Russia - WikiLeaks
Russia 090512
Basic Political Developments
• A/H1N1 virus
o Russians Told to Avoid U.S. - Russia's top public health official has advised Russians to avoid traveling to the United States because of the risk of infection with the A/H1N1 influenza virus, also known as swine flu, Interfax reported.
• Itar-Tass: Friendly ties with Mori to promote RF-Japan relations – Putin
o Itar-Tass: Only one economic leader can’t overcome world crisis – Putin
o RIA: Russia, Japan looking to resolve disputes through economic ties
o Itar-Tass: Friendly ties with Mori to promote RF-Japan relations – Putin
o AFP: Putin in Japan for talks on energy, business ties
o Bloomberg: Japan, Russia to Sign Siberian Oil Exploration Accord (Update1)
o Japan and Russia to co-develop oilfields
o Reuters: Russia, Japan seek to bolster economic ties
o Bloomberg: Putin Says Russia, Japan Should Boost Nuclear Energy Efforts
• Obama to make official visit to Russia in early July
• White House confirms Barack Obama desire to visit Russia
• Russian FM optimistic on arms control deal with US
• Russia stops being leading trade partner in Transcaucasia, Central Asia – IMF
• The time for the Palestinian state has come - Presiding over a UN Security Council meeting, Foreign Minister Sergey Lavrov urged the new administration in Tel Aviv to endorse a two-state solution for Israel and Palestine immediately and restart negotiations
• Russia calls for international efforts to achieve peace in the Middle East
• Lavrov: “All parties should resume talks towards peace process”
• Russian FM calls for efforts to resume peace process in Middle East
• Russian shipbuilders look for tide to come in - Prime Minister Putin has criticised Russian companies ordering ships from abroad, while the domestic shipbuilding industry is on the rocks.
• Putin tells firms to buy Russian ships,they object - Prime Minister Vladimir Putin on Monday told Russian companies to buy ships at home to help struggling domestic shipyards but a key client slammed Russian goods as uncompetitive.
• President Dmitry Medvedev to meet with CPRF leadership - President Dmitry Medvedev goes ahead with the practice of consultations with the main political parties of Russia.
• Police officer killed in shootout in Russia's Daghestan - A police officer was killed overnight and three other people injured in a drive-by shooting in Russia's southern republic of Daghestan, a local Interior Ministry official said on Tuesday.
• RT: Russia to play key part in nuclear comeback - Russia is no exception. It currently has 31 operating reactors in 11 locations – mostly in the European part of the country. And the authorities are hoping to double that to cut down its dependence on oil and gas to generate electricity.
• Russia's Glonass system to get full state support - deputy PM
• New Russian fighter jet due by year-end: Russian Deputy Prime Minister Sergei Ivanov told reporters after a shipbuilding meeting in the Far Eastern city of Komsomolsk-on-Amur that full-scale production of the advanced multi-role fighter will start in 2010, RIA Novosti reported.
• Military Commissions Arms: The army added 17 ICBMs, four short-range Iskander missile complexes and 34 rockets for the S-400 air-defense systems, Deputy Prime Minister Sergei Ivanov told Prime Minister Vladimir Putin on May 6, according to a transcript posted on the Cabinet web site.
• NYT: Russia Stockpiles the Gems, Awaiting the Return of Demand
• UK rights activists defends banned Moscow Gay Pride parade
National Economic Trends
• Russia daily c.bank swap limit at 5 bln rbls
• Russia Pension Funds Gain Most in Four Years, Kommersant Says
• New official forecast: 6% GDP decline in 2009
• EBRD cuts Russia's 2009 growth forecast from 1% to -7.5%
Business, Energy or Environmental regulations or discussions
• VEB Toughens Standards - Vneshekonombank, which dispenses Russia's economic stimulus funds, will grant subordinated loans only to banks that have 3.5 billion rubles ($108 million) of capital, limiting access to fewer than 100 lenders.
• VEB to lend $250mln to airlines for 13 years for acquisition of Superjets – Ivanov
• VEB approves subordinated loans to Russian Standard and Promsvyazbank
• Russian credit growth decelerating rapidly - While the CBR has stepped in aggressively with the liquidity support in 4Q09, it has been short-term and is being gradually reduced in 1Q09.
• Electricity consumption decreased 8.1%y-o-y during the first week of May
• Mechel's Kuzbass power sales co could pass on 2008 dividends
• Severstal to unveil Q1 IFRS results May 15
• Russian steelmakers gain market share
• Deripaska may sell construction business-paper
• IUD suspends construction of steel rolling plant in Armavir
• Railway Cargo Turnover: Continuous Recovery - Russian Railways has released highlights of its April transportation statistics. As railways account for 85% of cargo transportation in Russia, the dynamics are a good proxy for changes in industrial output.
• Russian truck maker KamAZ resumes work after three-week halt
• GAZ autoworks restarts conveyor Tue after May holidays
• Iridium seeks Russian satellite services market - Bethesda-based Iridium Satellite announced Monday that is has begun the process of entering the Russian market for mobile satellite services, forming a company called, "Iridium Communications Russia, OOO" to pursue a license for providing such services in Russia.
• New Arctic bulk carrier for Murmansk Shipping Company - The Murmansk Shipping Company has officially taken over its new ice protected bulk carrier constructed at the Chinese Chengxi Shipyard.
• MOSCOW BLOG: Investors take big bets - Now that investors are no long dodging falling rocks, some have started to think about the long term and are betting heavily that emerging Europe, and Russia in particular, will return to its growth path, albeit at a reduced rate, sometime soon.
Activity in the Oil and Gas sector (including regulatory)
• Chinese Envoy to Russia: Oil Pipeline Serves Strategic Goals of Both Sides
• Transneft negotiates placement of US$1bn Eurobonds
• LUKoil makes an offer to RITEK minorities
• LUKOIL: Caspian development continues as planned - On Friday newswires reported that LUKOIL had anchored the 1,340-ton basement block of its first stationary ice-resistant platform at the Yuriy Korchagin oil field on the Caspian Sea
Gazprom
• Gazprom/DESFA agreed on Greek part of South Stream [pic]
• Gazprom and Eni set to sign one more intermediate agreement on South Stream - According to today's Kommersant, on Friday (May 15) the Prime Ministers of Russia and Italy are going to sign one more intermediate agreement on the construction of the South Stream pipeline project
• UPDATE: Polish PGNiG OKs New Short-Term Deal With Gazprom
• RosGas AG to Control 20 Percent of Hungarian Gas Distribution
• Who is really behind RosGas?
• Analysis: Explosion in Moscow bad PR for Gazprom
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Full Text Articles
Basic Political Developments
A/H1N1 virus
Russians Told to Avoid U.S.
Russia's top public health official has advised Russians to avoid traveling to the United States because of the risk of infection with the A/H1N1 influenza virus, also known as swine flu, Interfax reported.
Gennady Onishchenko, head of the Federal Consumer Protection Service, said late last week that Russians should delay all trips that aren't necessary to avoid the virus, which has killed at least 49 people, including 45 in Mexico, two in the United States and one each in Canada and Costa Rica. Onishchenko earlier in the week advised against traveling to Mexico and Canada. (MT)
RUSSIA-JAPAN
Friendly ties with Mori to promote RF-Japan relations – Putin
TOKYO, May 12 (Itar-Tass) - Russian Prime Minister Vladimir Putin hopes that his friendly ties with Japan's ex-Premier Yoshiro Mori will help forward the development of Russo-Japanese relations.
During a meeting with Mori here on Tuesday, Putin pointed out that the former engages in vigorous political activities both inside the country and in the international arena.
"I know that you follow very attentively the development of the economic situation in the world and in Japan, and that you are highly active in parliament," Putin said. He thanked the ex-Premier, who is now a member of the House of Representatives, for deeming it possible to return from his African tour and, prior to another trip, find time for the meeting.
For his part, Yoshiro Mori said he had been looking forward to this meeting. "When we first met, I came to feel that you sought in earnest to inform your country so that Russia would become an open and democratic state," Mori said. He pointed out that Putin as Russia's Chairman of Government now plays a big role not only inside the country but in the international arena as well.
Only one economic leader can’t overcome world crisis – Putin
TOKYO, May 12 (Itar-Tass) - Russian Prime Minister Vladimir Putin believes that only one economic leader cannot overcome the world crisis.
“The global crisis showed graphically that in the world economy, as well as the world politics, one, even a very powerful leader cannot ensure stability, sustainability and predictability,” Putin said at the Russian-Japanese business forum in Tokyo on Tuesday.
“To resolve this task the leadership should be collective,” the premier believes. In this connection, Russia “intends to develop the direct dialogue with the business circles of the leading countries in the world, including Japanese businesspeople.”
In Putin’s view, the crisis gives “a unique opportunity to reform the economy and invigorate the world financial system.” According to him, a forming modern agenda “should reflect adequately the growing role of new centers of economic growth and political influence, primarily in the Asia-Pacific region.”
Putin recalled about a program of anti-crisis measures in Russia with a big financing volume – three trillion roubles (about 90 billion dollars). “These allocations are mainly made to support the banking system, the real sector of economy, labour market and the consumer demand, that is to say citizens of the country,” the premier said.
He believes that “these measures will allow averting the worst scenario and will lay down the foundations for resuming a sustainable economic growth.”
Putin reminded that at the end of the previous year Russian economy was exposed to the impact of “the double strike”, “This was the financial crisis, considerably deteriorated conditions of the foreign trade – the fall in the demand and the prices on traditional Russian export goods.”
Putin forecasts “a certain reduction in the GDP, industrial production and the foreign trade” in 2009. “However, I can affirm that Russian market and social institutions proved its stability and viability, and the capability to counteract the destructive tendencies of this crisis,” the Russian prime minister pointed out.
Russia, Japan looking to resolve disputes through economic ties
TOKYO, May 12 (RIA Novosti) - Russian Prime Minister Vladimir Putin said on Tuesday Moscow and Tokyo could resolve their existing territorial dispute by building mutual trust and developing strong economic ties.
Putin arrived in Tokyo on May 11 to discuss a long-standing territorial dispute, along with economic, energy and international issues with the Japanese leadership.
"With this attitude in mind, our mutual work will allow us to resolve a number of global issues, including the signing of a peace treaty [between Russia and Japan]," Putin told a Russian-Japanese business forum in Tokyo.
Russia and Japan have yet to sign a formal World War II peace treaty due to their territorial dispute over the four South Kuril Islands, former Japanese territory annexed by the Soviet Union after the war.
The Russian prime minister said both countries were interested in developing strong economic ties, primarily in the energy sector.
"Cooperation in the energy sector, which plays a key role in steady supplies of fuel-carriers to the Asian-Pacific region and strengthening the global energy security, remains our priority," Putin said.
Japan is one of Russia's major trading partners in Asia, ranking third in terms of bilateral trade. Last year trade turnover between Russia and Japan totaled almost $29 billion.
Japanese companies take part in two major energy projects in Russia's Far East - Sakhalin-I and Sakhalin-II.
"We launched an LNG plant in Sakhalin this February. The first shipments of liquefied natural gas have already arrived in Japan," the prime minister said.
He also confirmed that Russia and Japan would sign an agreement on cooperation in the civilian use of nuclear power, opening new possibilities for bilateral cooperation.
"I am certain that we will find new areas of mutual interest and we are ready to implement mutually beneficial projects," Putin said.
Friendly ties with Mori to promote RF-Japan relations – Putin
TOKYO, May 12 (Itar-Tass) - Russian Prime Minister Vladimir Putin hopes that his friendly ties with Japan's ex-Premier Yoshiro Mori will help forward the development of Russo-Japanese relations.
During a meeting with Mori here on Tuesday, Putin pointed out that the former engages in vigorous political activities both inside the country and in the international arena.
"I know that you follow very attentively the development of the economic situation in the world and in Japan, and that you are highly active in parliament," Putin said. He thanked the ex-Premier, who is now a member of the House of Representatives, for deeming it possible to return from his African tour and, prior to another trip, find time for the meeting.
For his part, Yoshiro Mori said he had been looking forward to this meeting. "When we first met, I came to feel that you sought in earnest to inform your country so that Russia would become an open and democratic state," Mori said. He pointed out that Putin as Russia's Chairman of Government now plays a big role not only inside the country but in the international arena as well.
Putin in Japan for talks on energy, business ties
7 hours ago
TOKYO (AFP) — Russia's Premier Vladimir Putin kicked off a visit to Japan Tuesday expected to lead to several business deals and a pact on nuclear power cooperation, despite a lingering territorial dispute.
