Russia
Russia 090630
Basic Political Developments
• RF, Pakistan For'Min officials discuss security issues - International and regional security issues, including problems concerning nuclear missile non-proliferation, were discussed here on Monday by members of the Russo-Pakistani Consultative group on strategic stability (CGSS), an official at the Ministry of Foreign Affairs of the Russian Federation has announced.
• Davutoğlu to visit Moscow later this week - Davutoğlu and Lavrov, who will meet on Thursday, when the former pays a working visit to Moscow, did not have an opportunity to have a bilateral meeting in Corfu.
• Russia, China To Hold Military Exercises July 22-26 – Report
• START negotiators succeded in making progress
• Russian FM cautions against optimistic expectations for Obama-Medvedev meeting - The Kremlin has not excluded the possibility that an agreement on strategic arsenal reductions will be reached during Obama's visit to Moscow July 6 to 8, but agreement is likely to depend on whether outstanding discord over the US anti-missile shield program can be resolved.
• MT: Oil Will Dictate U.S. Ties - By Alexander Golts
• MT: Obama Will Make Russia a Priority - By Mikhail Margelov
• U.S. warship to visit port in Russia's Far East - A U.S. missile destroyer will arrive on July 1 in the port of Vladivostok in Russia's Far East on a goodwill visit, a U.S. diplomat said on Tuesday.
• Russian-Israeli aviation row leads to suspension of flights - The Civil Aviation Authority suspended flights to three southern Russian cities on Sunday following a dispute with Russia's Federal Air Transport Agency. All flights from Israel to Sochi, Rostov and Krasnodar have been discontinued until further notice.
• New batch of IN stealth frigates to be delivered on-time - Russia will deliver three stealth frigates worth $1.6 billion to the Indian Navy (IN) in line with the "contract deadline" of 2012, a senior official of a Russian shipyard has said. He was speaking on the sidelines of the 4th International Maritime Defence Show in St. Petersburg.
• Russia stokes tensions with Georgia as troops gather near border
• Troops Enter Caucasus for Exercises
• ‘Scent of War’ Spreads Across CIS, Moscow Commentator Says - In an essay in “Nezavisimaya gazeta” today, Yuri Simonian, who regularly comments on events in the former Soviet republics, says that perhaps one should “consult an astrological calendar for the past week” because wherever one looks the situation seems to have fallen under the influence of Mars, the god of war
• Russian in Extradition Battle Says U.S. Agents Violated Law - Viktor Bout, a Russian businessman suspected of arms trafficking who faces possible extradition to the United States, is pursuing what his lawyer calls a rare legal procedure that accuses American officials of overstepping their jurisdiction in a sting operation here last year.
• Russia to launch U.S. telecoms satellite from Baikonur - A Proton-M rocket with a U.S. telecommunications satellite will be launched on Tuesday from the Baikonur space center in Kazakhstan, the Russian Federal Space Agency said.
• Russia Boosts Security at Chemical Weapons Sites - "Military guards and paramilitary security units with special gear and guard dogs will be in charge of our facilities," said Russian chemical weapons official Nikolai Khlebnikov. "Antiterror forces, armed with automatic weapons, grenade launchers and sniper rifles, have been formed to tighten the defense in line with the General Staff's instruction."
• Senior militant killed in Chechen police operation- Among the dead was Abubakar Musliyev, the "emir" of the Shali gang, who had been placed on a federal wanted list, Alkhanov said.
• Two gunmen killed in Chechnya, including gang overlord
• One killed, 3 injured in militant attack on convoy in Chechnya
• The Return of the Siloviki - But Putin and his siloviki (political allies whose power base is in the security apparatus) seem to prefer an "inertia strategy," the worst of the Russia 2020 scenarios. This strategy amounts to state capitalism, living on Russia's energy wealth, and doing nothing to curtail Russia's massive red tape and corruption.
• Mitvol Accepts Job As Moscow Prefect - Oleg Mitvol, the outspoken former environmental inspector, said Monday that he had accepted an offer by Mayor Yury Luzhkov to become the prefect of Moscow's Northern Administrative District.
• Russia's military in national service dilemma - Many young Russian men are among the last recruits checking in for conscription. The spring draft of 2009 is nearly over and soon they will try on the military uniform and join the school of life.
