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Basic Political Developments

• Medvedev to address last 2010 Cabinet meeting - Today President Medvedev is attending this year’s last Cabinet meeting to offer his New Year’s congratulations, assess the government’s performance in 2010 and outline the priorities for 2011.

• No port deal for Iran – Artemyev: Russia’s state commission for foreign investments has turned down  a bid by Iranian Hazar Sea Shipping Lines company to buy a shipping port in Astrakhan, in the lower reaches of the Volga River. 

• Russia grounds Tu-95MS bombers powered by same engines as crashed An-22

• 12 pilots killed in plane crash in Russia - The plane was flying from the city of Voronezh when it disappeared from radar screens late Tuesday, a source at a law enforcement agency told ITAR-TASS news agency. A preliminary investigation says the crash might have been caused by engine failure.

o All 12 people on An-22 plane crashed in Tula reg killed-SK

o 12 missing in Russian military cargo jet crash

o All 12 people on board of crashed Russian military aircraft are dead (Update-3

• Russian aviation watchdog says no injuries in Yamal copter crash, one pilot killed - Rosaviatsia reported earlier in the day that a Mil Mi-8 helicopter with three crewmembers and 15 passengers had crashed while approaching a hydrocarbon field on Yamal. It said that the crew commander had been killed and the fate of the other two crewmembers was unknown while the passengers had sustained injuries of various degree of gravity.

• Russia sends humanitarian aid to flood-hit Colombia - The plane carrying 25 tons of humanitarian aid is expected to arrive in Bogota on Wednesday, Colombia's interior ministry has said. Russia is sending 50 tents, 2,000 blankets, two mobile power stations and 500 kilograms of medical supplies.

• UPDATE 2-Putin wants Russia to ease foreign investor rules - Says Russia needs "smart" investment; Says law on foreign investment will be changed; Says PepsiCo to invest $1 bln in 5 years; Govt blocks TeliaSonera asset merger bid

o Russia Moves to Draw in More Foreign Investors - Analysts say the Kremlin now has little choice but to warm the chilly investment climate, because prices for oil, Russia's main export, aren't high enough to generate the hundreds of billions of dollars in capital needed to overhaul the country's creaking industry and infrastructure. The government also is raising taxes to cover increases in pensions and other benefits.

o Russian business climate mighty chilly - The latest convictions drew immediate international outcry and underscored concerns that companies wanting to do business in Russia are entering a legal limbo, where the judiciary is beholden to the Kremlin.

• Russian watchdog bans MegaFon, Turkcell merger - Russian billionaire Alisher Usmanov, Megafon's third largest shareholder, earlier instituted legal proceedings to block the merger, claiming the deal violated Russia's rules on foreign investment.

• Guinea Politics Looming for RusAl - “There is a global battle for Guinean bauxite,” Alexei Vasiliyev said in an interview in Moscow on Dec. 22. “It would be logical for Guinea to demand more favorable terms for the operations of foreign companies.”

• Fishery bosses: Bribes in Russia widespread - About 10 presidents and executives of fisheries headquartered in Hokkaido and the Tohoku region said they handed cash to Russian border guards to buy their tacit permission to catch fish in excess of official quotas.

• A Chechen Delegation Visits Amman - - The Deputy Mayor of Amman, Engineer Amer AlBashir, received in his office his Excellency, the Chechen Minister of Culture, Mr. Decalo Mozakayeiv Abdullah and his accompanying delegation… This visit came as part of the twinning agreement that was previously signed between Amman and Grozny.

• Dagestani police on heightened alert – Minister: The republic’s Interior Minister Abdurashid Magomedov  said on Tuesday that from December 27 through January 9 the local police would be on heightened alert keeping a close eye on public places and strategic facilities.

• Over 6500 stranded passengers still waiting at Moscow airports of Domodedovo and Shermetievo

• Aeroflot cancels 23 international, 26 domestic flights

• Moscow airlines cancel flights

• Vedomosty: blocked without leaving a trace

• 50,000 still cut off from power in Moscow Region

• Moscow residetns asked to stay indoors over bad weather

• Russian Press at a Glance, Wednesday, December 29, 2010

• 2010 a milestone for CIS – by Innokenty Adyasov, special for RIA Novosti

• Tactical arms control remains issue - The Russians have about 3,800 tactical weapons, compared with fewer than 500 in the US stockpile, Risch said. Such weapons are built for battlefield use and carry lower yields, compared with strategic weapons, which are long-range and target an enemy’s cities and defense infrastructure.

• Russian legislator: Israel really needs to talk with Hamas - "In Eastern politics you play chess, not American football," says Michail Margelov; "relations between the two countries improving," he adds.

• Khodorkovsky, Lebedev 'lied' to shareholders - Jailed ex-oil tycoon Mikhail Khodorkovsky "lied" to the shareholders of his oil firm Yukos, a judge said on Wednesday, two days after a Moscow court found him guilty of embezzlement in a politically tinged trial.

o Reading of Khodorkovsky guilty verdict enters third day - The judge has begun reading the verdict for former Yukos head Mikhail Khodorkovsky and his associate Platon Lebedev for the third day in a row.

o Likely outcomes of Khodorkovsky's trial: Prison Sentence Of Six More Years; Lighter Sentence; Medvedev Intervention; Suspended Sentence

• Murky maneuvers of Moscow’s ex-mayor - Russian government auditors have come up with shocking evidence as to how state funds were used over the past two years when Yury Luzhkov was still mayor of Moscow. The preliminary findings show that almost US$7.5 billion was irregularly spent on construction in the capital.

National Economic Trends

• Russian govt approves borrowing limit for 2011 - The Finance Ministry is authorized to issue ruble-denominated state securities totaling no more than 1.7448 trillion rubles in 2011. The limit on external obligations next year is $7 billion.

• Ruble at a Two-Month High - May Be a Huge Outperformer in 2011

Business, Energy or Environmental regulations or discussions

• Norilsk Nickel, Polyus, Wimm-Bill-Dann: Russian Equity Preview

• Norilsk ready for more talks on RUSAL stake

• Norilsk Fails to Reach Agreement to Buy Out Rusal’s 25% Stake

o UPDATE 1-Norilsk starts buyback after RUSAL deal fails

o Norilsk Offers to Buy Shares at $252 Apiece, Starting Today

o Deripaska’s EuroSibEnergo Says Norilsk Rejected Bid for OGK-3

o Russia's Norilsk to sell OGK-3 to InterRAO-sources

• Bullish Russia ETF Options Trades Jump as Crude, Ruble Advance

• Market Insider: Russian Roulette Could Pay Off in 2011

• Lincoln Electric to Acquire Severstal Welding Business in Russia

• PepsiCo to invest nearly $1bn in Wimm-Bill-Dann

• Report: SCT Agrees on EUR 3.8BN Deal in Russia

• GPS-GLONASS phone to hit stores in 2011

• UPDATE 1-Russia's Sistema unveils first GLONASS mobile device

• Russian airline Utair expects $1.6 bln sales in 2011

• Enel In Talks With Russia's Inter RAO On Bulgaria Plant Stake

• VTB buys into TransCreditBank

• VimpelCom Ltd. sent a proposal to Naguib Sawiris’s Weather Investments seeking a merger without a shareholder agreement that would have guaranteed Sawiris two seats on the 11-member supervisory board, Vedomosti reported Tuesday, citing an unidentified VimpelCom official. (Bloomberg)

• Alrosa increased diamond output about 5 percent this year to 34.3 million carats from 32.8 million last year, the monopoly said Tuesday, citing preliminary results. (Bloomberg)

• Tastes Like Chicken - Russia Plans to Produce More Chicken Domestically Instead of Importing It, but the Problem Is That the Majority of the Population Won’t Be Able to Afford Locally-Made Chicken

Activity in the Oil and Gas sector (including regulatory)

• Russia sets new oil products export duties for 2011-13

• Higher Russian oil tax makes China spend more

• Croatia’s INA to Buy Oil Field in Russia From Mol, Poslovni Says

• Petroneft Sees Niche in Soviet Deposits

• LUKoil Mulls More Investments in Africa

• Russian Natural Resources Ministry To Offer Several Federal Subsoil Fields on Auction in 2011 - The fields include the Naulskoye, Lodochonoye, Malyshevskoye and Selidovskoye fields. Trutnev said the gold field Sukhoy Log was not included in the list of fields to be licensed in 2011.

• Russia antimonopoly service mulls third wave of oil company fines

Gazprom

• Gazprom Lowers Forecast For Gas Production in 2010 to 508.5 Billion Cubic Meters

• Gazprom looks to gas future - Alexei Miller, the chief executive at Gazprom, said that while the domestic gas market is a main focus, increasing the reliability of European transit networks remains at the top of the company's agenda.

• Gazprom: European consumers pay more than they could - “Our consumers who received the so-called ‘reductions’ pay more than they would have, if they had not changed their contracts,” said Kupriyanov.

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Full Text Articles

Basic Political Developments

Medvedev to address last 2010 Cabinet meeting



Dec 29, 2010 10:34 Moscow Time

Today President Medvedev is attending this year’s last Cabinet meeting to offer his New Year’s congratulations, assess the government’s performance in 2010 and outline the priorities for 2011.

As he commented on the results of the outgoing year on federal television at the end of last week, the president said that the Cabinet needed cleansing and security ministry officials had to show more responsibility.

No port deal for Iran – Artemyev



Dec 29, 2010 00:16 Moscow Time

Russia’s state commission for foreign investments has turned down  a bid by Iranian Hazar Sea Shipping Lines company to buy a shipping port in Astrakhan, in the lower reaches of the Volga River. 

The head of this country’s antimonopoly agency Igor Artemyev said on Tuesday the refusal was in line with standing UN sanctions against Tehran.

December 29, 2010 11:28

Russia grounds Tu-95MS bombers powered by same engines as crashed An-22



MOSCOW. Dec 29 (Interfax-AVN) - The Russian Air Force has suspended all flights of Tupolev Tu-95MS strategic bombers powered by the same NK-12 turboprop engines as the Antonov An-22 heavy military transport plane that crashed in the Tula region late on Tuesday, Russian Defense Ministry spokesman Col. Vladimir Drik told Interfax-AVN.

"To ensure safe operation of planes equipped with identical engines, such as the An-22 and the Tu-95MS, the Air Force commander has ordered that their flights be suspended until the causes of the crash have been determined," Drik said.

va dp

12 pilots killed in plane crash in Russia



Published: 29 December, 2010, 07:33

Edited: 29 December, 2010, 11:13

An AN-22 military aircraft has crashed in central Russia, killing all 12 pilots who were onboard as passengers.

The plane was flying from the city of Voronezh when it disappeared from radar screens late Tuesday, a source at a law enforcement agency told ITAR-TASS news agency. A preliminary investigation says the crash might have been caused by engine failure.

The Russian Ministry of Defense, which owns the An-22, said it was a regular training mission and had no cargo onboard.

Investigators have recovered the flight recorders from the crashed aircraft.

A criminal case over the deaths of the 12 people has been launched by the Investigative Committee.

© Autonomous Nonprofit Organization “TV-Novosti”, 2005 - 2010. All rights reserved.

All 12 people on An-22 plane crashed in Tula reg killed-SK



29.12.2010, 09.32

MOSCOW, December 29 (Itar-Tass) - All the 12 people on the Antonov An-22 military-transport plane that crashed in the Tula region have been killed, the RF Investigative Committee (SK) sources told Itar-Tass.

“There were 12 military pilots from two crews on the plane. All of them were killed,” the SK said.

[pic]

12 missing in Russian military cargo jet crash



(AFP) – 1 hour ago

MOSCOW — A giant Antonov cargo plane crashed during a training exercise in central Russia, leaving all 12 military pilots aboard the aircraft missing and presumed dead, officials said on Wednesday.

The An-22 military plane carrying the servicemen but no cargo had been performing a training exercise on its way from Voronezh to Tver in central Russia when it disappeared from radar screens late Tuesday, said a spokeswoman for military prosecutors of the Moscow military district.

Its scattered remains were found early Wednesday in a field four kilometres from the village of Troitskoye in the Tula region, with the impact of the crash leaving a five-metre-deep crater in the ground, spokeswoman Natalya Zemskova told AFP.

"All those aboard died," the Moscow-based investigators said in a separate statement, adding local witnesses heard an explosion.

Zemskova said however that the pilots were presumed dead because officials were still looking for their bodies.

Igor Konashenkov, spokesman for the defence minister, said bad weather at the scene was hampering search efforts. "It's a blizzard and snowing," he said in televised remarks.

Dating back to the Soviet era, Antonov An-22 is a military cargo turboprop plane and is among the world's largest aircraft.

Authorities opened a criminal probe into the accident, said Zemskova, adding however it was too early to say what caused the crash.

Accidents involving military aircraft are relatively common in Russia.

Last year, another Russian military plane, a Tupolev Tu-142, crashed into the sea during a training exercise in Russia's Far East, leaving all 11 crew members missing and presumed dead.

All 12 people on board of crashed Russian military aircraft are dead (Update-3



06:58 29/12/2010

All 12 people on board of the Russian Air Force An-22 transport aircraft that crashed late on Tuesday night in central Russia's Tula Region were found dead, a source in the law enforcement bodies said on Wednesday.

"All 12 pilots that were on board of the An-22 military transport aircraft are dead. Their bodies have been already discovered," the source said.

The An-22 Cock aircraft en route to the airport of Migalovo disappeared from radar screens at 21:30 Moscow time [18:30 GMT]. The remains of the burning aircraft were discovered from the air at 2:36 Moscow time [23:36 GMT Tuesday] near the village of Krasny Oktyabr in the Tula Region.

He added that rescuers are currently searching for flight recorders that would help establish the cause of the accident.

Earlier a source in the Russian Defense Ministry said that a failure of aviation equipment, particularly an engine failure, might have caused the crash.

According to various sources, there are up to 300 transport aircraft in service with the Russian Air Force, including An-12 Cub, An-72 Coaler, An-22 Cock, An-124 Condor and Il-76 Candid planes. Most of the aircraft entered service in the 1960s and 1970s and are considered outdated by modern safety and noise pollution standards.

MOSCOW, December 29 (RIA Novosti)

Russian aviation watchdog says no injuries in Yamal copter crash, one pilot killed



12:18 29/12/2010

MOSCOW, December 19 (RIA Novosti) - The Russian aviation watchdog Rosaviatsia said on Sunday that the helicopter crash on the Russian Arctic island near the Yamal Peninsula killed the crew commander while there were no injuries among the other crewmembers or the passengers.

Rosaviatsia reported earlier in the day that a Mil Mi-8 helicopter with three crewmembers and 15 passengers had crashed while approaching a hydrocarbon field on Yamal. It said that the crew commander had been killed and the fate of the other two crewmembers was unknown while the passengers had sustained injuries of various degree of gravity.

"According to specified data, there are no injuries among the passengers and two out of the three crewmembers," a spokesman for Rosaviatsia said, adding that only the crew commander had been killed in the crash.