The former Russian president, travelling with a high-powered delegation, was in Tokyo to meet corporate chiefs, regional governors, two former premiers and the opposition leader before holding talks with his counterpart Taro Aso.
Russian officials warned before the visit that Tokyo should not expect a breakthrough in a territorial dispute that has plagued relations since World War II and has prevented the neighbours from signing a peace treaty.
Putin's deputy chief of staff, Yury Ushakov, cautioned against "inflated expectations" in the dispute over what Japan calls the Northern Territories and Russia refers to as the Southern Kurils.
Moscow believes the historic dispute should not get in the way of stronger economic relations, including the transfer of Japanese cutting edge technology to Russia and the flow of Russian oil to energy-poor Japan.
Putin told a meeting of regional governors from both countries Tuesday that "regional cooperation is an important factor which can stimulate economic development, help overcome the consequences of the global economic crisis".
Closer ties "will help to create a favourable atmosphere for joint projects... (and) create new jobs, which is especially important now".
Japan and Russia were scheduled to sign several official agreements, including a pact to promote the non-military use of nuclear power which would pave the way for Japan to export nuclear power plant technology to Russia and for Russia to sell more nuclear fuel to Japan.
They were also due to sign commercial deals, including on cooperation in banking and in hydro and wind-power plants, Russian officials said.
The Nikkei reported that both countries were expected to sign a deal as early as Tuesday to jointly develop two major oil fields, holding up to several hundred million barrels, in the central Irkutsk region of Eastern Siberia.
The government-run Japan Oil, Gas and Metals National Corp. was expected to take a 49 percent stake, while Russia's Irkutsk Oil Co. would take the remainder, the Nikkei reported, citing unnamed sources.
On a lighter note, Putin, a judo black belt, was to unveil a Japanese language version of his book on the sport alongside Yasuhiro Yamashita, a world judo champion with whom Putin has also recorded a video manual.
Japan, Russia to Sign Siberian Oil Exploration Accord (Update1)
By Shigeru Sato and Yuji Okada
May 12 (Bloomberg) -- Japan Oil, Gas & Metals National Corp., a state-owned explorer, and Russia’s Irkutsk Oil Co. will jointly develop two fields in eastern Siberia as Japan seeks to reduce reliance on supplies from the Middle East.
The companies will sign an initial agreement to form a joint venture at 4 p.m. in Tokyo today, said Kazuhiko Uematsu, a spokesman for Jogmec, as the Japanese explorer is known. Jogmec will hold 49 percent stakes in the two fields, he said.
The agreement coincides with Russian Prime Minister Vladimir Putin’s visit to Tokyo, during which the two countries will sign a pact on peaceful uses of nuclear energy. Japan imports more than 80 percent of its oil from Saudi Arabia and neighboring states.
“The Eastern Siberian area has the advantage of geographical proximity to Japan and rich potential in oil and natural gas reserves,” Jogmec said in a statement on its Web site. “Development has been delayed by the harsh natural surroundings and a lack of infrastructure that has prevented sufficient research.”
Jogmec and Irkutsk Oil will conduct exploration work on the 3,307-square-kilometer Bolshetirsky block and the 4,835-square- kilometer Zapadno-Yaraktinsky area, the Japanese company said in a statement.
The partners plan to complete by February 2013 a seismic survey to estimate potential reserves of the two fields with a total of six exploration wells to be drilled, the Tokyo-based company said in its statement. The two areas are close to a pipeline under construction from eastern Siberia to Russia’s Pacific coast, it said.
Japan’s government has been lobbying for the completion of the oil pipeline to link the Russian coast with untapped reserves in eastern Siberia.
To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@; Yuji Okada in Tokyo at yokada6@.
Last Updated: May 12, 2009 00:57 EDT
Japan and Russia to co-develop oilfields
Wire services
Japan and Russia plan to sign an agreement, as early as today, to jointly develop oilfields in Eastern Siberia.
The agreement is expected to involve two oilfields in central part of the Russian region of Irkutsk, reported the Nikkei business daily..
Developing the fields will cost an estimated 15 billion yen for the period leading up to commercial production alone, the daily said.
The project will be led by a joint venture between Japan Oil, Gas and Metals National Corporation, or JOGMEC, and Irkutsk Oil. The Japanese government-owned company is expected to take a 49% stake and the Russian partner the remainder.
With the goal of starting full-scale production as early as 2013, the joint venture will kick off survey and drilling in 2010 or later.
JOGMEC will transfer its stake to Japanese private-sector companies, once commercial production is deemed feasible, reported Reuters.
Tuesday, 12 May, 2009, 03:05 GMT | last updated: Tuesday, 12 May, 2009, 03:07 GMT
Russia, Japan seek to bolster economic ties
Tue May 12, 2009 9:02am IST
By Oleg Shchedrov and Chisa Fujioka
TOKYO (Reuters) - Russia and Japan are set to sign a parcel of agreements on Tuesday including oil and nuclear energy deals as they stress business ties over a long-running dispute over some offshore islands.
Russian Prime Minister Vladimir Putin, travelling in Tokyo with 100 company executives, will attend a business forum and later meet Japanese Prime Minister Taro Aso for talks on boosting trade and investment.
Despite the territorial row, which has prevented the two sides from signing a peace treaty for World War Two, economic ties have flourished as Japan eyes Russia's growing consumer market and its booming oil and gas industries.
Russia, facing a recession after a decade-long boom, is also eager for Japanese investment to develop its Far East region.
"Regional cooperation is an important factor which can stimulate economic development, help overcome the consequences of the global economic crisis," Putin told a meeting of regional governors from both countries.
"Deepening direct regional cooperation will help to create a favourable atmosphere for joint projects ... create new jobs, which is especially important now."
In a sign of growing business ties, the state-run Japan Oil, Gas and Metals National Corp (JOGMEC) said in a statement it would sign an agreement with Irkutsk Oil Co to jointly develop two oil fields in Eastern Siberia through a joint venture.
The project, the latest in Japan's efforts to reduce its reliance on the Middle East for its oil needs, will cost 15 billion yen ($152.6 million) to bring it to commercial production alone, the Nikkei business newspaper reported.
Japan and Russia are also expected to sign an agreement on civilian nuclear energy use in a deal that would clear the way for Japanese companies to help build nuclear power plants in Russia.
The agreement would also allow Japan to tap Russia's uranium enrichment technology.
While both countries have extolled the mutual benefits of stronger economic ties, little progress was expected on a dispute over a group of small islands, known in Russia as the Southern Kuriles and in Japan as the Northern Territories.
Neither Japan nor Russia accepts the other's claim of sovereignty over the sparsely populated islands, the closest of which is 15 km from Japan's northernmost island of Hokkaido.
Putin Says Russia, Japan Should Boost Nuclear Energy Efforts
By Sachiko Sakamaki and Lyubov Pronina May 12 (Bloomberg) -- Russian Prime Minister Vladimir Putin invited Japanese companies to invest in his country, and said the two nations should work to ensure energy security in Asia.
“Russia is setting an ambitious task of reforming the economy,” Putin said in a speech to business leaders in Tokyo as part of a three-day visit. “There is a space for cooperation with Japan in sectors of innovation -- first and foremost nuclear energy and telecommunications.”
Putin later today will sign an agreement with Prime Minister Taro Aso to boost cooperation on the development of peaceful nuclear energy, likely increasing trade that amounted to almost $30 billion last year. Executives from Russian companies are accompanying him to meet with Japanese counterparts.
“Bilateral economic cooperation has reached a qualitatively new level,” Putin said. “Business prospects are bright.” He cited the opening of a Nissan Motor Co. plant in Russia next month as the kind of project “that the Russian government will support in every way.”
Japan and Russia are unlikely to make similar progress over a territorial dispute when Putin and Aso meet. Putin’s deputy chief of staff, Yuri Ushakov, told reporters in Moscow last week that Russia isn’t prepared to cede four islands claimed by Japan. Putin today said relations with Japan are improving.
‘Political Dialogue’
“A major factor stimulating cooperation is the developing dialogue between our countries, local governments and companies,” he said. “We hope that this will continue in the future.”
Russia, the world’s largest energy producer, is grappling with its first recession since 1999 after the global financial meltdown dragged down oil prices. Putin said the crisis provided “a unique opportunity to reform the economies and financial systems” and called on the Asia-Pacific region to play “a stronger role.”
Putin’s visit comes three months after Aso met with Russian President Dmitry Medvedev on Sakhalin Island to inaugurate Russia’s first liquefied natural gas plant, which has contracts to deliver LNG to customers in Japan. The plant is located 160 kilometers (100 miles) from Japan’s northern island of Hokkaido.
Japan has repeatedly demanded that Russia return four islands near Sakhalin seized by the Soviet Union at the end of World War II. Failure to reach an agreement on the islands, known as the Northern Territories in Japan and the southern Kurils in Russia, has prevented the countries from signing a peace treaty formally ending the war.
During a meeting with Japanese business leaders, Putin said improving ties would help the two nations settle their differences.
“It is that attitude and that joint work that will allow us to resolve global issues including reaching a peace agreement,” he said during the meeting.
To contact the reporters on this story: Sachiko Sakamaki in Tokyo at ssakamaki1@; Lyubov Pronina in Tokyo at lpronina@
Last Updated: May 12, 2009 00:54 EDT
Obama to make official visit to Russia in early July
Today, 10:41 PM
US president Barack Obama will make his first official visit to Russia since entering the White House from July 6 to 8, the Kremlin said on its website on Monday.
Obama had said following talks with Russian President Dmitry Medevedev on the eve of the G20 summit in London on April 1 that he would visit Russia in July.
"The president of the United States, Barack Obama, will be on an official visit to Russia from July 6 to 8... at the invitation of the Russian president," the Kremlin statement said, giving no further details.
Obama said Thursday he was "hopeful" of improving ties between Washington and Moscow after hosting visiting Foreign Minister Sergei Lavrov in the Oval Office.
The president said his wide-ranging talks with Lavrov focused on Iran, nuclear proliferation, Afghanistan and Pakistan, the Middle East, the financial crisis and other issues.
"We have an excellent opportunity to reset the relationship between the United States and Russia on a whole host of issues," Obama said.
"I am hopeful that the meetings that we had so far, and the meetings that we expect to have throughout the course of this year, will be of mutual benefit to both countries."
Medvedev hailed Barack Obama as "my new comrade" after their face-to-face London discussions.
"I liked the talks. It is easy to talk to him. He can listen. The start of this relationship is good," Medvedev said, adding: "Today it's a totally different situation (compared to Bush)... This suits me quite well.
"Today from the United States there is at least a desire to listen to our arguments," he added of US missile defence shield plans in Moscow's former eastern European sphere of influence that Russia fiercely opposes.
Obama, before that meeting, said there were "very real differences between the United States and Russia, and I have no interest in papering those over."
But, he added, "there are also a broad set of common interests that we can pursue."
White House confirms Barack Obama desire to visit Russia
WASHINGTON, May 12 (Itar-Tass) - US President Barack Obama does intend to visit Russia for a continuation of important work in the field of nuclear non-proliferation but a timeframe for the visit is to be announced by the White House additionally, presidential press secretary Robert Gibbs told Itar-Tass on Monday in response to a request to confirm the Kremlin announcement that Obama's official visit to Russia would be made from July 6 to 8.
Gibbs said he had no specific confirmation of the mentioned timeframe for the visit. After the briefing, officials in the press service of the US National Security Council to the White House told Itar-Tass the same.
The timeframe, announced in Moscow as a tentative one, has been known for several weeks now. Many expected that officially it would be confirmed during Russian Foreign Minister Sergei Lavrov's working visit to Washington at the end of last week. However, that did not happen, although matters concerning arrangements for a meeting between the two presidents were, naturally, discussed most substantively.
Gibbs, in his remarks on Monday, reaffirmed that, adding, though, that most important was not the organisational aspect but the working out of the essence of matters that Obama is looking forward to discussing in Russia so as to strengthen the security of the two countries and the whole world.
Russian FM optimistic on arms control deal with US
28 minutes ago
MOSCOW (AP) — News reports quote Russia's foreign minister as saying that Washington has taken a constructive stance in arms control talks and there is a good chance of reaching a deal.
Russian news agencies quote Sergey Lavrov as saying that Moscow hopes that a successor agreement to the 1991 START arms reduction treaty will be ready for signing by the year's end. The START treaty expires in December.
Lavrov spoke to Russian reporters Tuesday after returning from a visit to the United States where he held talks with President Barack Obama and Secretary of State Hillary Rodham Clinton.
