Russia



Russia 091110

Basic Political Developments

• Reuters: PRESS DIGEST - Russia - Nov 10

• Kremlin: November 15-16, Dmitry Medvedev will visit Singapore on an official visit

• Kremlin: November 14-15, Dmitry Medvedev will take part in the summit of the Asia-Pacific Economic Cooperation (APEC) forum in Singapore.

• ISRIA: Russia - MFA - Upcoming 21st APEC Ministerial Meeting in Singapore

• RIA: Medvedev to attend APEC summit in Singapore on November 14-15

• RIA: Medvedev, Austrian chancellor to discuss gas supplies to Europe

• Itar-Tass: Medvedev, Faymann to discuss cooperation within the scope of the South Stream gas pipeline project

• Itar-Tass: Austria Federal Chancellor to begin working visit to Russia

• RIA: Early warning for future gas wars – by Oleg Mityaev: On the eve of the November 18 summit between Russia and the European Union in Stockholm, the Russian Energy Ministry prepared and sent to the European Commission a memorandum outlining the creation of an early warning system for energy affairs.

• RIA: Obama, Medvedev to discuss START, N.Korea, Iran in Singapore

• NY Times: Power for U.S. From Russia’s Old Nuclear Weapons

• NY Times: The Kremlin Can't Have It Both Ways - By KATI MARTON and NINA OGNIANOVA

• Reuters: Putin backs Siemens, Rosatom nuclear pact

• AP: Venezuela, Russia to boost technology cooperation - Venezuela and Russia say they are working on a series of agreements for Moscow to provide the South American country with technology for the development of industries ranging from robotics to biochemistry.

• People’s Daily Online: Venezuela-Russian technology exhibition opens near Caracas

• Aysor.am: Semneby: South Caucasus states are vulnerable

• : India, Russia call for consolidation of global action against terrorism

• Xinhua: India, Russia call for consolidation of global action against terrorism

• Itar-Tass: CIS defence ministers adopt military coop strategy until 2015

• Itar-Tass: CIS defmins to discuss defence, mil-tech cooperation

• RIA: CIS defense ministers to talk military cooperation in Tajikistan

• APA.az: Georgian Foreign Minister: Russia asks us to open the borders

• Axisglobe: Russian military intelligence found out details of millions-worth armament deal between Georgia and Pentagon

• Interfax: Patriarch Kirill will visit Georgia, but it is early to fix dates

• Gaztea.kz: Russia ratified agreement on professional training for law-enforcement, fire-prevention, rescue bodies and special services

• NhanDan: Vietnam President welcomes Russian guests

• ISRIA: Russian MFA Spokesman Andrei Nesterenko Response to Media Query on PNA Head Mahmoud Abbas’s Recent Statement

• ISRA: Russia - MFA - Joint Article of Foreign Ministers Sergey Lavrov of Russia and Franco Frattini of Italy, ‘A New World Order and a Common European Home,’ Izvestia, November 9, 2009

• RIA: Six Russians detained in Kazakhstan over border violations

• RIA: Ten countries to build Kalashnikov assault rifle producing plants

• Interfax: Military police to be introduced in Russian armed forces in 2010 –source

• RIA: Russian police must not aim guns at law-abiding citizens – minister

• Itar-Tass: The Federal Security Service breaks international prostitution ring - the FSB public relations office

• RIA: Russia to launch Progress freighter to ISS

• BBC: Russia to resume ISS construction - After a hiatus of almost a decade, Russia is set to resume construction of its share in the International Space Station (ISS) with the launch of a new module this week.

• RIA: Russian Tu-142 wreckage brought to surface in Tatar Strait

• Prime-Tass: Nov 21: Prime Minister Vladimir Putin to make speech on overcoming crisis, post-crisis economy at United Russia rally in St. Petersburg

• Interfax: Death penalty in Russia should be replaced with life imprisonment without the right to pardon, confident Mironov

• Interfax: Fifty-six percent of Russians support death penalty – poll

• Interfax: Islamic encyclopedia to be printed in Russia, project costs 1mln. US dollars

• Itar-Tass: Three people have died and four were injured in bus collision in the Republic of Dagestan

• Axisglobe: Search carried out in house of former Russian GRU battalion officer Musa Yamadayev

• The Jamestown Foundation: Moscow and Grozny Evince Growing Nervousness Over Regional Security

• St. Petersburg Times: Stroimontage Offices Searched

• St. Petersburg Times: Russia’s Eternal Military-Industrial Kholkhoz - By Alexander Golts

• Businessneweurope: Russia's regions suffer setback

• Interfax: The first insurance company operating under Shariat laws is established in Russia

• World Politics Review: Russia-Saudi Relations: The Kingdom and the Bear

National Economic Trends

• Reuters: Russia c.bank: rate cuts to ease pressure on rouble

• Itar-Tass: CBR’s net purchases of dollars in Oct-15 bln, euro-484 mln

• VTB Capital: CBR has bought USD 1bn since beginning of November

• RenCap: Central Bank of Russia starts to buy currency again

• Interfax: CB urges investors not to over-indulge in carry trade (Part 2)

• Bloomberg: Russia Set to Lower Key Rate Half a Point This Year (Update1)

• Russia Today: Impact of FDI rebound slowed by red tape

• : Russian plants most winter grains 'since 1993'

Business, Energy or Environmental regulations or discussions

• UralSib: Utilities Sector: First positive figures on weekly consumption

• VTB Capital: Ministries are considering pricing policies on the capacity market

• UralSib: Utilities Sector: Large industrials begin refusing MRSKs services

• Steel Guru: Poll results (Week 44) - Russian steel mills to push global levels down

• Steel Guru: Russian import and export data for 9 months

• RenCap: Mechel reports unimpressive 2Q09 results

• Bloomberg: Sberbank to Raise Salaries to ‘Market’ Levels, Vedomosti Says

• : Fitch affirmed the ratings of 6 Russian banks

• Reuters: TIMELINE-Russian banks struggle with bad loans

• : CTC files lawsuit against board member

• RenCap: Federal Arbitration Court again refuses to suspend damage recovery from Telenor

• RenCap: WiMAX licences likely to go to Svyazinvest?

• UralSib: Rostelecom: 1H09 IFRS results: expectedly feeble

• : Russia: October light vehicle sales decline 52%

• Reuters: Russia could allow Renault to increase AvtoVAZ stake

Activity in the Oil and Gas sector (including regulatory)

• Upsttreamonline: Iran lines up Russian deals

• Upstreamonline: Premier seeks to resume in Russia

• Rigzone: Tatneft Underscores 10-Month Oil Production Operations

Gazprom

• Daily Mail: CITY FOCUS: Gazprom woes hit Britain

• RenCap: Gazprom reports 2Q09 result, remains cheap on relative value basis

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Full Text Articles

Basic Political Developments

Reuters: PRESS DIGEST - Russia - Nov 10



Tue Nov 10, 2009 2:34am EST

MOSCOW, Nov 10 (Reuters) - The following are some of the leading stories in Russia's newspapers on Tuesday. Reuters has not verified these stories and does not vouch for their accuracy.

KOMMERSANT

kommersant.ru

- Russia and Slovenia are due to sign an agreement on building the South Stream gas pipeline, taking gas to Northern Italy via Slovenia's territory.

VEDOMOSTI

vedomosti.ru

- Russian broadcaster CTC Media (CTCM.O: Quote, Profile, Research, Stock Buzz) has filed lawsuits against its board member and former CEO Alexander Rodnyansky, seeking to deprive him of his rights to exercise share options which could fetch him up to $100 million, the daily reports.

- Russia's court officials seem to have found enough reasons to extend the moratorium on the death penalty to 2010, the daily reports.

- The head of Russia's state-controlled Sberbank, German Gref, has promised to raise salaries for bank employees by 15 percent from next year.

ROSSIISKAYA GAZETA

rg.ru

- Russia has launched a vaccination campaign against the H1N1 flu virus.

- Mikhail Kalashnikov, the designer of the Soviet Union's most famous gun, is celebrating his 90th birthday on Tuesday. He is still full of energy and is working on new types of arms, the daily says.

VREMYA NOVOSTEI

vremya.ru

- Russia's Prime Minister Vladimir Putin has ordered the government to find ways to ease the process of launching foreign investment projects.

- Russia's ruling United Russia political party plans to make state officials use Russian-made products to boost attitudes towards local industries, the daily reports.

NEZAVISISMAYA GAZETA

ng.ru

- Russia is losing its influence in the former ex-Soviet republic of Armenia, Russia's main ally in the CIS, the daily says, in connection with reports that Armenia has asked NATO to help defend its borders with Georgia.

Kremlin: November 15-16, Dmitry Medvedev will visit Singapore on an official visit



/Google translation/

November 10, 2009, 10:10

The first-ever bilateral visit of President of Russia held in Singapore at the invitation of Singapore President Sellapan Rama Nathan.

Kremlin: November 14-15, Dmitry Medvedev will take part in the summit of the Asia-Pacific Economic Cooperation (APEC) forum in Singapore.



ISRIA: Russia - MFA - Upcoming 21st APEC Ministerial Meeting in Singapore



The 21st Annual Meeting of Foreign and Trade Ministers from the Asia Pacific Economic Cooperation (APEC) Member Economies will be held in Singapore from November 11-12. From the Russian Federation, Economic Development Minister Elvira Nabiullina and Deputy Foreign Minister Alexei Borodavkin will take part.

The Ministerial Meeting will be a key stage in preparations for an upcoming meeting of heads of state and government from the APEC member economies to be held from November 14-15.

Discussions will focus mainly on addressing the global financial crisis and defining optimal post-crisis development models. Considerable attention will be devoted to discussing joint steps to advance regional economic integration as an important means for overcoming the recession, as well as APEC’s role in supporting the successful conclusion of the WTO Doha Round negotiations.

In addition, the ministers will examine a set of cooperation issues in bolstering the various aspects of regional security, including in such areas as counter-terrorism and emergency preparedness.

A Joint Ministerial Communique will be adopted at the end of the meeting.

RIA: Medvedev to attend APEC summit in Singapore on November 14-15



11:3610/11/2009

MOSCOW, November 10 (RIA Novosti) - Russian President Dmitry Medvedev will attend an Asia-Pacific Economic Cooperation (APEC) summit to be held in Singapore on November 14-15, a Kremlin spokesman said on Tuesday.

APEC forum meetings began on Sunday and will culminate in a summit this weekend.

During the summit, the Russian president will meet with his U.S. counterpart, Barack Obama, to discuss strategic arms cuts, as well as North Korea and Iran.

The Kremlin earlier said that Medvedev would meet with his Chinese counterpart Hu Jintao and Japanese Prime Minister Yukio Hatoyama on the sidelines of the summit.

APEC comprises 21 states, including Australia, Indonesia, China, Malaysia, Russia, South Korea, Singapore, the United States, and Japan.

Medvedev's visit to Singapore is the first ever to the Southeast Asian country by a Russian head of state.

"I hope that this visit, the first in the history of our relations, will serve as to further expand our bilateral cooperation," Medvedev said earlier.

November 10, 2009, 10:00

RIA: Medvedev, Austrian chancellor to discuss gas supplies to Europe



04:4410/11/2009

MOSCOW, November 10 (RIA Novosti) - Russian President Dmitry Medvedev and Austrian Chancellor Werner Faymann will discuss energy cooperation, in particular Russian gas supplies to Europe, on Tuesday, the Kremlin said.

Faymann is arriving in Russia on a two-day visit Tuesday. He is also expected to hold talks with Prime Minister Vladimir Putin.

"One of the strategic directions of Russian-Austrian cooperation could be the implementation of the South Stream project," a Kremlin spokesman said, adding that bilateral ties enjoy "stable" and "positive" dynamics.

The spokesman said Russia and Austria are both convinced that the South Stream project will "contribute to Europe's more stable energy supply" and will "ensure unhindered transit of Russian natural gas to European consumers."

He said an intergovernmental agreement to build the pipeline's Austrian section is being developed.

The South Stream gas pipeline, scheduled to be completed by 2015, is part of Russia's efforts to cut dependence on transit nations. It is a rival project to the EU-backed Nabucco, which would bypass Russia.

The 25 billion-euro ($36.5 billion) project is designed to annually pump 31 billion cubic meters of Central Asian and Russian gas to the Balkans and on to other European countries, bypassing Ukraine, which has frequent disputes with Russia over gas supplies and transits. The pipeline's capacity is expected to be eventually increased to 63 billion cubic meters.

On May 15 Russian energy giant Gazprom signed a package of project-related documents with Bulgaria, Greece and Serbia. Similar agreements are being now coordinated with Slovenia and Austria.

In September, Austrian President Heinz Fischer said during a meeting with Medvedev in New York that Russia remained a reliable partner for his country in all spheres, including the energy sector.

Fischer said that despite the economic crisis, Russia and Austria continued to boost ties, including in energy cooperation, adding that he was convinced the trend would be preserved.

Medvedev said that although the crisis had had a negative impact on trade between the two countries, the task of the two states' leadership was "to compensate for the decline as soon as possible."

Itar-Tass: Medvedev, Faymann to discuss cooperation within the scope of the South Stream gas pipeline project



10.11.2009, 01.11

MOSCOW, November 10 (Itar-Tass) - President Dmitry Medvedev of the Russian Federation (RF) and Federal Chancellor Werner Faymann of Austria, who arrives in Russia for a working visit, are to meet Tuesday to discuss cooperation within the scope of the South Stream gas pipeline project and European security matters.

A Kremlin administration official has told Itar-Tass, "The implementation of the South Stream project may become one of strategic areas of Russo-Austrian cooperation."

"Russia and Austria share an appraisal that the project aimed at diversifying routes for the delivery of energy resources, will promote a sustainable supply of energy to Europe, and an unimpeded transit of Russian natural gas to European users," the official pointed out.

The Kremlin expert said, "This taken into consideration, an intergovernmental agreement is being worked out for cooperation in the construction of the Austrian section of the gas pipeline".

Faymann is also to discuss current economic matters at talks with RF Prime Minister Vladimir Putin.

Apart from economic problems, the upcoming talks between Medvedev and Faymann will focus on European security, the Kremlin official said. "The talks will concentrate on matters concerning an effective use of the potential of Russo-Austrian interaction in the interests of our two countries and safe Europe," the official said.

Itar-Tass: Austria Federal Chancellor to begin working visit to Russia



10.11.2009, 11.21

VIENNA, November 10 (Itar-Tass) - Federal Chancellor Werner Faymann of Austria, who begins his working visit to Russia on Tuesday, intends to discuss the issue of ensuring stable supplies of energy carriers to Europe, as well as issues of international security and prospects for development of bilateral relations, a spokesman for the Federal Chancellor’s Office said in a talk with ITAR-TASS on the eve of the visit.

“On the first day of his visit to Moscow,” he said, “the head of the Austrian government will have a meeting with Russian President Dmitry Medvedev in the Kremlin, and in the evening a reception will be held on his behalf for prominent representatives of Russian political, economic and cultural circles, as well as mass media bodies at the residence of the Austrian ambassador.”

“On the second day,” he went on to say, “a wreath-laying ceremony at the Tomb of the Unknown Soldier and talks with Russian Prime Minister Vladimir Putin are to be held.”

The Austrian side intends to touch upon such topics as mutual relations between Russia and the European Union, as well as interaction in solving topical international problems, including settlement of crisis situations around Iran, North Korea and in the Middle East, and within the framework of the UN Security Council where Austria presides at present.

While discussing economic issues, the sides may touch upon gas problems, including the issue of ensuring the reliability of its transit supplies via Ukraine in coming winter, as well as prospects for laying new gas pipelines to Europe, such as the Northern Stream, the Southern Stream and Nabbuko.

RIA: Early warning for future gas wars



10:0810/11/2009

MOSCOW. (RIA Novosti economic commentator Oleg Mityaev) - On the eve of the November 18 summit between Russia and the European Union in Stockholm, the Russian Energy Ministry prepared and sent to the European Commission a memorandum outlining the creation of an early warning system for energy affairs.

The memorandum calls for joint actions if Russian energy supplies to Europe are suspended, including if the interruption is caused by transit countries. Apart from improving energy dialogue with the EU, this document is designed to prevent Ukrainian President Viktor Yushchenko from unleashing yet another gas war with Russia.

The Russian Energy Ministry has announced its readiness to work with the EU to finish the memorandum by November 18 and sign it at the summit. The memorandum defines an "emergency situation" as any considerable decline in the amount of energy transported, stored, distributed or consumed, as determined by international law and bilateral agreements between Russian and the EU. Its "early warning mechanism" is a series of measures for anticipating potential energy problems and risks and responding promptly to any threat of an "emergency situation."

The agreement will focus on Russia-EU bilateral energy relations. The position of transit countries may be considered only if both the consumers and the exporters agree to do so.

The memorandum has more to do with diplomacy than the details of maintaining gas transit systems. For example, it describes what should be done if Ukraine stopped paying for gas and started illegally siphoning it off, and Russia shut off gas supplies in response.

However, it is the memorandum's diplomatic nature that may compel Ukraine to pay for gas. The EU has recently become one of the main sources of credit for the Ukrainian economy. EU officials are capable of exerting pressure on the Ukrainian president, which they demonstrated over the past weekend.

This time, a new gas war may be provoked by the Ukrainian presidential elections, which are scheduled for January 17, 2010. Gas contracts with Russia have already become a bargaining chip in the struggle for power between Viktor Yushchenko and Yulia Tymoshenko.

In late October, Tymoshenko even complained over the telephone to her Russian counterpart Vladimir Putin that Yushchenko had not allowed her to pay for the gas supplied to Ukraine in October.

In response, Yushchenko demanded that his government revise contracts for the purchase of Russian gas and its transit to Europe. He suggested cutting the amount of gas his country purchased by half and increasing the price of transporting 1,000 cubic meters of gas for 100 km from the current $1.70 to $2.60-$2.80. In his opinion, Ukraine's commitments are fixed more rigidly than those of Russia.

Yushchenko is suffering from low approval ratings and may benefit if Moscow shuts off gas supplies. This would help him unite his voters in the struggle against the artificially created enemy, Russia.

In theory, a new gas war could have started this week. November 9 was the deadline for Ukraine to pay for the Russian gas it consumed in October, and Kiev paid for it only at the last moment. Representatives for the Ukrainian president emphasized that their boss was not the cause for any delay in payment for Russian gas.

Apparently, Brussels also played a major role. Over the past weekend, European Commission President Jose Manuel Barroso asked Yushchenko by phone not to obstruct payment for Russian gas. He reminded the Ukrainian president that his country is not only a purchaser but also a link in supply of Russian gas to Europe, and Europeans should not suffer from thwarted supplies.