The Mi-8 helicopter owned by Yamal Airline was delivering geologists from the town of Labytnanga to the Bovanenkovo hydrocarbon field, which Russian energy giant Gazprom is developing.

The helicopter was landing in the conditions of polar night when it crashed. Another helicopter of Yamal Airline has flown to the site of the incident to evacuate people.

The latest incident with a Mi-8 helicopter occurred on November 25 when it crashed in Russia's Omsk region in southwestern Siberia, killing seven passengers and injuring three crew members. The helicopter was engaged in delivering workers to a drilling site. It fell and caught on fire.

Russia sends humanitarian aid to flood-hit Colombia



09:38 29/12/2010

Russia's Emergencies Ministry has sent a plane with humanitarian aid to Colombia which has been severely affected by devastating floods.

The plane carrying 25 tons of humanitarian aid is expected to arrive in Bogota on Wednesday, Colombia's interior ministry has said. Russia is sending 50 tents, 2,000 blankets, two mobile power stations and 500 kilograms of medical supplies.

Russia's ambassador to Colombia, Vladimir Trukhanovsky, and Colombia's emergencies department head Luz Stella Jara will attend the ceremony at the military airport Catam de Bogota.

Heavy rains have caused flooding and landslides in the South American state that have killed at least 301 people, injured 292 people and left another 62 missing. More than 5,000 houses and 300,000 buildings have been destroyed.

The country's worst rains in the past 40 years have caused a damage of over $500 million and flooded over 1.3 million hectares of agricultural lands. The Colombian government has earmarked $5.3 billion to tackle the aftermath of the disaster.

MEXICO CITY, December 29 (RIA Novosti)

DECEMBER 29, 2010

UPDATE 2-Putin wants Russia to ease foreign investor rules



3:36am IST

* Says Russia needs "smart" investment

* Says law on foreign investment will be changed

* Says PepsiCo to invest $1 bln in 5 years

* Govt blocks TeliaSonera asset merger bid (Adds Putin quotes, commission decision, details)

By Gleb Bryanski

NOVO-OGARYOVO, Russia, Dec 28 (Reuters) - Russia plans to change a key law regulating foreign investment in so-called "strategic" sectors in 2011 in a bid to bring "smart" money into the country, Prime Minister Vladimir Putin said on Tuesday.

Russia passed the law, which limits foreign investment in strategic sectors in 2008, before the country was hit by the economic crisis. The law requires that major deals get approval from a government commission.

The Russian budget is now in the red, and with no improvement in the country's investment climate, major foreign acquisitions are rare, casting doubts over the country's bid to privatise $32 billion worth of assets.

"We understand that we need foreign direct investment but we need not just capital, we need "smart" investment, accompanied by technology transfer and job creation," Putin told the commission meeting.

"As far as the strategic sectors are concerned, the access will be significantly simplified. Already in 2011 we are planning to pass a number of amendments to the law on foreign investment," Putin said.

Putin did not disclose details but said the proposed changes will ease investor access to the food, pharmaceutical, banking and natural resources sectors. He said that a second round of amendments was already being worked on.

"I hope that measures we are taking will help us significantly increase the flow of foreign investment into Russia," Putin said.

Earlier on Tuesday, the Natural Resources Ministry signaled possible changes, saying the limit on foreign ownership of Russia's strategic mineral deposits should be raised to 25 percent from 10 percent. [ID:nLDE6BR0Y2]

DEEMED INEXPEDIENT

Putin said foreign direct investment was estimated to reach $40 billion in 2010, compared with only $16 billion last year, but FDI statistics in Russia are distorted by offshore ownership of major Russian firms.

The commission, chaired by Putin, gave a green light for acquisition of Russian juice and dairy firm Wimm-Bill-Dann (WBD.N: Quote, Profile, Research) by PepsiCo (PEP.N: Quote, Profile, Research) for $3.8 billion, one of the biggest acquisitions by a foreign company in Russia to date.

Putin said PepsiCo had pledged to invest about $1 billion in research and development, marketing and modernisation of the Russian firm's production facilities in the next five years.

The commission also declined a request by a shareholder in mobile operator Megafon TeliaSonera (TLSN.ST: Quote, Profile, Research) to transfer its interest in MegaFon to an offshore firm where it can be merged with the stake in Turkish mobile firm Turkcell (TCELL.IS: Quote, Profile, Research).

"We have reviewed a request by TeliaSonera regarding changes in the (Megafon) ownership structure. As a result of these changes shares in Megafon would be transferred to new offshore companies," said commission member Igor Artemyev.

The transaction -- backed by another Megafon shareholder, Altimo, but opposed by a third shareholder, tycoon Alisher Usmanov -- would have helped TeliaSonera increase control over one of its key holdings. [ID:nLDE6611CM]

The situation can spark a shareholder conflict in Megafon similar to the one over the rival operator Vimpelcom (VIP.N: Quote, Profile, Research). That conflict was solved through a similar scheme of asset merger in an offshore firm.

"This request was declined since TeliaSonera is controlled by governments of Sweden and Finland ... The situation with a handover of property rights to offshore firms given TeliaSonera's ownership structure was deemed inexpedient," Artemyev said. (Writing by Gleb Bryanski; Editing by Gary Hill)

Russia Moves to Draw in More Foreign Investors



By ALEXANDER KOLYANDR

MOSCOW—Russian Prime Minister Vladimir Putin promised to loosen restrictions on foreign investment in some sectors next year, hours after President Dmitry Medvedev reiterated his calls to improve what he called Russia's "bad" investment climate.

Interros owner Vladimir Potanin last week criticized the Kremlin's stance on business.

The leaders' unusually frank assessment and olive branch to foreign investors on Tuesday comes at a time when investors and business leaders have dismissed government efforts to stimulate private investment as little more than talk. The big increase in state ownership and regulation over the past few years is stifling growth and holding back vital investment, they say.

The latest high-profile criticism of the Kremlin's stance on business came from Vladimir Potanin, owner of the Interros metals, media and banking holding company and one of Russia's wealthiest businessmen. "There is less and less space for independent business," Mr. Potanin said in a recent interview. "To do business, you need a powerful partner—either a large company or the authorities."

"They make the right declarations," Mr. Potanin continued, speaking of Kremlin pledges to improve the investment climate, which have been a hallmark of Mr. Medvedev's two-year-old presidency. "But I'd like to see deeds follow those words."

Mr. Potanin spoke last week, before a Moscow court on Monday declared former oil tycoon Mikhail Khodorkovsky guilty of embezzling billions of dollars in oil from his OAO Yukos company and laundering the proceeds.

Russian President Dmitry Medvedev on Tuesday reiterated calls to improve the country's investment climate.

Authorities' seven-year prosecution of Mr. Khodorkovsky, and the breakup and partial renationalization of Yukos, have for many investors come to symbolize the Kremlin's turn away from private business.

Defense lawyers and many observers say the cases are politically motivated, an allegation the Kremlin denies.

The Russian government further increased its control over the economy during the financial crisis, bailing out companies and banks and providing billions in subsidies to support struggling companies.

Heavily dependent on raw materials exports and cheap foreign credit, Russia's economy suffered a 7.9% contraction in 2009 as the global financial crisis hit.

With commodity prices still well below precrisis highs and international capital less plentiful, growth over the next few years is expected to be around 4%, far below the levels seen before the crisis and those in big developing countries like Brazil, India and China.

Mr. Potanin welcomed the government's adoption this fall of a three-year, $32 billion privatization program but called for the plans to be made even more ambitious: "The state's need to own assets is a sign of its weakness, not strength," he said.

Analysts say the Kremlin now has little choice but to warm the chilly investment climate, because prices for oil, Russia's main export, aren't high enough to generate the hundreds of billions of dollars in capital needed to overhaul the country's creaking industry and infrastructure. The government also is raising taxes to cover increases in pensions and other benefits.

At a meeting with economic aides Tuesday, Mr. Medvedev said the government needs to work more to stimulate investment. "Unfortunately, the investment climate in our country, to put it mildly, leaves something to be desired," he said. "It's bad."

Russian Prime Minister Vladimir Putin, center, visits a new Moscow office of Russian bank VTB with Chief Executive Andrei Kostin, left.

Speaking at a separate event later in the day, Mr. Putin, who is widely viewed as the more powerful member of Russia's ruling tandem, promised to loosen restrictions on foreign investment in some sectors, including food, medical equipment, banking and natural resources.

Also Tuesday, Russia's Natural Resources and Ecology Ministry suggested increasing to 25%, from 10%, the stake a foreign shareholder is allowed to hold in companies developing strategic oil resources.

Mr. Putin, chairing a meeting of a government panel on foreign investment, noted that foreign direct investment this year will total about $40 billion, up from $15.9 billion in 2009. The body on Tuesday approved one of the largest foreign investments in Russia in recent years, PepsiCo Inc.'s $5.4 billion takeover of OAO Wimm-Bill-Dann, a major dairy and juice producer.

To show the government's success in stimulating business, Mr. Putin also was shown what officials said was a prototype of a Russian-made cellphone that will go on sale soon for 10,999 rubles ($370), Interfax reported.

"It matches all the functions of the [Apple] iPhone 4 and exceeds it in navigation," Deputy Prime Minister Sergei Ivanov said, noting that it combines the Western GPS system with Russia's own Glonass navigation system.

Mr. Putin suggested it be brought to market in time for March 8—International Women's Day, a major holiday in Russia—"so women will know exactly where their husbands are."

Russian business climate mighty chilly



By LOREN STEFFY Copyright 2010 Houston Chronicle

Dec. 28, 2010, 9:55PM

Bruce Misamore sent his friend and former colleague Mikhail Khodorkovsky a Christmas letter a few weeks ago. The good tidings were short-lived.

This week, Khodorkovsky, once Russia's richest oil tycoon, was convicted on charges of embezzlement and money laundering. The government claims he stole $30 billion worth of oil from his former company, Yukos, then pocketed and hid the proceeds.

"The charges were completely bogus," said Misamore, a former Pennzoil executive hired by Khodorkovsky in 2000 to bring Western accounting standards to Yukos before the Russian government seized the company. The embezzlement charges relate to oil that Yukos exported between 1998 and 2003, when Khodorkovsky was running the company.

"It was alleged that he stole everything we exported for several years," said Misamore, who lives in Houston and is retired. "None of that oil was ever stolen. It was all completely accounted for."

Khodorkovsky is 10 months away from completing an eight-year sentence on earlier charges of tax evasion, also related to Yukos.

He and his supporters have long claimed he's the victim of political persecution. He emerged from post-Soviet Russia as a powerful figure, controlling what was then the country's biggest private oil company. He made an enemy of Russian Prime Minister Vladimir Putin by backing Putin's political adversaries.

The latest convictions drew immediate international outcry and underscored concerns that companies wanting to do business in Russia are entering a legal limbo, where the judiciary is beholden to the Kremlin.

White House spokesman Robert Gibbs called it "an abusive use of the legal system for improper ends," and Secretary of State Hillary Rodham Clinton said the verdict "raises serious questions about selective prosecution and about the rule of law being overshadowed by political considerations," ABC News reported.

After the fall of the Soviet Union, Western oil companies flocked to Russia, hoping to develop its vast oil and natural gas reserves. Most have since pulled out or significantly reduced their operations there, a trend that's certain to continue in light of the Khodorkovsky verdict.

Companies that invest in Russia must realize they have no legal recourse if the government or a government-controlled company decides to come after them, Misamore said.

"If you run into trouble over there, nobody's going to help you," he said.

One small asset

When government agents stormed Yukos' offices in Russia, Misamore was in London. He returned to Houston and, listing his company laptop as the only asset, attempted to put Yukos into Chapter 11 bankruptcy to stop the seizure by the Russian government.

The tactic didn't work, and the laptop was later stolen in a mysterious home burglary.

As I wrote in the summer of 2009, Misamore has joined with other former Yukos executives in waging a global battle to recover former Yukos assets on behalf of the company's shareholders.

They were able to sell a refinery and a pipeline in Europe. This summer, the group won a victory in the Netherlands after the Dutch Supreme Court upheld $400 million worth of arbitration awards against the Russian oil company Rosneft, which inherited some of the assets the government seized from Yukos.

Madoff comparison

Meanwhile, Khodorkovsky prepares to spend as many as seven more years in jail. After the verdict, Putin compared Khodorkovsky to confessed swindler Bernard Madoff, saying "a thief should be in jail."

Misamore said he hopes Putin feels the same way about the seizure of Yukos.

"The biggest thief is Mr. Putin himself," he said. "He stole the biggest oil company in Russia."

Loren Steffy is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@. His blog is at .

Russian watchdogbans MegaFon, Turkcell merger



11:41 29/12/2010

Russia's Commission for Foreign Investment has rejected a deal between the domestic telecoms firm Altimo and Nordic telecoms giant TeliaSonera to merge their interests in the Russian leading mobile operator MegaFon and Turkey's Turkcell, the anti-trust watchdog said late on Tuesday.

In November 2009, TeliaSonera and Altimo, the telecoms arm of Alfa-Group financial and industrial holding company owned by Russian billionaire Mikhail Fridman, signed a deal to merge their stakes in MegaFon, one of Russia's top three mobile firms where Altimo holds 25.1% and TeliaSonera 43.8%, and Turkey's largest cell phone company Turkcell in which they own 4.99% and 37% respectively.

"We studied the MegaFon deal for a long time, in particular, TeliaSonera's request for transformations inside the group. These transformations would have resulted in new offshore companies, to which MegaFon's shares would have been transferred. This deal was disapproved by the commission," said Igor Artemyev, head of the Anti-Monopoly Service and commission member.

Russian billionaire Alisher Usmanov, Megafon's third largest shareholder, earlier instituted legal proceedings to block the merger, claiming the deal violated Russia's rules on foreign investment.

MOSCOW, December 29 (RIA Novosti)

Guinea Politics Looming for RusAl



29 December 2010

Bloomberg

Guinea’s new President Alpha Conde is likely to ask for better terms from foreign miners operating in the West African nation, including United Company RusAl, the world’s biggest aluminum maker, according to President Dmitry Medvedev’s envoy to Africa.

“There is a global battle for Guinean bauxite,” Alexei Vasiliyev said in an interview in Moscow on Dec. 22. “It would be logical for Guinea to demand more favorable terms for the operations of foreign companies.”

Conde, a long-time opposition leader who was named winner in the Nov. 7 runoff vote and was inaugurated Dec. 21, vowed ahead of the election that he would review all mining deals to make them more favorable to the state. Guinea holds as much as 50 percent of global reserves of bauxite, an ore used to make aluminum, according to the U.S. State Department.

Any review of contracts should be resolved “on the basis of compromise and in the interests of all sides,” Vasiliyev said. If Guinea is embarking on “a democratic path,” it must respect existing laws, he said.

RusAl is the largest foreign employer in Guinea with 2,300 employees and relies on the African nation for 40 percent of its bauxite needs. The aluminum producer has said it plans to invest $5.5 billion in a new mine there, Dian Dian.

The company doesn’t expect any new demands from Guinea, it said in an e-mailed statement. “As one of the biggest employers in the country, we operate fully within the law and play an important socio-economic role, carrying out major social projects in the cities where we operate,” RusAl said.