Lavrov said Russia would like a new deal to count all nuclear warheads including those in storage. But he added that Moscow is ready to listen to the U.S. arguments to the contrary.
Russia stops being leading trade partner in Transcaucasia, Central Asia – IMF
YEREVAN. May 12 (Interfax) - Russia is no longer a leading trade
partner in Transcaucasia and Central Asia due to the world economic
crisis, Ratna Sahay, deputy director of the IMF Middle East and Central
Asia Department, said during the presentation of her report addressing
the prospects of the Armenian economy given in Yerevan on Monday.
Russia's GDP is expected to drop sharply (by 6%) in 2009, Sahay
said. The deterioration of the economic situation in Russia has already
caused a considerable reduction of trade and private transfers from
Russia to the countries of the region, and exports from the region's
countries to Russia have also decreased, she said.
The economies of some countries, especially Tajikistan, Kazakhstan,
and Armenia, are largely dependent on the inflow of private transfers
from Russia, said Sahay.
At the same time, Russia continues to play an important role in the
region in terms of investments, said Sahay.
The time for the Palestinian state has come
12 May, 2009, 10:55
Presiding over a UN Security Council meeting, Foreign Minister Sergey Lavrov urged the new administration in Tel Aviv to endorse a two-state solution for Israel and Palestine immediately and restart negotiations.
On his last stop in the US, Russian Foreign Minister Lavrov chaired a meeting with the UN Security Council. Addressing the urgent need for an Israel-Palestine solution, his main concern was not to backtrack.
“There's an alarming negotiation vacuum caused by a number of well-known reasons: outbreaks of violence, the Gaza crisis, first the election and then a long process forming an Israeli government. In these conditions the major thing is to renew negotiations between the Israelis and the Palestinians as soon as possible,” stated Lavrov in his address.
In an unusually unified voice, the Security Council’s finger pointed in the new Israeli government’s direction, whose hawkish Prime Minister Benjamin Netanyahu refuses to publicly endorse the idea of a Palestinian state.
UN Secretary General Ban Ki-Moon supported the idea that “the time has come for Israel to fundamentally change its policies, in this regard, as it has repeatedly promised to do, but not yet done. Action on the ground, together with a genuine readiness to negotiate on all core issues, including Jerusalem, borders, and refugees, based on Israel’s existing commitments, will be the true test of Israel’s commitment to the two-state solution.”
Russia called for the ministers of all major powers to fly in, but one face missing is US Secretary of State Hillary Clinton, which raised a lot of questions at Lavrov’s press conference which he quickly shook off.
“We don’t see any political attitude in this, I was just in Washington three days ago and Hillary told me that she wouldn’t be able to make it. And she asked Susan Rice to represent the US,” Lavrov said himself.
Fixing the crisis in the Middle East is going to take vigorous diplomacy, and to stress the time crunch, Russia is already making plans to hold a peace conference where all sides will be invited.
Russia calls for international efforts to achieve peace in the Middle East
Today, 10:46 PM
Russia’s Foreign Minister has called for world efforts to resume the peace process in the Middle East, with a common goal being an independent Palestinian state living side by side in peace with a secure Israel.
Sergei Lavrov made the statement to the press on Monday after he chaired an open Security Council meeting as the president of the 15-nation UN body, Xinhua news agency reports. Russia holds the rotating Council presidency for the month of May.
"We need to create the appropriate international atmosphere," Lavrov said. "All Council members were united in that today's meeting was extremely timely."
"Our common goal is to achieve the implementation of the concept of the two states, Palestine and Israel, living in peace and security," he said. "This point is reflected in the presidential statement that was adopted at the outcome of the discussion. The Security Council, in its statement, expressed its resolve to continue to provide necessary assistance to the parties to achieve this."
The Security Council adopted the presidential statement, drafted by Russia, at the end of the open debate to call for "renewed and urgent efforts" by the parties and the international community to achieve "a comprehensive, just and lasting peace in the Middle East" on the basis of "the two-state solution."
"The Security Council stressed the urgency of reaching comprehensive peace in the Middle East," the statement said. "Vigorous diplomatic action is needed to attain the goal set by the international community - lasting peace in the region, based on an enduring commitment to mutual recognition, freedom of violence, incitement and terror, and the two-state solution, building upon previous agreements and obligation."
"Council members call upon the parties to resume talks, not from square one, but taking into account decisions of the Council, and based on arrangements they reached between themselves," Lavrov said.
"Resumption of talks should not go back to square one because of the gains we already have," he said. "They should be based on reaffirmation of the international legal basis that is contained in Security Council resolutions."
Lavrov: “All parties should resume talks towards peace process”
12 May, 2009, 00:12
Russian Foreign Minister Sergey Lavrov has been chairing a UN Security Council meeting that seeks to restart the Middle East Peace Process. The outcome has been explained at a press conference at UN headquarters.
Lavrov noted that the Security Council had called upon all parties involved in the Middle East Peace Process to resume their talks. It was also pointed out that to reach comprehensive peace in the Middle East, efforts must be made to continue this process not only with the Palestinians, but also on the Syrian and Lebanese tracks.
Participants in the meeting supported the convening in Moscow of an international conference on the Middle East later this year.
“This unanimous support for our initiative clearly will help us in our continuing work to coordinate the timing and substance for this Moscow forum,” said Mr. Lavrov.
Previous resolutions remain valid
Answering a question about the two-state solution for the Israeli-Palestinian conflict and adhering to previous commitments by the parties, Lavrov said that none of the previous agreements, including those decisions regarding a two state concept, had been cancelled. It is a matter of principle, he said, to resume talks based upon the decisions made so far and reflected in UN resolutions, and not begin from scratch.
Lavrov particularly pointed out that the Arab Peace Initiative seeking to normalize relations between the entire Arab region and Israel had received “unprecedented support” during the meeting.
“We have been for this initiative from the first days after this initiative was approved in 2002. And I was pleasantly surprised by the fact that all UN Security Council members were saying, this time, that this initiative should be one of the cornerstones of the future settlement,” the Russian Foreign Minister said.
According to Lavrov’s statement, the Arab Peace Initiative will be “organically incorporated” into the Middle East Policy of US President Barak Obama.
Talks with Hamas
Lavrov also mentioned that Russia had never stopped talking to all parties involved in the Palestinian problem.
“We continue negotiations with Hamas and we’re concentrating on those aspects which are a basic concern of the Palestinian people. This includes seeking the unity of the Palestinian people,” he said.
“Recently, some countries avoided this issue and spoke only to one part of the Palestinian community. Today they already accept that there is no solution to the Palestinian problem if there is dissent within the Palestinian community,” added Russia’s Foreign Minister.
The Moscow conference
According to Lavrov, the date of the Moscow conference on the Middle East will be determined shortly after the new Israeli government has approved of participating in the conference.
“The Middle East Quartet will meet shortly to discuss this issue," he said.
Lavrov mentioned that the Moscow conference would include a broad number of parties. There will be all members of the Quartet, the Islamic Conference, the League of Arab States, countries from other continents that provide humanitarian, material or moral support to the efforts in the region.
However, President Obama’s visit to Moscow July 6-8, as Sergey Lavrov noted, is not linked to the Middle East.
Russian FM calls for efforts to resume peace process in Middle East
2009-05-12 04:49:12
UNITED NATIONS, May 11 (Xinhua) -- Russian Foreign Minister Sergey Lavrov on Monday called for world efforts "to create the appropriate international atmosphere" to resume the peace process in the Middle East, with a common goal to achieve the concept of the two-state solution, which means an independent Palestinian state to live side by side in peace with a secure Israel.
Lavrov made the statement to the press here after he chaired an open Security Council meeting as the president of the 15-nation UN body. Russia holds the rotating Council presidency for the month of May.
"We need to create the appropriate international atmosphere," Lavrov said. "All Council members were united in that today's meeting was extremely timely."
"Our common goal is to achieve the implementation of the concept of the two states, Palestine and Israel, living in peace and security," he said. "This point is reflected in the presidential statement that was adopted at the outcome of the discussion. The Security Council, in its statement, expressed its resolve to continue to provide necessary assistance to the parties to achieve this."
The Security Council adopted the presidential statement, drafted by Russia, at the end of the open debate to call for "renewed and urgent efforts" by the parties and the international community to achieve "a comprehensive, just and lasting peace in the Middle East" on the basis of "the two-state solution."
"The Security Council stressed the urgency of reaching comprehensive peace in the Middle East," the statement said. "Vigorous diplomatic action is needed to attain the goal set by the international community -- lasting peace in the region, based on an enduring commitment to mutual recognition, freedom of violence, incitement and terror, and the two-state solution, building upon previous agreements and obligation."
"Council members call upon the parties to resume talks, not from square one, but taking into account decisions of the Council, and based on arrangements they reached between themselves," Lavrov said.
"Resumption of talks should not go back to square one because of the gains we already have," he said. "They should be based on reaffirmation of the international legal basis that is contained in Security Council resolutions."
"I hope the (presidential) statement to a certain extent will play a role in terms of impacting those who have yet to formulate their approaches," he said.
On Russia's proposal to hold an international conference, the Russian foreign minister said: "Participants in this meeting supported the convening in Moscow this year on an international conference on the Middle East. This unanimous support for our initiative clearly will help us to coordinate the timing and the substance for this Moscow forum."
On the Arab Peace Initiative, Lavrov said: "There is the unprecedented, clear support for Arab Initiative."
"We have advocated for this essentially from its very inception," he said. "At this point, I was pleasantly surprised to see that all council members very clearly talk about the need to make this initiative one of the cornerstones of a future settlement."
Russian shipbuilders look for tide to come in
12 May, 2009, 07:27
Prime Minister Putin has criticised Russian companies ordering ships from abroad, while the domestic shipbuilding industry is on the rocks.
The Amursky shipyard in Russia’s Far East made dozens of warships and submarines during the Second Word War.
Cargo ships, refrigerator vessels, platforms…the shipyard’s managing director told Prime Minister Putin what it used to make, and what it’s building today – just two tankers for a German customer.
Local companies build just 6% of the ships Russia needs. The rest come from abroad – and the PM believes ship buyers need to shop at home.
“I think it's unacceptable to commission ships from foreign shipbuilders if such orders can well be placed at Russian shipyards.”
Two of the far eastern shipbuilders are already bankrupt, and 8 others are unprofitable and deeply in debt. Lack of orders is one of the main problems for the Russian ship-yards, most of which were originally set up for naval construction.
The government says the answer is to turn them into civil shipbuilders, but industry players such as Andrei Krainy, Head of Federal Fishing Agency, say that’s easier said than done.
“Historically, Russia's Far Eastern shipbuilding was military focused. Now companies don't know how to control costs, and therefore today we are not competitive nor by the price, neither by deadlines.”
Russia needs to attract foreign capital and projects to build new dockyards and modernise old ones. The United Shipbuilding Corporation says Singapore is considering invest $5 billion in the construction of a Russian dockyard in which Russia will have a 25% stake.
Meanwhile, the state is buying a 59% stake in the Amursky, with its billion dollar debt, for a symbolic price in order to save it.
And State lender Sberbank is to loan the yard $400 million for ten years. It remains to be seen if that can keep the business afloat.
Putin tells firms to buy Russian ships,they object
05.11.09, 10:23 AM EDT
By Oleg Shchedrov
KOMSOMOLSK-ON-AMUR, Russia, May 11 (Reuters) - Prime Minister Vladimir Putin on Monday told Russian companies to buy ships at home to help struggling domestic shipyards but a key client slammed Russian goods as uncompetitive.
Officials are trying to encourage companies to buy more home-produced goods to help Russia through its first recession in a decade and make up for slumping exports.
'I consider it inadmissible to place orders at foreign shipyards when you have the opportunity to build similar ships in Russia. Priority should be given to national industry,' Putin said at a meeting on shipbuilding in far eastern Russia.
The sector has been singled out as one of the government's key priorities as part of a long-term plan to diversify the economy from its dependence on energy and commodity exports.
But a fisheries official and a key ship buyer said Russia was not yet ready to compete with foreign companies.
'The far eastern shipbuilding sector had been designed to serve the navy. They cannot work properly with civilian orders, we are not competitive on price and on production schedules,' said Andrei Krayniy, head of the Federal Fishing Agency.
'In the Norwegian Sea, where we work with Norwegians, our ships fish next to each other and still our costs are 25 percent higher because of lousy engines,' he added.
His comments were echoed by Sergei Frank, general director of Sovcomflot, one of the shipbuilding sector's biggest clients.
'Up to 80 percent of equipment at Russian docks is outdated and it is difficult to build competitive ships,' Frank said, adding that a major ship took 30 months to build in Russia but half as long in South Korea.