Now, even if the European Union does not accept the Russian memo on an early warning system for energy affairs in full, its sheer appearance will play into Russia's hand as it is trying to share with Europe the risks implied by gas transits via Ukraine.

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

RIA: Obama, Medvedev to discuss START, N.Korea, Iran in Singapore



02:3810/11/2009

WASHINGTON, November 9 (RIA Novosti) - The U.S. and Russian presidents will discuss strategic arms cuts, as well as North Korea and Iran, during a meeting in Singapore during the weekend, the White House said Monday.

"Obviously, we'll continue to talk through issues that they've spent time working on, most notably the START Treaty that expires I believe the 5th of December, and continue discussions about North Korea and Iran," White House spokesman Robert Gibbs told journalists.

Barack Obama and Dmitry Medvedev will meet during a summit of the Asia-Pacific Economic Cooperation member states. APEC forum meetings began on Sunday and will culminate in a summit on November 14-15.

START I (the Strategic Arms Reduction Treaty), the basis for Russian-U.S. strategic nuclear disarmament, is valid until December 5. The two countries' leaders have expressed the hope that a new pact will be ready before it expires.

Six-party talks involving the two Koreas, the U.S., Russia, Japan and China on the denuclearization of the Korean Peninsula ground came to a halt in April when North Korea walked out of negotiations in protest against the United Nations' condemnation of its missile tests.

The West suspects Iran of pursuing a secret nuclear weapons program but the Islamic Republic says it needs nuclear power solely for civilian purposes.

APEC comprises 21 states, including Australia, Indonesia, China, Malaysia, Russia, South Korea, Singapore, the United States, and Japan.

NY Times: Power for U.S. From Russia’s Old Nuclear Weapons



By ANDREW E. KRAMER

Published: November 9, 2009

MOSCOW — What’s powering your home appliances?

For about 10 percent of electricity in the United States, it’s fuel from dismantled nuclear bombs, including Russian ones.

“It’s a great, easy source” of fuel, said Marina V. Alekseyenkova, an analyst at Renaissance Bank and an expert in the Russian nuclear industry that has profited from the arrangement since the end of the cold war.

But if more diluted weapons-grade uranium isn’t secured soon, the pipeline could run dry, with ramifications for consumers, as well as some American utilities and their Russian suppliers.

Already nervous about a supply gap, utilities operating America’s 104 nuclear reactors are paying as much attention to President Obama’s efforts to conclude a new arms treaty as the Nobel Peace Prize committee did.

In the last two decades, nuclear disarmament has become an integral part of the electricity industry, little known to most Americans.

Salvaged bomb material now generates about 10 percent of electricity in the United States — by comparison, hydropower generates about 6 percent and solar, biomass, wind and geothermal together account for 3 percent.

Utilities have been loath to publicize the Russian bomb supply line for fear of spooking consumers: the fuel from missiles that may have once been aimed at your home may now be lighting it.

But at times, recycled Soviet bomb cores have made up the majority of the American market for low-enriched uranium fuel. Today, former bomb material from Russia accounts for 45 percent of the fuel in American nuclear reactors, while another 5 percent comes from American bombs, according to the Nuclear Energy Institute, an industry trade association in Washington.

Treaties at the end of the cold war led to the decommissioning of thousands of warheads. Their energy-rich cores are converted into civilian reactor fuel.

In the United States, the agreements are portrayed as nonproliferation treaties — intended to prevent loose nukes in Russia.

In Russia, where the government argues that fissile materials are impenetrably secure already, the arms agreements are portrayed as a way to make it harder for the United States to reverse disarmament.

The program for dismantling and diluting the fuel cores of decommissioned Russian warheads — known informally as Megatons to Megawatts — is set to expire in 2013, just as the industry is trying to sell it forcefully as an alternative to coal-powered energy plants, which emit greenhouse gases.

Finding a substitute is a concern for utilities today because nuclear plants buy fuel three to five years in advance.

One potential new source is warheads that would become superfluous if the United States and Russia agree to new cuts under negotiations to renew the Strategic Arms Reduction Treaty, which expires on Dec. 5.

Such negotiations revolve around the number of deployed weapons and delivery vehicles. There is no requirement in the treaty that bomb cores be destroyed. That is negotiated separately.

For the industry, that means that now, as in the past, there will be no direct correlation between the number of warheads decommissioned and the quantity of highly enriched uranium or plutonium, also used in weapons, that the two countries declare surplus.

(This summer, Mr. Obama and President Dmitri A. Medvedev of Russia agreed to a new limit on delivery vehicles of 500 to 1,100 and a limit on deployed warheads as low as 1,500. The United States now has about 2,200 nuclear warheads and the Russians 2,800.)

Mr. Medvedev has reaffirmed Russia’s commitment to a 2000 agreement to dispose of plutonium, and both countries plan to convert that into reactor fuel as well.

An American diplomat and an official with a federal nuclear agency in Washington have confirmed, separately, that the two countries are quietly negotiating another agreement to continue diluting Russia’s highly enriched uranium after the expiration of Megatons to Megawatts, using some or all of the material from warheads likely to be taken out of the arsenals.

The government officials were not authorized to publicly discuss these efforts.

This possible successor deal to Megatons to Megawatts is known in the industry as HEU-2, for a High Enriched Uranium-2, and companies are rooting for it, according to Jeff Combs, president and owner of Ux Consulting, a company tracking uranium fuel pricing.

“You can look at it like a couple of very large uranium mines,” he said of the fissile material that would result from the program.

American reactors would not shut down without a deal; utilities could turn to commercial imports, which would most likely be much more expensive.

Enriching raw uranium is more expensive than converting highly enriched uranium to fuel grade.

To make fuel for electricity-generating reactors, uranium is enriched to less than 5 percent of the isotope U-235. To make weapons, it is enriched to about 90 percent U-235.

The United States Enrichment Corporation, a private company spun off from the Department of Energy in the 1990s, is the treaty-designated agent on the Russian imports. It, in turn, sells the fuel to utilities at prevailing market prices, an arrangement that at times has angered the Russians.

Since Megatons to Megawatts has existed, American utilities operating nuclear power plants, like Pacific Gas & Electric or Constellation Energy, have benefited as the abundance of fuel that came onto the market drastically reduced overall prices and created savings that were ultimately passed along to consumers and shareholders.

Nuclear industry giants like Areva, the French company; the United States Enrichment Corporation and Nuclear Fuel Services, another American company; and Rosatom, the Russian state nuclear corporation, are deeply involved in recycling weapons material and will need new supplies to continue that side of their businesses.

In the United States, domestic weapons recycling programs are smaller in scale and would be no replacement for Megatons for Megawatts. The Nuclear Fuel Services, in Erwin, Tenn., in 2005 began diluting uranium from the 217 tons the government declared surplus; so far 125 tons have been processed. It is used at the Tennessee Valley Authority plant.

The American plutonium recycling program is also well under way at a factory being built at the Energy Department’s Savannah River site in South Carolina to dismantle warheads from the American arsenal; a type of plutonium fuel, called mixed-oxide fuel, will come on the market in 2017.

In total, the 34 tons to be recycled there are expected to generate enough electricity for a million American homes for 50 years.

Op-Ed Contributor

NY Times: The Kremlin Can't Have It Both Ways



By KATI MARTON and NINA OGNIANOVA

Published: November 9, 2009

“It’s time to stop treating Russia as a ‘handicapped person,’” former Czech President Vaclav Havel said recently, responding to suggestions that Russia cannot be expected to reach democracy anytime soon. He urged that Russia be treated as a “partner country like any other,” applying the same standards to Russia as we do “to Burma, Brazil, the Czech Republic or any other country.” We agree.

During a recent mission by representatives of the Committee to Protect Journalists to urge the end of impunity in the killing of journalists in Russia, we were struck by Moscow investigators and prosecutors using the familiar excuses: “Give us time,” they told us. “Russia is where the United States was in the days of the Wild West.”

But a great nation claiming equal status with other great nations cannot plead exemption when it comes to press freedom and human rights. Russia cannot have it both ways.

Secretary of State Hillary Clinton’s recent censure of impunity in the killing of journalists, as well as her public support for Russia’s embattled human rights defenders, comes at a critical time. Such messages not only boost the morale of the Kremlin’s marginalized critics, they can act as real protection for what is left of Russian civil society. Mrs. Clinton singled out the murders of 18 journalists — only one of which has been solved — when she declared: “When violence like this goes unpunished in any society, it undermines the rule of law, chills public discourse, which is, after all, the lifeblood of an open society, and it diminishes the public’s confidence and trust in their government.”

In Moscow we met with dozens of reporters, press freedom advocates and relatives of murdered journalists. We also met with officials, including detectives with Russia’s top investigative agency responsible for bringing the murders of our colleagues to justice. Our purpose was to share the findings of our own investigative report on the murders as well as our recommendations for specific action by Russian authorities and the international community. Our report, “Anatomy of Injustice,” is full of leads that have not been followed and witnesses that have not been interviewed. It is a record of systematic failure to prosecute 17 murders. Grieving relatives and colleagues of murdered reporters repeatedly told us what a difference international attention can make. “Journalists are always more protected when their fates are monitored from abroad,” Musa Muradov, a reporter with Kommersant, told us. “To a certain extent,” he said, “it can save us.”

One of the greatest barriers to establishing a safe environment for journalists is the collective shrug with which the Russian public has responded to the murders. Most Russians get their news from state-sanctioned media and are simply unaware of the problem. The Kremlin virtually controls the top television channels. Only Internet outlets and a handful of brave but low-circulation publications carry a range of opinions. For the rest of society, mostly good news streams into their living rooms. With the economy relatively stable and streets relatively safe, the average Russian opts for a see-no-evil, hear-no-evil attitude.

But the evil is getting too big not to see, and too loud not to hear. Russia is now the third deadliest country in the world for journalists. When 18 journalists are killed for asking tough questions on behalf of all Russians the government is failing at its job.

This is not only an internal matter. Russia’s partners in Europe and around the world have an obvious interest in stopping these killings. Nations need transparency in their associations with other nations.

Following Mrs. Clinton’s lead, other world leaders should voice their support for Russia’s embattled journalists and human rights defenders. The health of Russia’s civil society cannot be left to nongovernmental groups alone. Russia is too great a nation to be treated, in Mr. Havel’s words, as “a handicapped person.”

Kati Marton is the author of “Enemies of the People: My Family’s Journey to America,” and a board member of the Committee to Protect Journalists. Nina Ognianova is the committee’s Europe and Central Asia Program coordinator.

Reuters: Putin backs Siemens, Rosatom nuclear pact



11.09.09, 11:27 AM EST

MOSCOW, Nov 9 (Reuters) - Russian Prime Minister Vladimir Putin urged German conglomerate Siemens AG to forge a 'strategic' partnership with state nuclear firm Rosatom during talks on Monday, a union that could lead to a powerful alliance.

'It's important that special relations appear between your company and Rosatom,' Putin said during a meeting with Siemens ( SI - news - people ) chief executive Peter Loescher.

'In essence, it's a strategic partnership.'

Putin first said in January that Siemens and Rosatom, both major players on world nuclear markets, had pledged to look at closer cooperation.

A source within Rosatom told Interfax news agency last month the venture could be created this year, a move that could irk French firm Areva ( ARVCF.PK - news - people ), which had earlier agreed to work with Siemens on a nuclear reactor project. Areva has said the decision breaches a non-competition clause.

Loescher said at the meeting with Putin on Monday that talks were progressing. 'On the whole, the discussions are going well,' Loescher said during the portion of the meeting at which reporters were present. 'We've had relations of high trust.'

Reporting by Gleb Bryanski; Editing by Dan Lalor) Keywords: RUSSIA SIEMENS/PARTNERSHIP

(vladimir.soldatkin@, +7 495 775 12 42, Reuters Messaging: vladimir.soldatkin.@)

AP: Venezuela, Russia to boost technology cooperation



(AP) – 6 hours ago

CARACAS, Venezuela — Venezuela and Russia say they are working on a series of agreements for Moscow to provide the South American country with technology for the development of industries ranging from robotics to biochemistry.

Venezuela's science and technology minister, Jesse Chacon, says the agreements will likely be signed next year.

Russian authorities have presented more than 5,000 technological projects for Venezuela's consideration.

Chacon says the transfer of nuclear technology is not among the projects that were presented at a forum in Venezuela's capital Monday — even through Russia plans to help Venezuela develop nuclear energy to produce electricity.

Copyright © 2009 The Associated Press. All rights reserved.

People’s Daily Online: Venezuela-Russian technology exhibition opens near Caracas



16:26, November 10, 2009

An exhibition on Venezuelan-Russian leading technology opened on Monday near Caracas, featuring advanced technology programs developed in Venezuela and about 5,700 Russian scientific projects.

"We are sure that the cooperation between Russia and Venezuela will allow the transference of technology and knowledge we need to beef up our industrial independence," Venezuelan Science and Technology Minister Jesse Chacon said.

The exhibition will showcase the cooperation projects between Russia and Venezuela in energy, chemistry, agro industry, medicine and information and communication technology.

Eleven public organizations, 20 universities and 62 Russian businessmen were participating in the exhibition, which runs through Tuesday.

Source:Xinhua

Aysor.am: Semneby: South Caucasus states are vulnerable



A new round of negotiations focused on issue of security over Caucasus will be held tomorrow in Geneva. In this connection EU Special Representative for South Caucasus Peter Semneby reviewed items of settlement of Karabakh conflict and Armenia-Turkey border in an interview with Kommersant paper’s reporter Olga Alenova.

When asked whether Armenian-Turkish border may open before settlement of Karabakh conflict, Peter Semneby said: “It’s a good development that Armenian-Turkish negotiations are in progress. Armenia-Turkish border’s opening can become a first step to overcome the abnormal situation when three longest borders of region are closed. These borders are those between Turkey and Armenia, Azerbaijan and Armenia, and between Georgia and Russia. These developments hinder growth.”

“Current Armenian-Turkish relations may now bring breakthrough although ratification, surely, will be complicated. But these developments are in Armenia’s and Turkey’s interests. And I believe the same for Azerbaijan as it is interested in open borders in region.”

“War in Georgia showed that South Caucasus states are vulnerable. This can be overcome if we solve these matters.”

“Sure, it is a problem and an unacceptable stuff that Russia has recognized South Osetia and Abkhazia. We will have talks on this issue involving Russia in discussions. Anyway we have common priorities in other areas, so our disagreement with Russia cannot hinder our cooperation aimed at overcoming other conflicts.”

TODAY, 11:18

Aysor.am

: India, Russia call for consolidation of global action against terrorism



15:39, November 10, 2009

India and Russia have called for the consolidation of global action against terrorism, including the terror threat emanating from Afghanistan and Pakistan, reported local daily The Asian Age on Tuesday.

During their talks in the Indian capital Monday, Indian External Affairs Minister S.M. Krishna and visiting Russian Deputy Prime Minister Sergei Sobyanin shared the view that drug trafficking is a major source of funds for terrorists and stressed the need to crack down on it, said the report.

Both the leaders underlined the need for early ratification of the Comprehensive Convention against International Terrorism (CCIT) by the UN so that the legal framework could compel member countries to crack down on the international scourge, said the report.

Sobyanin also met Indian Prime Minister Manmohan Singh and discussed Singh's visit to Moscow early December, according to the report.

Xinhua: India, Russia call for consolidation of global action against terrorism



2009-11-10 15:30:12

NEW DELHI, Nov. 10 (Xinhua) -- India and Russia have called for the consolidation of global action against terrorism, including the terror threat emanating from Afghanistan and Pakistan, reported local daily The Asian Age on Tuesday.

    During their talks in the Indian capital Monday, Indian External Affairs Minister S.M. Krishna and visiting Russian Deputy Prime Minister Sergei Sobyanin shared the view that drug trafficking is a major source of funds for terrorists and stressed the need to crack down on it, said the report.

    Both the leaders underlined the need for early ratification of the Comprehensive Convention against International Terrorism (CCIT) by the UN so that the legal framework could compel member countries to crack down on the international scourge, said the report.

    Sobyanin also met Indian Prime Minister Manmohan Singh and discussed Singh's visit to Moscow early December, according to the report.

Itar-Tass: CIS defence ministers adopt military coop strategy until 2015



10.11.2009, 11.55

DUSHANBE, November 10 (Itar-Tass) - CIS defence ministers have met in Dushanbe to discuss multifaceted cooperation in the military sphere, regional security and the need for further integration of defence ministries on the CIS space.

The Russian delegation was led by Defence Minister Anatoly Serdyukov.

Ministers also focused on how to optimize the structure and combat strength of troops of the CIS Unified Air Defence System, ensure control over air space and manage the air movement of CIS member-states, said Alexander Sinayisky, Secretary of the CIS Defence Ministers Council.

After discussions ministers approved the concept of military cooperation until 2015 and basic areas of development of the CIS Unified Air Defence System.

Top military officials also discussed preparation for the 65th anniversary of the end of World War II.

Tajik President Emomali Rakhmon received defence ministers and stressed the need for stronger military cooperation to ensure better security of the CIS member-states.

Officials from Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Ukraine, Uzbekistan, Russia and Tajikistan attended the meeting.

Serdyukov held a working meeting with his Tajik counterpart Sherali Khairulloyev.

Itar-Tass: CIS defmins to discuss defence, mil-tech cooperation



10.11.2009, 02.09

DUSHANBE, November 10 (Itar-Tass) - The results of defence and military-technical cooperation among the member-countries of the Commonwealth of Independent States (CIS) and the importance of enhancing interaction among the Defence Ministries in couteracting international terrorism and other global threats are to be considered here on Tuesday by the Defence ministers of CIS countries, an official at Tajikistan's Defence Ministry has told Itar-Tass, pointing out that the agenda of the ministerial meeting comprises an aggregate of 20 items.

The Russian delegation is led by Defence Minister Anatoly Serdyukov, who arrived here on Monday night. Representatives of all the Defence Ministries of the CIS, except Moldova, will take part in the meeting.

Participants in the ministerial meeting will consider as priority problems the state of affairs connected with the air defence system, the training of military personnel in Russia's specialised institutions of higher learning, and analyse the situation in Afghanistan and other flashpoints located in direct proximity to the borders of CIS countries.

Prior to the opening of the meeting, Tajikistan's President Emomali Rakhmon is to receive the leaders of military delegations.

RIA: CIS defense ministers to talk military cooperation in Tajikistan



03:3010/11/2009

DUSHANBE, November 10 (RIA Novosti) - The council of the defense ministers of the Commonwealth of Independent States (CIS), a loose association of post-Soviet countries, will meet in Dushanbe on Tuesday, the Tajik Defense Ministry said.