Along with other foreign companies in Guinea, RusAl may have to negotiate with Conde’s government on its tax and social contributions, Vasiliyev said. RusAl may also need to hold talks about the terms of Dian Dian, he said.

Guinea’s Mines Minister Mahmoud Thiam didn’t answer calls to his mobile phone when Bloomberg News called seeking comment, and didn’t immediately respond to e-mailed questions. Prime Minister Jean Marie Dore’s resignation was accepted on Dec. 22 and Conde is yet to appoint his replacement, who will then name a new cabinet.

RusAl, along with London-based Rio Tinto Group, has already faced difficulties in Guinea after the military junta that seized power in December 2008 following the death of long-serving President Lansana Conte opened a review of all foreign mining deals.

Rio faced a dispute over its ownership of the Simandou iron-ore project. The junta also threatened to revise the terms of RusAl’s license to develop Dian Dian, take back state control of a bauxite and alumina plant sold to the company in 2002, and levy tax claims of $860 million.

RusAl on June 15 said it had reached “a number” of accords, including to develop Dian Dian and to continue its current tax and customs system, after the company’s billionaire chief executive Oleg Deripaska met the country’s government for talks in Conakry, the capital.

Dian Dian, located 350 kilometers north of Conakry, contains about 1 billion metric tons of bauxite ore with a high aluminum content, according to RusAl.

Other companies operating in the country include Aluminum Corporation of China, AngloGold Ashanti — Africa’s biggest gold miner — and Brazil’s Vale, the largest iron-ore producer.

Fishery bosses: Bribes in Russia widespread



Revelation suggests the illegal activity is almost common practice throughout the industry. -The Yomiuri Shimbun/ANN

Wed, Dec 29, 2010

The Yomiuri Shimbun/Asia News Network

In connection with cash payments made by four Japanese fisheries to Russian border guards to fish walleye pollack in Russia's exclusive economic zone, executives of other fisheries have told The Yomiuri Shimbun they also have given cash to Russians to fish saury, salmon and trout in Russian waters.

About 10 presidents and executives of fisheries headquartered in Hokkaido and the Tohoku region said they handed cash to Russian border guards to buy their tacit permission to catch fish in excess of official quotas.

"We did it to catch more fish than is legally allowed," an official of one of the companies said. Other companies said they provided the money to avoid trouble.

The companies have been fishing in the Bering Sea and waters around the Northern territories within Russia's EEZ, the executives said.

The latest revelation suggests the illegal activity is almost common practice throughout the industry, and has been conducted for a wide variety of fish and over a long period of time, observers said.

Some companies said they paid money to Russian border guards several years ago while others said they did so more than 10 years ago. But other firms said they still make such payments.

The amount of money varies from tens of thousands of yen to 3 million yen (S$47,300) a year.

Meanwhile, other firms said they had previously given furniture or cars to Russian guards.

Currently, about 230 Japanese ships catch walleye pollack and saury in the EEZ claimed by Russia. The fishing quota decided through the Japan-Russia fishery agreement is 46,452 tons for this year.

Meanwhile, the number of ships that catch salmon and trout in the Russian EEZ is 36, whose combined fishing quota amounts to 8,447 tons this year.

-The Yomiuri Shimbun/Asia News Network

28 Dec 2010

A Chechen Delegation Visits Amman



Amman-Jordan - The Deputy Mayor of Amman, Engineer Amer AlBashir, received in his office his Excellency, the Chechen Minister of Culture, Mr. Decalo Mozakayeiv Abdullah and his accompanying delegation.

Eng. AlBashir and his guest Mr. Mozakayeiv praised the mutual relationships between the two countries, and the brotherly ties that were founded by His Majesty, king Abdullah the second, and the Chechen president, Mr. Ramadan Qadroof.

Also, Eng. Albashir confirmed the interest of Amman Municipality in strengthening the ties between the two cities, Amman and Grozny, and exchanging the expertise in all fields of infrastructure services.

During the meeting which was also attended by two municipality members, Mr. Mahmoud AlQaissi, and Miss Nissreen AlNajdawi, the Deputy Mayor, Eng. AlBashir, also applauded the fact of naming the main street in the Chechen capital, Grozny, after His Majesty, king Abdullah the second, and one of its public parks after the late king Hussein Bin Talal.

The compliment was returned when Eng. AlBashir announced that also Amman municipality named a main street in Rahmaniyeh neighborhood in Sweileh after the Chechen president, Mr. Ramadan Qaroof next to the public park, which was also named after the previous Chechen president, Mr. Ahmad Hajji Qadroof.

In addition to that, Mr. Mozakayeiv showed his admiration towards all the advanced development that the city of Amman is encountering.  He also praised all the efforts made by the municipality in serving its citizens through the wonderful development projects that are being carried out.

This visit came as part of the twinning agreement that was previously signed between Amman and Grozny.

- Ends -

Dagestani police on heightened alert – Minister



Dec 29, 2010 00:38 Moscow Time

The militants killed in Dagestan on Sunday planned a series of terror attacks on New Year’s night.

The republic’s Interior Minister Abdurashid Magomedov  said on Tuesday that from December 27 through January 9 the local police would be on heightened alert keeping a close eye on public places and strategic facilities.

Over 6500 stranded passengers still waiting at Moscow airports of Domodedovo and Shermetievo



29 December 2010 | 08:29 | FOCUS News Agency

Home / World

Moscow. Over 6500 stranded passengers are still waiting for their flights at Domodedovo and Shermetievo airports in Moscow, ITAR-TASS reported.

Situation remains serious at the airports. Shermetovo Airport cancelled 52 flights, and Domodedovo Airport – 11.

Over 850 militia offices have been mobilized at the two airports to provide security and order.

Meanwhile Russian meteorologists announce for snow blizzard in the region of Moscow on Wednesday.

Aeroflot cancels 23 international, 26 domestic flights

Today at 09:28 | Interfax-Ukraine

Aeroflot Russian Airlines plans to cancel 23 international and 26 domestic flights on Wednesday, December 29, Aeroflot told Interfax on Tuesday.

"The top priority now is to carry the passengers who have not flown in the previous days," it said.

In particular, Aeroflot plans to cancel 13 flights to St. Petersburg, three to Sochi, two to Yekaterinburg, two to Krasnodar, and one to Astrakhan, Volgograd, Kemerovo, Kazan, Novosibirsk, and Omsk each.

In addition, Aeroflot plans to cancel four flights to Frankfurt and one each to Warsaw, Dresden, Berlin, Munich, Prague, Baku, Zagreb, Kyiv, Istanbul, Stockholm, Antalya, Amsterdam, London, Paris, Vienna, Nice, Rome, New York, and Tokyo.

Read more:

Moscow airlines cancel flights



Dec 29, 2010 10:33 Moscow Time

Aeroflot-Russian Airlines is cancelling 23 international and 26 domestic flights for December 29th. The air company’s representative has said that the cancellations are necessary to haul hundreds of passengers who have been stranded in Moscow airports for days because of the bad weather.

   Among the cancelled flights are flights from Moscow to St.Petersburg, Sochi, Yekaterinburg and Novosibirsk, and flights to Germany, the Czech Republic, Italy, the United States and Japan.

Vedomosty: blocked without leaving a trace



29 December 2010 | 08:13 | FOCUS News Agency

Home / World

Moscow. Official representatives of Shermetieovo and Domodedovo assure that airports have brought to normal their activity after suffered problems caused by power cut and weather anomaly. Together with the militia they deny information released online about fighting and problems between passengers who got nervous after long waiting of the cancelled flights.

Meanwhile passengers continue complaining of misinformation and incompetence of the staff, Vedomosty daily writes.

It took three days to the officials to pay attention to the disorders at Moscow’s airports.

Cancelled flights were not the only aftermaths of the severe weather. Hundreds of people were left without electricity, heating power and water supply in Central Russia.

50,000 still cut off from power in Moscow Region



Dec 29, 2010 10:12 Moscow Time

180 built-up areas with a population of almost 50,000 are still blacked out in the Moscow Region. Power supply cuts have been caused by a spell of bad weather. The freezing rain that hit Moscow and the Moscow Region at the weekend caused the felling of trees and disruptions in power transmission wires. Power supply is due to be restored by later today.  

Moscow residetns asked to stay indoors over bad weather



Dec 29, 2010 10:32 Moscow Time

Moscow residents are advised to stay indoors if possible as the city and its suburbs face yet another spell of bad weather.

  A warm cyclone from the Black Sea and a cold anticyclone from the Kola Peninsula are expected to bring gales, snowstorms and wet snow, which is fraught with more trees falling down and more power supply disruptions.

  A city government official says that public services are fully prepared to meet the challenge.

Russian Press at a Glance, Wednesday, December 29, 2010



09:03 29/12/2010

© RIA Novosti. Rybchinskiy

POLITICS

Russian President Dmitry Medvedev ordered Prosecutor General Yury Chaika to investigate the three-day collapse in operations at Moscow's two main airports -- just hours after desperate passengers stranded in Sheremetyevo attacked workers

(The Moscow Times, Vedomosti, Kommersant)

The Russian Foreign Ministry accused the West of pressuring its courts over the trial of Mikhail Khodorkovsky and Platon Lebedev, as the judge dismissed testimony by a high-ranking official who spoke against the charges in the case

(The Moscow Times, Kommersant)

Russia's relations with Belarus were turning frosty again as Moscow warned Minsk against dragging its feet on the release of Russians jailed during protests over President Alexander Lukashenko's re-election

(The Moscow Times, Nezavisimaya Gazeta)

Russian President Dmitry Medvedev signed a law separating the Investigative Committee from the Prosecutor General's Office and defining their responsibilities

(The Moscow Times)

Russia expelled two Spanish diplomats in response to the expulsion of two Russian diplomats from Madrid seven weeks ago

(Kommersant)

ECONOMY & BUSINESS

Auditors say that Moscow city transport companies including the Moscow Metro, Mosgortrans and Moscow Metrostroi have misspent almost half of the funds allocated for improving the capital's transport infrastructure over the past three years

(The Moscow Times, Vedomosti, Nezavisimaya Gazeta)

LUKoil, Russia's largest independent oil producer, held top-level meetings with representatives from three West African states, including Liberia, as a part of a $9 billion overseas investment program

(The Moscow Times)

Prime Minister Vladimir Putin told managers and staff of VTB, the country's second-biggest lender, to shape up and do more sports to help improve the bank's performance in coming years

(Kommersant, Rossiiskaya Gazeta, Nezavisimaya Gazeta)

IT & COMMUNICATIONS

Even the airwaves have traffic jams in Moscow, at least on New Year's Eve, but congratulating your family and friends while celebrating the arrival of the New Year via a call or SMS should work out, if you plan ahead

(The Moscow Times)

CRIME

The Moscow City Court sentenced Igor Izmestyev, a former Bashkortostan representative in the Federation Council, to life in prison in the toughest sentence ever for a former senator

(The Moscow Times, Kommersant, Rossiiskaya Gazeta)

A Thai prosecutor's office has dropped a child molestation charge against acclaimed Russian pianist and conductor Mikhail Pletnev

(Kommersant)

SOCIETY

Three suspects, including a senior official in the administration of the Moscow region town of Khimki, were detained in the beating of environmental activist Konstantin Fetisov

(The Moscow Times, Kommersant)

2010 a milestone for CIS



10:24 29/12/2010

© POOL

Innokenty Adyasov, special for RIA Novosti

The year 2010 has been arguably the most important year for the member states of the Commonwealth of Independent States (CIS) since gaining independence following the collapse of the Soviet Union in 1991. Some of this year’s events are bound to set new trends within the CIS for 2011 and beyond.

The arrival of Viktor Yanukovych

The policies pursued by the former Ukrainian president, Viktor Yushchenko, brought Russian-Ukrainian relations to a low point. Ukraine did not have enough cash to pay for gas already supplied from Russia, and the ensuing gas conflict threatened Russia’s gas supplies to Europe once again. Bilateral trade plummeted, and Ukraine found itself on the brink of default.

Yanukovych, the leader of the Party of Regions, was elected president in the second round of voting on February 7, 2010, giving the country hope for a change of course and economic recovery.

In April 2010, Russian President Dmitry Medvedev and Viktor Yanukovych signed the landmark Kharkov Agreements, extending Russia’s lease of the Sevastopol base for its Black Sea Fleet for another 25 years, starting from May 2017. In return, Ukraine was exempted from Russia’s gas export tax, which represents a 30% discount.

Predictably, the newfound cooperation between the countries revived trade, which is expected to exceed $35 billion this year, a nearly 100% increase over 2009, according to the Ukrainian leadership.

Recently, Yanukovych said that Ukraine may join the Common Economic Space. So next year could very well mark the start of Ukraine’s integration in EurAsEC projects, such as the mentioned Common Economic Space and the Customs Union.

That being said, Ukraine’s economy and finances will hit a roadblock in 2011. Loan payments will be due, and the country will have to contend with a large budget deficit. This year its sovereign debt reached 32.1% of GDP. Next year the Ukrainian government will probably have to introduce some unpopular policies, such as steep price hikes on housing and utilities, freezing retirement benefits and salaries of public sector employees, and increasing the tax burden on small and medium-sized businesses. The Ukrainian hryvnia may begin to depreciate. Some observers are even predicting that the current government will collapse.

Economic problems could spell trouble for Prime Minister Mykola Azarov and his Cabinet. However, Ukraine’s newfound openness to the prospect of integrating with its CIS partners – primarily Russia, Kazakhstan and Belarus – may provide it with a life line: Ukrainian products would have unfettered access to a market of 170 million people; the country would be hooked in to Russia’s gas pipeline system, which would allow Ukraine to export gas from Kazakhstan and possibly Turkmenistan; Ukrainian companies could raise capital on financial markets in Russia and Kazakhstan. But as Yanukovych moves Ukraine closer to the Customs Union and Common Economic Space, there is bound to be strong resistance from the Ukrainian opposition and criticism from the EU and the United States.

The irreplaceable Lukashenko

As expected, Alexander Lukashenko was reelected president of Belarus with 80% of the vote. Although OSCE observers have not recognized the December 19 elections as fully democratic, citing “a lack of transparency in vote counting” and “the use of excessive force to disperse protesters,” the West has not severed ties with Belarus and will probably continue to maintain a cautious dialogue with Lukashenko in 2011.

The West may use its desire for amnesty for Belarusian opposition leaders arrested on December 19 as the formal pretext for continuing contacts.

The Belarusian opposition, which was far from united, has been utterly defeated. Observers anticipate the rise of a new generation of opposition leaders whose formative years came after the collapse of the Soviet Union. It is critical that Russia cultivate ties with these new leaders. This may provoke criticism from Belarusian officials, but Russia’s relations with its closest neighbor must extend beyond a single politician.