Illustrating problems in the sector, the Amur Shipbuilding Enterprise -- one of the main producers and modernisers of submarines in Soviet days -- is on the verge of bankruptcy.
Putin said an agreement has been reached, under which private shareholders would sell a 59 percent stake in the shipbuilder to Russia's largest lender Sberbank for a nominal in fee. Sberbank would then pass the shares into the control of the state United Shipbuilding Corporation (USC).
That would take USC's stake in the factory to around 77 percent. At the same time, state-controlled Sberbank would lend the factory $400 million for 10 years to help modernise it.
'I don't understand how one managed to privatise an enterprise which specialises in producing nuclear submarines,' Deputy Prime Minister Sergei Ivanov told reporters.
'Private owners have yielded no positive results ... The enterprise found itself on the brink of bankruptcy.'
(Reporting by Oleg Shchedrov, writing by Toni Vorobyova; Editing by David Cowell) Keywords: RUSSIA SHIPPING/
(antonina.vorobyova@; Tel: +7495 7751242, Reuters Messaging: antonina.vorobyova.@)
President Dmitry Medvedev to meet with CPRF leadership
MOSCOW, May 12 (Itar-Tass) - President Dmitry Medvedev goes ahead with the practice of consultations with the main political parties of Russia.
The Head of State is to receive the leadership of the Communist Party of the Russian Federation at the Barvikha residence on Tuesday. Earlier he held similar meetings with the leading members of the United Russia and the Just Russia parties.
Tuesday's participants in the upcoming consultations take, on the whole, a positive view of this practice, just as of the President's striving for a dialogue with all poltical forces.
Police officer killed in shootout in Russia's Daghestan
MAKHACHKALA, May 12 (RIA Novosti) - A police officer was killed overnight and three other people injured in a drive-by shooting in Russia's southern republic of Daghestan, a local Interior Ministry official said on Tuesday.
The spokesperson said the incident occurred on Monday evening near a town market in the Kizilyurt district, when gunmen opened fire on the police officer from a vehicle.
"The police officer died instantly, three people who were standing near the officer were wounded," he said.
A woman and two men have been hospitalized.
Investigators worked at the scene overnight and a search has been launched to try and trace the attackers.
Sporadic militant attacks and clashes remain common in Russia's North Caucasus republics neighboring Chechnya, although the Kremlin campaign to fight separatists and terrorists there was formally declared concluded. Violence often spills over into the republics, in particular Ingushetia and Daghestan.
Russia to play key part in nuclear comeback
12 May, 2009, 07:24
Russia is about to enter a new era of cooperation with Japan on nuclear energy, as the energy source undergoes a renaissance at home.
With the threat of global warming increasing, nuclear power has a renewed appeal. Going Atomic…With the world's fossil fuel resources rapidly depleting, many governments are now taking a closer look at the potential of nuclear energy.
Russia is no exception. It currently has 31 operating reactors in 11 locations – mostly in the European part of the country. And the authorities are hoping to double that to cut down its dependence on oil and gas to generate electricity.
Nuclear power plants provide 16% of the country’s overall output. And now with the increasing energy demand the government hopes to boost this figure up to 25% in the next 15 years. These ambitious plans are now starting to find their way into reality.
By 2011, the Kalininskaya power plant – some 350 km from Moscow – is expecting to launch a new reactor. It'll be capable of supplying half of the capital's energy needs all by itself, saving up to 450 million tons of oil annually.
Russia has decades of experience in the nuclear energy. But there were also major disasters along the way. The Chernobyl nuclear power plant, in present-day Ukraine, exploded in April 1986, and is regarded as the worst atomic accident in history.
After that many started to question the safety of atomic power. But scientists such as Yaroslav Shtrombakh, Kurchatov Institute Deputy Director, are offering reassurances.
“After the Chernobyl incident a lot of work has been done to make the reactors safe. Now in Russia there are still 11 chernobyl type of reactors operating, but with all the modifications, they are 100% safe.”
Other countries are hoping to use the expertise of Russian nuclear energy technology with deals signed around the world. When the new reactor is unveiled in two years, it will by the latest contribution by Russia towards planning for a post-fossil fuel energy future.
Russia's Glonass system to get full state support - deputy PM
MOSOW, May 12 (RIA Novosti) - Russia will not cut funding for its Glonass satellite navigation program despite the current economic crisis, a deputy prime minister said on Tuesday.
Glonass - the Global Navigation Satellite System - is the Russian equivalent of the U.S. Global Positioning System, or GPS, and is designed for both military and civilian use. Both systems allow users to determine their positions to within a few meters.
"Despite economic difficulties financing [for the Glonass program] in 2009 will remain unchanged, without any cuts or limitations," Sergei Ivanov said at the International Satellite Navigation Forum in Moscow.
Ivanov said the Glonass grouping currently consisted of 20 satellites. The system requires 18 satellites for continuous navigation services covering the entire territory of the Russian Federation, and 24 satellites to provide services worldwide.
A total of 9.9 billion rubles ($360 million at the current exchange rate) was allocated for Glonass from the federal budget in 2007, and 4.7 billion rubles ($170 million) in 2006.
Prime Minister Vladimir Putin signed a directive on September 12, 2008 allocating an additional $2.6 billion to develop the system.
Six new Glonass satellites will be added to the network in 2009.
Head of Russia's Federal Space Agency, Anatoly Perminov, earlier said the number of satellites in the Glonass network would be increased to 30 by 2011.
New Russian fighter jet due by year-end
KOMSOMOLSK-ON-AMUR , Russia, May 11 (UPI) -- Russia's fifth-generation jet fighter will undergo its first test flights by the end of the year, military officials said Monday.
Russian Deputy Prime Minister Sergei Ivanov told reporters after a shipbuilding meeting in the Far Eastern city of Komsomolsk-on-Amur that full-scale production of the advanced multi-role fighter will start in 2010, RIA Novosti reported.
"By the end of this year, the plane will rise into the air and flight tests will begin," Ivanov said.
The first prototype of the fighter, being developed by the Sukhoi aircraft maker, is scheduled to make its maiden flight before the end of 2009, the news agency said.
Military Commissions Arms
The military commissioned intercontinental ballistic missiles and rockets for its newest air-defense systems last year as the government stepped up funding to restore its might.
The army added 17 ICBMs, four short-range Iskander missile complexes and 34 rockets for the S-400 air-defense systems, Deputy Prime Minister Sergei Ivanov told Prime Minister Vladimir Putin on May 6, according to a transcript posted on the Cabinet web site.
This year, the country plans to spend 1.3 trillion rubles ($40 billion) on weapons, upgrades, as well as fuel and food for the military, he said, without giving comparative figures. (Bloomberg)
Russia Stockpiles the Gems, Awaiting the Return of Demand
By ANDREW E. KRAMER
Published: May 11, 2009
MOSCOW — The global recession sapped demand for all kinds of commodities — like steel and grain — yet small burlap bags are still arriving by the planeload at Russia’s state-owned diamond company.
Each day, the contents of the bags spill into the stainless steel hoppers of the receiving room. The diamonds are washed and sorted by size, clarity, shape and quality; then, rather than being sent to be sold around the world, they are wrapped in paper and whisked away to a vault — about three million carats worth of gems every month.
“Each one of them is so unusual,” said Irina V. Tkachuk, one of the few hundred people, mostly women, employed to sort the diamonds, who sees thousands of them every day.
“I’m not a robot. I sometimes think to myself ‘wow, what a pretty diamond. I would like that one.’ They are all so beautiful.”
It could be years before another woman admires that stone. Russia quietly passed a milestone this year: surpassing De Beers as the world’s largest diamond producer. But the global market for diamonds is so dismal that the Alrosa diamond company, 90 percent owned by the Russian government, has not sold a rough stone on the open market since December, and has stockpiled them instead.
As a result, Russia has become the arbiter of global diamond prices. Its decisions on production and sales will determine the value of diamonds on rings and in jewelry stores for years to come, in one of the most surprising consequences of this recession.
Largely because of the jewelry bear market, De Beers’s fortunes have sunk. Short of cash, the company had to raise $800 million from stockholders in just the last six months.
The recession also coincided with a settlement with European Union antitrust authorities that ended a longtime De Beers policy of stockpiling diamonds, in cooperation with Alrosa, to keep prices up.
Though it is a major commodity producer, Russia has traditionally not embraced policies that artificially keep prices up. In oil, for example, Russia benefits from the oil cartel’s cuts in production, but does not participate in them.
Diamonds are an exception. “If you don’t support the price,” Andrei V. Polyakov, a spokesman for Alrosa, said, “a diamond becomes a mere piece of carbon.”
In an attempt to carefully calibrate its re-entry on the global market, without forcing prices still lower, Russia is relying on two things: the Soviet-era precious gem depository — created to hold jewelry confiscated from the aristocracy after the 1917 revolution — and capitalist investors, whom Alrosa hopes will buy diamonds as an investment, like gold.
Russia is taking a leadership role in other ways, too.
Sergei Vybornov, Alrosa’s chief executive, said that he had helped persuade the central bank of Angola — which, like Russia, is still relatively flush with oil money — to buy 30 percent of the production of Angola’s diamond mines, keeping these stones off the market.
And last fall, Alrosa began what it called the St. Petersburg Initiative, along with De Beers and other large producers, to invest collectively in generic diamond advertising, akin to De Beers’s promotion of the slogan “Diamonds are forever.” Russia assumed the task as De Beers has principally shifted to promoting its own branded gems.
Still, it is a precarious time for the Russian diamond company to assume leadership of the industry.
Until last year, De Beers produced about 40 percent of the global rough stone supply, and Alrosa 25 percent. But De Beers, which is prohibited under its European Union antitrust agreement from stockpiling, closed mines in response to the glut in rough stones. Russia is loath to do that, as authorities in Moscow, gravely concerned about potential unrest by disgruntled unemployed workers, try to keep workers on the payroll.
In the first quarter, De Beers reduced output by 91 percent compared with the previous year. The diversified mining companies Rio Tinto and BHP Billiton also curbed production.
Meanwhile, the market for wholesale polished diamonds, worth about $21.5 billion, is expected to fall to about $12 billion in 2009, according to Polished Prices, an analytical service for the industry.
Rough diamond prices have fallen even more, as much as 75 percent since their peak last July at some auctions.
The two markets are distinct. Typically, about 60 percent of a rough diamond is lost as dust or shavings in the cutting process.
Mr. Vybornov blames diamond traders who pledged diamond stocks as loan collateral for part of the world glut. When credit dried up last fall, banks and other creditors seized those gems and sold them, he says, flooding the market. By December, his company decided to withdraw entirely from the market rather than further erode prices.
Russia historically remained mostly a behind-the-scenes player, perhaps because Soviet authorities would have had to perform some ideological gymnastics to promote a product consumed principally by the rich of the capitalist world. Instead, twisting politics, the Soviets concluded a semisecret agreement with apartheid-era De Beers to sell Siberian diamonds in a way that would not undercut the market.
After the collapse of the Soviet Union, the Russian diamond industry created a formal alliance with De Beers, selling the South African company half of each year’s production at a discount intended to subsidize De Beers’s generic diamond advertising undertaken in the 1990s, mostly in the United States.
Now, the Russians are in the driver’s seat.
Charles Wyndham, a former De Beers evaluator and co-founder of Polished Prices, said Russia had thus far managed the transition well: withholding gems to make more money in the long run rather than further depressing the market.
“Whatever one wants to say about the Russians, they certainly aren’t stupid,” Mr. Wyndham said.
Alrosa is seeking to jump-start demand by selling gems under long-term contracts to wholesale buyers in Belgium, Israel, India and elsewhere. Under these contracts, six of which have been signed, prices are set at a midpoint between the peak last August and this winter, and fixed for a period of several years.
“A diamond ring should not cost $100,” Mr. Vybornov said. “We don’t want that type of client.”
Alrosa is also working with a Moscow investment bank, Leader, a subsidiary of the Russian natural gas monopoly Gazprom, to market diamonds to investors. Under the plan, investors would buy diamonds but the gems would not be released to jewelers for several years.
It is a program, essentially, of outsourcing the stockpiling function to investors in exchange for the chance to profit from a possible recovery in the market.
At one of Alrosa’s cutting shops in one of Moscow’s outer districts, Aleksandr A. Malinin, an adviser to the president of Alrosa, showed a typical collection that might become the basis for such an investment vehicle.
The gems fit in a felt box about the size of a laptop computer.