Chief ministry spokesman Faridun Makhmadaliyev said the meeting in the Tajik capital would involve delegations from Azerbaijan, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Uzbekistan and Ukraine.

He said the council would discus military cooperation between the CIS member states and approve the 2010 agenda, as well as moves to develop a united air defense system by 2015.

APA.az: Georgian Foreign Minister: Russia asks us to open the borders



[ 10 Nov 2009 10:58 ] [pic]

Tbilisi. Nizami Mammadzadeh – APA. Georgia’s Foreign Minister Grigol Vashadze said Russia had offered the official Tbilisi to open the borders with Georgia, APA’s Georgia bureau reports.

Georgian Foreign Minister said Russia had sent a note to them.

“Russia has sent a note and said that the opening of Russia-Georgia borders should be discussed by the experts of the two sides. But we consider that the information coming from Russia should be approached carefully,” he said.

Grigol Vashadze noted that the experts of the two countries had already held a meeting concerning the issue.

“The expert groups have expressed their positions. But we consider that the opening of Georgia-Russia borders favors only Azerbaijan and Armenia, it is of no importance for Georgia, because Russia has embargoed our goods. Under Russian laws, Georgians are banned from traveling to Russia. In this case, we do not think that the opening of the borders will favor us,” he said.

Axisglobe: Russian military intelligence found out details of millions-worth armament deal between Georgia and Pentagon



09.11.2009

An official of the Russian military intelligence who wished to remain unnamed ‘leaked’ to journalists today the information that the United States have allegedly offered supplying of large lot of armament, military equipment and ammunition to Georgia in the amount of more than $100 million, and to carry out the transaction through the private company, Barrington Alliance Incorporated with the head office in Chicago, instead of governmental channels, online edition of the Moscow daily Izvestia reports. It says the offered armament includes upgraded ground-to-air missiles Patriot-3, personal portable infrared homing surface-to-air missiles Stinger and Igla-3 missiles of portable and motorized versions, Javelin man-portable surface-to-air missiles, and precision-strike semiactive laser-guided Hellfire II missile systems. The quantity of ammunition, including cartridges for small arms, has been estimated in dozens of millions pieces, according to the Russian military intelligence official.

The General Staff of the Russian Armed Forces has confirmed this information. "After the military confrontation in the Caucasus, the Ministry of Defence of Georgia created a structure under the name, Studying of Warfare Lessons. According to its conclusions, it is necessary to urgently raise potentialities of the Georgian army in conducting of anti-aircraft and anti-tank defense, and also to have highly mobile forces of special operations capable to effectively operate in the mountains and equipped by modern means of warfare, the official of the military intelligence has prepared read the prepared text to the Russian news agency ITAR-TASS. „The delivery to Georgia of the specified armament by the USA completely corresponds to conclusions of the Georgian militaries".

Last week the head of the Russian military intelligence Alexander Shlyakhturov declared that the NATO member-states, Ukraine and Israel had been rendering military assistance to Georgia. The NATO delivers small arms and equipment, the USA conduct trainings of personnel, Israel sells drones, and Ukraine sells tanks and means of air defence, according to the head of the Russian GRU, Newsru adds.

Russia Today TV channel, referring to Israel's daily Maariv, reports that the US is hiring Russian-made freight planes belonging to UTI Worldwide Inc. to transport arms and ammunition to Georgia. The paper says the Pentagon is redirecting supplies to Tbilisi that were earmarked for Iraq.

10 November 2009, 11:49

Interfax: Patriarch Kirill will visit Georgia, but it is early to fix dates



Moscow, November 10, Interfax - Patriarch Kirill of Moscow and All Russia confirmed his intentions to visit Georgia, but the Moscow Patriarchate officials say it is early to fix exact dates.

"It's rather difficult to speak about probable timing of Patriarch of Moscow and All Russia's visit to the Georgian Church," deputy head of the Moscow Patriarchate Department for External Church Relations Archpriest Nikolay Balashov told an Interfax-Religion correspondent.

Georgian mass media have recently reported that during their meeting in Baku Patriarch-Catholicos of All Georgia Ilia II invited Patriarch Kirill to visit his country and received consent.

Fr. Nikolay confirmed that during the Baku meeting Ilia II "repeated his invitation to visit the Georgian Orthodox Church as earlier he conveyed such invitations to Patriarch Kirill with the Georgian Patriarchate delegations that visited Moscow."

"Patriarch Kirill confirmed his intention to officially visit local Orthodox Churches in compliance with the Dyptich order (liturgical order of commemorating primates of Orthodox Churches - IF)," the interviewee of the agency said.

According to him, today only the dates of Patriarch Kirill's visit to the Alexandrian Patriarchate, which the second in the Dyptich, are discussed.

In July 2009, Patriarch Kirill made the first official visit to the local Orthodox Church and visited the Constantinople Patriarchate.

Today the liturgical list of local Orthodox Churches mentioned by the Primate consists of 15 jurisdictions in the following order: the Constantinople Church, the Alexandrian Church, the Antioch Church, the Jerusalem Church, the Russian Church, the Georgian Church, the Serbian Church, the Romanian Church, the Bulgarian Church, the Cyprus Church, the Greek Church, the Albanian Church, the Polish Orthodox Church, the Orthodox Church of the Czech Lands and Slovakia and the Orthodox Church in America.

Gaztea.kz: Russia ratified agreement on professional training for law-enforcement, fire-prevention, rescue bodies and special services



14:21 10.11.2009

text: "Kazakhstan Today"

The President of the Russian Federation, Dmitry Medvedev, signed the Federal Law on Ratification of the agreement on professional training for the law-enforcement, fire-prevention, rescue bodies and special services of the CSTO member states, Kazakhstan Today agency reports citing the press service of the president of the Russian Federation.

The Federal Law was passed by the State Duma on October 23, 2009 and approved by the Federation Council on October 30, 2009.

According to the press service, the Federal Law, signed in Moscow on September 5, 2008, ratifies the agreement on professional training for the law-enforcement, fire-prevention, rescue bodies and special services of the CSTO member states.

NhanDan: President welcomes Russian guests



Last updated: 15:59 - November 10, 2009

|President Nguyen Minh Triet received President and Chairman of the Management Board of the Bank for Foreign Trade Kostin |

|A.L., who is leading a Russian business delegation on a visit to Ho Chi Minh City on November 9. |

| |

|The State leader said he was pleased to welcome the Russian guests, expressing the wish that they will harvest good results |

|during their visit, opening new possibilities for co-operation between the two countries’ businesses. |

| |

|He thanked the people of the former Soviet Union and current state of Russia for their support for Vietnam during its |

|struggles for independence in the past as well as its current national development. |

| |

|While affirming Russia is a traditional, faithful and reliable friend of the Vietnamese people, President Triet expressed his|

|wish that co-operation between the two countries become more effective in the future. |

| |

|He also congratulated Russia on its recent successes, saying that the increasing role and position of Russia, especially in |

|economics, science and technology, and the military, had contributed to stabilising the world situation. |

| |

|For his part, Kostin informed the President of the results of his delegation’s meetings with leaders of major Vietnamese |

|enterprises. Businesses on both sides agreed to boost investment co-operation in energy and auto assembly as well as |

|implement tourism projects in Vietnam. |

| |

|The two sides agreed on the establishment of a Russian business investment fund in Vietnam and the investment by Vietnamese |

|enterprises in energy and mining in Russia as well as setting up a joint venture to invest in a third country. (VNA) |

ISRIA: Russian MFA Spokesman Andrei Nesterenko Response to Media Query on PNA Head Mahmoud Abbas’s Recent Statement



Question: Despite intensive international efforts, the crisis in the Middle East negotiation process fails to be overcome. The situation is also compounded by the lack of agreement among Palestinians. Against this background, the statement of PNA Head Mahmoud Abbas that he will not seek re-election is particularly worrisome. Any comment?

Answer: I agree that the situation is indeed very complicated.

In our opinion, in the current difficult circumstances, the regional and international parties should do their utmost to prevent destabilization in the region, and to ease the conditions for restoration of the negotiation process on the Palestinian track and other tracks of a political settlement in the Middle East.

We have also repeatedly spoken about the urgent need to restore Palestinian unity both for the sake of the national interests of the Palestinians themselves and to ensure the effectiveness of the negotiations. Russia has contributed and continues to promote this. At the same time we believe that Mahmoud Abbas as the universally recognized Palestinian leader is a key figure in the realization of the legitimate aspirations of the Palestinian people. Therefore, we have supported and will support him.

ISRA: Russia - MFA - Joint Article of Foreign Ministers Sergey Lavrov of Russia and Franco Frattini of Italy, ‘A New World Order and a Common European Home,’ Izvestia, November 9, 2009



Twenty years ago, after the fall of the Berlin Wall, two new tasks emerged at the center of the Euro-Atlantic and international agenda: to create a “common European home” and a “new world order.” These two concepts, as yet unrealized, were and remain complementary.

A new world order based on interdependence and cooperation in dealing with common problems cannot do without a “Greater Europe” stretching from the Atlantic to Vladivostok. Only such a Europe – with a global vision and goals shared by everyone – would guarantee stability on our continent. How far have we progressed in this project put forward by Charles de Gaulle in the midst of the Cold War?

Over the last two decades awareness has begun to take root across Europe, albeit still fragile, that maintaining dividing lines on the European continent compromises the security of all. The nuclear threat and that of any other major war have been laid to rest. The sad chapter of the Balkan wars has been closed and although some differences persist, the negative effect on the European situation of the Caucasus crisis in summer 2008 is basically overcome. Much has been done to strengthen the strategic nature of relations between Russia and the European Union, including their institutional aspect. In 1996 Russia concluded a partnership and cooperation agreement with the EU; and in 2004 Russia and the European Union reached accord on the Four Common Spaces. The EU is Russia’s main economic partner today. This applies equally to the strategic energy sector, although a modern system of energy security that ensures a balance of interests of the energy producing, transit and consumer countries, as agreed by the G8 leaders at the St. Petersburg summit, has yet to be created. Cooperation between Russia and the Atlantic Alliance has also been arranged through the Russia-NATO Council mechanism, created at Pratica di Mare in 2002.

Is it much or too little? This is a lot, but that is not enough. The fall of the Berlin Wall triggered the emancipation of international relations from the earlier constraints of ideological confrontation. Nevertheless it must be acknowledged that an adequate political response has not been forthcoming. Pan-European political collaboration has not yet made that leap in quality to meet the new challenges and threats. Yet today, with a change in the coordinate system in European and global politics, in the face of these “new threats” of our century—ranging from terrorism, nuclear proliferation, international crime, environmental deterioration to the problems of energy security and economic and financial stability—there is an ever increasing need for a strong and cohesive political partnership in the pan-European area. In other words, the “new world order” needs the “common European home”.

We believe that, in order to build this “common home,” the following priorities must be established.

First, to give new political impetus to relations between Russia and NATO based on a real partnership and in light of reciprocal security interests; secondly, to develop within the overall negotiation process a new agreement between the European Union and Russia so that the strategic partnership would be not only economic, but also political.

Lastly, to create a new architecture of European security that is already being discussed in various European settings. This architecture could be created by combining the competencies and synergies of the various institutions and organizations in the pan-European area, including OSCE, NATO, EU, CIS and CSTO, and by relying on common interests and the necessity of ever closer cooperation between Russia, the European Union, and the United States.

In other words, we need strengthening and implementing the principles contained in the documents of the OSCE, especially in the Helsinki Final Act and the Rome Declaration establishing the Russia-NATO Council. This would help us form a single field of security throughout the Euro-Atlantic space based on a common understanding of the contemporary realities, which initially wasn’t there.

We welcome efforts already made, and the potential contributions of participants in the European process in achieving this goal. Today we all share the responsibility for ensuring global security as it is currently understood.

The soon to come into effect Treaty of Lisbon, as well as the achievement of a new quality in the Russia-US relationship will open up new opportunities for cooperation in the Euro-Atlantic area that must not be missed. At stake is the future of our entire region and its role in an increasingly complex and pluralistic international system of the 21st century, in which we would like to see diversity become value added and a factor of stability and development rather than confrontation.

RIA: Six Russians detained in Kazakhstan over border violations



08:5910/11/2009

ASTANA, November 10 (RIA Novosti) - Kazakh border guards have detained six Russian nationals for border violations, the Central Asian state's National Security Committee said Tuesday.

"A Kazakh border guard detail detained six nationals of the Russian Federation who were traveling by car from Kazakhstan to Russia on November 9," the committee said in a statement.

"They tried to illegally cross the border," the statement said, adding that they had also been trying to smuggle "200 kilograms of fish."

An investigation is underway.

RIA: Ten countries to build Kalashnikov assault rifle producing plants



12:3210/11/2009

MOSCOW, November 10 (RIA Novosti) - Ten countries have applied for licenses to construct plants to produce Kalashnikov assault rifles, a deputy CEO of Russia's state arms exporter Rosoboronexport said Tuesday.

Rosoboronexport is currently fulfilling a 2005 contract to build a Kalashnikov plant in Venezuela.

"In the past few years, ten foreign states have applied to Russia for the creation of facilities on their territories to build licensed Kalashnikov AK-100 series assault rifles," Igor Sevastyanov said.

Sevastyanov did not specify which countries had applied, noting only that they included Latin American and Middle East states. He said some clients want plants built from scratch and others want production upgraded.

Mikhail Kalashnikov, the Russian inventor of the AK-47 assault rifle, turned 90 on Tuesday.

Then-Soviet soldier Kalashnikov was inspired to design the weapon after being wounded in 1941 during WWII. While his first attempts were deemed unsuccessful, he was given a position in weapons development, and by 1947 he had perfected his masterpiece.

Rosoboronexport chief Anatoly Isaikin earlier noted the huge number of unlicensed Kalashnikov rifles produced all over the world.

"There are about 100 million Kalashnikov assault rifles worldwide, of which half are counterfeit, i.e. produced without licenses, patents or intergovernmental agreements," he said.

Interfax: Military police to be introduced in Russian armed forces in 2010 –source



MOSCOW. Nov 10 (Interfax) - Military police will be formed in the

Russian armed forces in order to strengthen law and order in the troops,

a Russian Defense Ministry source told Interfax-AVN on Tuesday.

"The first military police units will be formed in the army and

navy in 2010. Military police will be 5,000 strong," he said.

The military police corps will be vertically organized, starting

with a unit (brigade) and ending up with a military district (fleet),

and be subordinated to a first deputy defense minister, the source said.

RIA: Russian police must not aim guns at law-abiding citizens – minister



11:2610/11/2009

MOSCOW, November 10 (RIA Novosti) - The Russian interior minister used his annual Police Day address on Tuesday to remind police chiefs that officers should point their weapons at criminals, and not aim them at law-abiding citizens.

There have been a number of murder cases in 2009 involving Russian police officers. The most high-profile case saw a southern Moscow district chief kill three people and injure two during a supermarket shooting spree in April.

"This year was particularly difficult and hard for all Russian police," Rashid Nurgaliyev began. "We must remember the tragedy that happened in Moscow, unfortunately through the fault of one of our colleagues, every day," he said.

"Department chiefs who take people on and hand out IDs and weapons must understand that these weapons should be pointed only in the direction of criminals, and not aimed at peaceful citizens," he added.

As well as violence, the Russian police force has been plagued by increasing allegations of corruption, something Nurgaliyev also pledged to tackle.

"We will not cover up for anyone!" he said. "This also refers to those who have turned service in law enforcement agencies into a criminal business. Such people must have no place in our ranks!"

This month, a police officer from the southern Russian city of Novorossiisk was fired and is set to be charged with libel after posting a video on the web asking Prime Minister Vladimir Putin to launch a nationwide corruption probe.

Alexei Dymovsky's message said that department chiefs routinely jailed innocent people to improve statistics. He also said that many young people joined the force despite monthly wages of some $400 because they knew they would be able to supplement their income with bribes.

The officer also complained of "dumb bosses" and routine "ignorance, boorishness and recklessness" within the force, as well as complaining that police were forced to work unpaid overtime.

The Novorossiisk police department has denied the allegations, saying "not a single allegation" could be verified.

President Medvedev has highlighted corruption as one of the country's key problems. Shortly after taking office in May 2008, he signed a decree to set up a presidential anti-corruption council and approved a plan to deal with the problem in July 2008, proposing that special units be created in every branch of government.

Itar-Tass: The Federal Security Service breaks international prostitution ring - the FSB public relations office



10.11.2009, 11.46

MOSCOW, November 10 (Itar-Tass) - The Federal Security Service has broken an international prostitution ring, which engaged in human trafficking using illegal migration channels to western Europe, the FSB public relations office told Itar-Tass on Tuesday.

"The criminal ring included citizens of Russia, Ukraine and Belarus. The operation was conducted jointly with the Investigations Committee of the Prosecutor General's Office and foreign partners," the FSB said.

"As a result of the operation, 14 active members of the group have been caught red-handed. Eight were detained in Russia and six - abroad. In addition, more than 20 persons have been exposed who are involved in these illegal activities," an FSB representative said.

"It has been ascertained that a ramified network of recruiting agents was operating in the Primorye Territory and the Belgorod, Kostroma regions and other provinces of central Russia, who, using fraud and abuse of trust recruited women (mostly from problem families) for subsequent ferrying them to western Europe on tourist visas.

"The recruited girls were sent to Moscow from provinces, where visas were drawn for them from fake papers. Criminals then selected "safe routes" for ferrying them to Europe.

"In European countries, the masterminds of the criminal business forced the girls into prostitution.

"A criminal case was opened against the organizers of the illegal migration channel. The operations and search events continue," the FSB said.

RIA: Russia to launch Progress freighter to ISS



09:5810/11/2009

MOSCOW, November 10 (RIA Novosti) - A Soyuz booster rocket carrying the Progress-M freighter to the International Space Station (ISS) will take off from the Baikonur space center at 14:22 GMT on Tuesday, a Russian space agency spokesman said.

The freighter is carrying a MIM-2 scientific module for experiments on the ISS, the Roscosmos official said.

The MIM-2 module is the first of three components Russia is planning to add to the station in the next three years.

The module will be used in 10 new experiments at the Zvezda module and the Pirs docking station on the Russian segment of the ISS.

Russia's space corporation Energia, located northeast of Moscow, is currently carrying out checks of a MIM-1 module. In December, the module should be delivered to Cape Canaveral in Florida from where it will be launched to the ISS in a NASA space shuttle in May.