The year 2010 saw tensions emerge between Russia and Belarus. Their mutual recriminations peaked in summer, and it appeared that the countries had entered a period of systemic crisis in relations. Analysts were quick to predict the impending collapse of the Union State and the Customs Union. However, in July Belarus announced plans to fully integrate into the Customs Union and to cooperate with its partners in the Common Economic Space. Cooperation within both groups has allowed Russia and Belarus to overcome their main disagreements. Russia cancelled oil export duties, while Belarus agreed to pay over to Russia all revenues from duties on refined products made of Russian crude.

Belarus will most likely continue jockeying between Russia and the West to secure economic benefits from both. At the same time, as the Common Economic Space takes shape, the “irreplaceable” Lukashenko will find it harder to prevent the influx of Russian capital to key sectors of the Belarusian economy.

Common Economic Space: Who will join next?

Efforts to set up the Common Economic Space plan will begin in earnest in 2011. The presidents of Russia, Belarus and Kazakhstan, the three trailblazers of integration, confirmed after a meeting of the supreme body of the Customs Union on December 9 that the Common Economic Space will be fully operational as of January 1, 2012.

The three presidents said that the Customs Union and the Common Economic Space are open to new members, particularly Tajikistan and Kyrgyzstan. “By developing the Common Economic Space, we are moving toward a Eurasian economic union,” they said in a joint declaration.

The Customs Union – the first phase on the way to the Common Economic Space – has proven its effectiveness in less than six months. Trade between its members has surged, the cost of goods has declined, and the three member states have agreed on the contours of a supranational body, the Customs Union Commission. The legal framework for the Common Economic Space was drafted incredibly fast. As a result, the three economies, which account for over 80% of the CIS’s GDP, will begin operating as a unified whole next year.

The potential new members, Kyrgyzstan and Tajikistan, are unlikely to add anything but economic problems and political instability to the situation. Low incomes, skyrocketing unemployment and corruption make these countries very vulnerable to extremism.

A new security doctrine

Unfortunately, the CIS is not empowered to take action to prevent and respond to ethnic violence of the kind that occurred in south Kyrgyzstan last summer. In response to the tragedy in Osh, the Collective Security Treaty Organization (CSTO) members adopted on December 9, 2010 a new concept for the CSTO as the main international group responsible for security in the post-Soviet space.

The CSTO heads of state met in Moscow to make changes to the Collective Security Treaty, the organization’s Charter and other procedural documents in an effort “to improve crisis response.”

They formulated a new document, the CSTO statute on crisis response, which governs the work of permanent bodies and provides for emergency consultations and the adoption of decisions to prevent (or settle) crisis situations.

The CSTO received an international mandate from the UN to conduct law enforcement operations to prevent an escalation of violence in its zone of responsibility. This new authority could prove especially useful in 2011, given the deteriorating situation in Afghanistan and the growing tensions in Central Asia.

The CIS turns 20

The Commonwealth of Independent States will turn 20 in 2011. How will economic and political processes develop in this area with over 280 million people? Will the post-Soviet economies fully recover from the worst economic downturn in years? Next year will hold some of the answers. We’re almost there.

Innokenty Adyasov is a member of the expert analysis council on the Russian State Duma’s CIS affairs committee.

The views expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

Tactical arms control remains issue



By Walter Pincus

Washington Post / December 29, 2010

WASHINGTON — What to do about Russia’s overwhelming advantage in tactical nuclear weapons was among the toughest issues that emerged from the Senate debate on the new nuclear treaty.

Although American public opinion was not a factor in the New START debate — polls showed overwhelming support for the arms-reduction agreement — questions about President Obama’s toughness toward Moscow were repeatedly raised, previewing a likely GOP issue in the 2012 election.

Talking to reporters last week, a State Department official seemed to be trying to quell any expectation of quick progress on the issue of tactical weapons.

“I don’t want anybody to think . . . [we] dive right in when January rolls around, because we do have some homework to do in that regard, and I’m sure the Russians do as well,’’ said Rose Gottemoeller, assistant secretary of state for the Bureau of Arms Control, Verification, and Compliance. “Any big negotiation takes preparatory work and some careful consideration.’’

She added that the State Department will have to work with the Defense and Energy departments to prepare for the next round.

But Senator Jim Risch, Republican of Idaho, who tried unsuccessfully to insert the tactical weapons issue into the START preamble, said, “I hope and I urge that the president, the State Department, and all the others involved will pursue this issue aggressively and quickly once we have this treaty behind us.’’

The Russians have about 3,800 tactical weapons, compared with fewer than 500 in the US stockpile, Risch said. Such weapons are built for battlefield use and carry lower yields, compared with strategic weapons, which are long-range and target an enemy’s cities and defense infrastructure.

“We are no longer going to look the other way and ignore this issue,’’ he said. “They have an advantage on us on this.’’

A 1991 agreement between President George H.W. Bush and President Mikhail Gorbachev of Russia called for both countries to remove their tactical weapons to central locations and destroy all nuclear artillery, demolition, mines, and warheads for short-range missiles. There were no provisions for verification on either side, and none has taken place.

Risch and other Republicans pointed out that as Russian troop levels have diminished, Moscow’s military leaders have focused increasingly on tactical nuclear weapons.

“They continue cranking out . . . new designs, new technology, new development, and new production of these tactical weapons — continuing to add to the disparity,’’ Risch said. “Some Russian military experts have written about use of very low-yield nuclear ‘scalpels’ to defeat NATO forces.’’

Senator Jon Kyl, Republican of Arizona and the leader of the opposition in debate on the treaty, said, “I can’t imagine anyone denying the fact that as we reduce our strategic offensive weapons, then the number of tactical nuclear weapons becomes all the more important, especially because of the large difference between the Russians and everyone else in the world.’’

Russia’s current president, Dmitry Medvedev, more than once has threatened to move tactical missiles west if the United States puts elements of a missile defense system in Eastern European countries to counter Iran.

There were concerns across Europe recently when news reports appeared about Russia moving tactical nuclear weapons near the borders of NATO countries.

During the Senate debate on the treaty, Secretary of State Hillary Rodham Clinton and Defense Secretary Robert M. Gates explained in a letter to Senator Susan Collins, Republican of Maine, that a short-range ballistic missile unit had long been stationed near Russia’s border with Estonia. They added that Moscow had announced that its newer SS-26 short-range missiles would be stationed there.

Recognizing the unease such actions cause, the Clinton-Gates letter went on: “Although this deployment does not alter either the balance in Europe or the US-Russia strategic balance, the US has made clear that we believe Russia should further consolidate its tactical nuclear weapons in a small number of secure facilities deep within Russia.’’

Russian legislator: Israel really needs to talk with Hamas



By KSENIA SVETLOVA 

12/29/2010 04:51

"In Eastern politics you play chess, not American football," says Michail Margelov; "relations between the two countries improving," he adds.

 

When the chairman of the Foreign Affairs Committee of the upper house of Russia’s parliament, enters the meeting room of the Knesset’s Foreign Affairs and Defense Committee, he is met with smiles and handshakes.

He knows personally a majority of members of the committee, as well as many other MKs and ministers.

Michail Margelov is not a stranger in Israel. In fact, he is one of the senior Russian officials to visit most often in recent years, building close ties with many politicians.

He spoke to The Jerusalem Post in the capital last week while on a five-day visit with three other members of the Federation Council of Russia to participate in a meeting of the Russian-Israeli interparliamentary group.

A seasoned diplomat, he was chief coordinator for advertising for president Boris Yeltsin’s 1996 reelection campaign, then his PR chief. Margelov was a consultant to Vladimir Putin’s electoral headquarters, and he was nominated by the latter to his current post as chairman of the Foreign Affairs Committee of the Federation Council of Russia in 2001.

Margelov’s keenness to develop relations between the legislatures of Israel and Russia resulted in the establishment of the interparliamentary group in 2009, which has now met for a second time. According to Margelov, this is another proof of the growing closeness between two countries.

This year, Israel and Russia celebrated the 20th anniversary of diplomatic relations and according to Margelov, although significant progress has been achieved, the enormous potential of relations is yet to be fulfilled.

He said the current visit, which included meetings with Prime Minister Binyamin Netanyahu, President Shimon Peres, leaders of the opposition and top security officials at the Defense Ministry, Public Security Ministry and Mossad, has been very fruitful, paving the way for the upcoming visit of President Dmitry Medvedev on January 17.

“I can say that over time relations between the two countries have become increasingly more substantial and meaningful,” Margelov said. “Today it’s much more then the emotional affection of the ’90s, but a true multidimensional partnership.

We cooperate in many spheres: economics, politics and, of course, security. I hope that the planned visit of President Medvedev next month will give a positive impulse to this strategic partnership.”

Margelov was quick to address Israel’s No. 1 security concern – Iran.

“We don’t have illusions concerning the regime in Teheran,” he said, not hiding his concern with its nuclear ambitions, underlining both regional and global aspects.

In September, Medvedev signed an order banning the delivery of the S-300 air defense system and a host of other major arms to Iran as part of measures Russia is taking to comply with UN Security Council Resolution 1929 of June 9, 2010, which adopted a fourth round of sanctions against the Islamic Republic.

“The Russian position on Iran is well known,” Margelov said last week. “We supported the relevant resolutions of the UN Security Council on Iran, and the president also decided to freeze the military and technical cooperation with the Islamic Republic, banning the sale of S-300 systems to Teheran. We don’t have any illusions concerning the Iranian regime.”

However, Margelov doesn’t hide his skepticism regarding economic sanctions.

“Sanctions alone will never work,” he said. “I’ve always been a pessimist concerning sanctions regimes, since we have Yugoslavia and Iraq with its oil-for-food program as negative examples. Usually the sanctions end up in corruption and smuggling activity. If they are not synchronized with continuous political pressure on the party under sanctions, they aren’t worth a dime.

“Also, any opportunity to get back to dialogue between the 5+1 negotiators and any chance to develop a political dialogue with Iran shouldn’t be missed. As I always say, in Eastern politics you play chess, not American football.”

When discussing security issues with Israeli officials, Margelov relies not only on analysis but on his personal experience in Sderot, which he visited a number of times.

“I know well what a live, unexploded Kassam rocket looks like,” he said.

At the same time, he doesn’t see any contradiction in engaging in a dialogue with all Palestinian factions, including Hamas. Russia has been involved in dialogue with the Islamist movement since it won the Palestinian Authority parliamentary elections in January 2006.

“I know that in Israel we are often criticized for our dialogue with Hamas and not only with Fatah,” he said. “It’s my sincere belief that a political party which won the elections held in the PA in 2006 should be engaged in such a dialogue; otherwise these elections shouldn’t have taken place. I monitored these elections myself on behalf of the parliamentary assembly of the European Council and still remember the astonishment of my European colleagues when they heard about the outcome.

However, in politics you need real actions, not illusions.”

During his current visit, Margelov also visited the PA areas, meeting with Fatah Central Committee member Nabil Shaath and other officials.

Russia recently issued a call for an urgent meeting of Middle East Quartet members.

“Indeed we called on the members of Quartet to meet soon,” Margelov said. “It shouldn’t be meeting for the sake of a meeting, nor an act for the sake of the act, but a serious, meaningful discussion.

We need to discuss the current activity of the Obama administration in this regard, and to discuss the options and strategies for the revival of the peace process.

“As for Russia’s particular role, we are able and keen to initiate and develop economic projects with the PA, create multiple work places and drive young people into the camp of those who seek peace.”

An experienced Arabist who first mastered the language travelling with his parents as a child through Arab world (Margelov’s father worked in foreign intelligence) and graduated from the Institute of Asia and Africa Countries in Moscow, he was appointed as Russia’s special envoy in Sudan in December 2009.

Talking about the fragile situation in Sudan, which is heading for a fateful moment, a referendum on independence for Southern Sudan scheduled to take place on January 9, the senator also referred to the many changes that the Middle East is currently experiencing.

“All the countries in the Middle Eastern region are going through significant change.

Turkey, Iraq... The latest statements of Iraqi Sunnis that they need political autonomy just like the Kurds might indeed jeopardize the unity of the country.

“I believe that the rearrangement of the Middle East would be very dangerous, it would be an unstoppable snow ball.

Needless to say, it could have a very negative effect on stability and security of the whole region, including Israel. If it begins, the region will live through extremely turbulent times.”

Khodorkovsky, Lebedev 'lied' to shareholders



11:29 29/12/2010

Jailed ex-oil tycoon Mikhail Khodorkovsky "lied" to the shareholders of his oil firm Yukos, a judge said on Wednesday, two days after a Moscow court found him guilty of embezzlement in a politically tinged trial.

Khodorkovsky, once Russia's richest man and seen as a political threat to Prime Minister Vladimir Putin, and his business partner Platon Lebedev pegged oil prices and "told lies" to Yukos shareholders about the proceeds, Judge Viktor Danilkin said.

Khodorkovsky, 47, and Lebedev, 54, embezzled 218 million tons of oil from Yukos and laundered over 3 billion rubles ($97.5 million) in revenues, Danilkin said on Monday.

The two men have already spent seven years in jail for fraud and tax evasion from their 2005 trial.

The term of the new sentence is expected in a few days' time, when Danilkin finishes reading the full 250-page verdict.

Russia has accused the West of exerting "unacceptable pressure" over the verdict, telling the United States and Europe to "mind their own business."

The United States, Germany and Britain were among those who expressed serious concern over Khodorkovsky's conviction.

U.S. Secretary of State Hillary Clinton said the trial raised "serious questions about selective prosecution and about the rule of law being overshadowed by political considerations."

German Foreign Minister Guido Westerwelle said it was a "step backward on the road toward a modernization of the country."

EU foreign affairs chief Catherine Ashton said she "expects Russia to respect its international commitments in the field of human rights and the rule of law."

Khodorkovsky's lawyers and human rights activists say the court was under pressure following a remark by Putin earlier this month that "a thief belongs in jail." Russia's man of deeds later claimed he was referring only to Khodorkovsky's first conviction.

The trial is widely viewed as a political vendetta by Putin, whom Khodorkovsky challenged by funding the liberal opposition in the early 2000s.

Khodorkovsky and Lebedev have always maintained that charges against them are trumped up.

MOSCOW, December 29 (RIA Novosti)

Reading of Khodorkovsky guilty verdict enters third day



Published: 29 December, 2010, 09:54

Edited: 29 December, 2010, 11:32

The judge has begun reading the verdict for former Yukos head Mikhail Khodorkovsky and his associate Platon Lebedev for the third day in a row.

On Monday the court pronounced them guilty of organizing a criminal group in the oil business, embezzling 218 million tonnes of oil from Yukos’ subsidiary companies and money laundering.

No more charges can be brought against them over this case.

After two days of reading the verdict provisions, Judge Viktor Danilkin has now passed to the description of evidence in the case, which confirms the defendants’ guilt.

Also read Nikolay Svanidze's and Vladimir Mamontov's columns on the issue

Verdict provisions

The reading of the verdict started at about 11am Moscow time (8am GMT) on December 27 at the capital's Khamovnichesky court. Judge Viktor Danilkin announced that the men have been found guilty of registering off-shore companies “to facilitate the criminal business”.

As for Yukos' oil extraction subsidiaries, Uganskneftegaz and Samaraneftegaz, the judge said they were initially put in “economically unfavorable conditions”, in which they had no opportunity to run their own business activities. 