• Russian Military Now Drafting ‘Anyone who Moves,’ Rights Activists Say - Caught in a bind between the largest draft quota in years – 305,000 -- and the smallest cohort of draft age men from which to fill it – those born in the difficult year of 1991 -- the Russian military, in violation of the law and its own regulations, is taking in “anyone that moves,” according to two activists who work on military manpower issues.
• Russian gays ready to protest during Obama visit
National Economic Trends
• Russia c.bank may cut rates by 150 bps in '09
• Russia power prices to rise with gas in '10-EconMin
• Russian budget deficit could exceed 6% in 2010 - Kremlin aide
• Economics: Official forecast gloomier as 2010 budget planning starts
• Economic Development Ministry lowers forecasts for GDP in 2009
• 10 constituents of Russian Federation have trade turnover of at least $100 million a year
• Russian unemployment still falling - The number of officially registered unemployed fell by 0.8% to 2.177 million people between 17-24 June, the Healthcare and Social Development Ministry said reports Prime Tass.
Business, Energy or Environmental regulations or discussions
• Gazprom, VTB Bank, Polyus Gold: Russia Stock Market Preview
• VTB chief says CHF Eurobond plans at "fairly advanced stage"
• VTB Plans Layoffs As Bad Loans Swell
• AIG Says 'Nyet' to Russia - The insurer said it will sell 98% of its shares in its consumer-finance operations in Russia to Banque PSA Finance SA, a subsidiary of PSA Peugeot Citroën Group.
• AIG to Sell Russian Banking Subsidiary
• AIG to sell Russia bank subsidiary to Peugeot unit
• EIB supports with EUR 115 million upgrading of Russia's mobile telecommunications networks
• Russia's MTS gets 413 mln euro loan
• Russia's Alfa halts talks with Telenor –exec
• RBC: Dispute indicates low chances for debt restructuring
• RBC Shares Jump as Director Says He's Leaving
• Reiman elected chairman of Svyazinvest
• Kocharian Joins Russian Company Board - AFK Sistema said the appointment was approved by its shareholders at an annual general meeting held over the weekend.
• Norilsk Nickel - AGM today, 45%+ votes will be from VTB and VEB, may bring surprise BoD decisions
• RZD Raises $482M
• Why GAZ Is Pinning Its Hopes on Opel - The ailing Russian automaker is a key player in the buyout of GM's Opel unit in Germany. But it's really GAZ that is looking for help from Opel
• Moscow elite residential property prices stabilize in May
• Russia's real world MBAs - The Moscow School of Management Skolkovo has big plans. Russia's leading oligarchs banded together to create a world-class business school just under three years ago and pledged half a billion dollars to make the project work. The school will take in its first batch of full-time MBA students in January and Dean of the school, Wilfried Vanhonacker, says that within the next 20 years he hopes to make Skolkovo one of the top schools in the world. And Vanhonacker is the man to do it: he already set up China's first business school a over a decade ago, which is now one of the world's 10 best schools.
Activity in the Oil and Gas sector (including regulatory)
• Russia 2010 gas price hike to top 10 pct – Kremlin
• Kudrin considers higher gas export duty a possibility
• Tax changes to bring more crude production and better profitability
• Regulator to up Transneft’s oil transport tariff 4% starting Wed
• Russia, China May Jointly Invest in Oil, Natural Gas Projects - Russian companies may participate in the construction of underground natural gas storage tanks in China, the National Development and Reform Commission said on its Web site today, citing a Sino-Russian cooperation plan approved on June 17.
• E.ON’s Russian-Backed Baltic Pipeline Leads Europe’s Gas Race
• Russia clinches gas contract with Azerbaijan
• Russia ready to buy Azerbaijani gas at record price – paper - Russia is ready to purchase Azerbaijani natural gas at a record price of $350 per 1,000 cu m to try and make a rival Western-backed gas pipeline project unfeasible, a business paper reported on Tuesday.
• Lukoil awards pre-export finance mandate
• Russia's Energy Rethink - The credit crunch is forcing Russia to rethink its hard line on foreign energy companies, potentially offering great opportunities to the likes of British company Royal Dutch Shell, America's Exxon Mobil and France's Total.