BBC: Russia to resume ISS construction



Page last updated at 21:49 GMT, Monday, 9 November 2009

By Anatoly Zak

Science reporter

After a hiatus of almost a decade, Russia is set to resume construction of its share in the International Space Station (ISS) with the launch of a new module this week.

A Poisk ("Quest") Mini-Research Module-2 (MIM-2 in the Russian abbreviation) is set for launch from Baikonur Cosmodrome in Kazakhstan on Tuesday at 1422 GMT.

The spacecraft is essentially a twin of another Russian module - the Pirs Docking Compartment - added to the outpost in September 2001.

In the intervening years, economic problems kept further Russian pieces of the station on the ground and forced a significant scaling down of the Russian segment in comparison to its originally conceived architecture.

The MIM-2 module is only the first of three long-term components which Russia plans to add to the station over the next three years.

Another module, Mini-Research Module-1 or MIM-1, is currently undergoing final check-ups at RKK Energia, Russia's prime contractor for manned spacecraft. Energia is based in Korolev, near Moscow.

Multi-purpose module

Next month, MIM-1 is due to be shipped to Cape Canaveral, Florida. From here, it is to be launched to the station in the cargo bay of Nasa's space shuttle in May.

The MIM-1 spacecraft was recycled from the habitation section of the aborted science and power-supply platform (NEP). This platform was never completed due to lack of cash.

Despite their identification as research modules, the primary function of both craft is to provide four docking ports for the Russian segment of the station, which are needed to receive Soyuz and Progress transport ships.

After this year's increase of the outpost's crew from three to six people, the number of Soyuz spacecraft heading to the station is set to double from two to four annually.

At least two three-seat Soyuz spacecraft have to be docked to the station at all times to serve as a lifeboat for all crew members.

With the anticipated retirement of the shuttle within a year, and until the introduction of the Nasa's Orion spacecraft in the middle of the decade at the earliest, Russian Soyuz spacecraft would be the only way to transport people in and out of the station.

In addition to their function as "hallways" for the outpost, MIM-2 and MIM-1 sport interfaces for the installation of scientific instruments.

At the beginning of 2012, Russia plans to launch yet another long-delayed multi-purpose module, MLM, aboard a heavy-lift Proton rocket.

As one of its key elements, MLM would carry a European-built remote manipulator arm, known as ERA.

An 11m-long robot is expected to be deployed to shift up to eight tonnes of hardware, as well as astronauts, during assembly operations outside the Russian segment.

In order to add the MLM to the ISS, the Pirs docking compartment would have to be detached from its current position on the station and directed to a destructive re-entry into the Earth atmosphere.

Beyond 2020

Since Pirs currently serves as a "door" for all Russian spacewalks, all future work on the exterior of the Russian segment would be staged from the MIM-2 Poisk module.

With the improvement of the Russian economic situation, the nation's federal space agency, Roscosmos, started planning the development of two new modules, that would take on the responsibilities of the cancelled NEP science and power-supply platform.

Both spacecraft would feature specialised research labs and their own solar power systems. Provided sufficient funding were available, they would be launched to the station by Proton rockets in 2014 and 2015.

However, with the financial situation around the ISS looking clouded, Russia reserved the possibility of converting these new modules into the core of a new station, which could serve as a base for deep-space exploration in the following decades.

In June 2009, Simonetta Di Pippo, the European Space Agency's (Esa) director of human space flight, said she shared Russia's vision of the future space station as a platform for deep space missions.

"I have continuous consultations with officials in Russia. We meet every month to month-and-a-half, and now we are going to start joint work on the study for how to proceed beyond 2025," Ms Di Pippo said.

"We have a common idea that we would like to preserve a presence in [low-Earth orbit]. We are studying different scenarios, whether we need permanent presence or, maybe, a human-tended capability, and we can end up with a totally different solution in the end. But I don't believe we can leave Earth orbit."

Ms Di Pippo also said that although current Nasa plans for a return to the Moon left no major role for the station, that could change in the future.

"Even on the Nasa side, they have too many different developments (associated with Earth orbit) - including commercial involvement - which they cannot immediately give up," Ms Di Pippo said.

By the end of 2010, all partners in the ISS project expect to agree on an extension of the station's lifespan from 2015 to 2020 or even 2025.

Once a date for ending the life of the ISS had been decided, active planning for post-ISS manned spaceflight could begin in Russia, Europe and possibly the US.

RIA: Russian Tu-142 wreckage brought to surface in Tatar Strait



05:1210/11/2009

MOSCOW, November 10 (RIA Novosti) - Russian Pacific Fleet naval ships have brought parts of a Russian military Tu-142 plane that crashed late Friday to the surface, local emergencies services said Tuesday.

"Overall, six large fragments of the Tu-142 fuselage have been brought up," a spokesman said.

Eleven people were on board the Pacific Fleet plane that went down during a combat training flight on Friday some 20 kilometers (12 miles) off the Tatar Strait, which separates mainland Russia from the Far East island of Sakhalin.

The remains of the plane were located on Saturday morning by several ships and planes at a depth of about 44 meters (144 feet). Fragments of human bodies have also been discovered. They will undergo a forensic medical examination.

According to preliminary data, the crash was caused by a technical failure.



Prime-Tass: Nov 21: Prime Minister Vladimir Putin to make speech on overcoming crisis, post-crisis economy at United Russia rally in St. Petersburg

10.11.09 09:56

Interfax: Death penalty in Russia should be replaced with life imprisonment without the right to pardon, confident Mironov



/Google translation/

November 10. Interfax-Russia.ru - Federation Council Speaker Sergei Mironov believes that the death penalty in Russia should be commuted to life imprisonment, while convicted at such a penalty should not be eligible for parole and clemency.

             "Society does not need the death penalty, but the certainty that no murderer will go unpunished, that the punishment would be inevitable, and all elements of crimes punishable by the death penalty today, there should be life imprisonment without the right of prisoners for parole and pardon - expressed his opinion Mironov on his blog.

             Mironov remarks that return to the application of the death penalty if it is decided to abolish it would be easy, because, he says, "is a relatively inexpensive way to inspire millions, at the time of reconciling many people with environmental reality."

             Meanwhile, the speaker stressed, much more difficult to make the punishment inevitable. In Russia, Sergey Mironov reminded annually carried about 12 million crimes registered as no more than 3,5 - 4 million offenses.

             Official repeats law enforcement agencies about the sharp increase in detection of murders by themselves do not say anything, because we wanted every year there are over 120 thousand missing. This population is middle of the city ", - said Sergey Mironov.

             In addition, each year is declared a wanted man over 70 thousand people. "We do not know the fate of almost 49 thousand missing, including almost 5,5 thousand disappeared in the past year. I'm sure many of them victims of the murderers who walk to freedom" - suggesting Mironov.

             What is good about the death penalty if the murderer "all too often escape justice?", Asked the head of the Federation Council.

             The speaker is absolutely convinced that the death penalty can not defeat crime and should be abolished.

10 November 2009, 10:36

Interfax: Fifty-six percent of Russians support death penalty – poll



Moscow, November 10, Interfax - More than half of Russian citizens support the death penalty, but the share of death penalty advocates has somewhat shrunk over the past few years, a poll suggests.

Fifty-six percent of respondents, polled by the Research Center of the SuperJob.ru recruiting portal, said they accepted the death penalty as punishment for severe crimes and as a factor that could bring the grave crime statistics down in this country. They also argued that taxpayers have to keep murderers, rapists and pedophiles serving life sentences, which is unfair.

"Convicted murderers and hardened criminals, if the proof of their guilt is irrefutable, must not be kept at taxpayers' expense and they must be executed," advocates of the death penalty argue.

The share of those who advocate capital punishment is larger among men than among women - 62% to 48%. And citizens aged over 55 are especially enthusiastic supporters of the death penalty.

Twenty-five percent of those surveyed oppose capital punishment and they cited an imperfect judiciary and severity of the punishment as the reasons that should obstruct the introduction of the death penalty. An innocent person can be executed due to a judicial error, some argued. Others said that those sentenced to capital punishment would not have an opportunity to mend their ways, that execution was a murder, that supporting the death penalty was tantamount to a killing and that God alone could decide who must live and who must die, according to the poll.

Nineteen percent of those surveyed were undecided. "I don't know whether we can dispose of other people's lives," some said. "I am not against the death penalty, but Russia's immature laws and judiciary can lead to chaos," other said.

The percentage of those who deem the death penalty unacceptable has not changed since 2007 and is 25%. The share of supporters has gone down from 59% to 56%, the poll indicates.

The opinion poll was conducted on October 30 to November 2 in all federal districts. It involved 3,800 respondents aged over 18.

09 November 2009, 17:16

Interfax: Islamic encyclopedia to be printed in Russia, project costs 1mln. US dollars



Moscow, November 9, Interfax - The Fund to support the culture, science and education of Islam and the Turkish Islamic Research Center are going to jointly publish the Russian Islamic encyclopedia.

"The Russia Islamic encyclopedia, as expected in four volumes, will include articles on history, modern condition and development of Islam in the Russian Federation, activities of Muslim organizations and Islamic higher educational establishments," the Foundation representative told Interfax-Religion on Monday.

It is planned to publish 5 thousand copies, estimated value of the project is one million US dollars. The Foundation and the Islamic Research Center are to finance it in equal portions, the interviewee of the agency said.

The edition will be based on the Great Islamic Encyclopedia in 43 volumes that will be issued in Turkey with support of the Islamic Research Center.

As expected, work on printing the Russian Islamic encyclopedia will be conducted in two stages and will take three years. First, the edition will be adapted, updated and translated into Russian. Then, on the second stage, the edition will be printed.

Itar-Tass: Three people have died and four were injured in bus collision in the Republic of Dagestan



10.11.2009, 01.20

ROSTOV-ON-DON, November 10 (Itar-Tass) - Three people have died and four were injured in a road accident involving passenger buses in the Republic of Dagestan. All the victims and the injured werre passengers of a Mercedes mini-bus which collided with a regular-route bus Neoplan, an official at the Southern regional center of the Russian Ministry for Emergencies has told Itar-Tass.

The incident occurred at about 23:00, Moscow time, on Monday, 240 km north of Makhachkala on the Federal Higway Kavkaz (Caucasus) in Tarumovka District of the republic. The circumstances of the incident are being ascertained.

Axisglobe: Search carried out in house of former Russian GRU battalion officer Musa Yamadayev



09.11.2009

The search has been carried out in the house of Musa Yamadayev, one of the Yamadayev brothers Chechen clan and a former officer of the Russian GRU Vostok battalion, radio Ekho Moskvy reports.

Referring to the Investigatory Committee of the Russian General Prosecutor’s Office, news agency Interfax expands that this action was authorized by court within the framework of a criminal case. Musa Yamadayev is a suspect in the case on disappearance of the member of the GRU Vostok battalion, Alikhan Khaladov. Musa Yamadayev was repeatedly summoned to interrogations, however he never attended any.

The Jamestown Foundation: Moscow and Grozny Evince Growing Nervousness Over Regional Security

[tt_news]=35713&tx_ttnews[backPid]=7&cHash=8a78a2962e

Publication: Eurasia Daily Monitor Volume: 6 Issue: 206

November 9, 2009 03:02 PM Age: 9 hrs

Category: Eurasia Daily Monitor, North Caucasus Analysis, Home Page, Military/Security, North Caucasus , Russia

By: Mairbek Vatchagaev

Today, all Russia’s actions in the south are dictated by the increasingly active armed underground in the North Caucasus and Russia’s desire to oppose its growing influence on the region’s indigenous population. In the summer of 2009 alone 462 acts of violence were reported, while throughout the whole of 2008 only 265 incidents were registered. As a result, more than 442 persons died in the summer of 2009, while there were only 150 deaths reported in the entire year of 2008 (regnum.ru, October 28). In other words, the number of acts reported throughout the region by Russia has nearly doubled.

That is why it is not surprising that despite the announced Russian troop level the opposite process is occurring. Troops are being redeployed to the region, in addition to the ones that have been there since the beginning of the second Chechen war in 1999. For example, Nezavisimaya Gazeta reported on October 29 that additional military units are being redeployed to southern Russia from the Moscow area. The 474th detached motor transport battalion was deployed to the town of Millerovo (Rostov oblast) from the town of Dmitrov (Moscow oblast). An anonymous North Caucasus Military District source also told the newspaper that a major reorganization will take place on the basis of Vladikavkaz-based 58th army, where the formation of an operational command is being completed. Instead of two divisions, the command will be comprised of seven motorized infantry brigades and one tank brigade. Until recently, there were two divisions in the 58thh army; the 19th and 42nd divisions, as well as several detached regiments, brigades and battalions. In addition to the two existing mountain brigades, the Botlikh brigade in Dagestan and the Zelenchukskaya brigade in Karachaevo-Cherkessia (news.km.ru, October 29), the formation of the 8th detached mountain motorized infantry brigade in Chechnya was completed (located in the village of Borzoi, which is just a couple of kilometers from the Shatoi district center). Besides that, the aviation divisions and regiments of North Caucasus Military District are being transformed into military airbases, each of which will have at least five squadrons at its disposal.

The official reason offered by Moscow for the troop buildup is the supposed weakness of the Russian army in the event of an attack from the south, insinuating an imaginary threat coming from Georgia. In reality, it is not so much about Georgia, which hardly can threaten Russia in any way, but about the overall situation in the region. Armed opposition is no longer seen as something ephemeral. Its roots have expanded into almost all the national republics of the North Caucasus. Taking into consideration the multi-million-strong diaspora abroad (primarily the Circassian diaspora in the countries of Turkey and the Middle East), Russia is trying to reverse the situation by ensuring that it has an absolute multiple-factor advantage in terms of military force.

Analysts have started speculating about the worsening of the situation in the region after the murder of this or that important civil society or political figure in the region. But aside from the famous people being murdered, news briefs are also reporting recurring victims within the local population. Numerous outrages are being perpetrated by unidentified armed people. In most instances those killed are presented as members of the armed opposition. For example, on October 31, three young Shahbiev brothers (Adam, Alsan, and Usman) were shot dead on the border of North Ossetia-Alania and Chechnya, near Mozdok. According to the authorities, they were all combatants and opened fire when they were pulled over. All three were killed, along with a policeman (regnum.ru, October 31). However, according to Kavkazsky Uzel (Caucasian Knot) website, all three were about to leave Russia for permanent residence abroad. This does not tally with the official version, since it makes no sense that they would have traveled with guns (kavkaz-uzel.ru, November 1). It is worth noting that Zaindi Shahbiev, who was famous not only as a writer, but also as a civil society activist and successful businessman in Moscow, disappeared in February 2008 when he was on his way back home to the Shalazhi settlement of Chechnya’s Urus-Martan district (Novaya Gazeta, June 26, 2008). This kidnapping and the decision of the Shahbiev brothers to leave Russia may well be connected.

More and more often, Chechen President Ramzan Kadyrov is portrayed as participating in military counter-insurgency operations personally and performing the role of the planner of the militants’ liquidation. This was the case on October 31, when security forces in Grozny killed Ali Hassanov, who was accused of being the “leader of the Chechen flatlands,” which casts doubt over whether such a position exists inside the armed opposition. Kavkazsky Uzel reported on November 1 that in October alone the armed forces officially reported killing about 30 suspected combatants in Chechnya.

Meanwhile, not everything is going smoothly in Kadyrov’s relations with his former ally, Ingushetia’s President Yunus-Bek Yevkurov. Disagreements were noted between Kadyrov and Yevkurov regarding operations conducted in the contiguous republics. Kadyrov publicly expressed his displeasure, which caused irritation on the part of Yevkurov, who urged his Chechen colleague not to give him public counsel that he can do without (club-rf.ru, October 28).

At the same time, feeling offended by Akhmed Zakaev, who gave an interview to the Russian newspaper Kommersant, Kadyrov declined to further pursue the London-based separatist leader’s return home to Chechnya (bbc.co.uk, October 29). The very next day, on the tenth anniversary of the start of the second Chechen war, Chechnya’s pro-Moscow parliament headed by speaker Dukvakha Abdurakhmanov “issued an official decree regarding the dissolution of the ‘Caucasian Emirate’, ‘Ichkeria’ and other structures created by the separatists” (lenta.ru, October 30).

In lock step with the growth of tension in the region, an attempt is being made to shift the attention from the North Caucasus to Georgia, where again, with the help of Russian propaganda, the issue of the Pankisi Gorge has once again reemerged (svpressa.ru, November 1). Be that as it may, today Russia is being forced to expend far more energy and effort on the North Caucasus than in 2007 or 2008, which may serve as evidence of a deepening conflict. Additional troops in the region cannot provide a shield against the ideological hardening of the armed resistance.

St. Petersburg Times: Stroimontage Offices Searched



Issue #1525 (87), Tuesday, November 10, 2009

By Nadezhda Zaitseva

Vedomosti

Artur Kirilenko, the co-owner of Stroimontage construction company, is suspected of premeditated bankruptcy and siphoning off the company’s assets.

Last Tuesday, employees of the Ministry of Internal affairs searched Stroimontage’s offices as part of an ongoing case opened in September by Baltiisky Bank in accordance with article 196 of the Criminal Code (premeditated bankruptcy), a law enforcement source told Vedomosti. Dmitry Bogolyubov, a representative of Stroimontage, did not confirm or deny this information. Violations of article 196 are punishable with a fine of 200,000 to 500,00 rubles ($6,890 to $17,230) or up to six years in prison.

Baltiisky Bank is demanding that Kirilenko, the principal shareholder and head of Stroimontage, return two loans worth a total of 965 million rubles ($33.2 million). Kirilenko had personally guaranteed the repayment of the loans, which were issued to Stroimontage and its subsidiary company KosMonblan (Mont Blanc) in 2008.

Vedomosti obtained a copy of an official statement (dated Sept. 24) detailing the charges being brought against Kirilenko. According to the document, he and Vladimir Zakharov, the head of KosMonblan, signed credit agreements with Baltiisky Bank, and then transferred their assets once the loans had been obtained. The assets were siphoned off by stripping KosMonblan of its proprietary rights and deliberately selling real estate at below-market prices, which inflicted especially serious damage on Baltiisky Bank, the statement said. Stroimontage won a concession in the courts when the contract according to which KosMonblan had financed construction of the Monblan business center was declared invalid, and now the office center belongs to Stroimontage.

The Monblan center was offered as security on a 715 million-ruble ($24.6 million) loan issued to KosMonblan, Oleg Shigaev, president of Baltiisky Bank, said in April. In September, Kirilenko offered the center to the bank as repayment of the loan.