Money-laundering from oil misappropriation was carried out through “complicated contracts abroad and on the domestic market”.

In an attempt to hide the misappropriation, the court found Khodorkovsky, Lebedev and other members of the criminal group had made fake purchase and sales deals through front companies.

Platon Lebedev has been found guilty of organizing financial transactions in the affair.

The judge said that Khodorkovsky and Lebedev had a thought-out plan for all these crimes and they acted in accordance with it. The court has considered dozens of minutes from general meetings of Yukos subsidiaries, which confirm this charge.

The defendants have also been found guilty of actively bribing shareholders and top mangers of Yukos-affiliated companies, who were out of their control and could hamper their plans. The money for the bribes was taken from the accounts of foreign front companies, the verdict says.

Despite the fact that Khodorkovsky and Lebedev pleaded not guilty, the court has found their evidence “contradictory” and taken it “critically”, the judge said.

Khodorkovsky’s lawyer Karina Moskalenko has said the defense will appeal the guilty verdict.

She also said that given the crimes the defendants have been found guilty of, the prison term is likely to be quite long.

Inside and outside the court

There has been no live broadcast in a special room for journalists. It is only possible to listen to the verdict in the courtroom, which does not have enough seats for all those wanting to witness the event.

“The fact that the broadcast was stopped at the beginning of the reading is a very meaningful symptom for justice,” Karina Moskalenko told journalists.

“Even if hearings are held behind closed doors, the reading of the verdict should be public. Otherwise, this places the judge beyond public control,” she added.

Also, on the first day after a 15-minute break in the middle of the reading, even those journalists that were in the court room at the beginning were not allowed in again.

Mikhail Khodorkovsky’s wife Inna has been removed from the court room. Interfax has reported that ushers demanded she leave as she was talking during the reading of the verdict.

Police have detained at least 22 activists who rallied outside Khamovnichesky court for refusal to wrap  up banners they brought with them.

Officers reportedly resorted to using force to detain the protesters. The activists were shouting “down with the police state”.

“Not guilty” – Khodorkovsky

On December 15, the reading of the verdict in the second criminal case against Khodorkovsky and Lebedev was postponed until the end of month. Both businessmen are serving their first eight-year prison term after they were found guilty in 2005 of fraud and tax evasion.

Khodorkovsky, the former Yukos company head, was Russia’s richest man before he was arrested in 2003. Prosecutors are now demanding 14 years in prison for him and his business partner Lebedev in the second criminal case – to be backdated to include the eight years served. During the second trial that has lasted 19 months, prosecutors accused Khodorkovsky and Lebedev of embezzling 218 million tons of oil from Yukos’ subsidiary companies.

Khodorkovsky said his actions were legal. He claimed that the prosecution had not managed to prove their position. The businessmen have always insisted on their innocence. Last month Khodorkovsky said before the court, “My principles are worth my life.”

Prosecutors said the charges against both defendants “have been substantiated.” They also claim they had asked for “a lesser punishment for the defendants” in accordance with new amendments regarding economic crimes.

© Autonomous Nonprofit Organization “TV-Novosti”, 2005 - 2010. All rights reserved.

Likely outcomes of Khodorkovsky's trial



 

By Thomas Grove, ReutersDecember 29, 2010 3:08 AM

A Russian judge who declared jailed ex-tycoon Mikhail Khodorkovsky guilty of stealing 350 million tonnes of oil worth billions of dollars edged toward a sentence this week in the high-profile case.

Below are the most likely scenarios:

Prison Sentence Of Six More Years

Political analysts and investors expect Khodorkovsky to be sentenced to six more years in prison, as requested by prosecutors at his second trial.

This would keep him in jail until late 2017.

Kremlin critics saw Khodorkovsky's 2005 fraud and tax evasion conviction as Kremlin-inspired retribution against Khodorkovsky for challenging then-president Vladimir Putin on issues such as corruption and using oil revenues to fund opposition groups.

A six-year sentence would emphasize Putin's role as Russia's paramount leader, even though, as prime minister, he is officially subordinate to President Dmitry Medvedev.

The sentence would dampen hopes that Medvedev -- Putin's protege who succeeded him as president in 2008 -- has sufficient will or power to keep his promises to liberalize society, reform state institutions and strengthen the rule of law.

Lighter Sentence

A sentence significantly shorter than six years could help the Kremlin save face, vindicating the guilty verdict while giving ground on what has turned into an international cause celebre and signalling that reform may be at hand.

It could minimize the risk of significant damage to the White House-Kremlin "reset" that has produced an improvement in Russian-U. S. ties.

A lighter sentence would send a mixed messages to analysts and investors looking for progress on issues such as corruption, described by Western executives as the biggest barrier to doing business in Russia.

Medvedev and Putin have set strikingly different tones on Khodorkovsky's trial. Asked about the trial, Putin quoted a line from a Soviet film: "A thief must sit in jail."

Medvedev said no government official had the right to comment on the case before the verdict, raising the possibility of disagreement between the two over Khodorkovsky's fate.

Putin and Medvedev have said they will decide together who will run in 2012. Any signs of competition could endanger the stability that Russians and investors cherish.

Medvedev Intervention

Kremlin intervention in the appears unlikely, but a presidential pardon would be the most interesting and politically loaded outcome. It would be a victory for Medvedev in asserting his power as president. It would show clear political ambition in the next presidential election and could cause discord with Putin, who is seen as the real decision-maker in the case.

The legal conditions surrounding a pardon are murky and legal experts and government officials have contradicted each other, leaving it unclear whether Khodorkovsky would have to admit guilt and ask forgiveness.

Suspended Sentence

A suspended sentence could indicate that the Kremlin does not see Khodorkovsky as a political threat or believes he has served his punishment. It might play to Medvedev's reformist promises, but it would by no means indicate it was his own decision. It could be interpreted as a sign that Putin believes he has more to lose by keeping Khodorkovsky in jail.

Although investors see the Khodorkovsky case as a one-off, it has affected Russia's image and a suspended sentence could attract new investment into the country.

Murky maneuvers of Moscow’s ex-mayor



Published: 29 December, 2010, 08:38

Edited: 29 December, 2010, 09:30

After his ignominious expulsion as the former head of Russia’s capital, Yury Luzhkov is again in the spotlight, this time over allegations of fraud.

Russian government auditors have come up with shocking evidence as to how state funds were used over the past two years when Yury Luzhkov was still mayor of Moscow. The preliminary findings show that almost US$7.5 billion was irregularly spent on construction in the capital.

White collar workers at one of Moscow’s banks are facing jail for extending too much credit and trust to the city’s former mayor. Yury Luzhkov and his wife Elena Baturina, Russia's richest woman, now find themselves at the center of yet another scandal. Prosecutors suspect them of laundering some 13 billion rubles, or almost half a billion US dollars, in a somewhat primitive, but seemingly effective fraud.

The Bank of Moscow, owned by a friend of Luzhkov, is accused of approving a whopping great loan to a dummy company, which then used the money to buy land from the mayor’s wife.

Vladimir Zhirinovsky, the leader of the Liberal Democratic Party, sheds some light on how the scheme might have worked.

“The scam was carried out under the control of City Hall and Luzhkov personally. In three months, this company, Premier Estate, appeared. And with little more than three hundred bucks in its account, managed to get a loan worth $500 million,” he says. “Unbelievable! It was clear the company may not pay it back and could evaporate. Then Premier Estate bought land from Baturina and it covered all her debts. While bankers across the world were committing suicide, the ex-mayor’s wife came out squeaky clean!”

On closer inspection, it appears that the Bank of Moscow may only have been a middle man in the transaction. Suspiciously, a couple of weeks before the loan, City Hall gave the bank 15 billion rubles and it issued new shares. Prosecutors suspect that this was the money given to Premier Estate to buy land from the Mayor’s wife.

Many are now wondering – did the mayor really steal the money for the love of his life?! No wonder that the alleged scam has angered Muscovites. They say it looks so blatant, as if the former mayor took the money from the city budget, wrapped it up for Christmas, crossed the street from his office and gave it to his wife – in full view of the bank.

The price paid for the land also raises questions. $7 million per hectare of land on Moscow’s outskirts is astronomical, according to experts. And there is no sign of any construction taking place there.

All of this adds to the bad smell left behind by the former mayor’s acrimonious exit, when Russia’s president Dmitry Medvedev fired him in September over loss of trust.

Later, summing up the year’s events in an interview to three Russian TV channels, Medvedev said that the main reason for the dismissal was that Luzhkov had failed to perform his duties.

“Instead of promoting himself and playing political games, the mayor should’ve been working. This city has a huge number of problems. Corruption is going through the roof,” said Russia’s president. 

Earlier examinations of the activities of the previous city administration launched by order of the new Moscow Mayor Sergey Sobyanin and a number of federal bodies showed that there had been “systemic problems” in the Moscow authorities’ activities regarding financial contracts, as well as violations with a $70 billion investment into city transport over the past three years.

“This is unheard of – it’s impossible to get anywhere through fair competition. Who gets all the work contracts and tenders? Who has always won until recently? As the mayor of Moscow used to say, it was those who exhibited outstanding business skills and proved their right to work on these projects, the most talented entrepreneurs. But we know what kinds of decisions were made,” Medvedev added.

Now, these allegations are out in the open, commentators believe those in charge will be forced to pick up the tab.

“The case has received too much publicity. These people will have to pay. One should not forget that the mayor has changed. So if they don’t pay up they’ll be jailed. To find those in charge will be easy. There’s a loan agreement in place,” says Tatyana Voronova, correspondent for Russia’s Vedomosti newspaper.

So the consequences of Luzhkov's controversial time as mayor are still being felt. And it could be that it is small time bank workers that will be paying the price of alleged big-time corruption.

© Autonomous Nonprofit Organization “TV-Novosti”, 2005 - 2010. All rights reserved.

National Economic Trends

December 29, 2010 11:14

Russian govt approves borrowing limit for 2011



MOSCOW. Dec 29 (Interfax) - The Russian government has approved the limit on sovereign borrowing in 2011, in two resolutions approved on December 27.

The Finance Ministry is authorized to issue ruble-denominated state securities totaling no more than 1.7448 trillion rubles in 2011.

The limit on external obligations next year is $7 billion.

jh

Ruble at a Two-Month High - May Be a Huge Outperformer in 2011



December 29, 2010

The Russian currency is surging, as oil prices recover and traders lock in the likelihood of higher interest rates ahead. There are ways to play this story.

Tuesday morning alone, the ruble was up another 70 basis points as the flow of oil out of Russia at higher prices per barrel pushes more and more foreign money into the country in response.

At this rate, it looks like crude might crack $100 a barrel in the foreseeable future, which would only drive additional strength for the ruble against the euro, dollar and other currencies.

Meanwhile, Russian central bankers have started raising overnight interest rates to fight increasing inflation pressures. As a commodity-oriented economy, Russia naturally generates inflation as its oil wells and gas pipelines pump new wealth out of the ground and convert it into foreign currency.

With local rates at only 2.75%, there is a long way to go before a full-fledged tightening cycle ends — which is evidence of just how artificially cheap Bank Rossii has been keeping the ruble over the last year.

As it is, the ruble remains more or less officially pegged to a basket of dollars and euros created to keep the Russian unit stable against its global rivals.

Russian banks are reportedly shifting their reserves to favor rubles, so it looks like traders’ suspicions that this currency will be a huge outperformer in the new year may be rewarded. If so, the ETF XRU is theoretically a decent way for U.S. retail investors to get exposure to this story:

[pic]

Moscow markets will close on Friday and not open again until after the Russian new year holidays end January 10.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business, Energy or Environmental regulations or discussions

Norilsk Nickel, Polyus, Wimm-Bill-Dann: Russian Equity Preview



By Ilya Arkhipov

Dec. 29 (Bloomberg) -- The following companies may be active in Russian trading in Moscow. Stock symbols are in parentheses and share prices are from the previous close of trading.

Russia’s 30-stock Micex Index rose 0.1 percent to 1,664.86. The dollar-denominated RTS Index gained 0.3 percent to 1,769.41.

OAO GMK Norilsk Nickel (GMKN RX): Norilsk’s board agreed to spend as much as $2.8 billion on capital projects in 2011. Russia’s largest mining company rose 0.6 percent to 6,798.79 rubles in Moscow.

OAO Polyus Gold (PLZL RX): Gold rose the most in a month after the dollar’s retreat boosted demand for the precious metal as an alternative investment. Russia’s largest gold miner gained 1.3 percent to 1,887.17 rubles.

OAO Wimm-Bill-Dann (WBDF RX): The Russian government gave its approval for PepsiCo Inc. to buy a controlling stake in the Wimm-Bill-Dann Dairy & Juice Co., Russia’s leading producer of juice and dairy products, for $3.8 billion. The shares fell 1.3 percent to 3,700.43 rubles in Moscow.

To contact the reporter on this story: Ilya Arkhipov at iarkhipov@

To contact the editor responsible for this story: Willy Morris in London at wmorris@

Last Updated: December 28, 2010 22:02 EST

Norilsk ready for more talks on RUSAL stake



Wed Dec 29, 2010 9:03am GMT

MOSCOW Dec 29 (Reuters) - Norilsk Nickel (GMKN.MM) said on Wednesday it is ready to continue talks with key shareholder RUSAL (0486.HK), after the aluminium giant declined to sell its 25 percent stake for $13 billion.

"Norilsk is open for dialogue," Norilsk president Andrei Klishas told reporters on Wednesday.

Separately, Yuri Filippov, Director of Production of Norilsk, said the company would invest $34 billion to develop production by 2025, and expects to see a steep increase in output starting in three years from now.

"In the next 2-3 years we do not expect a sharp increase in output, we will raise output starting from 2016 when our (copper) deposits in the Baikal region start to operate," he said. (Reporting by Polina Devitt and Aleksandras Budrys; Writing by Toni Vorobyova; editing by Maria Kiselyova)

Norilsk Fails to Reach Agreement to Buy Out Rusal’s 25% Stake



By Yuriy Humber and Ilya Khrennikov

Dec. 29 (Bloomberg) -- OAO GMK Norilsk Nickel dropped plans to buy a 25 percent stake in the company from Oleg Deripaska’s United Co. Rusal, the same day that Interfax reported it rejected an offer for its power unit from the billionaire.

Norilsk failed to reach an accord with Rusal to buy the aluminum maker’s 25 percent stake, the Moscow-based maker of nickel, copper and palladium said yesterday in an e-mail.

The company’s board also rejected a $2.1 billion cash offer from Deripaska’s OAO EuroSibEnergo for its 79 percent stake in power unit OAO OGK-3, deciding instead to swap it for shares in state-run utility OAO Inter RAO UES, Interfax reported, citing an unidentified Norilsk director and an unnamed Rusal official.

Deripaska’s battle for control of Norilsk against rival shareholder Vladimir Potanin is set to extend into 2011, marking at least four years of ownership conflicts at the world’s biggest nickel miner. Norilsk management said Dec. 27 that it is ready to offer a buyback to all shareholders should Rusal rejects its bid of at least $12 billion for its stake in Norilsk.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@; Yuriy Humber in Tokyo at yhumber@.