Gazprom
• Gazprom to buy 0.5 bcm of Azerbaijani gas annually from 2010
• Gazprom Gets Priority for Azeri Gas
• Gazprom Neft says has under 49 pct of Sibir
• Gazprom Stays the Course Under Putin's "Manual Management"
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Full Text Articles
Basic Political Developments
RF, Pakistan For'Min officials discuss security issues
MOSCOW, June 30 (Itar-Tass) - International and regional security issues, including problems concerning nuclear missile non-proliferation, were discussed here on Monday by members of the Russo-Pakistani Consultative group on strategic stability (CGSS), an official at the Ministry of Foreign Affairs of the Russian Federation has announced.
The Ministry official said, "During the consultations, the sides substantively discussed a broad spectrum of topical matters concerning international and regional security, including nuclear missile non-prroliferation, as well as bilateral interaction in various fields".
The Russian delegation at the talks was headed by Sergei Ryabkov, Deputy Minister of Foreign Affairs, and the Pakistani one was led by Harun Shaukat, Deputy Foreign Minister.
Next meeting of the Russo-Pakistani CGSS will be held in Pakistan. A specific timeframe is to be fixed through diplomatic channels.
Davutoğlu to visit Moscow later this week
30 June 2009, Tuesday
Foreign Minister Ahmet Davutoğlu is scheduled to pay a working visit later this week to the Russian capital, where he will have an opportunity to discuss a wide range of bilateral issues with his counterpart.
Davutoğlu and his Russian counterpart, Sergey Lavrov, were both on the Greek island of Corfu over the weekend, which was the venue for both a meeting of the NATO-Russia Council and a foreign ministerial gathering of the Organization for Security and Cooperation in Europe (OSCE).
Davutoğlu and Lavrov, who will meet on Thursday, when the former pays a working visit to Moscow, did not have an opportunity to have a bilateral meeting in Corfu. Nonetheless, Ankara has welcomed the fact that NATO and Russia on Saturday resumed formal cooperation on broad security threats despite failing to bridge major differences over Georgia in their first high-level talks since the war in the Caucasus region.
“Turkey has always favored friendly relations and a cooperation mechanism between NATO and Russia. Although the meeting in Corfu has symbolic importance, a path to dialogue has been opened now,” Turkish diplomatic sources, speaking on condition of anonymity, told Today's Zaman.
Davutoğlu's visit to Moscow will come days before a tentatively planned meeting of Armenian and Azerbaijani leaders expected to take place in Russia in mid-July. Diplomatic sources in Ankara, meanwhile, declined to elaborate on the agenda of the meeting between Davutoğlu and Lavrov, only saying that all kinds of issues that are of common interest for the two countries, ranging from energy to trade, will be on the agenda of the talks.
Last week, a US negotiator announced that mediators hope to clinch an agreement between Azerbaijan and Armenia on the principles of a peace deal on breakaway Nagorno-Karabakh at talks tentatively planned for mid-July in Russia. US Deputy Assistant Secretary of State Matthew Bryza said he and his fellow mediators from France and Russia were “shooting for” a full framework agreement by the end of 2009. But he conceded the risk of a last-minute breakdown of the kind that derailed earlier efforts to broker an agreement between the Caucasus neighbors, who continue to exchange fire over their tense frontline 15 years after major hostilities ended.
Davutoğlu, meanwhile, is expected to pay a two-day bilateral visit to Bucharest, Romania, on July 3-4 following his visit to Moscow, Today's Zaman learned from reliable sources.
Russia, China To Hold Military Exercises July 22-26 – Report
Jun 29, 2009
MOSCOW (AFP)--Russia and China will hold joint military exercises next month, a top Russian military official said Monday, as the giant neighbors work towards tighter cooperation.
"The head of the Russian and Chinese military delegations agreed that 1,300 soldiers from each side would participate," said the deputy army chief Lieutenant General Sergei Antonov, adding 20 Russian war planes would take part.
The massive five-day exercises, dubbed Peace Mission 2009, are to focus on anti-terrorism and will take place on both countries' territories July 22-26, Antonov told the ITAR-TASS state news agency. The two countries are in their third round of talks to hammer out the details of the joint manoeuvres, he said.
Russia and China made a show of their strengthening ties last month when Chinese President Hu Jintao visited Moscow for a major bilateral summit. The friendly diplomacy is a marked change from the later decades of the Cold War era, when the Soviet Union and China clashed for supremacy in the Communist world.
