizhnekamskneftekhim has reached a preliminary agreement on co-operation in world markets



Baku, Fineko/abc.az. Azerikimya, a sub-company of the State Oil Company of Azerbaijan (SOCAR) has signed with Nizhnekamskneftekhim (Russia), the primary protocol of intentions on co-operation.

The SOCAR informs that the protocol was the result of the visit of a Russian company delegation in Azerbaijan. The parties are ready to expand partnership to improve chemical production, collaboration in technical and human resource development, co-operation in world markets on the long-term basis.

Azerikimya almost fully unites chemical industry in Azerbaijan. Nizhnekamskneftekhim manufactures about 100 chemicals at its 10 enterprises.

Development of Shtokman deposit not to damage Barents Sea ecology



03.10.2010, 16.08

MURMANSK, October 3 (Itar-Tass) - Implementation of the Shtokman project will not damage the environment of the Barents Sea, claimed many participants in the Second Arctic International Economic Forum, rounding off in Murmansk on Sunday.

“There will be no compromises with safety at all stages of construction and development of the project,” said for instance representative of the Shtokman Development AG Frank Otefolt. His colleague Marat Sharifullin noted that Rostekhnadzor (Federal Service for Supervision of Environment and Technology) already approved the positive findings of the state ecological examination of design documentation.

“Specialists have fulfilled a great volume of engineering and ecological investigations,” he said. “To have complete data, explorations were conducted four seasons with the use of special vessels as well as aviation concerning 20 main indicators. Special attention was given to the coastal zone where there are populations of Kamchatka crabs and fish of valuable species.

Norwegian specialists, engaged in developing Arctic shelf deposits in the Norwegian Arctic zone, shared their experience of protection of marine biological resources. They expressed readiness to cooperate with Russian partners in this business.

The final results of the forum will be drawn up later, following the examination of all proposals by its participants. But it can be said even now for sure that “another big leap has been made in developing the Arctic shelf”, claimed president of the Murmansk Union of Industrialists and Entrepreneurs Alexander Lebedev.

Russia to supply China with gas but no deal on price



Issue: 905 Posted: October, 03 2010

Russian gas monopoly Gazprom signed a deal with China National Petroleum Corporation (CNPC) extending the terms of Russian gas supply to China on 27 September but the two sides have still not struck a deal on price. Meanwhile, Russia said it wants to supply its energy hungry neighbor with all its natural gas needs.

No dollar value was given to the agreements signed during a state visit by Russian President Dmitry Medvedev, but they included documents on cooperation in coal, natural gas, nuclear energy and renewable energy.

Russian Deputy Prime Minister Igor Sechin told reporters in Beijing that Russia is in talks with Chinese partners on plans to launch natural gas supplies to China starting in 2015, ITAR-Tass reported. “Russia is ready to meet China’s full demand in gas,” Sechin said.

Gazprom said that under that agreement it will supply China with 30 billion cubic meters of gas annually for 30 years starting in late 2015. The final deal is expected to be signed in 2011, Gazprom said. Gazprom and CNPC signed a framework agreement in October 2009 on the supply of up to 70 billion cubic meters per year of Russian gas to China, but the pricing formula has been a stumbling block to finalizing the deal.

Sechin said that if talks with China on gas supplies went well, Russia could sign commercial contracts by the middle of next year.

Interfax quoted Russian Energy Minister Sergei Shmatko as saying that “in my opinion, the main terms of (gas) supplies, apart from the price, have been agreed upon.”

Russia is the world’s biggest energy producer and China is the world’s largest energy consumer, overtaking the United States last year. Although Europe remains Russia’s largest export market for gas and oil, both Beijing and Moscow have been seeking to diversify their energy sources and markets.

But Konstantin Simonov, head of Russia’s National Energy Security Fund, told New Europe ahead of Medvedev’s visit to Beijing that “it will be a serious mistake if Russia will begin to export gas to China…I hope that he will not sign the final agreement because there is still no formula of price and this is good news.” He opined that Moscow is using the option of gas exports to China as its answer to Europe’s talk of diversification away from Russia. “It’s the only one answer to the policy of European Union,” Simonov said.

Meanwhile, Russian national oil pipeline operator Transneft and CNPC have signed a general agreement to jointly operate a trans-border section of a new pipeline offshoot from Russia’s East Siberia-Pacific Ocean pipeline (ESPO) to China’s Daqing, while Russia’s biggest oil producer Rosneft has inked an agreement with CNPC to fill the offshoot with technical oil. Under a contract signed in 2009 to supply 300,000 barrels per day of oil over 20 years to China, Rosneft is to start supplies via the route in January 2011. “Rosneft is trying to ensure it remains the energy partner with China. Rosneft is also pushing for a major entry into the gas sector,” Chris Weafer, chief strategist at Moscow’s Uralsib bank, wrote in an e-mailed note to investors on 27 September.

Later in the day, Medvedev and Chinese President Hu Jintao took part in a ceremony to inaugurate the end of the pipeline’s construction. “The successful completion of the pipeline’s construction is an example of mutually beneficial cooperation between the two countries and a new landmark in our energy partnership,” Hu said during the ceremony, according to Itar-Tass. “I hope that starting from today, corresponding companies and bodies [of the two countries] will undertake all the further efforts to bring our cooperation to the yet higher level,” he said. “The project is to strengthen our strategic partnership and cooperation and will be of help for the both countries,” Medvedev was quoted as saying.