To contact the editors responsible for this story: Patrick McKiernan at pmckiernan@; Andrew Hobbs in Sydney at ahobbs4@

Last Updated: December 28, 2010 23:22 EST

UPDATE 1-Norilsk starts buyback after RUSAL deal fails



Wed Dec 29, 2010 8:53am GMT

* Norilsk offers to buy up to 6.2 pct of shares

* Offers to buy shares at $252 each

* RUSAL declined to sell its 25 pct stake (Adds details, background)

MOSCOW, Dec 29 (Reuters) - Norilsk Nickel (GMKN.MM), the world's top nickel and palladium miner, launched a $4.5 billion share buyback on Wednesday after failing to persuade co-owner UC RUSAL (0486.HK) to sell its 25 percent stake in the company.

Corbiere Holdings Limited, a unit of Russia's Norilsk Nickel, on Wednesday offered to buy up to 11.9 million shares, or 6.2 percent of share capital, at $252 each.

The buyback opens a new front in core shareholder Vladimir Potanin's campaign to secure strategic control over Norilsk, but was opposed at a board meeting on Tuesday by RUSAL's controlling shareholder Oleg Deripaska.

"Successful implementation of the (buyback) programme, coupled with the simultaneous implementation of its production strategy (will) deliver significant value and return capital to ... shareholders," Norilsk said in a statement.

A source close to Norilsk's shareholders told Reuters that the company was willing to raise its offer for RUSAL's 25 percent stake to $14 billion from an original $12 billion, but Deripaska wanted $16 billion.

Norilsk decided not to offer that much because it was concerned this amount could harm its finances, the source said.

"RUSAL has always emphasized that its stake in (Norilsk Nickel) is a strategic investment, and that the company does not intend to sell it," RUSAL said in a statement on Wednesday.

Based on current market valuations, RUSAL's 25 percent stake in Norilsk is worth about $10.65 billion, according to Reuters calculations.

Shares in Norilsk were up 3.2 percent in Moscow at 7,019 roubles ($231) by 0837 GMT, outperforming a broadly flat market.

(Writing by Toni Vorobyova; Editing by Erica Billingham)

Norilsk Offers to Buy Shares at $252 Apiece, Starting Today



By Torrey Clark

Dec. 29 (Bloomberg) -- OAO GMK Norilsk Nickel plans to buy back shares at $252 apiece and American depositary shares at $25.20 apiece, in an offer starting today at 5 p.m. in Moscow.

The offer will run until Jan. 21, and may be extended, the Russian mining company said today in an e-mailed statement.

Norilsk said in separate statement today that it plans to buy as much as $4.5 billion of stock.

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

Last Updated: December 29, 2010 03:03 EST

Deripaska’s EuroSibEnergo Says Norilsk Rejected Bid for OGK-3



By Ilya Khrennikov

Dec. 29 (Bloomberg) -- EuroSibEnergo Plc, Russian billionaire Oleg Deripaska’s power utility, said OAO GMK Norilsk Nickel’s board rejected its $2.1 billion cash offer for a 79 percent stake in OAO OGK-3.

EuroSibEnergo is “disappointed that Norilsk Nickel chose to ignore” the company’s cash offer for the OGK-3 power generator, Elena Rollins, a spokeswoman for Deripaska’s company, said today in an e-mail.

Norilsk decided to sell OGK-3 to OAO Inter RAO UES, the state-run utility, Interfax reported late yesterday, citing an unidentified person familiar with the board decision. Maria Uvarova, a spokeswoman for the nickel producer in Moscow, declined to comment today.

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

To contact the editor responsible for this story: Anna Shiryaevskaya at ashiryaevska@

Last Updated: December 29, 2010 01:55 EST

Russia's Norilsk to sell OGK-3 to InterRAO-sources



11:13am IST

* InterRAO chosen to buy 79.24 pct stake -sources * Stake had been valued at $2.3 bln

* Other bidder was Deripaska

MOSCOW, Dec 29 (Reuters) - Mining giant Norilsk Nickel has decided to sell a 79.24 percent stake in Russian utility OGK-3 utility to state-controlled InterRAO , two sources familiar with the decision told Reuters.

The decision was taken at a Norilsk Nickel board meeting on Tuesday. InterRAO had offered up to 15 percent of its shares for the stake, which has been valued at $2.3 billion.

The second bidder was Russian tycoon Oleg Deripaska, whose aluminium company RUSAL holds 25 percent in Norilsk Nickel. Deripaska's energy firm EuroSibEnergo had offered $2.1 billion for the OGK-3 stake, Russian media reported this month.

At Norilsk Nickel, Deripaska is locked in a conflict over strategy with another key shareholder, Vladimir Potanin.

On Tuesday, RUSAL declined the offer to sell its Norilsk stake to the company for $12 billion. [ID:nN28259601]

Currently, Norilsk Nickel owns 82.7 percent in loss-making OGK-3 [ID:nLDE6BF20U]. InterRAO's planned acquisition would give it enough capacity to power a mid-sized European country [ID:nLDE69H0EQ].

(Reporting by Anastasia Lyrchikova and Polina Devitt; Writing by Toni Vorobyova; Editing by Lincoln Feast)

Bullish Russia ETF Options Trades Jump as Crude, Ruble Advance



By Jeff Kearns

Dec. 29 (Bloomberg) -- Trading of bullish options on Russian stocks jumped to seven times the four-week average yesterday in the U.S. after oil traded near a two-year high and the ruble touched its strongest level in two months against the dollar.

More than 15,200 calls to buy the Market Vectors Russia ETF changed hands, the most in two months and five times the number of puts to sell. The shares rose 0.2 percent to $37.44 and touched $37.70, the highest intraday level since September 2008. The most-active contracts on the ETF were January $38 calls, which accounted for about four-fifths of the volume.

“It’s shorter-term positioning and likely someone who wants near-term bullish exposure but doesn’t want the risk of owning the ETF itself,” said said Chris Jacobson, chief options strategist at Susquehanna Financial Group LLP in Bala Cynwyd, Pennsylvania. “I’d definitely say it’s notable volume.”

Crude, which along with natural gas makes up about a quarter of Russia’s economic output, traded near a 26-month high after U.S. crude supplies were forecast to extend their biggest monthly decline since December 2006. Russia’s currency climbed 0.4 percent to 30.2448 per dollar by the close of trading in Moscow, the strongest since Oct. 15.

If exercised, the 14,995 January $28 calls traded yesterday would give the right to buy almost 1.5 million shares of the ETF. That’s more than half of the average daily volume of 2.79 million shares over the past four weeks.

Options Trading

Calls give the right to buy 100 shares of a security for a certain amount, the strike price, by a set date. Puts convey the right to sell. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will rise or fall.

Implied volatility, the key gauge of option prices, for at- the-money options expiring in 30 days has rebounded from 27.14 after tumbling to a record low of 23.32 on Dec. 23. The level has declined from this year’s peak of 89.03 in May.

“Buyers are exploiting implied volatility in the ETF that’s near multiyear lows to position for a rally,” said Jim Strugger, an options strategist at MKM Partners LP in Stamford, Connecticut. “They appear to be speculating that gains in commodity prices and related equities will continue in the coming weeks.”

Ninety-three percent of the January $38 calls changed hands on the ask price, while their open interest was 1,629 existing contracts before yesterday, indicating that buyers of new bullish contracts initiated most of the transactions. The ETF’s last close above $38 was in September 2008.

Crude for February delivery gained 49 cents, or 0.5 percent, to settle at $91.49 a barrel on the New York Mercantile Exchange yesterday. Futures have advanced 15 percent this year.

The ruble, which added 0.2 percent to 34.599 versus the central bank’s target dollar-euro basket yesterday, has gained 3.3 percent in December versus the mechanism used to limit swings in the currency that disadvantage exporters, its biggest monthly advance since September 2009, according to data compiled by Bloomberg.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@.

To contact the editor responsible for this story: Nick Baker at nbaker7@.

Last Updated: December 28, 2010 22:00 EST

Market Insider: Russian Roulette Could Pay Off in 2011



Published: Tuesday, 28 Dec 2010 | 8:38 PM ET

By: Patti Domm

CNBC Executive Editor

As Russia moves to lure foreign investors, some strategists see the Russian bear as the emerging market bull for 2011.

"There's more than 15- to 20-percent upside for emerging markets, and we think Russia is going to be at the head of the pack. Within emerging markets, it's one of our favorites," said Kate Moore, global equities strategist at Bank of America Merrill Lynch.

Goldman Sachs and HSBC are also bullish on Russia, despite all the risks.

On Tuesday, the Russian government tried to allay fears that it unfairly stifles foreign investment, after years of increasing state interference and regulation. Russian Prime Minister Vladimir Putin Tuesday promised to relax restrictions on foreign investment in some sectors, not long after President Dmitry Medvedev called for an improved business climate.

The pronouncements come as a Moscow court this week declared Russian businessman Mikhail Khodorkovsky guilty of embezzling billions of dollars from his OAS Yukos company. The Obama Administration Monday criticized the Russian government for his prosecution, saying it raises concerns about the Russian legal system and business environment.

"It can be a tough call because a lot of people that got burned on Russia in 2007, 2008 are really reluctant to get back in on this story," said Moore.

"It just feels like 2011 is going to be a good year for Russia. The truth of the matter is a lot of the companies in Russia are good multinational companies. Certainly, some of their management may be at risk because of investigation by the Kremlin, but a lot of that played out already in 2007, 2008, 2009," she said.

Moore said a lot of those that came under criticism had received assets in the post-Soviet years by non-market mechanisms. "Some of the worst is behind us," she said.

Buying Into Russia

There are signs of new investment interest in Russia from U.S. multinationals, including Pepsi's acquisition of Wimm-Bill-Dann, a juice and dairy company. Russia's government commission on foreign direct investment and strategic sectors announced Tuesday that it approved the acquisition.

Just this week, General Electric [GE  18.32  [pic]  0.13  (+0.71%), the parent of CNBC, also said it was forming ventures with state-controlled OAO Inter RAO UES and Russian Technologies to produce equipment for Russian energy and health care systems.

"Pepsi [PEP  65.28  [pic]  -0.14  (-0.21%) bought Wimm-Bill-Dann, one of the biggest consumer companies. People think of it as a dairy company, but it has a broader reach. Developed companies are looking at the big growth opportunities, and they're looking at Russia. The consumer culture is somewhat more evolved than China," Moore said.

She also said the equity market is a laggard, and it provides opportunity. Russia is expected to see GDP growth of 4.5 percent in 2011, and its stock market currently has a P/E of 6.5, well below the P/E of 12 for emerging markets, as a whole. "It's nearly half the U.S., which is trading at 13 times," she said.

"You have to say, 'If we're bullish on growth, and we're bullish on commodities prices, does Russia really deserve that much of a discount?'" she said.

"From an equity perspective, Russia was a massive laggard in 2010, both in terms of valuations and in terms of price performance. Russian energy was one of the least loved sectors and it's a major part of the equity index," she said.

"As people look at 2011, fairly bullish oil and commodity prices, and seeing that Russian energy was a laggard, they are rotating into it," she said. Russian stocks were up about 15 percent in 2010, compared to Mexico, for instance, which rose 23 percent. South Africa rose 24 percent.

Moore said besides consumer and energy, technology is an interesting growth area in Russia because the government is paying a lot of attention to it. She also said upcoming local elections this year may also spur more government spending.

"The other part of the macro story is the ruble story. When we look at other currencies, we're actually pretty bullish on the ruble. We have a fairly higher appreciation on the ruble than we have on other currencies," she said.

"We're talking about the economy accelerating from 2010 to 2011 when other emerging markets are slowing down," he aid.

Another likely event in the coming year is that the reserve funds Russia built with petrodollars will be spent, and the government will need to find other ways to fund projects. "That will give them an opportunity for the government to float more debt, and we think there's big demand for emerging market paper," she said.

Where Else to Buy

Moore's global favorites after Russia are India, Singapore and Brazil. Within Eastern Europe, she also likes Poland and is neutral on Turkey.

"Poland could be a sort of decoupling story, especially if contagion drags down Central Europe. It has a fairly more insulated economy, and it could continue to perform pretty well," she said.

Lincoln Electric to Acquire Severstal Welding Business in Russia



CLEVELAND, Dec. 28, 2010 /PRNewswire-FirstCall/ -- Lincoln Electric Holdings, Inc. (Nasdaq: LECO) today announced that it has signed a definitive agreement to acquire OOO Severstal-metiz: welding consumables, a leading manufacturer of welding consumables in Russia and a subsidiary of OAO Severstal, one of the world's leading vertically integrated steel and mining companies. The transaction will include acquiring manufacturing operations and exclusive distribution rights of the Severstal brand of welding consumables. Financial terms were not disclosed.

"This acquisition will add to our manufacturing capacity in this fast growing market and complement Mezhgosmetiz-Mtsensk OAO ("MGM"), our recent Russian acquisition," said John M. Stropki, Chairman and Chief Executive Officer. "Severstal's extensive stick electrode offering, along with solid wire and flux cored wire products, when combined with solid wire products from MGM, will make Lincoln Electric a leading consumables manufacturer in the CIS countries. The two acquisitions complement our imported products offering and will expand our market presence in the region."  

Manufacturing production facilities are based in Orel, Russia, with 283 employees. OOO Severstal-metiz: welding consumables' 2010 estimated sales are approximately $40 million USD.  

"The sale of OOO Severstal-metiz: welding consumables will allow us to concentrate fully on our core business (wire and wire products) and continue to provide our clients with competitive product of the highest quality," said Oleg Veter, Chief Executive Officer of Severstal-metiz group of companies.

The OOO Severstal-metiz: welding consumables transaction is under review by Russian regulatory authorities and is expected to close during the 2011 first half.  

The Severstal-metiz group of companies incorporates all of OAO Severstal's metalware assets, and is among the top European producers of wire and wire products. Severstal-metiz's production sites are located in Russia, the Ukraine and Europe, and its primary customers are in the construction, oil and gas, automotive, metallurgy and engineering industries.

Lincoln Electric is the world leader in the design, development and manufacture of arc welding products, robotic arc-welding systems, plasma and oxyfuel cutting equipment and has a leading global position in the brazing and soldering alloys market. Headquartered in Cleveland, Ohio, Lincoln has 39 manufacturing locations, including operations and joint ventures in 19 countries and a worldwide network of distributors and sales offices covering more than 160 countries. For more information about Lincoln Electric, its products and services, visit the Company's Web site at .

The Company's expectations and beliefs concerning the future contained in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and involve a number of risks and uncertainties. Actual results may differ materially from such statements due to a variety of factors that could adversely affect the Company's operating results both prior and subsequent to closing the above-mentioned transaction. The factors include, but are not limited to: uncertainties arising prior to closing that may impact consummation of the transaction; regulatory clearances; and the success of post-closing integration efforts.