“The bank’s suspicions are confirmed — the management of Stroimontage deliberately created a situation in which a group of companies controlled by Kirilenko was knowingly unable to repay the obligations incurred,” said Yelena Sanarova, a representative of Baltiisky Bank.

Opening a criminal case is the most effective means for a creditor to prove their rights, said Yegor Noskov, a managing partner of the Duvernoix Legal law firm. If the investigation determines that Stroimontage’s bankruptcy was premeditated, the courts may re-examine their ruling that declared the Kosmonblan investment agreement void and invalidated the business complex as collateral, said the lawyer.

In addition to the 715 million ruble ($24.6 million) warranty and a bonded loan of 1.2 billion rubles ($41.3 million), Stroimontage is saddled with 2.3 billion rubles ($79.2 million) of debt, the company’s press office said in April.

St. Petersburg Times: Russia’s Eternal Military-Industrial Kholkhoz



Issue #1525 (87), Tuesday, November 10, 2009

By Alexander Golts

It seems that professional observers of Russia’s endless political antics have something new to add to their list. People have long ceased to be amazed by the fact that Prime Minister Vladimir Putin has a habit of meddling in Russia’s military affairs, national security and foreign policy — all of which belong to the constitutional domain of President Dmitry Medvedev. But the president has unexpectedly stuck his nose into an area that had previously belonged to Putin alone.

Last week, Medvedev visited the NPO Mashinostroyenia missile design bureau in Reutov, located just outside Moscow. Amazingly, the head of state did not limit himself to simply inspecting new missile programs. Nor was he satisfied at being given the chance to sit at the control console of the country’s coastal defense system. Rather than express delight over the experience, the president gave a thorough dressing-down to the titans of the country’s military-industrial complex. It turns out that despite receiving major budgetary funding, the defense sector has done practically nothing to modernize its industrial base. What’s more, in addition to enjoying exclusive manufacturing rights on government orders, the military-industrial complex has had the temerity to jack up prices on its products. And Medvedev exposed the biggest secret of Russia’s military complex: It does not produce any modern equipment but busies itself trying to “modernize” old airplanes, tanks and missiles that were designed way back in the 1970s and 1980s. This highly ineffective practice of updating and upgrading old designs is exactly what the president said needs to be stopped.

Attentive readers might have noticed that the Russian commander-in-chief essentially repeated what several defense analysts — including myself — have been saying for years. Of course, I don’t mean to suggest that our publications had any influence on the president. There is something else that is motivating Medvedev — an open conflict between Defense Ministry brass and leaders of the military-industrial complex. The Defense Ministry has no desire to buy overpriced, outdated military equipment. What’s more, the “Zapad 2009” war games convinced the military leadership that despite claims of possessing weapons “that are unmatched by any other country,” Russia’s military-industrial complex is physically incapable of producing equipment with modern information support.

Moreover, Deputy Defense Minister Vladimir Popovkin made the extremely harsh statement that the Defense Ministry is not a welfare agency, and its function is not to keep decrepit defense contractors alive. In addition, military leaders announced plans to purchase drone aircraft from Israel and helicopter carriers from France. Military contractors, full of spite, retaliated by publishing “patriotic” texts accusing Defense Ministry leaders of selling out and of even betraying national interests.

By battling for increased effectiveness and productivity in the defense sector, Medvedev stepped on the toes of the multibillion-dollar cash cows that had been fattened for years by Putin loyalists such as former Defense Minister and current Deputy Prime Minister Sergei Ivanov, Deputy Prime Minister Igor Sechin and Rosoboronexport chief Sergei Chemezov. Now we will see the degree of Medvedev’s influence and whether the captains of the country’s military industry will heed or ignore his criticisms. After all, the president was referring more to the symptoms of the illness than to the root causes.

The reason for the ineffectiveness of Russia’s military-industrial complex is that it is not an industrial complex at all. It is actually thousands of scattered enterprises that are incorrectly classified as defense contractors — mostly to save jobs. Some of them haven’t produced anything for years. This situation made it impossible to implement full-scale serial production in the defense industry. The best that most contractors can do is to manufacture enough pieces of hardware to fill the piecemeal orders trickling down from the main production plants where the final, antiquated assembly process is carried out. That is why the price for parts continuously increases, but their quality does not.

It is especially amusing when Medvedev vehemently demands that military factories stop merely upgrading old equipment and start manufacturing new hardware to begin re-equipping our armed forces by 2012. The top brass were apparently afraid to inform their commander-in-chief that all of Russia’s so-called “modern” military hardware — the Su-34, Su-35 and MiG-35 military aircraft, the S-400 air-defense system and the short-range Islander missile — are nothing more than slightly upgraded versions of projects that were designed nearly 30 years ago. These projects spent most of the 1990s lying around in dormant military plants. Even the so-called “supermodern” BrahMos cruise missile, a joint venture between India’s Defense Research and Development Organization and NPO Mashinostroyenia, is not built from solid-state electronics but vacuum tubes.

The only way out of this dead end is to stop the senseless attempt to produce everything at once — from missiles, tanks and aircraft to pistols and submachine guns. Military leaders need to set their priorities and create the necessary production chain while keeping in mind that initial overall production costs will be far higher than the individual price tag on this or that particular armament.

But I am not sure how much Putin and his team will like this new approach to reorganizing the military-industrial complex, considering that for the better part of the last decade they have been striving to achieve just the opposite. They tried to corral scores of defense enterprises into a single “military kolkhoz” called Russian Technology that included entities as disparate as aviation construction corporations and shipbuilding companies. And in the manner of a true Soviet collective enterprise, for every profitable and functioning company brought in, 10 more dying or bankrupt firms hitch along for a free ride.

While all of this waste was going on, Kremlin bosses didn’t lift a finger. Then-President Putin’s regime took the losses onto its own books and continued shoveling tens of billions of rubles into the bottomless pit of defense spending. Will they take Medvedev’s angry words seriously? Their response will be a good indication of how much political weight Medvedev really carries.

But the fact that Medvedev has voiced his support for the Defense Ministry by criticizing the country’s traditional sacred cow, the military-industrial complex, as woefully inefficient can in some ways be classified as “modernization” — at least by Russian standards.

Alexander Golts is deputy editor of the online newspaper Yezhednevny Zhurnal.

Businessneweurope: Russia's regions suffer setback



Ben Aris and Clare Nuttall

November 10, 2009

Read the research reports from the last year and they will tell you that Russia has been badly hurt by the crisis. Read the more recent reports and they will tell you that the country seems to be bouncing back more strongly than anyone dared to hope.

All true, but these reports skip over where the real damage has been done: Russia's economy as a whole is faring pretty well, but its regions have been set back years. And even if the widely cited macroeconomic numbers return to 2008 levels in the next two years - as seems the case - many of Russia's regions will take a lot longer to recover than that.

Russia was once described as a "tale of two economies," to cite the title of a seminal paper written by Renaissance Capital's head of research, Roland Nash: one Russia was Moscow and the other was everything else. Moscow was a cornucopia of plenty, awash with oil money and the scene of some of the most conspicuous consumption on the planet. The regions were mired in grinding misery with the man in the street trying to exist on $50 a month and function with dilapidated infrastructure or lead a normal life in the face of an almost total lack of services.

The growth of the boom years started to change all that. By 2006, the regions began overtaking the centre in terms of everything - retailers were marching out to the regions and loudly proclaiming their latest hypermarket store in Samara or Rostov-on-Don; the internet penetrated deeply into the snow bound wastes of Siberia (as parents want to connect their children to the rest of the world); mobile phone Sim card penetration passed 100% in cities that most westerns couldn't even pronounce; and, most impressively, the volume of retail loans and deposits with banks in the regions overtook that in Moscow. "To the people!" became the rallying cry of commerce, in an echo of the fin de siecle Narodnik movement of the 19th century where proto-revolutionary Russian intellectuals, such as writer Anton Chekov rushed off to the interior in search of the "real Russia" only to find it brutal, alcoholic and ignorant.

Given the growing importance of the regions, surprisingly little research has been done by analysts on Russia's hinterland. Most fixate on Moscow and St Petersburg, which are respectively the largest and second largest cities in Europe (and both are counted as regions in their own right in Russia's federal structure). Both cities are larger in terms of population than almost all of the countries of the former Soviet Union and Central Europe.

Add to this that some 80% of Russia's population live in the European part of the country, bounded by the low lying Ural mountains, and it is no surprise that amongst the other cities mentioned by investors are names from this part of the country like Rostov, Samara and Nizhny Novgorod, which come up all the time.

The economic structure of Russia is also dominated by a few names, but a couple of these regions lie outside of Europe in Russia's sparsely populated Asian territory: of Russia's 83 regions (down from 89 following Vladimir Putin's administrative reforms), some 14 regions were net contributors to the federal budget at their peak of tax revenues collected, while the rest needed help from the centre.

This has led to political problems: while the contribution of retail in European Russia is significant, the really big money earners are the Siberian oil producing regions like Timan Pechora, Tymen and the semi-autonomous regions like Tatarstan and Bashkortostan, which at the end of the 1990s came close to splitting away from the federation along with the Far East until Putin put his foot down.

Regions sent backwards

The crisis has hurt the regional development of Russia far more than the country as a whole, and driven a new wedge between the centre-periphery divide. "The crisis has put a brake on consumer and investment demand across all regions," says Deutsche Bank in a rare report on the Russia's regions released in September. For example, while things like real estate prices have held up reasonable well in Moscow, falling between 10% and 20%, they have completely collapsed in some of the more off-the-beaten-track regions.

Analysts at Uralsib also note that the fall hasn't been uniform across the country. "The crisis has significantly increased regional disparities between various parts of the social, financial and economic spheres in Russia." Real incomes increased in 31 of Russia's 83 regions in the first four months of 2009 (in the depths of the crisis), and fell in the remaining 52 regions.

Two sets of regions were hardest hit by the crisis: those that were lagging behind already, and the manufacturing and non-energy commodity producing regions. "Areas that traditionally were among the least developed in the country - such as the small ethnic republics in the Caucasus or Volga region - have experienced further declines in the living standards of their population. At the same time, in Russia's wealthiest regions these falls were less severe," the Uralsib report says.

Those regions, such as Chechnya and Ingushetia, already had the highest levels of unemployment and lowest standard of living in Russia. Tuva, another small ethnic republic, on the border with Mongolia is ranked lowest according to the UN's Human Development Index.

The largest falls in real income were recorded in the manufacturing and non-energy commodity producing regions. "The global financial crisis has had a devastating effect on the industrial dynamics in some large industrialized regions, particularly those where the concentration of coal and metals industries is high," says Uralsib.

The impact was particularly severe in regions with large metallurgy production plants - such as the Chelyabinsk and Lipetsk regions, as well as regions dependent on a single industry or group of related industries. A substantial drop in real incomes was also seen in manufacturing centres such as Kaliningrad and Ryazan. The highest unemployment growth rates were observed in the Volga, Urals and Northwest Federal regions.

The regions have also been exposed by the make-up of the local economy, which is a legacy of Stalin's central planning. In the 2010 budget, Putin earmarked special financial support for Russia's 400-odd "monotowns," or towns where the local economy is dominated by a single giant factory. The most obvious example is the city of Tolyatti in the Samara region, home to Lada-maker Avtovaz, which announced it would lay off over 21,000 workers in the new year. Social tensions are also running high in Magnitogorsk in the Chelyabinsk region, which is home to a giant steel mill.

State to the rescue

The complexity of the Kremlin's problem isn't well appreciated. Putin summed it nicely in one of his state of the nation speeches as president: "Our country is rich, but our people are poor."

To this, he should have added the qualifier that the poverty of the average Russian depends to a large extent on where they live. The Kremlin elite remain terrified of the population radicalising and so have been quick to pour money into the more backward regions to keep them going. According to Deutsche Bank, the economic downturn has increased pressure on regional budgets since tax revenues have fallen. "Total regional revenues including transfers decreased by 14% in the first half of this year compared to the year previously while expenditures increased by 20% over this period," the report says.

Uralsib notes that unemployment and social tensions are much worse in the south and distant northern regions than in central Russia, where many of the wealthiest regions are located. One upshot is the increase in terrorist attacks in the Caucasus recently. "The worsening social situation has created fertile ground for the growth in extremism in the Caucasus, which explains the recent rise in the number of terrorist attacks in Ingushetia and Chechnya," it says. "The extremely high concentration of wealth and political economic power in Russia is potentially dangerous."

Supporting the regions is draining money away from the Kremlin's stated $1-trillion infrastructure programme, which is now on hold, and other long-term development projects. Social spending "has increased pressure on the strained finances of the federal government, forcing the Cabinet to divert a large amount of funding from infrastructure programs to social and employment programs," says Uralsib. And with some success – while unemployment is rising in most countries of the world, in Russia joblessness is already falling.

Regional winners

Still the news isn't entirely bad: some regions will come through the crisis as winners.

Moscow and the oil-rich Tyumen region are Russia's two richest regions with per capita income of more than twice the national average - this was also true in Soviet-days. Moscow accounted for 24% of Russia's GDP in 2007, with GRP (gross regional product) of $274bn, according to Deutsche Bank. Moscow is Russia's financial centre, and the bulk of Russia's imports, exports and investments are channelled through Moscow. Tyumen is the centre of oil and gas production in Russia. Thanks to its rich endowment of natural resources and low population, its per capita GRP reached $27,000 in 2007, far above the national average of just $6,300.

In all, Deutsche Bank identifies nine regions as having the best investment climate, based on calculations of their above average investment potential and below average investment risk: the city of Moscow and Moscow region, St Petersburg, Samara region, Krasnodar territory, Nizhni Novgorod region, Republic of Tatarstan, Rostov region, and Republic of Bashkortostan. Together, these regions account for 45% of Russia's GDP and achieved GRP growth of between 5.8% and 10.3% between 2000 and 2007. The nine regions have some things in common; they are all located in European Russia, and host 7 of the 11 Russian cities with over 1m inhabitants. However, their economic strength is derived from very different sectors - agriculture, the extractive industries, retail trade and manufacturing.

09 November 2009, 13:29

Interfax: The first insurance company operating under Shariat laws is established in Russia



Moscow, November 9, Interfax - There has been concluded an agreement to establish the first Russia's "Takaful business", an insurance company operating under Shariat laws.

In the first quarter of 2010, a new organization intends to offer its customers the services of motor hull insurance and pilgrimage trips, Kommersant daily reports Monday morning.

One distinction of the Islamic insurance concept is that the customer shares the company's revenue in the form of discounts for the insurance period of the next year or any side payments in case of customer's insurance termination.

"We had to substantively upgrade the classic Takaful model applicable within the Middle East; our model is closer to a more liberal Malaysian one," Shamil Murtazaliev, Vice-President on investments of Saphinat Group, told.

The potential Takaful insurance market in Russia is estimated at US $2.6 billion. The size of international financial services market operating under the Islamic laws exceeds US $750 billion.

World Politics Review: Russia-Saudi Relations: The Kingdom and the Bear



Saurav Jha | 09 Nov 2009

Saudi Arabia's possible purchase of at least $2 billion of Russian military equipment has the potential to be the most significant Russian arms deal in the Middle East since the Soviet Union transferred SA-2s to Nasser's Egypt. By all indications, it seems that the two countries have reached an agreement for the arms transfer, after a two-year negotiation period. The deal may be part of a larger process that leads to a significant realignment in the external relations of both parties.

The arms transfer agreement, which covers a broad spectrum of weapons, is guided by the agreement on cooperation in military technology that was initiated during a visit of Russia's then-President Vladimir Putin to Riyadh in 2007, and later signed by the two countries in 2008. According to Russian sources, Saudi Arabia may purchase up to 150 helicopters (30 Mi-35 attack helicopters and 120 Mi-17 transport helicopters), more than 150 T-90S tanks, around 250 BMP-3 infantry fighting vehicles (IFVs), and "several dozen" air defense systems (including possibly the S-400 Triumf). Contracts for the sales of the helicopters, tanks and IFVs -- worth a combined $2 billion -- seem imminent, with more negotiations required on the air defense systems. In all, the Saudi market may absorb up to $7 billion worth of Russian equipment in the future.

The precise timing for the deal seems to have been guided by the worsening Iran nuclear crisis and the increasing enmity between the Iranians and the Saudis. The Saudi defense requirements also come at a time when Russian newspapers are awash with reports of the monetary loss -- in the billion-dollar range -- that Moscow must incur on the sale of S-300 air defense systems to Iran. That deal has been stalled due to pressure from Washington and Tel Aviv. Clearly, handsome compensation seems to be in the pipeline from Saudi quarters.

Beyond the Iranian angle lies the Saudi need to diversify its sources of military equipment and thereby raise its bargaining power as a buyer. With the deal, Russia has beaten out the French, who have fallen out of favor lately with the Saudi establishment, especially since King Abdullah has been directly overseeing weapons procurement. The French practice of bundling additional weapons not sought by the buyer in a consolidated package has irked the Saudis. The turn to Russia effectively thwarts French pressure to buy weapons that the Saudis do not need, allowing them to focus on those that they do.

Saudi Arabia also seems to have responded favorably to Russian feelers with respect to coordinating production and pricing on the international oil market. These two countries lead the world in oil exports and have huge reserves of gas as well. In the future, the Saudis may provide a bridge for the Russians to OPEC.

From the Kremlin's point of view this deal represents an immense leg up for the Russian military-industrial complex, and a possible inroads with a country known to have access to key U.S. and European defense technology. Also, beating out the French in the defense realm might give Moscow a leg up in the nuclear sweepstakes as well, given that Riyadh seems set to debut nuclear energy in the kingdom.

There might also be an Indian role somewhere in all of this. India has in the past served as a parts supplier and maintenance station for Russian hardware operated by countries in its neighborhood. In fact, this arrangement is a key aspect of the Indo-Russian defense partnership and has served to advance Russian hardware sales. The purchase by Malaysia of Su-30 MKMs, which resemble the Indian Su-30 MKI, is a case in point. It is conceivable that given the recent upturn in Indo-Saudi relations, the latter may also look towards India for keeping future Russian origin weapons up to speed. India may also help the Saudis in setting up Russian-origin nuclear reactors.

Indo-Saudi ties have experienced a drastic improvement since King Abdullah's visit to India in 2006. On the other hand, India and Iran have been steadily drifting apart, ever since India's anti-Iran vote at the IAEA in 2007 and amid differences over the Iran-Pakistan-India pipeline. Iran's increasingly bellicose statements on Israel and its Holocaust denial have made the relationship a difficult one for India. Israel, after all, is a "special" supplier of strategic technologies to India, and New Delhi cannot afford to jeopardize this relationship. Moreover, another nuclear-armed nation in the vicinity is hardly in India's interests.