The larger stones, a circular-cut 10 carat flawless white and a princess-cut yellow, were estimated at about $400,000. The smaller ones ranged from $16,000 to $100,000. But the value of the box, while surely several million dollars, is something of a mystery just now given the depressed market.
How the buy-in price for the stones will be set, and how the company will determine when the price goes up and down, is unclear, Mr. Malinin said.
“We have to tell people that diamonds are valuable,” he said. “We are trying to maintain the price, just as De Beers did, as all diamond producing countries do. But what we are doing is selling an illusion,” meaning a product with no utility and a price that depends on the continued sense of scarcity where there is none.
At the Alrosa unit that receives diamonds, called the United Selling Organization, where about 90 percent of the output of the Siberian mines arrives for processing, Elena V. Kapustkina pours about 45,000 carats of diamonds though a stainless steel sieve every day to sort them by size.
“It’s just a job,” she said.
When asked whether diamonds had lost their romance for her, Ms. Kapustkina paused, looked down at the pile of gems on her table and blushed.
In fact, she said, her husband, a truck driver, gave her a half-carat ring 22 years ago. “Of course I love it,” she said. “It’s from my husband.”
UK rights activists defends banned Moscow Gay Pride parade
Today, 10:36 PM
A prominent British human rights activist has praised the decision of Moscow gays to hold a Gay Pride parade that has been banned by the city authorities.
"Although I am determined to support our Russian and Belarusian comrades, like them I am anxious about what may happen to us. But we have to take some risks; otherwise the homophobes and authoritarians will win,” Peter Tatchell was quoted by politics.co.uk as saying Monday.
"At Moscow Pride in 2007 I was beaten almost unconscious by right-wing extremists, while the police stood by and watched. They then arrested me."
There have been warnings that anyone joining the march will face "tough measures", and "I don't have much confidence that the Moscow police will accept our right to protest or that they will protect us against neo-Nazi violence," he said.
Gay Pride marches in Russia have a habit of attracting neo-Nazis to demonstrate against them. Gay rights activists say police often stand by while neo-fascists attack the demonstrations.
This Saturday's Moscow Gay Pride parade has been renamed Slavic Gay Pride to support the lesbian, gay, bisexual and transgender equality struggles in all Slavic countries, Russian and non-Russian.
It will coincide with the final of the Eurovision song contest which is being held later that night, also in Moscow.
National Economic Trends
Russia daily c.bank swap limit at 5 bln rbls
05.12.09, 03:45 AM EDT
MOSCOW, May 12 (Reuters) - Russia set the daily limit for currency swap operations with the central bank at 5 billion roubles ($153.6 million) on Tuesday, the same as in the previous trading session on Friday.
Limits on how much foreign currency banks can swap for roubles in the central bank were introduced from Oct. 20 in a bid to hinder currency speculators. Operations which do not involve the central bank are unaffected. ($1=32.55 Rouble)
Russia Pension Funds Gain Most in Four Years, Kommersant Says
By William Mauldin
May 12 (Bloomberg) -- Russia’s official pension funds grew at an annualized 29.7 percent rate in the first quarter, the best three-month return in four years, Kommersant said.
Troika Dialog, Russia’s oldest brokerage, managed the pension fund with the best performance, the newspaper said, citing data it compiled itself.
Vnesheconombank, Russia’s state development bank, oversees 388 billion rubles ($12 billion) in pensions, while non-government managers registered with the state manage 35.6 billion rubles, Kommersant reported.
The price of Russia’s benchmark 30-year dollar bond increased 7.4 percent in the first quarter, or an annualized 33 percent, according to data compiled by Bloomberg.
To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@
Last Updated: May 12, 2009 02:13 EDT
New official forecast: 6% GDP decline in 2009
Rencap, Russia
Tuesday, May 12, 2009
On 24 Apr Reuters reported that the Ministry of Economic Development (MET) downgraded its 2009 macroeconomic forecasts. The MET now expects the economy to shrink 6% this year, almost three times more than its previous forecast of a 2.2% decline in 2009 (made in Mar 2009). The MET expects industrial production to drop 9.1% this year (from a previously forecast 7.4% decline); fixed investment to decline 21.1% (from a previous figure of 13.8%); and retail sales will decrease 4.9% (from a growth forecast of 0.3%).
We think that the main reason for lowering forecasts revisions is the poor performance of the Russian economy in 1Q09.
According to MET estimates, GDP dropped 9.5% YoY in 1Q09. The MET had initially estimated GDP would decline 5-6% YoY in 1Q09 (this estimation was used for the MET's previous macro forecasts). The new macroeconomic forecast will be considered by the government budget committee at the end of May.
EBRD cuts Russia's 2009 growth forecast from 1% to -7.5%
Alfa, Russia
Tuesday, May 12, 2009
In response to the collapse in Russia's GDP by an estimated 9.5% in 1Q09, the EBRD has lowered its GDP growth forecast to -7.5% for this year. This new estimate is subject to revision in the event that the 1Q09 growth structure changes or the final GDP figure turns out different from the current estimate.
We note that the EBRD's new forecast assumes the worst-case scenario for Russian economic growth in 2009. It is also important that the Russian government's new forecast, expected to be in the range of -6% to -7.4%, is between the recent IMF forecast and the new EBRD figure.
Our take is that investment growth will be central to determining GDP growth in Russia this year and the next. The country's consumption boom of the last several years translated into rapid import growth and thus was largely offset by the decline in net exports. In a similar way, the decline in consumption expected in 2009-2010 will be compensated for by a decline in imports. Also, the key negative surprise of 1Q09, which explains the very weak growth, was the 15% decline in investment, which showed the state's inability to carry out a proactive, growth-focused policy. Thus, we believe a more efficient fiscal stimulus is the best way to avoid a contraction in GDP in the coming years.
Business, Energy or Environmental regulations or discussions
VEB Toughens Standards
Vneshekonombank, which dispenses Russia's economic stimulus funds, will grant subordinated loans only to banks that have 3.5 billion rubles ($108 million) of capital, limiting access to fewer than 100 lenders.
VEB also will require banks to lend the money they borrow to priority industries as the government seeks to revive the shrinking economy, the state lender said late Thursday. (Bloomberg)
VEB to lend $250mln to airlines for 13 years for acquisition of Superjets – Ivanov
ttp://article/1009/42/377012.htm
Vneshekonombank will provide $250 million in 13-year loans to local airlines for orders of Sukhoi Civil Aircraft Co.'s SuperJet regional aircraft, Deputy Prime Minister Sergei Ivanov said Monday. (Bloomberg)
VEB approves subordinated loans to Russian Standard and Promsvyazbank
Rencap, Russia
Tuesday, May 12, 2009
Last Thursday (7 May), VEB announced that its supervisory board had granted approval to provide subordinated loans totalling RUB19.2bn to 10 privately-owned banks. We view the announcement as positive for both the individual institutions and the entire Russian banking system. The largest amounts have been assigned to Promsvyazbank and Russian Standard Bank (RUB4.0bn and RUB4.96bn, respectively) .
With regard to Promsvyazbank, the receipt of capital from the state should be considered in conjunction with accelerated loan-loss provisioning. In 1Q09, the bank increased loan provisioning 1.7% (from 6.3% to 8.0%, according to RAS) and therefore reported a loss of RUB2bn. Given the capital injection from the state, the bank will be able to support its capital adequacy at acceptable levels and continue building provisions, which we regard as a reasonably positive scenario.
With regard to Russian Standard Bank, we do not think the application for VEB loans was driven by a need for capital, as even before this, the bank's total capital adequacy ratio would exceed 20%, while the new capital raising would bring it to around 23%. Therefore, we tend to view the RUB5bn loan from VEB as a long-term funding source, which should be very useful to the bank in the current market conditions.
We see no direct implications of Thursday's announcement for bond pricing. However, we reiterate our positive view on Russian Standard's credit (especially given the very large scale of funding support from the state) and note that, despite the recent strong performance of its bonds, yields of around 35-40% (RUSB-10 and 11) still seem attractive to us.
Maxim Raskosnov
Russian credit growth decelerating rapidly
Citibank, Russia
May 12, 2009
Access to funding remains limited. The Russian banking system relies to a large extent on wholesale funding - of the top 15 banks, only Sberbank has a ratio of corporate and individuals deposits to total liabilities of about 50%. While the CBR has stepped in aggressively with the liquidity support in 4Q09, it has been short-term and is being gradually reduced in 1Q09. Furthermore, deposits from individuals and corporates have stagnated as a result of the concerns about the health of the financial system and economic slowdown (real GDP contracted in 1Q09 by 9.5%, according to the Ministry of Economic Development).
Banks asset quality is deteriorating rapidly. The CBR reports loans overdue, which is the proportion of the loan overdue (as opposed to the total amount of the loan), by more than one day. Total loans overdue have increased to about 3% for the largest banks, with loans overdue increasing most rapidly for those banks in the 6-20th by asset size.
According to our estimates, NPLs based on asset classification are most likely already over 10% for most banks, and look set to peak at 20% by the end of the year. In 1Q, many banks already registered losses and therefore will have to absorb increasing NPLs mostly from capital in 2009.
The sharp deceleration in credits is likely to lead to lower growth and higher NPLs.
According to the Interfax data, credit growth turned negative QoQ for most of the leading banks in 1Q09. We are concerned about the reinforcing downwards spiral, where limited access to credit may lead to lower economic performance and subsequently higher NPLs. However, in our view, setting numeric credit growth targets will address the "symptoms" rather than the "disease". The key should be addressing banks' undercapitalisation and improving risk management procedures.
Electricity consumption decreased 8.1%y-o-y during the first week of May
Citibank, Russia
May 12, 2009
Electricity consumption decreased 8.1%y-o-y and 6.1% w-o-w during the first week of May, Interfax reports, citing Market Council. The decline looks to be high compared to the range of negative 4%-6.5% seen in February-April this year and higher than the sharp January contraction of -7.7% yoy.
Mechel's Kuzbass power sales co could pass on 2008 dividends
MOSCOW. May 12 (Interfax) - Directors at the Mechel (RTS: MTLR)
coal and steel group's Kuzbass Power sales Company (Kuzbassenergosbyt)
(RTS: KZBE) have recommended a dividend waiver for 2008, the company
said in materials.
Net profit for 2008 was 227.12 million rubles, of which the company
proposes to retain 200.6 million rubles and reinvest the remainder.
The company did not pay dividends for 2007 either.
The AGM takes place on June 15 and the register closed on May 8.
OJSC Mechel-Energo owns 72.14% ordinary shares and Siberian Coal
and Energy Company (SUEK) owns 25.2% of Kuzbassenergosbyt, which
controls 36% of the Kemerovo region's electricity market.
Severstal to unveil Q1 IFRS results May 15
MOSCOW. May 12 (Interfax) - Severstal (RTS: CHMF) will unveil its
Q1 2009 financial results to International Financial Reporting Standards
(IFRS) on May 15, the Russian steel major said.
Russian steelmakers gain market share
Rencap, Russia
Tuesday, May 12, 2009
Event: On Friday (8 May), NLMK said it had restarted its 1.7mn tpa blast furnace (BF) #4. The Lipetsk production site is currently running all five of its blast furnaces. NLMK expects 8.3mnt of steel output at Lipetsk and total steel output of 10mnt this year. Earlier last week, Evraz confirmed that its only idled BF (2.3mn tpa capacity) is expected to be started at the ZSMK site in June. The decision reflects rising steel demand in China. According to Evraz's CFO, Pavel Tatianin, "ZSMK may successfully compete with the Chinese steel producers due to technical upgrade conducted on ZSMK facilities in 2005-2007."
The decisions of steel producers underpin our view that Russian steel mills remain far more competitive on major export markets in the current environment. Evraz and NLMK maintain 15-20% global slab market shares. Mass media speculated last week that Corus may shut its Teesside plant in the UK, as a slab deal had fallen through. In 2004, Corus signed an offtake agreement with a Marcegaglia-Dongkuk-Duferco consortium to sell 78% of the plant's slab production for 10 years. The consortium members have since initiated moves to terminate the contract. Corus is unable to break even at the Teesside plant at $300-330/tonne (FOB) for slab, and the consortium members are unwilling to source slabs from Corus at a higher price. In our view, Russian steelmakers have a fair chance of taking Teesside's market share in this situation. We note that about 50% of NLMK's 1Q09 slab volumes were supplied to NLMK-Duferco JV facilities.
Boris Krasnojenov
Deripaska may sell construction business-paper
Tue May 12, 2009 2:39am EDT
MOSCOW, May 12 (Reuters) - Indebted Russian tycoon Oleg Deripaska is seeking a buyer for his construction and development businesses, Vedomosti business daily reported on Tuesday, quoting unnamed sources.