More generally, the Company's operating results may also vary from forward-looking statements due to the following factors: the effectiveness of operating initiatives; general economic and market conditions; currency exchange and interest rates; adverse outcome of pending or potential litigation; possible acquisitions; market risks and price fluctuations related to the purchase of commodities and energy; global regulatory complexity; and the possible effects of international terrorism and hostilities on the Company or its customers, suppliers and the economy in general. For additional discussion, see "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

SOURCE Lincoln Electric Holdings, Inc.

PepsiCo to invest nearly $1bn in Wimm-Bill-Dann



      RBC, 29.12.2010, Moscow 10:48:19.U.S. soft drink company PepsiCo Inc. is expected to invest over RUB 30bn (approx. USD 991m) in Russia's largest private producer of packed milk, mineral water and juices, Wimm-Bill-Dann, within the next five years, Russian Prime Minister Vladimir Putin announced during a meeting of the governmental commission on foreign investments on Tuesday. "The U.S. company will invest in the technical re-equipment of production lines, research and development, and new sales schemes. By doing this, the company will create over 1,000 new jobs," Putin stated. He stressed that PepsiCo's acquisition of Wimm-Bill-Dann would allow the former company to not only strengthen its positions on the Russian market, but also enter the markets of the CIS member states.

      As reported earlier, PepsiCo Inc., the world's second largest soft drink producer, and Wimm-Bill-Dann agreed on December 1 on the purchase of 66 percent of the latter company's shares for $3.8bn. PepsiCo is currently awaiting the necessary approvals from regulators to go ahead with the deal.

Report: SCT Agrees on EUR 3.8BN Deal in Russia



Ljubljana, 29 December (STA) - Amidst concerns over the looming bankruptcy of Slovenia's biggest builder, SCT, Radio Slovenija reported on Wednesday that SCT has agreed on a EUR 3.8bn deal in Russia, the bulk of which is related to construction of road infrastructure in Sochi, the host of the 2014 Winter Olympics.

GPS-GLONASS phone to hit stores in 2011



Dec 29, 2010 00:58 Moscow Time

On March 1, 2011 telephones equipped with GPS-GLONASS navigators will hit the stores all across Russia.

Each unit, retailing for just over $360, will use this country’s first microchip measuring just 90 nanometers.

Deputy Prime Minister Sergei Ivanov presented the world’s first such phone to Prime Minister Vladimir Putin during a meeting on Tuesday.

UPDATE 1-Russia's Sistema unveils first GLONASS mobile device



Tue, Dec 28 2010

* Sistema CEO presents device to PM Putin

* Sistema plans to launch the device in March (Adds quotes, details, background)

By Gleb Bryanski

NOVO-OGARYOVO, Russia, Dec 28 (Reuters) - Russian company Sistema (SSAq.L: Quote, Profile, Research, Stock Buzz) unveiled on Tuesday the country's first mobile device equipped with the GLONASS navigation chip promising to start sales in two months.

The state has spent more than $2 billion in the last decade on developing the GLONASS system seen as a potential rival to the U.S. global positioning system (GPS). Russia hopes the project will spark a domestic technology revolution.

"You are holding in your hands the world's first telephone with a chip able to communicate with both GLONASS and GPS," Sistema CEO Vladimir Yevtushenkov told Prime Minister Vladimir Putin.

The chip was developed by Sistema's subsidiary Sitronics (SITR.RTS: Quote, Profile, Research, Stock Buzz) jointly with state technology corporation Rosnano. Yevtushenkov said the sales will start on March 1 when the company expects to produce 500,000 GLONASS-enabled devices.

Putin, who personally spearheaded the GLONASS project acting as a salesman for the system on international visits, joked in response, proposing to postpone the launch until March 8, the International Women's Day, still widely celebrated in Russia.

"Let's launch it on March 8 to make a present for women. So that they could know where their husbands are, identify their position precisely on the map," Putin said.

The project suffered a major setback this month when three GLONASS navigation satellites plunged into the Pacific Ocean after a rocket launch went wrong. Russia currently has 20 satellites of the needed 24 to complete the system.

"We launched European satellites successfully but crashed our own ... The system would have been more reliable if we did not lose the three satellites," Putin said. Russian Space Agency aims to complete the satellite network in March.

Russia plans to introduce duties of around 25 percent by 2012 on the import of mobile phones without the GLONASS navigation system, as part of efforts to encourage worldwide adoption of the technology.

In August, the head of the state GLONASS operator, said firms such as Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz), Motorola (MOT.N: Quote, Profile, Research, Stock Buzz) and Qualcomm (QCOM.O: Quote, Profile, Research, Stock Buzz) were in talks with Russian chip manufacturers about the mass production of handheld devices enabled with both GLONASS and GPS. [ID:nLDE67A0JC]. (Writing by Gleb Bryanski)

Russian airline Utair expects $1.6 bln sales in 2011



Wed Dec 29, 2010 8:20am GMT

* Utair to transport 40 pct more passengers in 2011

* Still in talks about acquiring state owned Moskva airline

MOSCOW, Dec 29 (Reuters) - Russia's fourth largest carrier Utair (UTAR.MM) said passenger numbers are expected to rise 40 percent next year to 7 million as the market recovers from the global economic crisis.

Utair, which flies helicopters as well as planes, expects the rise in passengers to boost revenue from core activities by 32 percent to 50 billion roubles ($1.6 billion).

Utair, which has one of the largest helicopter parks in the world, plans to boost its helicopter services by 6.5 percent, expanding it to 10 countries outside of Russia.

Controlled by Surgutneftegas (SNGS.MM), Russia's fourth largest oil producer, Utair is in talks about acquiring state-owned airline Moskva (former Atlant-Soyuz), transport minister Igor Levitin told journalists on Tuesday.

The talks were due to be completed by the end of 2010, Levitin said.

Moscow's government put its 51-percent share in the air carrier up for sale after new mayor Sergei Sobyanin replaced the long standing Yuri Luzhkov earlier this year. [ID:nLDE69E1TS]. (Reporting by Gleb Stolyarov and Natalya Shurmina, Writing by Nastassia Astrasheuskaya; editing by John Bowke and Louise Heavens)

DECEMBER 28, 2010, 12:30 P.M. ET

Enel In Talks With Russia's Inter RAO On Bulgaria Plant Stake



MILAN (Dow Jones)--Enel SpA (ENEL.MI) is in talks with Russia's Inter RAO (IRAO.RS) about the possible sale of the Italian power utility's majority stake in a plant in Bulgaria, according to a spokesman Tuesday.

"Enel considers Inter RAO a potential buyer," the spokesman for Enel in Russia told MF-Dow Jones, confirming a news report by RIA Novosti.

Enel is looking for a buyer of its 73% stake in a coal-run plant in Bulgaria called Maritza III. It wants to use the money to pay off debt.

It has said it wanted to close the sale by the end of the year but was prepared to delay it until early next year.

It has said it had identified at least two candidates for the stake.

Enel is likely to net about EUR400 million from the Maritza sale, a person familiar with the matter told Dow Jones Newswires earlier this month.

Contrary to RIA Novosti's report, the Enel spokesman said the utility is interested in selling its stake for cash.

"[Enel] is not interested in any asset swap," he said.

-Oscar Bodini, MF-Dow Jones; Gilles Castonguay, Dow Jones Newswires;

VTB buys into TransCreditBank



      RBC, 29.12.2010, Moscow 11:36:40.VTB has purchased 27.8 percent of TransCreditBank's shares, the lending institution announced in a statement today. The acquisition was carried out in two stages: VTB first purchased 9.8321 percent of shares, and then hiked its stake in the bank up to 27.8314 percent.

      As reported earlier, VTB is poised to buy a controlling stake in TransCreditBank and consolidate it in its accounting statement by the end of 2010. At the same time, however, TransCreditBank is expected to maintain its status as an independent legal entity.

For the Record



29 December 2010

VimpelCom Ltd. sent a proposal to Naguib Sawiris’s Weather Investments seeking a merger without a shareholder agreement that would have guaranteed Sawiris two seats on the 11-member supervisory board, Vedomosti reported Tuesday, citing an unidentified VimpelCom official. (Bloomberg)

Alrosa increased diamond output about 5 percent this year to 34.3 million carats from 32.8 million last year, the monopoly said Tuesday, citing preliminary results. (Bloomberg)

December 28, 2010

Tastes Like Chicken



By Tai Adelaja

Russia Profile

Russia Plans to Produce More Chicken Domestically Instead of Importing It, but the Problem Is That the Majority of the Population Won’t Be Able to Afford Locally-Made Chicken

The Russian government issued a decree on Monday to formally slash its frozen poultry import quotas by more than 40 percent, ending a long period of squabbling and back-room negotiations involving major meat exporting countries such as the United States. According to the new government directive, Russia will halve the quota on poultry imports to 350,000 tons – 46 percent down from an earlier estimate of 600,000 tons next year, RIA Novosti reported. Russia’s frozen poultry import quotas for the outgoing year stood at 780,000 metric tons.

Industry executives as well as government officials have touted the cuts in poultry imports, which many see as humiliating, as evidence of growing domestic production. First Deputy Prime Minister Viktor Zubkov said in comments to reporters last month that the new volume of imports would be enough to meet domestic demand. Musheg Mamikonyan, who heads Russia's Meat Union, said the quota for poultry imports in 2011 was being reduced in order to boost local production. Earlier, Mamikonyan had predicted that that poultry quota may be slashed to 400,000 tons, with about 70 percent of that coming from the United States.

Russia's top Sanitary Officer Gennady Onishchenko last month threatened to impose a complete ban on the sales of frozen chicken starting January 1, in a move that analysts said will hurt imports from the United States, which currently supplies only frozen chicken to Russia. Onishchenko, who heads the Federal Consumer Protection Service, said chicken meat loses a significant amount of its nutritional value when frozen, citing research conducted in Russia. The decision to ban the use of frozen chicken for the manufacture of all processed products dates back to March 2008, Onishchenko said.

Onishchenko’s latest threat was credible enough for many WTO members, including the United States, to strongly criticize the move. U.S. Department of Agriculture Spokeswoman Katie Gorscak said in a statement that the ban had "no scientific basis or food safety rationale." Russian chief negotiator in the talks to join the World Trade Organization, Maxim Medvedkov, said the organization's members had already called the ban ungrounded and indicated that it did not conform to the organization’s standards, Interfax reported. A group of local poultry producers also wrote to First Deputy Prime Minister Zubkov last month saying that the proposed ban on use of frozen poultry in all processed products is “impossible to implement in many cases,” and will drive domestic prices up, Kommersant reported, citing a letter signed by 12 major processing farms. Extending the ban effectively halts Russian poultry imports, the newspaper said.

To the relief of poultry exporters, Onishchenko said last week that Russia has changed its position on banning importation of frozen chicken meat, after giving the issue careful consideration, and that it would resume imports from the start of next year. "As for a total ban, we have postponed it for the foreign market, and we will continue increasing chilled meat turnover on the internal market," Onishchenko said, RIA Novosti reported. Earlier, Onishchenko said poultry freezing was an outdated and crude technology, which led to a loss of many of the useful qualities of meat. He also praised inert gas technology, which, he said, allowed storage of poultry for up to 120 days. But the National Meat Association said at the time that a technology for chilling poultry with inert gas did not exist, while the intention to ban freezing raised the question of whether Russia intended to export meat, as it could not be exported chilled.

Russia opened its door wider to U.S. poultry exports after both countries concluded a bilateral WTO accession agreement in late 2006. By 2008, Russia ranked as the biggest market for U.S. poultry, and is also the fourth largest market for U.S. pork exports. The United States shipped 733,000 tons of poultry meat to Russia in 2009 and the U.S. quota for 2010 was set at 600,000 tons, which, though smaller, still makes it Russia’s largest supplier of poultry products. However, Russia, which spent more than $750 million on U.S. poultry last year, froze imports on January 1 after long-planned regulations that forbid the import of poultry treated with chlorine – a production method used by many U.S. producers – went into effect. Moscow made new demands in August, saying the United States should provide guarantees that the plants authorized to supply meat have been inspected properly. The ban has drastically impacted the volume of U.S. poultry imports in Russia, which may stand at just 250,000 metric tons this year, according to November estimates by the Economic Development Ministry.

Poultry politics has also featured prominently as United States and Russia make efforts to reset bilateral relations.

Presidents Dmitry Medvedev and Barack Obama struck a deal in June to allow U.S. producers to import poultry meat that has been processed with substances other than chlorine. Implementation has been held up, however, by a series of inspections of U.S. meat production plants held between October 4 and October 16 this year. On October 18, Russia's Federal Veterinary and Phytosanitary Inspection Service cleared the way for only 18 out of 33 inspected American companies to export chicken meat to Russia. All 18 companies will be recommended for inclusion into the list of companies authorized to import meat to Russia, the service said in an October 18 statement cited by RIA Novosti. Two of the U.S. poultry exporters – Tyson and JBS's Pilgrim’s Pride subsidiary – said they would resume poultry exports to Russia in early September, in what would be the first U.S. poultry consignments after an eight-month pause following Russia's request for chlorine-free treatment of meat supplied to Russia.

There is little doubt that Russia has been steadily reducing the import quota as it strives to protect the rising domestic output of chicken meat. Mamikonyan said that local production of poultry will grow 13 percent this year to reach 2.9 million tons, and will add ten percent more in 2011. Pork production will also grow, albeit at a slower pace, from between eight percent to nine percent in 2010 and at ten percent next year, he said.

However, reducing Russia’s reliance on meat imports from the United States may also be an issue of national pride and sometimes – political expedience, experts say. A day after Russia’s agriculture watchdog announced it was granting permission for more poultry imports from the United States, Prime Minister Vladimir Putin had to make emollient statements meant to appease some of the nationalist leaders in the country’s Parliament. American imports of chicken meat fell from a one-time high of 1.5 million tons to 300,000 tons this year, Putin told Vladimir Zhirinovsky, the leader of Russia's Liberal Democratic Party. Putin said Russia does not need to import poultry in 2011 as it has already amassed the required volumes and has increased domestic production. He noted that Russia's sanitary services often had misgivings about how poultry imports were being produced and transported, adding that Russia was moving to increase domestic production. "I want to remind you that Russia's domestic poultry production has increased by over 70 percent and pork by 39 percent in the past few years. This is a considerable growth for any economy and for any agricultural sector," Putin said, RIA Novosti reported.

National Meat Association Head Sergei Yushin attributed this year’s cutback in poultry imports to the lack of a stable supply timetable for American poultry, which he said has been putting undue pressure on the market. “Imports from the United States are supposed to be completed in the fourth quarter, but since the first consignment arrived only in October, most of the meat imports would flood the market in the fourth quarter and possibly spill over into 2011,” Yushin said. Another reason, he said, is that domestic meat production could grow by as much as 300,000 tons this year, just enough to cover shortfall in imports.

However, some Russian meat producers have argued that poultry import from the United States is unlikely to exceed 60,000 tons before the year runs out, and therefore would not threaten domestic producers. In addition, imported chicken meat tended to come in at a lower price, they said. Anatoly Butorin, the general director of Bely Frigat Group, said that reducing meet imports will lead to a price hike on chicken meat in Russia. "The fresh meat being produced domestically is meant for well-heeled consumers," Butorin said. "Imported chicken meat, however, is for the poor and the pensioners. Ours is, unfortunately, a country of pensioners."