In recent years, the countries have taken great strides to step up trade and put old rivalries behind them, ending a decades-long dispute over their 4,300- kilometer border just last year.
The two held joint exercises in 2005 and 2007 under the auspices of the Shanghai Cooperation Organization, a regional security group consisting of China, Russia and four Central Asian states.
Russia has also been the main supplier of arms to China since the two countries normalized relations in 1989 - the same year Washington imposed an arms ban on Beijing.
START negotiators succeded in making progress
The Commission, consisting of prominent experts on disarmament and national security, comes out in favour of complete elimination of nuclear weapons. Ahead of the Russia-US summit, they have gathered in Washington to present their four-stage plan that envisions the elimination of all nuclear arms by the year 2030 (2030).
The Global Zero panel is part of the international initiative of the same name. A campaign for full renunciation of nuclear weapons on a world scale had been officially launched in 2008 at a founding conference in Paris. The conference had drawn more than 100 eminent political, military, business and public leaders.
Burt said Global Zero members had met with a high official of the US administration who had informed them of the process of Russo-American consultations on a renewal of the START Treaty. It has become known to Itar-Tass that the high official in question was the chief American negotiator -- Assistant Secretary of State Rose Gottemoeller. The account that Global Zero members received was quite a positive one. They gathered the impression that the Russian and American sides were seeking a marked progress at those talks. The Global Zero memebrs hope that that progress will be reflected in a joint statement of the leaders of the two countries, Burt emphasized.
Academician Yevgeny Velikhov, president of the Russian Kurchatov Institute research center, has told Itar-Tass that an official of the Barack Obama administration "reaffirmed the earnestness of the talks" on strategic offensive arms and said that those talks would be followed up by "negotiations on further significant cutbacks" in nuclear weapons.
The Obama administration has stated repeatedly that it aims to achieve certain framework accords with Russia on strategic offensive arms by the time the two presidents meet in Moscow from July 6 to 8.
Russian FM cautions against optimistic expectations for Obama-Medvedev meeting
Today, 10:48 PM
Russia's top diplomat cautioned against overly-optimistic expectations for an upcoming meeting between US President Barack Obama and Russian President Dmitri Medvedev, saying in an article Monday that improved relations "will take time."
"There is a new dynamic in Russia-US relations - a positive change that reflects the imperatives of these challenging times," Russian Foreign Minister Sergei Lavrov's wrote in Newsweek magazine .
"As President Medvedev has noted, a crisis of trust developed between us in recent years," he said.
"Our political relationship became too adversarial. Overcoming this legacy will take time."
Moscow's foreign minister added that "Russia and the US must jointly manage expectations to ensure that attempts to 'reset' our relationship succeed."
"This does not mean shying away from setting ambitious goals," he said.
"But it does require a sober assessment of what is really possible, and the time it will take to accomplish these goals."
US-Russian relations deteriorated significantly during former president George W. Bush's second term over a US anti-missile shield for Poland and the Czech Republic, plans to expand NATO to Russia's border and the August 2008 war between Russia and Georgia - a key US ally in the region.
Since Obama's arrival at the White House, relations between the two powers have improved.
Russian and American officials are engaged in discussions on reducing their nuclear arsenals, ahead of the expiration in December of the nuclear disarmament START I treaty, negotiated during the last months of the USSR in 1991.
The Kremlin has not excluded the possibility that an agreement on strategic arsenal reductions will be reached during Obama's visit to Moscow July 6 to 8, but agreement is likely to depend on whether outstanding discord over the US anti-missile shield program can be resolved.
Oil Will Dictate U.S. Ties
30 June 2009 By Alexander Golts
Whenever people ask me about the future of U.S.-Russian relations, I answer that they will be determined by the price of oil. If the price stays below $40 per barrel, relations will be great. Both sides will hold talks on a strategic partnership, Russia will be included in Middle East negotiations, and Moscow will carry out limited participation in joint military activities. If on the other hand the price of oil is more than $60 per barrel, Moscow will resume "getting up off its knees" and attempt to assert itself by creating problems for the West -- and the United States in particular -- under the slogan of "defending national interests."
By a strange twist of fate, the price of oil happens to be hovering near $60 per barrel, and Moscow strategists cannot decide which course to pursue.