The newspaper quoted a source close to Deripaska's holding company, Basic Element, as saying that the businessmen had asked Sputnik consultancy to search for a buyer.
Another source, this time close to Deripaska's construction firm, Glavstroi, said options under discussion included the partial sale of the least profitable businesses and the total sale of all construction and development units.
The daily quoted Basic Element spokesman Sergei Babichenko as saying the construction business remained a priority for the firm.
The daily said Glavstroi had debts of around 47 billion roubles ($1.44 billion), owed mainly to Russian banks. Analysts estimate the total debt accumulated by those companies in which Basic Element owns a stake at about $20 billion. Under a separate deal, Deripaska is set to hand back a 25 percent stake in Austrian builder Strabag (STRV.VI: Quote, Profile, Research, Stock Buzz) to Strabag's other key shareholders. ($1=32.55 Rouble) (Writing by Gleb Bryanski; Editing by Jon Loades-Carter)
IUD suspends construction of steel rolling plant in Armavir
Tuesday, 12 May 2009
Steelorbis reported that the Ukrainian steel producer Industrial Union of Donbass has temporarily frozen the construction of its new steel rolling plant in Armavir, located in Krasnodar, Russia due to the weakening of its financial performance.
According to the reports, IUD is currently looking to secure funds from European banks, in order to continue the construction of its plant in Armavir, and has invited an international engineering consulting company Atkins, which is carrying out an independent capital project evaluation and is designing an international business plan for the company. The further construction of the plant depends on the evaluation in question.
IUD started the construction of its new steel rolling plant in Armavir in September 2006, and was planning to invest about USD 200 million to 250 million. The plant will include a steel melting shop of 1.5 million tonnes annual capacity a bar and section mill of 600,000 tonne to 700,000 tonne annual capacity and a wire rod mill with an annual capacity of 400,000 tonnes to 500,000 tonnes.
(Sourced from Steelorbis)
Railway Cargo Turnover: Continuous Recovery
VTB Capital
May 12, 2009
Russian Railways has released highlights of its April transportation statistics. As railways account for 85% of cargo transportation in Russia, the dynamics are a good proxy for changes in industrial output.
In April, railway cargo turnover dropped 14.6% YoY, an improvement on the 20.1% YoY decrease in March. The decelerating decline in transportation might imply that the drop in industrial production (13.7% YoY in March) is also slowing (we estimate to 11.9% YoY in April). This corresponds with the constant improvements in the Russian Manufacturing PMI, which rose from 42 in March to 43.3 in April.
Analysing transportation volume dynamics for particular cargos might shed light on the situation in specific sectors of the economy. The decelerating drop in turnover corresponds with a slight improvement in the key cargos: coal (25% of total cargo in March) dropped 13%, compared with the 16% YoY fall in March, while oil and oil products (22% of the total) were down only 2% YoY in April from the 4% YoY decrease in the previous month. While the latter is one of the most resilient cargos due to the relative stability of oil production, an improvement in coal transportation reflects a revival in the metals industry. Steel makers used up their inventories and are currently restocking: iron ore also demonstrated an improvement, from -19% YoY in March to -16% YoY in April. However, ferrous metals themselves have not demonstrated positive dynamics yet (-36% in April vs the 32% drop in April), although we expect to see this in the coming months. The construction materials segment (11% of the total) also continues to stagnate, with transportation volumes down 39% YoY.
Russian truck maker KamAZ resumes work after three-week halt
KAZAN, May 12 (RIA Novosti) - Russia's largest truck maker KamAZ has resumed production, after a lack of orders led to a three-week halt, a spokesman for the truck producer said on Tuesday.
"The main assembly line was halted on April 23 as KamAZ completed its orders for the month. Today KamAZ's main assembly line and all production units have restarted work," the spokesman said.
The ongoing global financial and economic crisis has caused a slump in world demand for vehicles. Since the start of the year, the Volga-based truck producer has been based only on the concrete orders. In the past 18 months, KamAZ has suspended production several times.
KamAZ dispatched over 2,500 trucks and auto sets to consumers in April or 300 vehicles more than in March, the spokesman said.
KamAZ, which is based in Naberezhnye Chelny in the Volga republic of Tatarstan, produced about 13,200 trucks in January-March 2009 or 61% less than in the same period last year, the spokesman said.
Auto factories throughout Russia have been hard-hit by rising prices for auto parts and other supplies, and declining sales.
GAZ autoworks restarts conveyor Tue after May holidays
NIZHNY NOVGOROD, May 12 (Itar-Tass) - Following the May holidays, the Gorky autoworks (GAZ) on Tuesday restarts the conveyor assembly line, which was shut down on April 30.
An official in the press service of the GAZ Group Company, of which the autoworks is part, has told Itar-Tass that the factory is planning to operate on a four-workday basis.
"The transition from a three-day schedule to a four-day one is prompted by the need to make up for the days-off during the May holidays," the press service official specified.
The Company official pointedout that the autoworks would operate within the scope of the management-approved system for a flexible planning of production. The system makes it possible to analyse and take into account an actual demand for motor vehicles on the market.
GAZ Group executives said the May production plans did not change so far. In May, the autoworks is planning to turn out about 5,000 lightweight commercial and medium-tonnage vehicles.
The GAZ Group is Russia's largest maker of commercial motor vehicles and roadmakng machinery. The company comprises the Gorky autoworks, 18 vehicle makers in Russia, sales and service organisations.
Monday, May 11, 2009, 9:03am EDT
Iridium seeks Russian satellite services market
Washington Business Journal - by Tucker Echols Staff Reporter
U.S. satellites have passed over Russia for a generation. Now Iridium Satellite LLC is offering the Russians a chance to use them.
Bethesda-based Iridium Satellite announced Monday that is has begun the process of entering the Russian market for mobile satellite services, forming a company called, "Iridium Communications Russia, OOO" to pursue a license for providing such services in Russia.
Iridium believes its low-earth orbiting satellite constellation can provide services where no other means of communication exist in Russia, particularly across extensive, open land masses and northern sea routes without telecommunications infrastructure.
New Arctic bulk carrier for Murmansk Shipping Company
2009-05-11
The Murmansk Shipping Company has officially taken over its new ice protected bulk carrier constructed at the Chinese Chengxi Shipyard.
The ship “Severnaya Zemlya” is the last of five new ice protected vessels of the Russian shipping company. The 31,755 ton deadweight vessel will be registered in the Russian Ship Register, a press release from the company reads.
The Murmansk Shipping Company handles about 80 percent of shipping along the Northern Sea Route. The company fleet has a total deadweight of 1,2 million tons. Until last year, the company also had management responsibility for the Russian state-owned fleet of nuclear powered icebreakers.
MOSCOW BLOG: Investors take big bets
bne
May 12, 2009
The outlook for the global economy is black, according to the International Monetary Fund (IMF) and others, but in the last few months a few investors have made massive bets, while stock markets across the region have soared. A big disconnect has appeared between what the analysts say and investors believe.
"Official agencies are now almost competing with each other in terms of portraying a grim global outlook for the region/global economy," Royal Bank of Scotland's Timothy Ash said in a note on May 7. "The contrast is stark with rallying markets/rising risk appetite. Someone is evidently wrong, or else this just provides a very low base for a jump in 2010-2011."
Now that investors are no long dodging falling rocks, some have started to think about the long term and are betting heavily that emerging Europe, and Russia in particular, will return to its growth path, albeit at a reduced rate, sometime soon.
New Zealand billionaire Richard Chandler made a huge bet at the end of March shortly after the main Russian stock market index (RTS) passed its low, buying a 3% stake in Russia's state-owned Sberbank for about $430m, Kommersant reported. In just two months, Chandler has almost doubled his money already.
Likewise at the end of December Prosperity Capital Management, the largest portfolio fund dedicated to Eastern Europe, took in its single biggest investment ever. The Norwegian Petroleum Fund, the Scandinavian sovereign wealth fund, pumped an undisclosed amount into the fund, which analysts say must have also on the order of several hundred million dollars.
And at the bottom of the scale, Central and Eastern Europe's leading retail fund, Sweden's East Capital, reports that it has also seen inflows in the last two months as confidence returns. "I am a lot more optimistic, but it is easy to be optimistic against the negative backdrop of only a few weeks ago. The investment sentiment has improved and we are seeing inflows, especially in Russia," says Karine Hirn, co-founder of East Capital. "Is this just a bear market rally? It is hard to say, but we need three things to see growth that is not just a function of short-term trading."
At the start of this year, few banks would be drawn on their end-of-year target for the RTS, but those that did put a number on it guess it would reach about 1,000 by the end of December. Now it looks like the RTS will pass the 1000-point in the next few weeks.
The trend is your friend
By now it's clear that the rally on emerging Europe's exchanges in the last two months is more than just a bear market rally. It has been too strong and gone on for too long.
Equity markets typically oversell in the midst of a crisis and then bounce back to more reasonable levels. Looking back to the 1998 financial crisis, investors enjoyed a bear market in October. But that time the market rose 20% over about two weeks and then leveled off. This time, Russia has enjoyed nine weeks of uninterrupted inflows and the index is up just short of 90% from the March lows to close at 938 on May 8 – still well off the 2000 mark the RTS was at last August as the storm clouds began to gather.
[pic]
Why has the market rallied so strongly? There are several factors going into the pot.
First is oil prices have firmed and speculation in February that the cost of a barrel would fall to $20-$25 dollars has proven unfounded. Instead, $40 has proven to be a pretty solid floor to the prices and Russia runs a trade surplus at this level. The subsequent rise of oil prices since the start of spring to $58 at the time of writing has fuelled enthusiasm.
Second is sentiment. Russian equity prices were clearly unduly punished in the sell-off, falling by more than any other market – both emerging and developed – in the world. At its nadir, Russian stocks were by far the cheapest in the world, which always tempts in some bottom fishers with a long-term perspective. The difference this time is the subsequent rally has been so strong that some investors have been tempted in to ride the rally giving it an extra impetus.
Global emerging market funds have avoided Russia in the first quarter, but Chris Weafer of Uralsib says the rally was so strong that some funds were forced to join the party. "The big investment funds neither sold into the strength of the market nor added any significant new positions so that, at end March, the average portfolio position in Russia remained underweight. But as the strong performance of Russian equities continued through April, evidence from the weekly funds flow is that investors are becoming less comfortable with an underweight – or even neutral – position. By the end of April, investors were starting to put more sizeable new money into Russia funds," says Weafer.
[pic] A third factor is that dedicated Russia investors have seen this movie before and know how it ends. Russia's future in 1998 was very uncertain. It had a drunk president controlled by a small group of powerful oligarchs. Capital flight was rampant and analysts cheered when economic growth turned positive for the first time for a few months in 1997. No one had any idea that the economy would blossom and put in a record 10% growth only a year after the crash. But with a decade of restructuring and investment (albeit too little, too late) under its belt, investors close to the country have a religious faith that the growth will resume and good companies that now have a 10-year track record will return to profitability sometime in the foreseeable future. Having done a lot of work to build up their credit histories and prove their business model is viable, when confidence returns the pick-up process should go a lot faster than it did in the first few years of this decade.
Growth and the "Twilight Zone"
There is still a lot of uncertainty about where things go from here. VTB Capital's Ivan Ivanchenko and Kirill Nikiforov caught the mood nicely with a spoof conversation between a cautious Russian investor hesitating about investing and a member of what used to be called the "hooray crowd" of Russia enthusiasts, who said now's the time to cash in.
The debate over the prospects for growth illustrates clearly the two camps. The IMF has come out with extremely pessimistic forecasts, predicting Russia's economy will contract by 6% this year. On May 7, the EBRD also released its forecast, predicting a milder 3.8% contraction this year, and most investment banks have similar forecasts. However, fund managers appear a lot more optimistic and a few are guessing economic growth will be flat for 2009, on the back of rising oil prices and state spending.
The release of the IMF's Global Economic Forecast paper caused a round of editorials asking if the fund had overdone it. But the IMF has a vested interest in taking the most pessimistic view it can. In times of crisis, it needs to create an atmosphere of gloom and asks governments to make politically difficult cuts. The best way to generate the political will to push these measures through and sell them to the population is to persuade everyone that the world is on the edge of a chasm. For example, in 1999 the IMF predicted Russia's economy would contract by more than 5% and hyperinflation would return, just as the economy began to powerfully expand.