The two countries also signed an agreement on Russia’s participation in preliminary engineering design work for the construction of the third and forth reactors at the Taiwan nuclear plant.

Gazprom

Gazprom and Timchenko moved shares



/Google translation/

Gazprom and Volga Resources fund (main beneficiary - Gennady Timchenko) redesigned their Novatek shares. ZGG Cayman Holding Limited (Gazprom) 9.99% shifted to Gazfin Cyprus Limited, follows from the Novatek message. 9.9972% were at the White Seal Holdings Limited (the beneficiary - Volga); while reducing the share of Clariden Leu Ltd. from 7.3637 to 0.0047%. Interfax

IP gas pipeline laying deal: Gazprom invited to participate



ZAFAR BHUTTA

ISLAMABAD  (October 04, 2010) : Pakistan has formally invited Russia's Gazprom, the largest extractor of natural gas in the world, to participate in laying gas pipeline under Iran-Pakistan (IP) gas pipeline deal. Iran has already welcomed Gazprom involvement in IP gas pipeline project.

Sources told Business Recorder that the Russian giant, Gazprom, has also expressed interest in building energy storage facilities in Pakistan.

A two-member Pakistan's delegation, led by State Minister for Finance and Economic Affairs Division (EAD) Hina Rabbani Khar, in a meeting of Pak-Russia Inter-Governmental Commission (IGC) held on September 22, 2010 in Russia, had invited Gazprom to participate in the development of IP gas pipeline project.

Pakistan and Gazprom have already signed a Memorandum of Understanding (MoU) for laying the 950 km gas pipeline under the IP gas pipeline project. "But the two sides are yet to enter into final agreement to build the pipeline to transmit gas from Iran to Pakistan under IP project," sources said.

They said that Russian President Dmitry Medvedev and Pakistan's President Asif Ali Zardari had also discussed the option to involve Gazprom in the IP project, during their meeting in August 2010 held in Russia . The two sides had decided to convene a meeting of Petroleum Ministers of Russia and Pakistan for detailed discussion on the proposal.

"Petroleum Minister Naveed Qamar is expected to accompany President Asif Ali Zardari during his upcoming visit to Russia to hold a meeting with his counterpart, and discuss the proposal relating to Gazprom's involvement in the IP project," sources said.

Pakistan and Iran have already signed sovereign guarantee agreement on IP. The project will be funded through public-private partnership and the capital cost for the Pakistan section is estimated at $1.65 billion.

Pakistan and Iran have signed Gas Sale and Purchase Agreement (GSPA) for import of 750 million cubic feet daily (mmcfd) of natural gas with a provision to increase gas volume to 1 bcfd. The imported gas volume is nearly 20 percent of Pakistan's current gas production and the supply will be for a contract period of 25 years, renewable for another five years. All of the imported gas will be dedicated to the power sector.

Iranian gas would support approximately 5,000 megawatts (MW) of power generation resulting in significant annual savings compared to alternative fuels such as high sulphur furnace oil, liquefied natural gas, and coal. As per current project implementation schedule, the first gas flow is targeted by the end of 2014.

A pre-feasibility study of the IPI project was undertaken in 2006; to further develop the project, a bankable feasibility study as well as Front End Engineering Design (FEED) will be undertaken that would enable the project managers to approach prospective investors and financiers.

Gazprom May Increase Maximum Dividend Payment



Aton

October 4, 2010

According to Vedomosti (4 Oct), Gazprom may increase the maximum dividend amount to 35% from 30% of RAS net income. Reportedly, the decision could be made in mid_October. Gazprom's dividend policy suggests the company could pay 10% of net income as a fixed part and 7.5_20% of net income as a flexible portion, dependent on its contributions to the reserve fund, research and development costs, capex, etc.

Bottom line

We believe the news is neutral for Gazprom's stocks as the company used to pay less than 30% of net income and indeed has not always followed its dividend policy.

October 04, 2010 11:57

Gazprom to complete design for Shtokman LNG port by year-end



MURMANSK. Oct 4 (Interfax) - Gazprom Dobycha Shelf LLC plans to complete the design of the port that will be used to export LNG from the Shtokman project before the end of the year, the deputy general director for shipping, Andrei Shapovalov, said at the Arctic Forum in Murmansk on Saturday.

"If everything goes to plan, the design of the port in Teriberka Bay will be completed at the end of this year," he said, adding that the port project would undergo expert review early next year and construction would commence in 2012.

The new port will most likely be registered as a subsidiary of the Port of Murmansk.

The Shtokman field is located in the central part of the shelf of the Russian sector of the Barents Sea. C1+С2 reserves amount to 3.8 trillion cubic meters of gas and about 37 million tonnes of gas condensate. A joint venture, Shtokman Development (Gazprom - 51%, Total - 25%, StatoilHydro - 24%), has been set up to carry out the first phase of the development.

The first phase involves producing 23.7 billion cubic meters of natural gas per year. Pipeline gas supplies were scheduled to begin in 2013 and liquefied gas supplies in 2014. However, the changed situation on the LNG market prompted Shtokman Development on February 5, 2010 to break out construction of facilities for shipping pipeline gas into a separate stage of the project's first phase.

RTS$#&: GAZP

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