Thus, President Dmitry Medvedev has announced his readiness to reduce the number of strategic delivery nuclear weapons to levels lower than those stated in the START I treaty. What's more, Moscow has declared its willingness to reduce the number of nuclear warheads below the level stipulated in the Moscow Treaty of 2002. In return, the United States should cancel plans to deploy elements of its missile defense system in Central Europe. At first glance, that appears to be a fair trade. In reality, though, it is not. START established a ceiling of 1,600 delivery vehicles for each side. Moscow has officially informed Washington that it possesses 814 such delivery vehicles. However, defense specialists estimate that Russia currently has only 600 delivery vehicles. That makes it possible for Russia to fulfill its pledge without eliminating a single actual weapon. The same is true regarding warheads. Moscow would have little difficulty in limiting its total warheads to 1,500 -- close to its current actual total -- even if the Moscow Treaty allows for as many as 1,700 to 2,200.
The same thinking is behind Medvedev's proposal for a new European security pact. Foreign Minister Sergei Lavrov recently explained that the pact is necessary because Europe should "not provide for its own security at the expense of the security of others, should not allow any activity within the framework of military alliances and coalitions that would weaken the unity of the overall security of the region nor permit the use of its territory to the detriment of the security of other states, to the detriment of peace and stability in the Euro-Atlantic region, and should not permit military alliances to develop at the expense of the security of other participants in the treaty."
At the same time, Lavrov pretends that he does not see two obvious flaws in his argument. The first is the difference between a security system such as NATO and one established by the Organization for Security and Cooperation in Europe. NATO was created by a group of states with common values to ensure their mutual defense against an external threat. The NATO countries guarantee each other mutual defense. The OSCE provides a fundamentally different form of security guarantee -- the assurance that member states will not attack each other. It took a considerable amount of time and effort for member states to reach an agreement on confidence-building measures and to determine limits to the number of armed forces and weapons required to prevent surprise attacks.
But now, Russia has suggested finding a way to determine the extent to which security is compromised by this or that action of a particular state. That would require establishing an objective indicator that could serve as a common denominator for the subjective fears and biases of various states. Thus, NATO insists that granting membership to former Soviet republics does not constitute a security threat to any other state. Moscow's position is the exact opposite. The only possible solution is for all security-related questions, including internal NATO decisions, to be approved by some form of pan-European forum. In that way Moscow would finally receive veto power over NATO decisions, primarily concerning the admission of new member states -- a right Russia has unsuccessfully striven to obtain for the past decade.
I doubt that anyone in the Kremlin seriously entertains any hopes that such an initiative would succeed. The goal in putting it forward is to gain time until Moscow can finally decide if it plans to befriend the West or treat it with enmity.
Alexander Golts is deputy editor of the online newspaper Yezhednevny Zhurnal.
Obama Will Make Russia a Priority
30 June 2009 By Mikhail Margelov
U.S. President Barack Obama's administration came to the White House during a difficult period. The economic crisis forced it to make greater allowances for the domestic situation in developing its foreign policy than is customary for U.S. politics. And apart from the country's economic woes, the new administration cannot help but be concerned about the problems created by former President George W. Bush -- troubles that not only wound national pride but constitute a direct threat to the United States' traditional leadership role in the world. Observers unanimously note the weakening of Washington's global standing, pointing to its tarnished image, its relative loss of influence in South America and its failure to meet its stated goal of spreading democracy in the Middle East.
Without question, Obama will try to rectify those failures, but he will do so by using different methods than the preceding Republican administration.
The new Democratic administration prefers the use of so-called "smart power" that relies on a wider array of tools to influence the situation than the use of military threats alone. In particular, the United States intends to give greater consideration to world opinion and international institutions when formulating its policies and actions. Obama promised to make wide use of the negotiation process to "consult with the world," taking global interdependence into consideration.
The United States is "tired" of the burden of single-handedly and constantly expanding an unlimited zone of responsibility around the globe. Washington needs, if not allies, at least loyal partners.