Brokers too tend to err on the downside, albeit for different reasons. No one was ever punished for picking a stock that suddenly did a lot better than expected, but you can lose your job very fast for choosing stocks that subsequently fall in value. Again, it was well into the summer of 2000 before Russia's investment banks began to talk up the market again, only after the growth was blindingly obvious.
One interesting way of explaining why stock markets might rally while economies are still contracting is what Robert Buckland of Citigroup Capital Markets calls the "Twilight Zone." Corporate earnings may still be falling as the last of the economic crisis works its way through, but share prices stabilize simply because the shares are so cheap that some patient investors are tempted to buy them.
The Twilight Zone is the second of three phases in a crash that comes between the collapse of a market and its return to normal growth. Buckland doesn't expect company earnings to start recovering until next year, but currently that doesn't matter as everyone is assuming they will. In the meantime you buy, as the stocks are cheap. The third phase will start next year, when the consensus is the region returns to growth, and share prices reconnect with a company's ability to make profits.
[pic]
It's different this time
The strength of this rally implies that investors believe "it's different this time." And as the old investment bank saw goes: these are the four most expensive words in the English language.
The academics say that following a deep crash it typically takes three and half years for a market to recover. Indeed, that's exactly what happened after 1998, as the RTS didn't return to its pre-crisis level of about 500 until October 2003.
Still, the optimists can make some pretty strong arguments for their case. A couple of unprecedented things have just happened. Unlike 1929 in the west and 1998 in the east, global governments have come together to put in place a $1 trillion rescue package. Given this crisis remains largely a crisis of confidence – remember, unlike 1998, nothing in Russia is actually broken and all the banks are still standing – if this money can restore global confidence, in theory, the recovery period could be much shorter.
Russia's economy has been knocked back to where it was in about 2003, but despite all the criticism concerning the Kremlin's failure to diversify the economy, an enormous amount of progress has been made. "If you compare Russia's economy in 1998 to this one, it is like night and day. This economy is fundamentally in better shape on nearly every count. The only indicators that are the same then and now is the average price to earnings ratio of Russian stocks – which simply doesn't make sense," says Liam Halligan, chief economist at Prosperity Capital Management.
Separately, the crisis is fundamentally a problem of failures in the western banking system which has spilled over to impact the east. However, the investment case and the convergence story in these markets remain intact.
An even more interesting extension of this argument is that the world has fundamentally changed: the decision to hold a G20, rather than a G7 or G8, meeting to bail out the world is the most concrete testament yet that the moniker "emerging" no longer applies to many of the countries in CEE, Asia and Latin America. Proponents of this argument point out that the world is in the middle of an unprecedented shift in economic power following the fall of communism. Everyone is pointing to China, one of the only countries in the world still growing strongly, which indeed has been the top destination for investors since the start of this year. They admit that China's GDP accounts for only 9% of the global total, but its extraordinary demand, coupled with that of Russia and the other "emerging" markets, will bring this crisis to an end a lot sooner than "normal." Certainly there can be little debate that the BRIC countries (China, Russia, India, Brazil) will emerge from this debacle with a bigger share of the global economy (barring another train wreck).
Against this, the naysayers have a simple and very strong argument: "it is never different." The rally on the stock market does seem to be overdone. Oil prices are rising, but so is unemployment, which is driving down demand. And while there are "green shoots" to point to, in general economies around the world are still going south. Another crunch is later this year is not unlikely at all if sentiment should shift again.
VTBC's Ivanchenko and Nikiforov sum up the debate nicely thus: "This conversation could last forever… as the arguments on both the cautious and the risk-taking sides are valid. However, the bottom line is that we are walking in the dark here and no amount of evidence can convincingly prove that the markets have turned for good."
Activity in the Oil and Gas sector (including regulatory)
Chinese Envoy to Russia: Oil Pipeline Serves Strategic Goals of Both Sides
BBC Monitoring 5/11/2009
URL:
The construction of the China-Russia oil pipeline conforms with the strategic goals of China and Russia to diversify the former's energy imports and latter's energy exports, Chinese Ambassador to Russia Liu Guchang has said.
The move reflects the two countries' confidence and determination to tide over together the current global economic downturn, Liu said in a recent written interview with Xinhua on Sunday.
The signing of a package of oil cooperation deals between China and Russia as well as the start of the oil pipeline project marked a major breakthrough in their energy cooperation, represented a new height of China-Russia strategic partnership of cooperation and further substantiate this partnership, Liu said.
Trade of crude via the pipeline will help stabilize and enhance the growth in bilateral trade, the diplomat added.
Under the agreement reached between both countries, China and Russia will jointly build and operate the pipeline from Russia's Siberian city of Skovorodino to China's northeastern city of Daqing as its terminal via China's border city of Mohe.
The construction of the Russian part of the pipeline started on April 27, and the Chinese part will be launched in mid-May. The pipeline, with an annual capacity of 15 million tons of crude to China within 20 years, is expected to go into operation in October 2010.
The two sides will study the feasibility of increasing its delivery capacity after the pipeline is put into production, Liu said. The project will ensure stable and secure oil supplies to China, open a stable and sound market for Russian oil, and boost the cooperation between enterprises of the two countries in oil exploration and refining, Liu said.
Such a cooperation mode may well serve as a good example for the two sides to further broaden and deepen their all-round, long-term and stable energy cooperation in natural gas, nuclear energy and electric power, Liu said.
Transneft negotiates placement of US$1bn Eurobonds
Citibank, Russia
May 12, 2009
Transneft recently secured a US$10bn loan from China and plans to receive the funds by the summer. The company intends to use the proceeds for construction of ESPO (East Siberia - Pacific Ocean) pipeline. The news on the Eurobond placement may indicate that the loan terms were less favourable compared to ones currently available in the bond markets due to growing interest in corporate bonds issuance.
LUKoil makes an offer to RITEK minorities
Alfa, Russia
Tuesday, May 12, 2009
Russian media reports that LUKoil made an offer to RITEK minority shareholders of R211 per ordinary and preferred share. The total price for the acquisition of shares it does not already own is $240m. LUKoil has a 74.6% stake in the company. RITEK produced 2.9m tons of oil in 2008 and has 326m tons of oil reserves according to the Russian C1 and C2 classifications.
LUKoil has publicly disclosed its intention to acquire minority stakes in consolidated subsidiaries. This offer suggests that LUKoil is paying $16,000 per bpd of 2008 production, while it is trading at about $22,000 per bpd itself.
The acquisition of minority stakes generates value for existing shareholders, provided the acquirer pays less than its own market value.
LUKOIL: Caspian development continues as planned
UralSib, Russia
May 12, 2009
First Caspian offshore platform basement anchored. On Friday newswires reported that LUKOIL (LKOH - Hold) had anchored the 1,340-ton basement block of its first stationary ice-resistant platform at the Yuriy Korchagin oil field on the Caspian Sea. The company plans to complete construction of the platform on this field in 2009. This news is positive from a strategic standpoint as it confirms LUKOIL's intentions to step up Caspian Sea development.
LUKOIL regards the region as its second core green field production center, after Timano-Pechora.
Vast reserve base ... From 1995-2008 LUKOIL discovered seven oil and gas fields in the Russian sector of the Caspian Sea: V. Filanovsky (3P reserves of 1.6 bln boe), Yu. Korchagin (3P reserves of 570 mln boe), Khvalynskoye, 170- km, Rakoushechnoye, Sarmatskoye and Centralnoye (discovered in May 2008 with geological resources of 730 mln boe). LUKOIL will launch development of the region with the V. Filanovskiy and Yu. Korchagin fields. In addition, LUKOIL has joint ventures with Rosneft in the Russian sector of the Caspian Sea and several PSA projects in the Kazakhstan and Azerbaijan offshore zones of the Caspian Sea.
... to support future production growth. LUKOIL plans to start crude oil production at the Yu. Korchagin and V. Filanovsky fields in December 2009 and 2011, respectively. The company estimates that the Yu. Korchagin and V.
Filanovsky fields will provide about 17 mbpa (2.3 mtpa) and 66 mbpa (9.1 mtpa) of crude by 2015, respectively. In our DCF-model Caspian development starts in 2010 and reaches 88 mbpa for all the projects by 2015 which comprises 12% of LUKOIL's total estimated production. The timing of the project and the production levels are in line with our DCF assumptions and are priced in our Hold recommendation for the stock and $39/share target price.
Victor Mishnyakov
Gazprom
Gazprom/DESFA agreed on Greek part of South Stream [pic]
[pic][pic]
12 May 2009 | 09:47 | FOCUS News Agency [pic][pic][pic]
Athens. The Hellenic Gas Transmission System Operator /DESFA/ and Russian Gazprom had signed an agreement on establishing joint company, which will build and manage Greek part of South Stream pipeline, Naftemporiki informs.
According to information Greek Minister of Development Kostis Hatzidakis will meet with Russian Ambassador to Greece on Wednesday to consider details on signing the agreement. It will be signed Friday in Moscow.
Such agreements had been signed with Serbia and Ukraine- countries through which north part of the pipeline will pass.
South part of the pipeline will past through Greece and will reach Italy through underwater equipment. Its capacity is about 10 bln m2 per year.
Significant part of the equipment will pass through Bulgaria, from where it will ramify to Serbia and Greece.
Agreement between Gazprоm and Bulgarian company has not been signed yet due to dissensions on network usage.
It is about to be signed after Russian and Bulgarian Prime Ministers Vladimir Putin and Sergey Stanishev had agreed on Moscow to built separate network on pipeline’s transit passing.
Gazprom and Eni set to sign one more intermediate agreement on South Stream
Alfa, Russia
Tuesday, May 12, 2009
According to today's Kommersant, on Friday (May 15) the Prime Ministers of Russia and Italy are going to sign one more intermediate agreement on the construction of the South Stream pipeline project. However, some disagreements still persist, in particular over the terms of gas marketing in the territory of transit countries and over volumes of gas sales, revenues from which should be split between Russia and Italy. Although this news adds some positives to the probability of this project being realized, and especially in light of the recent refusal from Turkmenistan to sign the agreement on Nabucco, we treat it as NEUTRAL for Gazprom.
MAY 12, 2009, 4:19 A.M. ET
UPDATE: Polish PGNiG OKs New Short-Term Deal With Gazprom
WARSAW (Dow Jones)--Poland's gas monopoly Polskie Gornictwo Naftowe i Gazownictwo SA (PGN.WA), or PGNiG, Tuesday approved terms for a new short-term agreement with Gazprom Export, a unit of Russian natural gas company OA) Gazprom (GAZP.RS), PGNiG said in a statement.
Under the agreement, Gazprom will deliver 1.024 cubic meters of natural gas by Sept. 30.
The value of the agreement is about $300 million, PGNiG said.
The deal replaces an agreement between PGNiG and Rosukrenergo AG, a Swiss-based trader jointly owned by Gazprom and two Ukrainian businessmen.
In February, Rosukrenergo was eliminated as an intermediary following a deal between Gazprom and Ukraine to end a dispute which caused a halt in Russian gas exports to Europe via Ukraine at the beginning of 2009.
Supplies from Rosukrenergo amounted to 24% of Polish imports via its eastern borders.
-By Malgorzata Halaba, Dow Jones Newswires; +4822 447-2430; malgorzata.halaba@
RosGas AG to Control 20 Percent of Hungarian Gas Distribution
[tt_news]=34975&tx_ttnews[backPid]=7&cHash=94c6684964
Publication: Eurasia Daily Monitor Volume: 6 Issue: 90
May 11, 2009 11:19 AM Age: 14 hrs
By: Roman Kupchinsky
Barely nine days after the Hungarian gas trader Emfesz KFT announced that it will begin receiving supplies of 3 billion cubic meters annually from the Zug (Switzerland) based company RosGas AG, rather than the now inactive RosUkrEnergo (RUE) the Russian press reported that Emfesz has been sold to RosGas (EDM, May 5; Vedomosti, May 7). Thus RosGas, a little-known company, now controls 20 percent of the Hungarian domestic gas distribution market.
Emfesz was owned by Dmytro Firtash, a Ukrainian businessman who is also the 45 percent owner of RUE. The company was created in 2003, when Firtash secretly owned the Hungarian-based company, Eural Trans Gas (ETG) which then became the intermediary for Turkmen gas sales to Ukraine.
ETG from its inception was a highly controversial company. Numerous media reports claimed that it was linked to Semen Mogilevich, an alleged member of the Russian mafia wanted by the FBI for major fraud. ETG denied these charges, but the suspicions did not vanish. In January 2008 Mogilevich was arrested in Moscow on charges of aiding and abetting a tax evasion scheme, but many observers believed this was false and that his arrest was directly linked to a struggle between Firtash and Gazprom over the control of Emfesz. According to informed sources, prior to his arrest Mogilevich disclosed that Gazprom was determined to take over Emfesz and that he had played a role in this plot.