Saudi Arabia can offer many of the same benefits to India that Iran can, and seems to have managed its relationship with Israel decently in the recent past. Indeed, Saudi Arabia has emerged as the single largest source of Indian petroleum imports and may become a key recipient of Indian IT exports in the future.

Russian policy may also be headed in a similar direction. A nuclear Iran armed with intermediate-range ballistic missiles capable of targeting Moscow is more a long-term threat than opportunity for Russia. Moreover, Iran serves as a competitor for Caspian oil as well as for influence in the Caucasus and Central Asia.

The Kremlin is also increasingly taking Israeli sensitivities into account. One of the main reasons for this is that a lot of Russian equipment can be made "hotter" through the replacement of Russian electronics and sensors with those from Israel. Indeed, Indian military imports from Russia increasingly contain India-specific Israeli inputs. Years of operating captured Arab-owned Soviet equipment has given Israel an amazing niche capability to integrate its own technology with Russian military architecture. Russia also wants to import some Israeli technologies for its own use, especially those that would help Russia counter asymmetric threats.

Irrespective of whether the Obama administration succeeds in bringing Iran around, it is clear that both Washington's partners and rivals are hedging against Iran's uncertain trajectory. In fact, in the event of a U.S.-Iran rapprochement, Riyadh and Moscow may find themselves even more irresistibly drawn towards each other.

Saurav Jha studied economics at Presidency College, Calcutta, and Jawaharlal Nehru University, New Delhi. He writes and researches on global energy issues and clean energy development in Asia. His first book for Harper Collins India, "The Upside Down Book of Nuclear Power," is scheduled for publication in January 2010. He also works as an independent consultant in the energy sector in India. He can be reached at sjha1618@.

Photo: Vladimir Putin of Russia and King Abdullah bin Abdul Aziz Al Saud in Saudia Arabia, 2007 (Kremlin photo licensed under Attribution 3.0 Unported License).

National Economic Trends

Reuters: Russia c.bank: rate cuts to ease pressure on rouble



11.10.09, 03:19 AM EST

MOSCOW, Nov 10 (Reuters) - Russia's central bank said on Tuesday that further rate cuts would reduce pressure on the rouble and warned against excessive carry-trade operations as volatility in the currency was likely to remain high.

Sergei Shvetsov, the head of the central bank's open market operations department, also told reporters that excess liquidity in November and December could lead to the weakening in the rouble.

(Reporting by Yelena Fabrichnaya; writing by Maria Kiselyova; editing by Dmitry Zhdannikov) Keywords: RUSSIA CBANK/

(maria.kiselyova@, +7 495 775 12 42, Reuters Messaging: maria.kiselyova.@)

Itar-Tass: CBR’s net purchases of dollars in Oct-15 bln, euro-484 mln



10.11.2009, 11.45

MOSCOW, November 10 (Itar-Tass) -- Net purchases of dollars by the Central Bank of Russia (CBR) in October 2009 reached 15, 219.81 billion dollars, and net purchases of euro - - 484.55 million, the business news agency PRIME-TASS reports with reference to the information of the CBR published on Tuesday.

The share of planned purchases of dollars amounted to 2,386.58 billion dollars, and euro - - 177.68 million euros.

In September 2009, net purchases of dollars by the CBR amounted to 2,650.01 billion dollars, and net sales of euro - - 39.12 million euro.

The volume of planned purchases and sales of foreign currency is established with account of the state of the internal currency and money market, as well as estimates of the state of the balance of payments, PRIME-TASS reports. These operations are carried out with the aim of ensuring stable functioning of the bank system and neutralizing expectations regarding the ruble rate dynamics.

VTB Capital: CBR has bought USD 1bn since beginning of November



VTB Capital, Russia

November 10, 2009

- might increase gold reserves - no plans to purchase Fannie Mae securities - further benchmark rate cuts possible in 2009

News: First Deputy Chairman of the CBR Alexey Ulyukaev, speaking to the media yesterday, said that the Central Bank had bought in excess of USD 1bn on the market since the beginning of November. Commenting on interest rate cuts, Ulyukaev confirmed that this option was a possibility.

In terms of future investment allocations, he noted that the CBR was not currently planning to purchase mortgage-backed securities issued by Fannie Mae, while purchases of gold from Gokhran (the state fund of precious stones and metals) could be considered depending on the terms offered.

Our View: The USD 1bn purchase is rather small compared with the USD 11bn which the CBR purchased in the first three weeks of October (USD 15-16bn for the full month) and suggests that the appreciation pressures on the RUB are abating. However, the amount purchased likely reflects just the last couple of trading days' action as risk appetite only recently returned to the Russian financial markets. With regard to the interest rates, we share the CBR's view and believe there is further room for cuts of up to 50bp before the year end.

RenCap: Central Bank of Russia starts to buy currency again



Renaissance Capital, Russia

Tuesday, November 10, 2009

With the start of trading on the domestic forex market, the Central Bank of Russia (CBR) was prompted to step in to prevent the rouble from appreciating. Yesterday, the central bank bought currency at 35.30, 35.25 and 35.20 rouble/basket rates, with currency interventions totalling no less than $1.5bn, we estimate. Clearly, the rouble is likely to continue to strengthen in the nearest future. Accordingly, we think the CBR will likely increase the volumes of currency purchased at each bid level. In addition, pressure on the rouble may make the regulator more active in its efforts to curb key rates. Last week's inflation figures are set to be released on Thursday, and if CPI remains at zero, we think the CBR may decide to cut rates as soon as next week.

Interfax: CB urges investors not to over-indulge in carry trade (Part 2)



MOSCOW. Nov 10 (Interfax) - The Central Bank of Russia is urging

investors not to over-indulge in carry trade transactions "as the

ruble's behavior might not be as easy to gauge as it was before the

crisis," Sergei Shvetsov, head of the CB's Financial Markets Operations

Department, said at a conference.

"I'd not say the ruble will necessarily strengthen," he said.

This will depend on oil prices, he said. Also, a large amount of

liquidity related to funding the budget deficit will find its way into

the market in November-December, "and that could potentially weaken the

ruble," he said, adding that the ruble rate would probably not be any

more volatile than other currency pairs.

Bloomberg: Russia Set to Lower Key Rate Half a Point This Year (Update1)



By Paul Abelsky

Nov. 10 (Bloomberg) -- Russia’s central bank will probably cut its key interest rate a further half a point this year to a record low as the regulator tries to goad banks to lend more and to stem ruble gains that threaten an export recovery.

Bank Rossii, which has reduced rates eight times in the past six months, may lower the refinancing rate a quarter point to 9.25 percent this month, according to the median estimate of nine economists surveyed by Bloomberg. The rate may fall to 9 percent by the end of the year, the survey showed. The bank, which doesn’t publish a timetable for rate meetings, began relaxing policy on April 24 for the first time since 2007.

“We still have some room for additional easing of our policy rate,” Bank Rossii First Deputy Chairman Alexei Ulyukayev said in an interview last week. Last month, he said the refinancing rate may be lower than 9 percent next year.

The bank last month cut the rate half a point in part to reduce the “attractiveness of short-term investments” and “stop the accumulation of risk” in the world’s biggest energy exporter. Prime Minister Vladimir Putin has said he won’t allow the ruble to strengthen excessively as exporters, reeling from a lack of credit, struggle to tap into a global trade recovery. Previous rate cuts have failed to ease lending, stalling business investment and hiring.

The ruble was unchanged versus the dollar at 10:45 a.m. in Moscow at 28.7362 and little changed against the euro at 43.0504.

Lenders’ corporate loan books shrank 0.7 percent in September from August, while lending to consumers fell 1.1 percent in the same period, the central bank said on Nov. 2. The ratio of non-performing loans climbed in the period to 6.4 percent from 6.2 percent, according to central bank data.

Economic Backdrop

Bank Rossii has lowered the rate from 13 percent in April after the economy contracted at a record pace, culminating in a 10.9 percent slump in the second quarter. Russia’s worst recession since the 1998 default and falling wages have eased consumer-price growth to the slowest in more than two years.

The annual inflation rate fell to 9.7 percent in October, the Federal Statistics Service said on Nov. 3. That compares with 14.2 percent a year earlier, and an average inflation rate of more than 14 percent in the decade through 2008.

“Inflation is likely to be single-digit in 2009 and the central bank may cut rates again this year by another 50 basis points,” Aleksandra Evtifyeva and Dmitri Fedotkin, economists at VTB Capital in Moscow, said in a report.

Consumer-price growth will be “a little more” than 8 percent this year, Putin said on Oct. 25, the slowest annual average pace on record. That marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s.

Steering Currency

Bank Rossii on Oct. 29 said it will use rates to steer the currency, marking the first explicit warning it will use tools beyond currency transactions to stem capital flows that threaten an economic recovery.

The bank bought more than $11 billion of currency last month, Ulyukayev said on Oct. 23. The nation’s currency reserves, the world’s third-biggest stockpile, rose to $432.8 billion as of Oct. 30, the highest this year.

An 80 percent rebound in the price of Urals crude, Russia’s main export blend, since the start of the year is helping a recovery as the government taps into the windfall revenue to finance its budget gap, the first in a decade, and keep stimulus measures in place.

Rising prices for commodities have also boosted the ruble to the highest level this year. The currency strengthened 3.5 percent against the dollar in October, the second consecutive monthly gain.

‘Fluctuations’

The ruble may trade around 36 against its target dollar- euro basket by the end of November and weaken to 38 by the end of the year, according to the median estimate in the survey.

“For now, at least, the prospects for the ruble are inherently tied to fluctuations in the oil price, Neil Shearing, emerging markets economist at Capital Economics in London, said in a report. “The best of the ruble rally has probably passed. While commodity prices may hover around their current levels for the next three months or so, we expect them to fall back over the course of next year as the pace of global recovery starts to fade.”

A weaker currency would lead the central bank to reverse its rate cuts and tighten liquidity, Shearing said.

Policy makers, including President Dmitry Medvedev, have pledged to wean the economy off its commodity reliance and steer Russia toward more sustainable expansion. The central bank wants to shift its policy focus to an inflation target by 2011.

The government expects the economy to contract 6.8 percent in the second half and 8.5 percent in 2009. Output will return to growth of 1.6 percent next year and 3 percent in 2011, the government estimates.

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

Last Updated: November 10, 2009 02:53 EST

Russia Today: Impact of FDI rebound slowed by red tape



09 November, 2009, 22:35

International business leaders say Russia’s emergence from the economic downturn is being hampered by the obstacles placed in the way of foreign direct investment.

Foreign investors want frequent meetings with government officials to help boost inflows into Russia. James Turley, CEO of global consultancy Ernst & Young, says it’s satisfied with Russia’s anticrisis measures but still unhappy with poor infrastructure and productivity, corruption and red tape

“A Company was interested in building a production plant here in Russia. The administrative barriers on obtaining the required permits to start construction resulted in delay of well over one year to even the beginning of construction. During that same period of time the same company built two similar plants in another country.”

Prime Minister Putin recognized the historical basis of the problem.

“It’s the negative heritage of the planned economy when the state took all the decisions even on market issues. Now certain proposals to escape that are being realized. It is not happening as fast as we would like but we shall continue to work on that.”

The Prime Minister also promised to stabilize the financial system, narrow the budget deficit and stimulate consumer demand, with Sanjiv Kakkar, Head of Unilever, Russia, saying that Russian consumers represent a potentially lucrative market.

“If we look at consumers in 10 thousand dollars households, Russia has as many as China has so certainly the potential is enormous.”

After plummeting in late 2008 and early 2009 the rate of foreign direct investment picked up in the second quarter. Analysts say that the increase means now is the time to act on making sure the flows continue and that what is already in Russia is allowed to be productive, with as little administrative burden as possible.

: Russian plants most winter grains 'since 1993'



Russia's winter grain plantings are to hit their highest for 16 years – but that doesn't mean that next year's harvest will show an improvement, a leading analysis group has said.

Sowings will come in at about 18m hectares, some 400,000 hectares higher than in 2008, Moscow-based consultancy Sovecon said.

The increase reflects a shift in the important Volga region away from spring plantings which, while avoiding the risk of winterkill, tend to be more vulnerable to stress from a lack of moisture.

"Farmers are trying to protect themselves from a repeat of this year, when the Volga region was badly damaged by drought," Sovecon managing director Andrey Sizov told .

Lower yields? 

However, while this would normally imply a rise in grain production, given that winter crops tend to yield more than spring-sown grains, it is too early yet to forecast a bumper 2010 harvest, Mr Sizov added.

Strong production in 2008 and 2009 had been supported by near-ideal weather in most regions.

"That may imply we have some weather problems next year," he said.

Furthermore, low grain prices appear to be prompting farmers to scrimp on fertilizer use once again.

"We are almost sure we can say inputs are lower this season. Farmers are spending less on fertilizers."

After two years when strong harvests have pulled nutrients from the soil, low fertilizer applications could mean "we find we have lower yields next year", Mr Sizov said.

About 80-81% of Russia's grain plantings are typically winter sown.

Business, Energy or Environmental regulations or discussions

UralSib: Utilities Sector: First positive figures on weekly consumption



UralSib, Russia

November 10, 2009

Results promising. Electricity consumption in Russia for the week of 30 October- 5 November 2010 increased by 2.4% YoY. This is the first growth in electricity consumption since autumn of last year, and it signals the end of the economic slowdown in the Russian utilities sector. We confirm our top picks for the sector: Mosenergo (MSNG - Buy), TGK-1 (TGKA - Buy) and OGK-4 (OGKD - Buy). Additionally, we have a positive outlook on the electricity distribution companies - MRSKs (MRKH - Not Rated). FGC (FEES - Hold) and RusHydro (HYDR - Hold) are the most liquid stocks in the utilities sector, and we expect some speculative demand for these names on the back of this news.

Low comparative base starts to play. Electricity consumption - as an indicator of economic activity - is particularly sensitive to industrial consumption. During the economic crisis the weekly YoY numbers showed a significant drop in electricity consumption volumes, which were down as low as 10% last year. These positive figures for electricity demand indicate that the economic decline of 2008-2009 has slowed down and that the situation has stabilized. In addition, we will see more economic statistics appearing later this year showing more promising YoY results due to 4Q08's low comparative base.

Undervalued asset base. Russian utilities companies are undervalued on their asset base as the reform process is still underway. On EV/installed capacity Russian generators trade at 234/kW, compared to international peers at 926/kW. Russian distribution companies and FSK trade at an EV/RAB multiple of 0.36, which is far below international peers at 1.0. However, the results of the reform will be quite sound: the wholesale electricity market is already 50% liberalized and this process will be complete in 2011. Additionally, 2009 saw the introduction of the RAB tariff system for electricity distribution companies, and many distribution companies and FGC are expected to get a new tariff system in 2010.

Matvei Taits

VTB Capital: Ministries are considering pricing policies on the capacity market



VTB Capital, Russia

November 10, 2009

price caps might be eliminated after 2015 - catch up in prices for new and old capacities might come earlier than the initially assumed 2018 - would be positive for generation companies if approved

News: According to Interfax, various ministries are still considering different options for pricing policies on the capacity market. The new suggestions call for no price caps on capacity auctions after 2015, the newswire reports. It has also quoted the Market Council representative as saying that the body suggested eliminating the price difference between old and new capacity as soon as possible (it had previously been announced that prices would catch up some time between 2015 and 2018).

Our View: Were the proposals to be approved and included into the capacity market concept, it would be positive for generation companies. While there has still been no final decision on the issue and the ministries are still considering different options, we welcome the newly appeared leaning towards a more liberal approach from the economic stand point. We continue to believe that the Sayano-Shushenskaya accident accelerated the introduction of the capacity market regulation and that the authorities will soon adopt it. We consider the news as a positive sign meaning the ongoing, even if not rapid, emergence of the capacity market in Russia.

UralSib: Utilities Sector: Large industrials begin refusing MRSKs services



UralSib, Russia

November 10, 2009

MRSK Siberia may lose one its key electricity consumers. Krasnoyarsk Aluminum Smelter, which is controlled by Rusal, wants to sign a direct electricity supply contract with the Federal Grid Company (FGC; FEES - Hold), by-passing distribution grids operated by MRSK Siberia (MRKS - Not Rated), for electricity supplies, Interfax reported yesterday. Rusal expects to save up to RUB200 mln ($6.5 mln) per month through the new contract. According to Interfax, the key reason for the switch is that Rusal's smelter is connected to high-voltage grids operated by FGC (meaning the factory consumes only FGC services), while MRSK is only an intermediary in the electricity supply chain. We view this news as fairly neutral for FGC, as it is unlikely to result in any additional significant benefits for the company. While this switch will hit the profits of MRSK Siberia in 2010 and could set a precedent for other industrials, we do not see it as fundamentally critical for MRSK Siberia or other MRSKs, as the RAB tariff system (Regulatory Assets Base) will mitigate any negative impact.

Switch to FGC services could spread. Currently, the electricity distribution network consists of two main parts: first, generated electricity runs through highvoltage grids operated by FGC and then goes on to medium- and low-voltage grids operated by MRSKs. There is a big system risk for all distribution companies supplying electricity to large industrials consumers, as the latter may try to connect to FGC grids directly. For industrial consumers, switching to FGC grids could prove beneficial, as it would help them to cut the final electricity price by 35-40%.

Discount to international peers. Currently, all distribution companies and the FGC trade on an EV/RAB multiple at 0.36, which implies a significant 64% discount to international peers' valuation of 1.0. The key reason for such a significant undervaluation, in our view, is that the companies are likely to fully switch (with target yields) to RAB only in 2012-2014, while the initial RAB valuation is only guidance. Furthermore, the timing of MRSKs switch to RAB is also an open question. Thus, we believe the discount for FGC is justified.

Steel Guru: Poll results (Week 44) - Russian steel mills to push global levels down



Tuesday, 10 Nov 2009

Question - Russian steel mills to push global levels down

Results

|Answer |% |

|Yes |68 |

|No |26 |

|Can't say |6 |

Total votes polled - 47

These are the results of on line poll on during Week 44 of 2009 (Nov 2nd 2009 to Nov 7th 2009)

Steel Guru: Russian import and export data for 9 months

Tuesday, 10 Nov 2009

According to the data released by the Russian Federation Federal Customs Service, in the first nine months of 2009 Russia exported following products

1 20.688 million tons of ferrous metals down by 3.95%YoY

2. 3.425 million tonnes of pig iron down by 19% YoY

3. 559,300 tonnes of ferroalloys down by 3.14% YoY

4. 10.401 million tonnes of semi finished steel products down by 17% YoY

5. 14.538 million tonnes of iron ore and concentrate down by 14.8% YoY

6 1.282 million tonnes of coke and semi-coke down by 50.6% YoY

7 6.794 million tonnes of flat rolled product up by 19.8% YoY

In the period in question, Russia decreased its ferrous metal imports by 43% YoY to 2.23 million tonnes and reduced its steel pipe imports by 45 YoY to 425,800 tonnes.