Activity in the Oil and Gas sector (including regulatory)

Russia sets new oil products export duties for 2011-13



Wed Dec 29, 2010 8:21am GMT

MOSCOW Dec 29 (Reuters) - Russian government approved new oil products export duties formula for the next three years, a document posted on its Web site showed on Wednesday.

Light oil products duty tariff is set at 67 percent of oil export tax in 2011, 64 percent in 2012 and 60 percent in 2013.

The levy for heavy oil products is set at 46.7 percent of crude export tax in 2011, 52.9 percent in 2012 and 60 percent in 2013, the government said on its Web site.

(Reporting by Yelena Fabrichnaya, writing by Katya Golubkova, editing by Toni Vorobyova)

Higher Russian oil tax makes China spend more



By He Shan

.cn, December 29, 2010

Russia plans to raise its export duty on oil shipments by as much as 4.5%, from $303.8 a ton to 317.5 a ton, on January 1, which means that China will have to pay more for Russian oil, Xinhua News Agency reports.

In February 2009, China signed a $25 billion "loan-for-oil" deal with Russia that guaranteed China 300 million tons of crude oil for 20 years at market price.

"The Russian oil exporters tend to increase price as the duty is lifted, so China should try to persuade them to share the increased cost, said Pang Changwei, director of the Research Center of Petroleum Politics of the China University of Petroleum.

According to a conservative estimate, China must pay $69 million more for 15 million tons of light oil products a year, even if Russian exporters agree to absorb half of the increased cost.

China's business press carried the story above on Wednesday. .cn has not checked the stories and does not vouch for their accuracy.

Croatia’s INA to Buy Oil Field in Russia From Mol, Poslovni Says



By Jasmina Kuzmanovic

Dec. 27 (Bloomberg) -- INA Industrija Nafte d.d. plans to buy an oil field in western Siberia from Hungary’s Mol Nyrt., Poslovni Dnevnik reported, citing sources close to the Croatian refiner.

The oil field has a daily production of up to 600 barrels, Poslovni said. The field’s reserves are estimated at 26 million barrels, which is about 8 percent of Croatia’s yearly consumption, according to Poslovni.

INA is controlled by Mol, which has a stake of 47.15 percent in Croatia’s biggest refiner. The government holds 44 percent.

To contact the reporter responsible for this story: Jasmina Kuzmanovic at jkuzmanovic@

To contact the editor responsible for this story: James M. Gomez at jagomez@

Last Updated: December 27, 2010 02:39 EST

Petroneft Sees Niche in Soviet Deposits



29 December 2010

Bloomberg

Petroneft, the biggest gainer among Russian oil producers this year, aims to triple output and reserves by drilling deposits abandoned during the Soviet era.

“A lot of time when you talk about Russia you need to talk full-cycle costs,” chief executive Dennis Francis, a former executive with Marathon Oil Corporation in Russia, said in an interview. “You can pick up reserves cheaply. While you make less money, you also spend less money finding the barrel.”

Drilling results at a prospect by Petroneft’s Soviet-era Lineynoye deposit in the Tomsk region of Siberia have lowered the risk of exploring in the area, he said. The company aims to boost proved and probable reserves to more than 200 million barrels by the end of next year from 70.8 million now, Francis said. Petroneft’s market value in London more than tripled this year to about 275 million pounds ($424 million).

Oil taxes and the financial crisis have hindered Russian oil explorers listed on London’s AIM small cap market, while Sibir Energy and Imperial Energy were bought by larger companies. Urals Energy ceded assets to Sberbank after failing to meet loan payments. Volga Gas has lost 62 percent in the past year, the most among Russian oil producers this year, after drilling a dry well.

Rosneft has declined 13 percent in Moscow in the past year. LUKoil, the country’s second biggest producer, has risen 5.4 percent, while TNK-BP gas gained 57 percent on the RTS bourse as it agreed to buy BP assets and was admitted to trading on MICEX.

“Petroneft shares aren’t that expensive considering that reserve additions are likely early next year” after drilling a successful well and further exploration in the region, Ildar Davletshin, an oil and gas analyst at Renaissance Capital, said by phone. “There’s also the potential for a buyer to be a catalyst.”

Low flow rates due to non-porous subsoil may pose a risk to production increases, Davletshin said. Petroneft plans to use high-cost fracturing to pulverize bedrock and improve flows, he said.

Petroneft may double commercial output to 4,000 barrels per day this year, after starting in October, and aims to triple that to 12,000 bpd by the end of 2012, Francis said. A second phase of development may push output to more 20,000 bpd in 2014, according to the company.

The company may also seek to acquire licenses, Francis said.

Russia has “thousands” of Soviet-era prospects in the 10 million or 15 million barrel range, passed over at the time for larger deposits closer to pipelines, Francis said. An expanded pipeline network and higher oil prices have made some of these deposits potentially viable, he said.

“It’s a small niche,” Francis said. “We have an advantage working there over some of the larger companies who are more focused on developing bigger resources.”

Petroneft gained access to a link to Transneft’s trunk pipeline from fields to the east of the Ob River for 25 years under an agreement signed in 2009. The link was built by Imperial Energy, which India’s Oil & Natural Gas Corporation acquired for about 1.4 billion pounds ($2.2 billion) last year.

The Energy Ministry estimates that only half of the country’s undeveloped oil fields could make a profit at $60 a barrel oil prices, given current taxes and costs.

Russia may encourage development of smaller deposits as the government aims to hold output at a post-Soviet high of 10 million bpd for more than a decade. The Finance Ministry has proposed discounts to the mineral extraction tax for deposits containing less than 35 million barrels of oil to help revive Russian oil production, which “clearly helps,” Francis said.

The company was formed in 2005 with rights to Block 61 in Tomsk, a region on the fringe of the West Siberian basin where most of Russia’s oil is produced. Through drilling, Petroneft raised the block’s proved, probable and possible reserves to 531 million barrels at the start of 2009, according to an audit by Ryder Scott.

In 2009, Petroneft and Arawak Energy bought the rights to Block 67 and plan to begin drilling next year. The block holds 55 million barrels of reserves under the Russian C3 classification.

Small explorers have preferred Tomsk where blocks put up for auctions tend to contain several prospects as opposed to other West Siberian regions, such as Khanty-Mansiisk, where structures tend to be auctioned individually, said Francis.

Petroneft agreed upon loan facility of as much as $30 million with Macquarie Group in May and raised $43 million selling shares to fund drilling and move reserves from the “possible” category to the more valuable “proved and probable” category.

“We are oil and gas people and we develop oil and gas, and eventually, if you do that well and get above the radar people get interested,” he said. “We aren’t going to stick polish and lipstick on it and sell.”

LUKoil Mulls More Investments in Africa



29 December 2010

By Howard Amos

LUKoil, Russia's largest independent oil producer, has held top-level meetings with representatives from three West African states, including Liberia, as a part of a $9 billion overseas investment program.

The president of LUKoil Overseas, Andrei Kuzyayev, met Ghana's energy minister, Joe Oteng Adjei, for discussions about the expansion of the company in Ghana, including the development of new projects, according to the latest corporate newsletter, Neftyanie Vedomosti.

After leaving Ghana, Kuzyayev held talks in the capital of Sierra Leone, Freetown, and LUKoil Overseas senior vice president Dmitry Timoshenko visited Liberia's capital of Monrovia.

Countries like Sierra Leone and Liberia, “which have just come through terrible civil wars … are today, with the interest of foreign investors, quickly resurrecting their shattered economies,” the company's publication said.

Sierra Leone and Liberia have significant, largely untapped offshore oil reserves.

Kuzyayev said in March that LUKoil would invest $3 billion each year in projects outside Russia from 2011 through 2013.

In partnership with the U.S. company Vanco Energy, LUKoil is currently working on two projects in the Gulf of Guinea — the Cape Three Points Deep Water block in Ghana and CI-401 in Ivory Coast waters. The blocks are a part of the Tano oil-and-gas basin and cover some 15,000 square kilometers of deep water.

The West African continental shelf is an interesting prospect for many international companies, said Valery Nesterov, an oil analyst at Troika Dialog.

“I think almost all Russian companies will be looking at the West African shelf — including Rosneft and TNK-BP,” he added.

LUKoil's potential resources in the area currently consist of up to 35 million barrels. The company said in September that it might have more petroleum in West Africa than in West Siberia.

As a private oil company competing against state-run monoliths, LUKoil has “limited access to [new] Russian resources,” Nesterov said. “LUKoil is forced to diversify abroad in order to spread the risks of working in Russia.”

Moreover, LUKoil's drilling experience in the deep West African waters is unique, said analyst Artyom Konchin of UniCredit Securities.

“They are the only Russian company who are working offshore at such depths,” he said.

Acquiring expertise in working continental shelves at any depth may be a way of gaining the edge in domestic Russian competition for new licenses.

Although Russian continental shelves are not as deep as the West African one, Nesterov said LUKoil is gathering “very useful experience for future drilling operations.” LUKoil also works in the Caspian Sea.

Rosneft is currently working with U.S. oil company Chevron on the Black Sea shelf. It is possible Rosneft may seek another partner, Nesterov said.

French firm Total used its Girassol deepwater project off the coast of Angola, also in the Gulf of Guinea, to convince Gazprom that its expertise was necessary to help develop the giant offshore Shtokman gas field. Total was accepted by Gazprom as a partner in its Shtokman venture in 2007.

28.12.2010

Russian Natural Resources Ministry To Offer Several Federal Subsoil Fields on Auction in 2011



The Russian Natural Resources Ministry will put several federally-ranked subsoil fields up for auction, Natural Resources Minister Yuriy Trutnev said today in Moscow.

The fields include the Naulskoye, Lodochonoye, Malyshevskoye and Selidovskoye fields. Trutnev said the gold field Sukhoy Log was not included in the list of fields to be licensed in 2011.

The minister said Russia would conduct about 300 to 500 to 700 auctions for subsoil rights in 2011. the revenue from the auctions would be significantly higher than in 2010, he said.

Copyright 2010, Russian Economy Ministry Statistics Department. All rights reserved.

Russia antimonopoly service mulls third wave of oil company fines



Moscow (Platts)--28Dec2010/1155 am EST/1655 GMT

Russia's Federal Antimonopoly Service is considering a third wave of fines against oil companies for manipulating oil product prices on the domestic market, the deputy head of the service, Anatoly Golomolzin, said Tuesday.

The first wave of fines was for a total of Rb5.4 billion ($178 million); the second wave was for Rb20.7 billion ($681 million) against four leading Russian oil companies -- Rosneft, Lukoil, TNK-BP and Gazprom Neft. Some of the fines have since been negotiated down.

"We are considering increasing the size of the fines for violations of antimonopoly law, which ranged from 1-3% [of revenues in the relevant market], but can range from 1-15%," Golomolzin said at a press briefing, adding criminal prosecutions are also possible because of repeated violations.

Golomolzin said FAS was exploring possible violations by Gazprom Neft and Slavneft -- a 50:50 joint venture between Gazprom Neft and TNK-BP -- in the jet fuel market, as the two companies have each reduced their jet fuel deliveries recently by over 40%, leading to a jump in prices.

FAS has also noticed that the price of diesel on the domestic market over the last two months has grown significantly compared to export netbacks, marking possible violations, Golomolzin said.

"We will not allow unjustified growth in prices," he said.

FAS is not considering a settlement with Gazprom Neft for its previous fines, as FAS will only settle if the company admits its guilt and is no longer in violation of antimonopoly law, Golomolzin said.

Russia's Supreme Arbitration Court is scheduled to consider the dispute between Gazprom Neft and FAS on February 15.

In November, Rosneft agreed to admit wrongdoing in regard to one of the FAS fines, and FAS agreed to reduce the fine to Rb2 billion from Rb5.3 billion, or 1% of revenues over the period the fine applied to.

Last May, Russia's Supreme Arbitration Court backed FAS in a decision against TNK-BP for the 2008 Rb1.1 billion fine, which TNK-BP has since paid.

The first wave of fines was in 2008, when FAS imposed record-high fines on the companies for maintaining artificially high prices. Rosneft was fined Rb1.44 billion, Lukoil was fined Rb1.5 billion, TNK-BP Rb1.1 billion and Gazprom Neft Rb1.357 billion.

In June 2009, the FAS said the four had again violated the antimonopoly laws and fined Rosneft an additional Rb5.3 billion, Lukoil Rb6.5 billion, TNK-BP Rb4.2 billion and Gazprom Neft Rb4.7 billion.

All four companies disputed the fines in the courts, arguing that in the absence of widespread exchange trading in Russia, there are no clear indicators of fair prices for oil products on the domestic market.

--Jake Rudnitsky, jake_rudnitsky@

Gazprom

29.12.2010

Gazprom Lowers Forecast For Gas Production in 2010 to 508.5 Billion Cubic Meters



Gazprom plans to produce 6.5 billion cubic meters of gas less than forecast previously, or 508.5 billion cubic meters of gas, Gazprom representative Sergey Kupriyanov said during an interview on RBK-TV.

"That is less than we had planned", he noted adding that gas exports totalled 140 billion cubic meters of gas which was as much as in 2009.

According to the Russian Customs Service, Gazprom's production fell 16 percent in 2009 compared to 2008, to 462.2 billion cubic meters of gas.

Copyright 2010, Oil and Gas Information Agency. All rights reserved.

Gazprom looks to gas future



Published: Dec. 28, 2010 at 7:09 AM

MOSCOW, Dec. 28 (UPI) -- The domestic market is the top priority for Russian gas monopoly Gazprom, though new transit corridors are important projects, a top executive said.

Most of the natural gas headed for Europe heads through Ukraine, though contractual disputes prompted the Russian gas monopoly to find new transit routes.

Alexei Miller, the chief executive at Gazprom, said that while the domestic gas market is a main focus, increasing the reliability of European transit networks remains at the top of the company's agenda.

"The Russian gas market is No. 1 priority for us," he said in a statement. "However, this does not mean we are disregarding the obligations to our European customers."

Gazprom is building the Nord Stream gas pipeline through the Baltic Sea. South Stream, the company's pipeline project for southern Europe, is in the feasibility stage.

In general, he predicted significant growth in the energy sector as world economies recover from the global recession.

"We are convinced that this trend will remain in the future," he said.

Gazprom: European consumers pay more than they could



28 December 2010 | 16:37 | FOCUS News Agency

Home / Business

Moscow. Gazprom consumers in Europe who have bound their contracts with the spot prices are forced to pay more than they would have, if they had not done so, said Gazprom Spokesman Sergey Kupriyanov, cited by RIA Novosti.

“Our consumers who received the so-called ‘reductions’ pay more than they would have, if they had not changed their contracts,” said Kupriyanov.

He added that Gazprom’s average price in the long-term contracts for 2010 is USD 308/1,000 cubic meters of gas, while on the spot market the prices have already climbed to about USD 310.

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