As the controversy surrounding ETG grew, Gazprom decided to break its links with the company and in 2004 it created RosUkrEnergo to take its place - but Firtash remained, and he was allowed to control 45 percent of RUE along with Ivan Fursin -another Ukrainian businessman with a 5 percent share. Gazprom meanwhile, along with then-Russian President Vladimir Putin and current President Dmitry Medvedev audaciously claimed that they did not know the identity of the 50 percent owners of RUE.
An article in Vedomosti on May 7 written by Irina Reznik, a journalist with long-standing high-level Gazprom contacts, cited unnamed sources "close to Gazprom and Emfesz" who said that RosGas will be controlled by the Bulgarian gas middleman company, Overgas.
Overgas, like RosGas, is a highly opaque structure. In February 2009, after the Ukrainian-Russian gas conflict ended and deliveries were restored to Bulgaria, government officials announced that they would again seek to remove two middleman companies -Overgas Inc., and Wintershall Erdgas Handelshaus Zug AG (WIEE)- from the gas supply chain between Russia and Bulgaria. They intended only to deal with Gazprom Export, a fully owned subsidiary of Gazprom headed by its CEO Alexander Medvedev (Moscow Times, February 4). Bulgaria tried to end the role of the two middlemen on two previous occasions, but Alexander Medvedev countered by saying that the companies were only suppliers (, February 4).
Medvedev's argument was at best disingenuous. Overgas does not own any gas fields and relies on Medvedev's company, Gazprom Export, for its supply of gas. Despite the best efforts of the Bulgarian government, Overgas was not liquidated and is still functioning. Apparently the government in Sofia is no match for Medvedev and Gazprom and now, according to Vedomosti, Overgas is being manipulated into acting as Gazprom's proxy within Hungary. A role similar to that played by Austria's OMV in its recent takeover of Hungary's energy giant MOL.
According to the Overgas Annual Report for 2007, the last year available, Gazprom owns 0.49 percent of the company, Gazprom Export 49.51 percent, and the London-based Overgas Holdings, Ltd, 50 percent. The chairman of the board of Overgas, Inc. is Alexander Medvedev who, as noted above, is also the head of Gazprom Export, the company which technically sells Gazprom's gas to Overgas. Bulgarian law does not regard this as a conflict of interest.
The Executive Director of Overgas, Inc. Sasho Dontchev is a graduate of Moscow's Oil and Gas Institute, and according to media reports, was largely responsible for making Overgas a leading Bulgarian domestic gas distributor (EDM, February 13).
The saga of Overgas and its affiliated directors led to an alleged Russian intelligence agent being arrested in Canada in November 2006, whose hired representatives were also employed by the Overgas holding company in London known as Energy Consultants Ltd (EDM, February 13).
There might be serious implications for the EU, if the Bulgarian Overgas is permitted to buy Swiss RosGas and thereby secure control over 20 percent of the Hungarian domestic gas distribution market acting as a proxy for Gazprom. Hungary and Bulgaria are rapidly becoming the weakest links in the EU gas diversification strategy and appear to be submitting to Russian pressure -and possibly organized crime links sanctioned by the Kremlin- in order to strengthen Gazprom's influence within Hungary and by default in Europe.
The EU commission has not yet commented on these developments, but the time is ripe for both the Europeans and the U.S. authorities to have their say on one of the most dangerous of the Kremlin's long list of criminal enterprises.
Who is really behind RosGas?
|Author: Kostis Geropoulos |
|11 May 2009 - Issue : 833 |
Hungary’s largest gas distribution company, EMFESZ, has been “fraudulently” sold to the mysterious Swiss-based firm RosGas AG without the consent of its owner, Ukrainian gas billionaire Dmitry Firtash, Robert Shetler-Jones, chief executive of Group DF that holds Firtash’s business assets, told New Europe telephonically on May 8, adding that DF would fight to get EMFESZ back. “We at Group DF and Mr. Firtash have sold nothing. What has happened is that our Managing Director, Mr (Istvan) Goczi has fraudulently transferred the shares in EMFESZ to RosGas without our approval and without our consent,” Shetler-Jones claimed.
He said that the sale raises new concerns about Europe’s gas security since the future EMFESZ, Hungary’s largest independent supplier of gas, remains uncertain. “We do not know who is behind RosGas and therefore we don’t know who is looking to supply EMFESZ with gas,” Shetler-Jones said, adding that he doesn’t understand how RosGas can secure supplies of gas to provide to EMFESZ.
Little is known about RosGas, the Swiss company which was recently created in Zug. Shetler-Jones claimed that RosGas has a few directors, one of whom is an officer who is directly responsible to Goczi, the managing director of EMFESZ. “We do not know who owns RosGas, we do not know on what basis they have persuaded Mr. Goczi to carry out this fraudulent operation,” he said.
Shetler-Jones stressed that there has not been a decision of the board of directors to sell EMFESZ to RosGas. “Mr Goczi, what he seems to be saying is that he is using a power of attorney for this so-called ‘sale.’ The power of attorney he is supposedly using is one dating from 2004 that was issued to him to initially buy the shares in EMFESZ on behalf of Mr. Firtash. He somehow managed to persuade the Hungarian authorities that this power of attorney gives him the authority also to sell the shares onto a third party,” Shetler-Jones claimed. “However, this does not, in our view, give him the right; it is certainly not done with our approval and therefore we will be pursuing all legal means in our path to get this asset back to our control,” he told New Europe, adding that Group DF will “most certainly” seek criminal charges against Goczi and his associates.
The dispute over the ownership of EMFESZ comes weeks after Firtash was muscled out of the Ukrainian gas trade under the terms of a new Russian-Ukrainian contract agreed by his nemesis Ukrainian Prime Minister Yulia Tymoshenko and Russian counterpart Vladimir Putin after the January gas supply crisis. Under the new contract, Russian gas monopoly Gazprom will supply Ukraine directly, cutting out the middleman – RosUkrEnergo. Firtash owns 45 percent of Swiss-registered RosUkrEnergo, where he is a partner with Gazprom, which holds another 50 percent of the trader.
EMFESZ announced two weeks it was switching its gas purchases from Rosukrenergo to RosGas. Asked about the switch, Shetler-Jones said, “As far as I’m aware RosGas is not supplying gas to EMFESZ. One of the issues that concerned us was the very statement that EMFESZ made about securing supplies of gas from RosGas ... Group DF was not aware of those negotiations and, of course, we do not know what Rosgas is, so I’m assuming that is all part of the process that we now seeing unwinding, the transfer of shares, the sourcing of different supplies of gas and who is behind it is fundamental to understanding what has happened.”
In a statement, EMFESZ said that RosGas is part of Gazprom’s network of business interests. This claim was dismissed by Gazprom Press Secretary Sergei Kupriyanov. “RosGas has nothing to do with Gazprom and does not belong to the Gazprom group,” Kupriyanov said. Shetler-Jones told New Europe that there is no evidence that there is any connection between RosGas and Gazprom. “If it is Gazprom and again we have no proof if it is Gazprom, of course this would be extremely important commercially but also politically, but I do reiterate that we have no evidence to that effect at the moment.”
Analysis: Explosion in Moscow bad PR for Gazprom
By JOHN C.K. DALY, UPI International Correspondent
Published: May 11, 2009 at 8:09 PM
WASHINGTON, May 11 (UPI) -- While it is difficult to work up much sympathy at the best of times for energy companies' public relations flacks, those representing Russia's state company Gazprom have had a bad few weeks. Recent explosions on pipelines to Moldova and Turkmenistan generated strained relations with the two nations, but the incidents were dwarfed by a massive explosion on a natural gas line in southwest Moscow early Sunday morning. What all three incidents have in common is revealing an issue that Gazprom would much rather keep quiet -- the increasingly decrepit state of its pipeline infrastructure, most of it dating from the Soviet era.
At 20 minutes past midnight on Sunday morning, residents on Ozernaya Street, close to the Moscow Circular Road in the southwest of the city, were rocked from their beds when a gas main ruptured. Eyewitnesses heard a sound like a jetliner taking off; within seconds, the escaping gas ignited, sending a column of flame more than 650 feet into the air. For comparison purposes, the Washington Monument is 555 feet high. After saying he initially thought a plane had crashed, one observer posting his comments on Facebook remarked from the scene, "Where I am is light as day and as warm as Africa."
Moscow authorities dispatched 50 firefighting brigades to combat the inferno. The first respondents who arrived at the scene early Sunday couldn't get within 1,000 feet of the ruptured pipeline because of the intense heat generated by the blaze.
The conflagration melted asphalt, consumed around 70 cars that were parked nearby and partly destroyed the nearby All-Russian Scientific Research Institute for Optical and Physical Measurements. Moscow's Municipal Telecommunication Firm reported that 80,000 customers lost their phone connection after underground telephone cables were damaged by the heat. The only fortunate news was that Mayor Yury Luzhkov reported that only five people were hospitalized with burns, none with serious injuries. Speaking about the casualties, Deputy Emergency Situations Minister Alexander Chupriyan said, "All of them are drivers, who happened to pass by the pipeline at the moment the fire broke out."
The mayor was also at pains to dismiss the possibility of terrorism, telling reporters, "We have to wait for the official investigation, but I am 99 percent sure this catastrophe was caused by a technical problem."
Those with slightly longer memories might note that May 9, celebrated in Russia as Victory Day over Nazi Germany in the Great Patriotic War, known as World War II to the rest of the world, has a darker remembrance. Five years ago to the day, Chechen militants assassinated Akhmad Abdulkhamidovich Kadyrov, Moscow's appointed president of Chechnya, during a Victory Day celebration in the ruined Chechen capital Grozny.
Perhaps it is memories of that coincidental darker anniversary five years ago that led to Itar-Tass quoting Anatoly Bagmet, the Moscow department head of the Prosecutor General's Office Investigation Committee, as saying, "The gas pipeline fire is being investigated. A criminal case may be opened on the investigation results," while RIA Novosti reported that Russian Interior Ministry bomb experts and colleagues from the Federal Security Service, successor to the KGB, have begun inquiries into the cause of what Deputy Mayor Pyotr Biryukov labeled the largest fire in Moscow since the war.
Luzhkov's assessment of the cause of the conflagration will probably be borne out by the forensic examination. While Chechen terrorist attacks in Moscow were a hallmark of their struggle against Russian dominance, the reality is that in the last several years, Putin's harsh methods have largely pacified the restive Caucasian province, as evidenced by the fact that Akhmad Kadyrov's son Ramzan is now president there. But if Muscovites can sleep a bit more soundly because of the capital's security measures, then the country's natural gas industry's dolorous safety record remains cause for concern, a problem that stretches back decades.
Twenty years ago, a leaking natural gas pipeline caused the most deadly railway accident in Soviet history. On June 4, 1989, two Trans-Siberian Railway passenger trains passing each other near the cities of Ufa and Asha apparently threw off sparks that ignited vapor leaking from a natural gas pipeline, producing an explosion estimated to be equivalent to 10 kilotons of TNT, two-thirds as powerful as the Hiroshima explosion. The inferno killed 575 and wounded more than 600, but tragically, three hours before the tragedy, engineers noticed a drop in the pressure in the gas line. Instead of checking for leaks, they ramped up the pressure back to normal.
Shortly after the incident, General Secretary Mikhail Gorbachev visited the scene of the tragedy and subsequently told the Congress of People's Deputies, "It seems once again that it is a matter of incompetence, irresponsibility, mismanagement."
Gazprom, the world's largest oil and gas company, controls 93,205 miles of pipelines. Last October, during an interview with the NTV television broadcaster, Gazprom Chief Executive Officer Alexei Miller predicted that his company would generate more than $35 billion in net profit by the year's end. If Miller doesn't want to end up alongside former Yukos chief Mikhail Khodorkovsky in YaG-14/10 penal colony near the town of Krasnokamensk in Chita province in eastern Siberia, 3,000 miles east of Moscow, on charges of "incompetence, irresponsibility, mismanagement," then he might consider dipping into his $35 billion rainy day fund to maintain those 93,205 miles of pipelines, as explosions in Moscow are at the very least negative PR.
Moscow authorities have said the 54th Eurovision Song Contest, which is scheduled for May 16 in Moscow not far from the scene of the fire and will draw an estimated audience of 100 million viewers, will not be affected. If Miller doesn't want to wind up alongside Khodorkovsky sewing protective clothing for the prison system and the police, then he has his work cut out for him.
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