(Sourced from SteelOrbis)

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RenCap: Mechel reports unimpressive 2Q09 results



Renaissance Capital, Russia

Tuesday, November 10, 2009

Mechel reported 1H09 results yesterday, which we view as neutral to weak. We think 2H09 should certainly be better for the company, but due to capex spending and interest payments the company's debt burden is likely to grow in the short term. Our key takeaways from the Mechel's financial results are:

• Sales were just 9% higher QoQ at $1.28bn, as higher production volumes in key steel and mining segments were offset by lower realised prices.

• Mechel reported EBITDA of $370mn in 2Q09, but it included an FX gain of $304mn. Without the FX gain and other one-offs, Mechel's EBITDA, on our estimates, was just $66mn vs $118mn in 1Q09.

• Segment-wise, results differed significantly: The mining segment made $91mn EBITDA net of FX gain; operating at 24% EBITDA margin; the steel segment was in the red with a $36mn EBITDA loss; while EBITDA in the ferroalloys segment turned positive.

• Losing money on the operating level: The operating cash flow before working capital changes (but including interest and taxes) was a negative $106mn (-$90mn in 1Q09). Only due to a working capital release, the company reported a $330mn cash flow from operations in 2Q09.

• Capex in 2Q09 was moderate at $130mn. Mechel has not finalised its budget for 2010 capital expenditures, but reiterated that that the Elga project and rail mill construction remain priorities. Mining at Elga is expected to commence in 3Q-4Q10. Earlier, the company estimated the construction of a railroad to the Elga deposit at $1.3- 1.4bn. Mechel said it had already invested RUB10bn and consequently, it will have to finance another $1bn in the Elga project alone. Mechel's debt was flat QoQ at $5.9bn. Net debt increased $130mn to $5.1bn. Mechel finalised its debt restructuring and its new debt repayment schedule suggests that the company will have to repay $1.44bn in 2010. With significant investments in organic development scheduled for 2H09 and 2010, we expect Mechel's debt burden to increase and that the company will remain very dependent on access to refinancing. As a result, we do not find Mechel's bonds (13.2-13.3% to two-year put) attractive at current levels and prefer Sibmetinvest bonds (Evraz's subsidiary) trading with yield of 14.2% to five-year put.

Bloomberg: Sberbank to Raise Salaries to ‘Market’ Levels, Vedomosti Says



By Alex Nicholson

Nov. 10 (Bloomberg) -- OAO Sberbank, Russia’s largest lender, needs to raise salaries to “market levels,” Vedomosti reported, citing a memorandum from Chief Executive Officer German Gref to employees.

Spending allocated for salaries will be increased 15 percent from Jan. 1, the newspaper added, citing the memo.

The number of Sberbank employees fell 3.6 percent, or by 5,800 people, in the first six months of the year, Vedomosti added.

To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@.

Last Updated: November 10, 2009 00:55 EST

: Fitch affirmed the ratings of 6 Russian banks



2009-11-10

Fitch Ratings has affirmed the long-term Issuer Default ratings (IDR) on six Russian banks: OJSC Alfa-Bank on the level of «BB-», MDM Bank’s level of «BB-», Nomos-BANK-level «B +», simply does not at the level «B +» BANK URALSIB level «B +» and Bank ZENIT level «B +».

At the same time the agency was changed from «negative» to «Stable» forecast on ratings of Alfa-Bank, MDM Bank and Nomos-Bank, retaining the «negative» forecast on ratings of Promsvyazbank, Uralsib Bank and Bank ZENIT.

«Stable» forecast on ratings of Alfa Bank, MDM Bank and Nomos-Bank, said the agency analysts, reflects the significant opportunities for these banks to absorb losses, partly because of new capital (from Alfa-Bank and Nomos-Bank) and larger openness about the opportunity for shareholders to provide additional capital, if necessary (especially at MDM Bank). «The stable outlook also reflects the recent stabilization of the overall operating environment in Russia, which makes a further significant deterioration in asset quality of these banks are less likely.

«Negative» forecast on ratings of Promsvyazbank, Uralsib Bank and Bank ZENIT reflects a more moderate ability of banks to absorb losses, greater uncertainty about the ability or willingness of shareholders to obtain additional capital if needed, and certain parts of the risk structure of banks, including very high growth rates before the crisis in Promsvyazbank, substantial lending to related parties at Uralsib Bank and the relatively high risk for the construction and real estate sectors in the Bank ZENIT. At the same time, Fitch believes that the downside risk for these banks has also fallen in recent months due to less adverse economic conditions, and further stabilization of macroeconomic indicators and trends in asset quality of banks in particular may lead to further revisions of forecasts for the votes back to «Stable in 2010

Although most of the above banks disclose the total problem and restructured (longer) loan of around 30% at the end of 3 quarter. 2009, which was largely in line with previous forecasts of Fitch’s sector as a whole (25% of baseline scenario, 40% for the pessimistic scenario) The agency notes that the bulk of the loan impairment occurred in 1 half of 2009, with only modest additional deterioration in 3rd quarter . 2009 The commitment of most of restructured loans performed, in part because of less adverse economic conditions, and loans, tend to improve security, should also help to reduce the ultimate loss of the banks. In addition, some problematic loans to larger companies were strategically important advantage of the refinancing of the banks in state ownership or direct state support for borrowers.

At Alfa-Bank’s bad loans (with a delay of more than 90 days) increased to 16.9% at end of quarter 3. 2009 compared with 1.1% on January 1, 2009, and expanded credit amounted to 9.8%. At the same time most of this increase occurred in 1 half of 2009 and should be considered in the context of reducing the loan portfolio by 20% in 1 half of 2009, Fitch also takes into account the experience of Alfa-Bank to negotiate and handle the situation with regard to the solution of problem assets that would restrict the final loan losses. Capitalization of capital supported by a contribution from shareholders of $ 320 million and a subordinated loan of $ 1.3 billion from the Bank ( «EBV») in 2009, and is projected to Fitch, based on national accounting standards by the end of 3 quarter. 2009, adjusted for the recent award of a subordinated loan from the bank, the bank would maintain the ratio of reserves to loans of about 30% of breaches of minimum capital requirements.

Problem loans at MDM Bank (loans overdue for more than 90 days, or reserved for more than 50%) has increased rapidly to 14.2% at the end of 1 half of 2009 about 4.9% by the end of 2008, but growth was moderate in the 3rd quarter. 2009 The Bank expects that by the end of 2009 in bad loans will be around 15-17%. Rescheduled loans accounted for about 14% of the loan portfolio at end of quarter 3. 2009, and some of them can also be negative equity in the future. Nevertheless, significant capital in MDM Bank (end of quarter 3. 2009 regulatory capital ratio stood at 16.6%) means that the bank has an opportunity to increase the ratio of reserves to loans up to 24% compared to the current level of 14%. Fitch noted is the relatively high quality of capital at MDM Bank (mainly Tier 1 capital), and thus significant untapped potential for capital 2 levels. In addition, taking into account the agency as an additional positive commitment to shareholders to give up to $ 500 million of additional capital if needed.

Quality of assets in the Nomos-Bank has remained generally at a level comparable to banks: at the end of 3 quarter. 2009 unpaid loans of 90 days, amounted to 6.4% of all loans, while 25.7% of the loans had been restructured. The Bank’s ability to absorb losses become stronger (at end of quarter 3. 2009 Bank could potentially suffer losses of up to 22%) after three contributions of subordinated loans from shareholders and VEB in 4 place. 2008 to 1 turn. 2009 totaling approximately 17.7 billion rubles. Nomos-Bank has requested additional subordinated loans online, but according to Fitch, is still uncertainty about its approval, taking into account information on the reduction of funds from VEB.

Problem loans are simply not (which mainly comprise loans delayed by more than 90 days) accounted for 8.7% of all loans at the end of 1 floor. 2009 (2.8% at the end of 2008), while the level of restructured loans were above average for comparable banks. Fitch believes the current low levels of capitalization: regulatory capital adequacy ratio at end of quarter 3. 2009 amounted to 10.7%, only slightly above the minimum level of 10%, giving an opportunity to increase the ratio of reserves to loans up 11.5% from the present figure of 10.5%. Capital adequacy ratio according to Basel was higher and amounted to 14% by the end of 1 half of 2009, while still allowing limited margin of safety in connection with the level of 12% stipulated covenants on some foreign loans. The new capital contribution, which is expected to be received in the 4 position. In 2009, the EBRD and Commerzbank, should lead to an increase in the total capital ratio, about 1.1% which means that if there is a further significant deterioration in asset quality, you may still need additional support letters.

The level of problem loans from the Bank ZENIT according to the reporting (defined as loans that are booked for more than 20%) was relatively moderate at 5.7% at the end of 1 half of 2009, while loans delinquent for 90 days, was 3, 9% ( on consolidated basis) on the same date. At the same time, lending the building sector and property sector is a significant proportion of 26% of the consolidated portfolio, and many of these are long-term loans with bullet repayment of principal. Although interest rates now paid on most of these loans, the timely repayment of the principal chairs heavily on the future performance of the construction industry. Bank strengthened its position within the regulatory capital through subordinated loans obtained from the shareholders of oil company OAO Tatneft ( «BB» / forecast «Stable») on 1 square. 2009 and VEB in July 2009, in each case the amount of 2.1 billion rubles. As a result of regulatory capital adequacy ratio at end of quarter 3. 2009 increased to 14.8% in nekosolidirovannoy basis (16.3% of the consolidated banking group), which allows you to increase the ratio of reserves to loans up 15.1% on the existing 5.8%.

Problem loans from the bank URALSIB (defined as loans to retail customers, expired on 90 days, and commercial loans to the devaluation of over 50%) reached 6.3% at the end of 1 half of 2009 (the end of 2008: 3.6%), while the level of long-term credits was higher than the average for comparable banks. The bank also has relatively high levels of lending to related parties, which amounted to more than 1.1 x the bulk of their assets at the end of 1 floor. 2009 Regulatory capital ratio increased to 15.3% at end of quarter 3. 2009 and supported by an infusion of capital amounting to 6.2 billion rubles. (mainly in the form of building the headquarters of the bank) from the majority owner of 2 place. 2009, which created the opportunity to increase the ratio of reserves to loans up 17.9% at end of quarter 3. 2009 about the actual 13.2%. According to information provided to Fitch, a significant portion of loans to related parties may be paid in the short term, and this may be accompanied by an increase in banks’ capital, which will be positive for risk structure Uralsib Bank.

Source:

Reuters: TIMELINE-Russian banks struggle with bad loans



Mon Nov 9, 2009 8:30am EST

MOSCOW, Nov 9 (Reuters) - Russian banks could be forced to make provisions of $45 billion in 2009 should bad loans rise to 10 percent of their overall credit portfolio, wiping out profits in the banking sector.

Following is chronology of recent key events in the sector:

MAY

May 19 - Problem loans could soar to 35 to 50 percent of total lending in Russia, Ukraine and Kazakhstan, Standard & Poor's says. [ID:nLJ957879]

JUNE

June 1 - Russian banks may need to be recapitalised with around 1.3 trillion roubles ($43.25 billion) in 2009, Moody's says. [ID:nL1554029]

June 5 - President Dmitry Medvedev rules out creating a "bad bank" to clean up bad loans. [ID:nL534983]

June 19 - VTB says bad debts could rise to $9 billion by June 2010. [ID:nLJ543168]

June 29 - VTB says will likely make a loss this year. [ID:nLT624294] [ID:nLT718543] [ID:nLT16910]

June 30 - Alfa Bank President Pyotr Aven says defaults may hit $130 billion in the next 12 months. [ID:nLU501949]

- Russian banks require $20 billion to $80 billion in additional capital within a year as NPLs will reach 15 to 40 percent of banks' loan portfolios by year-end, Fitch says. [ID:nLU368648]

JULY

July 9 - Russia says it will spend 150 billion roubles in 2009 and 310 billion in 2010 on recapitalising banks via OFZ treasury bills. [ID:nL9317896]

July 14 - Sberbank restructures 6.5 percent of its corporate loan portfolio and 5 percent of retail loans. [ID:nLE295374]

July 22 - Oleg Vyugin, chairman of MDM bank, says bad loan levels are already 10 percent in the banking system [ID:nLM83854]

AUGUST

Aug 27 - Sberbank will complete and sell real estate projects it has accumulated as non-performing loans rise and it forecloses on pledged assets [ID:nLR76657]

Aug 28 - Russian officials cut forecasts for banks' bad loans to less than 10 percent by the year-end and said state help for the sector could be scaled back. [ID:nLR695672]

SEPTEMBER

Sept 7 - VTB sells 41.5 pct of new share issue for 180.03 billion roubles ($5.7 billion) to the state. [ID:nL0449822]

Sept 11 - The state is unlikely to buy into privately owned banks, says central bank First Deputy Chairman Alexei Ulyukayev. [ID:nLB635152]

Sept 16 - Russian companies have restructured the lion's share of problem debts but the issue will stay on the 2010 agenda, the local head of Raiffeisen (RIBH.VI: Quote, Profile, Research, Stock Buzz) says. [ID:nLG149961]

Sept 19 - Sberbank says it hopes to sell assets acquired through unpaid loans during the crisis within three years. [ID:nLJ444394]

Sept 21 - Sberbank (SBER03.MM: Quote, Profile, Research, Stock Buzz) says it expects provisions to rise above the forecast of 10 percent in 2009 [ID:nNLP502374]

Sept 30 - Central bank chairman Sergei Ignatyev says the Russian banking system as a whole will likely end 2009 in the black, and Russia's Alfa Bank backtracks from an earlier gloomy prognosis and says "there is no danger of catastrophe" for the financial system. [ID:nLU343674]

OCTOBER

Oct 15 - Russia's top 20 banks had restructured about 26 percent of loans to their largest borrowers by Sept. 1 [ID:nLF592601]

Oct 21 - Russia's central bank has conducted a series of banking stress tests which showed no major threat to the system [ID:nLL682825]

- VTB (VTBR.MM: Quote, Profile, Research, Stock Buzz) posted a net loss of 11.0 billion roubles ($374.8 million) in Q2 2009, while signalling the worst is over. [ID:nLL696643]

Oct 29 - Moody's expects bad loans at Russian banks to rise to 20 percent of the total portfolio this year and to 25 percent in 2010 [ID:nL012582]

Oct 30 - The Russian government will more than halve the funds aimed at supporting banks in 2010 to 100 billion roubles [ID:nLU657368]

(Compiled by Dmitry Sergeyev)

: CTC files lawsuit against board member



By Chris Dziadul

November 10, 2009 07.13 UK

Russia’s CTC Media has filed a civil complaint against Alexander E. Rodnyansky, its former president and CEO and currently a non-executive member of the board of directors.

The complaint, submitted to several US courts, alleges that Rodnyansky has been involved in the business of one of CTC Media’s competitors in Russia.

CTC Media’s two leading shareholders Alfa CTC Holdings Ltd and MTG Russia AB have also said they are no longer willing to support his presence on the board. His resignation from the board will therefore come into effect on February 7, 2010.

CTC Media is one of the leading commercial broadcasters in Russia.

RenCap: Federal Arbitration Court again refuses to suspend damage recovery from Telenor



Renaissance Capital, Russia

Tuesday, November 10, 2009

Event: Yesterday (9 Nov), the Moscow District Federal Arbitration Court again refused to suspend the recovery of a $1.7bn damage payment by Telenor to VimpelCom. The court upheld a ruling issued by the Moscow Arbitration Court in early June and a ruling by the Ninth Moscow Arbitration Court of Appeals in early August.

Action: Neutral for the stock, in our view.

Rationale: The withdrawal of the lawsuit initiated by Farimex for $1.7bn is one of the deal breakers for the merger of VimpelCom and Kyivstar. We think the chances of the merger happening eventually, are high.

Ivan Kim

RenCap: WiMAX licences likely to go to Svyazinvest?



Renaissance Capital, Russia

Tuesday, November 10, 2009

Event: According to Vedomosti today (10 Nov), the regulator issued the conditions of the WiMAX licences tender which will take place between 18 Feb and 11 Mar 2010. There will be 40 licences for 40 regions put up for tender. The total capex into the WiMAX network should be a minimum of RUB4.77bn ($165mn). Each licence will cost RUB1mn. According to the terms of the licence, the network should be launched no later than a year and a half after the licence is nominated.

Action: The news is potentially positive for Svyazinvest daughter companies and negative for MTS and VimpelCom, in our view.

Rationale: The conditions of the tender are designed in such a way that Svyazinvest subsidiaries have a good chance to get WiMAX licences: eg companies with fibre optic lines get five points; one point for each year of long-distance, zonal, local, data transmission, Internet access and VoIP services provision - but not more than five points per service. Svyazinvest subsidiaries usually comply with these conditions and provide the aforementioned services. At the same time, mobile operators are disadvantaged: eg a tender participant will have 20 points written off if it has a 3G mobile licence. On the negative side for Svyazinvest, there is a condition stipulating that WiMAX networks are to be built using Russian WiMAX equipment.

Ivan Kim

UralSib: Rostelecom: 1H09 IFRS results: expectedly feeble



UralSib, Russia

November 10, 2009

Substantial decrease in net profit. Yesterday, Rostelecom (RTKM - Not Rated) released very weak 1H09 IFRS numbers. Revenue grew 4.4% YoY to RUB32.8 bln ($986 mln) driven by value-added services (VAS), which grew 29% YoY to RUB10.5 bln ($315 mln) in the first half of the year. However, on the cost side payments to international operators increased 39% YoY to RUB5 bln ($150 mln), as a result of ruble depreciation and growth in international transit traffic. In 1H09, OIBDA declined 27% YoY to RUB5.7 bln ($170 mln), implying an OIBDA margin of 17.5%, down 7.5 ppt YoY. Net income fell 85% YoY to RUB1.4 bln ($42 mln).

Traditional segments perform worse. Traditional voice telecom business showed significantly weaker results compared to VAS, Internet access services for operators and corporate client segments. Domestic long-distance (DLD) revenues were down by 10% YoY to RUB13.3bln ($398 mln) due to a 5% YoY decline in DLD traffic to 4.8 mln minutes. Revenue from leased-line services fell 4% to RUB4 bln ($120 mln), reflecting network construction by inter-regional telecoms (IRs) and Russian mobile operators. However, Rostelecom's business optimization initiatives did not prevent cost growth. Although the overall headcount was reduced by 2% YoY to 22,000, labor costs surged 22% YoY to RUB5.4 bln ($162 mln).

Supports our negative view. Rostelecom's 1H09 IFRS figures underpin our negative view on the stock, and might cause short-term negative sentiment, and suggest that swap ratios for Rostelecom shareholders during the upcoming Svyazinvest reorganization could be unfavorable (as they should be based on 2009 financials according to Svyazinvest). We would advise entering the consolidated operator by investing into IRs with diversified business structures and high fundamental upside potentials. Our top picks in the sector are Uralsvyazinform (URSI - Buy), Sibirtelecom (ENCO - Buy), VolgaTelecom (NNSI - Buy) and Far East Telecom (ESPK - Buy), since these fundamentally strong names could get more attractive swap ratios. Rostelecom is traded significantly above its 12-month target value of $1.5/share, driven by speculative rather than by fundamental factors. We do not have a recommendation on the stock.

Konstantin Chernyshev

: Russia: October light vehicle sales decline 52%



Tuesday, November 10, 2009,

New light vehicle sales in Russia fell by 52% year-on-year in October, from 243,650 units to 116,700. Sales were down month-on-month as well, compared with the 117,981 units sold in September 2009.

Cumulative sales of cars and LCVs in the country lagged behind at 1,232,514 vehicles, compared with 2,492,794 vehicles a year earlier. This translates into a year-on-year decline of 51%.

"October sales showed the same level of decline as in September compared to 2008 giving further indication that the market has stabilised but at a hugely reduced level compared to last year. We are encouraged by the government initiative on introducing a scrappage scheme to the Russian automotive market. We support this but it is vital for the whole industry in Russia that the scheme applies to all dealers regardless of the origins of the cars that they sell. This is the structure that has worked in all other major markets and helps to simplify the operation of the programme for customers, dealers, manufacturers and the administrating authorities," said David Thomas, chairman of the Association of European Businesses Automobile Manufacturers Committee (AEB AMC).

A handful of brands operating in the country recorded year-on-year sales improvements in October. This list included Kia (+31%), Suzuki (+2%), Audi (+14%), Porsche (+22%) and Mini (+85%).

AvtoVAZ continued to lead the light vehicle market last month, with sales totalling 28,211 units (-50%), followed by General Motors with 9,000 vehicles (-71%), and Volkswagen Group with sales of 7,115 units (-42%).

While two Lada models, the Priora and Samara, took the top two spots in October, the Renault Logan took over third from the Lada 2105/2107. The Priora accounted for sales of 8,562 units (-39%), the industry sold a total of 7,436 Samara units (-52%), and 5,076 Logans were sold (-11%) last month.

Published on Tuesday, November 10, 2009

Reuters: Russia could allow Renault to increase AvtoVAZ stake



AVTOVAZ/ (URGENT)

TOGLIATTI, Russia, Nov 10 (Reuters) - Russia's government would consider allowing French automaker Renault to increase its 25 percent stake in Russian car maker AvtoVAZ, Deputy Prime Minister Igor Shuvalov said on Tuesday.

He said Renault should be involved in the debt restructuring of the near-bankrupt Lada maker as an investor in the firm and that there were no plans to convert AvtoVAZ' debt into shares.

"The government is ready to consider Renault offers regarding increasing its stake in the company. But there is no such offer as yet," Shuvalov told reporters. (Reporting by Gleb Bryanski; writing by Maria Kiselyova; editing by John Bowker)

Activity in the Oil and Gas sector (including regulatory)

Upsttreamonline: Iran lines up Russian deals



By Upstream staff 

Iran's oil ministry said it was in talks with a Russian oil company to develop three oilfields in the Islamic state, according to reports.

Iran, the world's fifth-largest crude exporter, has struggled to attract the money and technology to develop its oil and gas fields as international sanctions and political pressures have kept foreign companies away.

"We are negotiating with ... a Russian company to develop the three oil fields in southwestern Iran," the semi-official Mehr news agency cited managing director of Iran's Central Oilfields Company, Alireza Zeighami, as saying, according to a Reuters report.

Zeighami said a consortium made up of an Iranian company and the Russian company would carry out development of the oilfields if talks succeeded.

"The Iranian company has submitted a proposal for early production which is under study," Zeighami said without elaborating.

Zeighami said an output of 8000 barrels per day was estimated in the first phase of the plan for the three fields and there are plans to raise it to 20,000 bpd in the second phase.

Iranian oil officials have said the country's energy industry needed some $200 billion investment in new oil, gas and petrochemical projects by 2015.

Some Asian companies, less susceptible to Western political pressure, have signed numerous memorandums of understanding for oil and gas projects, many of which have yet to be finalised.

Monday, 09 November, 2009, 14:48 GMT  | last updated: Monday, 09 November, 2009, 14:50 GMT

Upstreamonline: Premier seeks to resume in Russia



By Upstream staff 

US-based oil and gas player Premier Energy signed a non-binding letter of intent with Rossgaz to buy the remaining interest in Karbon CJSC, a closed join stock company incorporated in the Russian Federation.

The company currently owns majority interest of Karbon CJSC, which holds exploration and production licence for the North-Kopanskoye oilfield in the Orenburg Region in the Volga-Urals basin.

Concurrently, a series of meetings have been successfully completed regarding the proposed funding of the planned development drilling programme for the North-Kopanskoye oilfield this year, the company said in a statement.

Karbon CJSC is preparing to resume the planned development drilling subject to successful completion of drilling agreements, release of the needed funds and Premier’s board approval.

The above transactions, including the acquisition of the remaining interest in Karbon, CJSC and the beginning of drilling, are subject to the drafting and negotiation of final definitive agreements, performing due diligence as well as board approval of Premier and Rossgaz and shareholder approval of Rossgaz.

Further, Premier is required to raise the needed capital for the rest of the interest in Karbon, CJSC as well as to support working capital.

There is no guarantee that such financing will be available at all or, if available, that the terms will be acceptable.

The company said there is no guarantee that Premier will be able to successfully close the above transaction or begin drilling.

Monday, 09 November, 2009, 21:48 GMT  | last updated: Monday, 09 November, 2009, 21:48 GMT

Tatneft Underscores 10-Month Oil Production Operations

OAO Tatneft 11/9/2009

URL:

Oil Production

The production of the oil companies in the Republic of Tatarstan amounted to 2,772,453 tons of crude oil in October, which made 103.7% versus the month of October 2008. The crude oil production amounted to 27,073,802 tons for the period of ten months or 100.1% versus the same period of the last year.

OAO TATNEFT produced 2,199,050 tons of crude oil in October, which made 104.2% versus the month of October of the last year with the above-the-plan production amounting to 41,104 tons (101.9%). The amount of 2,163,150 tons of oil was delivered to the trunk oil pipeline system with the above-the-plan delivery volume amounting to 64,670 tons.

OAO TATNEFT produced 21,527,925 tons of crude oil during the ten months period.

The above-the-plan production amounted to 367,067 tons (101.7%).

The amount of 21,380,750 tons of oil was delivered with the above-the-plan delivery amounting to 762,000 tons.

Drilling

The total penetration during the period of 10 months of 2009, taking into account the operation of OOO TNG-Lenburneft, amounted to 463 thousand meters (687 thousand meters during the period of 10 months in 2008) including 370 thousand meters for OAO TATNEFT (425 thousand meters during the period of 10 months in 2008) with production drilling amounting to 349 thousand meters and exploratory drilling accounting for 21 thousand meters; 32 thousand meters were penetrated for the subsidiary companies of OAO TATNEFT (37 thousand meters during the period of 10 months in 2008), including 9 thousand meters of production drilling and 23 thousand meters of exploratory drilling; 61 thousand meters were drilled for joint ventures and independent oil companies (225 thousand meters during the period of 10 months in 2008), including 54 thousand meters of production drilling and 7 thousand meters of exploratory drilling.

In total, 307 wells were constructed and handed over to customers (437 wells during the period of 10 months in 2008), including: 247 wells for OAO TATNEFT (270 wells during the period of 10 months in 2008), including 226 production wells and 21 exploratory wells; 17 wells were built for the subsidiary companies of OAO TATNEFT (17 wells during the period of 10 months in 2008), including 6 production wells and 11 exploratory wells; 43 wells were constructed for joint ventures and independent oil companies (150 wells during the period of 10 months in 2008) including 35 production wells and 8 exploratory wells.

35 crews of OOO Bureniye Company performed well drilling operations with application of traditional drilling techniques during the period of ten months. Besides, one drilling crew performed works on construction of wells drilled in the underbalanced pressure mode for NGDU Bavlyneft. They penetrated 432,091 meters and handed over to customers 288 wells (641,156 meters and 403 wells in 2008), including 343,719 meters and 230 wells for OAO TATNEFT (406,187 meters and 249 wells in 2008). Production drilling for OAO TATNEFT amounted to 322,909 meters and 209 wells, while exploratory drilling amounted to 20,810 meters and 21 wells. Six drilling crews operated in the territory of the Samara District. 45 thousand meters were penetrated outside the Republic of Tatarstan. 67.2 thousand meters were penetrated in horizontal wells and multilateral downhole splitters.

Penetration per one drilling crew amounted to 12 thousand meters during the period of 10 months, while the penetration per crew amounted to 13 thousand meters for the corresponding period of 2008. Drilling operations of OOO Lenburneft with application of traditional drilling techniques were performed by 4 drilling crews. One crew was drilling a well for OAO Krasnoyarskgazprom Company in the Krasnoyarsk Area, while two crews were drilling wells for NGDU Leninogorskneft and one drilling crew performed drilling operations to the bituminous deposits at Ashalchinskoye field of NGDU Nurlatneft. 31,076 meters were penetrated and 19 wells were handed over to customers during the period of 10 months of 2009, including 26,276 meters drilled and 17 wells handed over to OAO TATNEFT (the penetration rate amounted to 45,485 meters for the corresponding period of 2008, including 18 832 meters drilled and 21 wells handed over to OAO TATNEFT). 10 crews were engaged in drilling lateral and horizontal wellbores with 7 of them drilling horizontals and laterals for NGDUs of OAO TATNEFT and 3 crews performed drilling for outside companies in the territory of the Orenburg District. 25,213 meters were drilled and 69 wells were handed over to customers during the period of 10 months, including 16,444 meters drilled and 51 wells handed over to OAO TATNEFT (18,082 meters penetrated and 58 wells handed over during the corresponding period of 2008).

Workovers

815 well remedial operations were performed in October 2009 and 8,065 well remedial operations were performed during 10 months of 2009. 36 well remedial operations were performed in ZAO Tatneft-Samara (8 wells in October).

Well workover operations were performed at 1,721 wells during 10 months of 2009 (161 operations in October), including production string sealing in 259 wells; shutting-off individual layers and recompletion in other intervals of 298 wells; transfer of the wells into different categories and wells completion for injection in 118 wells; failure liquidation and cleaning of the electrical cable and the bottom hole areas in 288 wells; physical well abandonment and re-abandonment in 37 wells. 462 wells were worked over with application of coil tubing (39 wells in October), including 130 wells worked over through the annulus.

Hydrofracking operations were performed at 106 wells (8 wells in October) with cumulative incremental oil production amounting to 2,927 thousand tons of crude oil.

16 slim holes were drilled and completed for OAO TATNEFT. 26 slim holes were also drilled and completed for small oil companies. Five wells are in the process of drilling for OOO Bytex at present, while one well is in the process of completion.

Works on oil recovery enhancement were performed at 1,463 wells (124 wells in October), including chemical treatment methods applied at 844 wells (86 wells in October).

The incremental oil production resulting from application of the enhanced oil recovery methods amounted to 4,291 thousand tons with chemical methods accounting for the production of 2,053 thousand tons of oil.

Operations for preparation and delivery of acid compositions were carried out at 1,629 wells during the period of ten months of 2009 and the production of chemical products amounted to 25 thousand 475 tons for the amount of 559 million rubles.

Gazprom

Daily Mail: CITY FOCUS: Gazprom woes hit Britain



By Sam Fleming

Last updated at 10:20 PM on 09th November 2009

Profits down by half, debts surging by a third. The first half financial results from Kremlin-controlled Gazprom made for sobering reading yesterday.

An energy giant that once claimed it would be the world's first trillion-dollar company has seen a dramatic slump in its fortunes, leaving its market value at less than a fifth of that level.

Given Gazprom has been portrayed as the Kremlin's ultimate political weapon, this recession-induced fall from grace will be viewed with some schadenfreude in the West.

But analysis to be presented this week by energy watchdog Ofgem spells out a far more worrying picture.

Western politicians used to fret that Gazprom could restrict supplies as part of the Kremlin's strategic manouvering.

The concern at Ofgem, expressed in an interview with chief Alistair Buchanan, is far more practical.

Will the Russians actually have the capacity to meet increasing demand for gas in Europe over the next decade? If not, the outcome will be

higher prices for us all. 'This is not a comment on Gazprom's management. Or a criticism of Gazprom. It is just a fact. Production investment is down, revenues from Russia are down,' Buchanan said, sitting at a conference table in his Millbank offices.

'I am not questioning that the gas is there or that the gas will come. My question on behalf of British consumersis, when will it come?'

He went on: 'While Britain's LNG ( liquefied natural gas) means we are in a better position than mainland Europe, should there be significant delays to the arrival of new gas supplies from Turkmenistan and Russia, gas scarcity in Europe could push up prices for British consumers.'

Ofgem analysis prepared for a speech by Buchanan tomorrow suggests that Europe could be affected by gas shortfalls of 41bn cubic metres by 2015 and 33bn cubic metres in 2020.

The problem centres on six key projects that are needed to bolster supplies.

These are the giant Shtokman field in Russia's Barents Sea, new developments in Russia's Yamal Peninsula, and, crucially, expansion in the secretive central Asian state of Turkmenistan - a key supplier to Gazprom.

Opening up vast new fields in these territories will be key to delivering on the increased gas needs of Western Europe. This will require over £80bn of investment, at a time when the revenues of Gazprom and its partners are crumbling amid low gas prices.

The Shtokman gas field will be particularly difficult to access.

The developers 'will practically need a degree in ice,' says Buchanan, as they cope with ice storms, icebergs, and air temperatures of minus 30 degrees.

There is clearly a very good chance that the £14bn project will be delayed until after its 2015 start-date.

And Buchanan does not believe Turkmenistan will get 'anywhere close' to delivering the 154bn cubic metres it needs to pump out by 2020.

Meanwhile production at existing gas fields is expected to slump from 600bn cubic metres to 400bn cubic metres by 2020.

'These fields are knackered and rather like the North Sea,' says Buchanan.

There are also major question marks surrounding the timing of three new pipelines needed to deliver gas to Europe: the Nord Stream and South Stream links, and an EU-led project called Nabucco. The political hurdles alone are formidable, leaving aside the cost of building these new arteries into Europe.

Gazprom declined to comment last night. But the oddity in all this is that Britain buys relatively little gas directly from the firm.

Indeed, by 2020 we will be largely self sufficient thanks to new liquefied natural gas capacity, and imports from Norway.

But given we have liberalised markets, any shortfalls on the Continent will quickly drive up prices here as gas is drained out of the UK.

Of course, as yesterday's government statements showed, there will be plenty of new non-gas energy capacity coming on stream in coming years, including new nuclear, wind and, potentially, clean-coal.

But Buchanan fears new nuclear stations will not be operating 'in any substantial way until 2020-2025'.

Even if the new wind capacity the government wants is in place by 2020, 'we will still be heavily reliant on gas.'

The outlook for troubled Gazprom will be a key influence on the British energy scene for years to come.

RenCap: Gazprom reports 2Q09 result, remains cheap on relative value basis



Renaissance Capital, Russia

Tuesday, November 10, 2009

Yesterday (9 Nov), Gazprom (Baa1/BBB/BBB) reported 2Q09 IFRS results. Despite beating both our and consensus forecasts, we think the numbers will be largely ignored by the market, given the significant lag in reporting and dramatic volatility in the company's production and sales patterns over 2009. In particular, we believe 2Q09 proved one of the worst quarters in the company's history, with gas sales down 20% YoY to 100bcm, negatively affected by a well-publicised reduction in domestic gas consumption (-10% YoY in volume terms), and reduced gas offtake by the company's European (-15% YoY) and CIS (-53% YoY) customers; as well as a historically low EBITDA margin of just 28% (a level not seen since 1999). The market situation seems to have improved since, with July-Oct 2009 statistics showing a significant recovery in both domestic and European sales, indeed pushing October numbers to 2007 and 2008 levels in terms of monthly production and above the 2008 level for exports to Western Europe. Reported revenues of RUB708bn were 5% higher than we had forecast, largely due to consolidation of OGK2 and OGK6 results. These have had an equally large effect on costs, so the EBITDA of RUB201bn was in line with our forescast, although the EBITDA margin of 28% fell short of our 30% estimate, diluted by lower-margin utility results. Reported net income has significantly beat our estimates (and was close to consensus) on the back of a higher-than-expected currency gain (RUB83.9bn, chiefly on the back of the revaluation of receivables denominated in foreign currency), a valuation gain on the acquisition of a 20% interest in Gazprom neft (RUB13.9bn) and the revaluation (RUB9.9bn) of interest in Moscow refinery following the acquisition of Sibir Energy. In terms of cash flows and leverage, Gazprom has remained a company with positive organic free cash flow (more so during 2Q09 than 1Q09, when its free cash flow was virtually zero). As of 30 June, total debt was up 12% QoQ and 25% YtD to RUB1.7trn, largely on the back of the acquisition of the 20% stake in Gazprom neft for $4.1bn in Apr 2009. Gazprom's key credit metrics worsened somewhat, with total debt/trailing 12-month EBITDA growing to 1.4x from 1.1x as of 1Q09 and 0.9x as of YE08, and this trend - because of the inertia in rolling EBITDA - is set to continue in our view. There has been little change in the structure of Gazprom's debt by either maturity distribution (29% short-term) or seniority (gas sales revenue stream remains largely unencumbered, save for Gazprom-20 structured export notes). Relative value-wise, we continue to like Gazprom bonds over its EN peers', such as PEMEX, and especially so in the longer end of the curve. We have provided a justification for our approach elsewhere (eg click here to view Russian bond strategy - Tick, tock... released on 2 Oct 2009). With the spread between Gazprom and PEMEX five-year CDS levels at almost 90 bpts (250 bpts vs 160 bpts), we still view Gazprom risk as cheap. Alexander Burgansky

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