It is well-known that a number of disagreements accumulated in U.S.-Russian relations during the years of the Bush administration. These concerned the deployment of elements of U.S. missile defense batteries in Central Europe, policies in the Caucasus, the relationship with Ukraine, Iran's nuclear program and NATO expansion. It is therefore unreasonable to expect an instantaneous improvement in relations. The first meeting between Obama and President Dmitry Medvedev in London, and their summit next week in Moscow, are only the initial efforts at improving those relations. However, both Obama and Medvedev left their London meeting on April 1 with favorable impressions. The U.S. president has declared explicitly that he is traveling to Moscow to "reset" relations with Russia. Washington considers it necessary to do so because there are many important problems in the world that the United States cannot resolve with Russia's participation, and vice versa. The Moscow summit is certain to include talks on various forms of strategic cooperation, including missile defense, nuclear nonproliferation, the fight against international terrorism, joint actions in Afghanistan and the Middle East, economic ties and measures for overcoming the crisis.
Russia might expand the level of its cooperation by offering more than the current, single corridor through its territory by which the United States can deliver supplies to its forces in Afghanistan. It is entirely possible that a certain rapprochement will be achieved on the U.S. and Russian positions concerning Iran's nuclear program. That question is clearly connected to U.S. plans to deploy missile defense systems in Central Europe. It should also be taken into account that the new U.S. administration believes that relations with Russia should be pursued on a strictly pragmatic, not ideological, basis.
Obviously, high on the agenda will be a range of questions connected with signing a new treaty limiting strategic nuclear weapons. The START I treaty expires at the end of this year. The agreement has played itself out. However, painstaking preparations have been made to fashion a new treaty with weapons limitations terms that are acceptable to both countries. The Russian side feels that it would make sense to leave certain aspects of START unchanged, such as the mechanisms for verifying compliance with the agreement and a range of other points.
The fact that the U.S. and Russian presidents will be meeting in Moscow on the eve of a Group of Eight summit inspires hope that, after a long period of stagnation, a new life will be breathed into U.S.-Russian relations. This is because neither Russia nor the United States is satisfied with the present condition of relations. Both sides are also interested in developing trade and economic ties, realizing that the crisis will not last forever. It is even possible that Moscow and Washington will reach some form of understanding over the issue of missile defense in Central Europe.
As Obama declared, U.S.-Russian relations go beyond bilateral considerations. He said the solution to a large number of major international questions depends upon these ties. Russia was not originally a high foreign policy priority for the new U.S. administration. However, I think that will change after the two presidents meet face to face in Moscow.
Mikhail Margelov is chairman of the International Affairs Committee in the Federation Council.
U.S. warship to visit port in Russia's Far East
VLADIVOSTOK, June 30 (RIA Novosti) - A U.S. missile destroyer will arrive on July 1 in the port of Vladivostok in Russia's Far East on a goodwill visit, a U.S. diplomat said on Tuesday.
The USS Stethem (DDG-63) is an Arleigh Burke-class destroyer. The ship was commissioned with the U.S. Navy on October 21, 1995 and is currently based out of Yokosuka, Japan.
It will be the ship's second visit to Vladivostok. On May 7-11, 2008, the destroyer with 300 crew aboard visited the port to join for the first time Russia's Victory Day celebrations.
This year, the visit coincides with celebration of Vladivostok City Day on July 2, and U.S. Independence Day on July 4.
The source said the crew would take part in a variety of cultural and sports events, and attend the opening of the first Subway fast food franchise in Vladivostok.
Russian-Israeli aviation row leads to suspension of flights
Jun. 29, 2009
Yaakov Lappin , THE JERUSALEM POST
The Civil Aviation Authority suspended flights to three southern Russian cities on Sunday following a dispute with Russia's Federal Air Transport Agency.
All flights from Israel to Sochi, Rostov and Krasnodar have been discontinued until further notice.
Giora Romm, director-general of the CAA, told The Jerusalem Post on Monday the underlying cause of the dispute was an attempt by the Russian aviation authority to create a situation in which Russian airlines would dominate the routes at the expense of Israeli carriers.
As part of its attempt to limit Israeli airline access to the Russian cities, Federal Air Transport Agency had failed to meet Israeli security requirements, such as the deployment of armed security guards at the three airports in question, Romm said.
"Aviation agreements between countries must be based on fully reciprocal relations, in terms of the number of flights involved," he said. "In these three cities, the Russians are giving us problems and not letting us fly there. They expect Russian airlines to dominate."
"We want security at those three airports to be on the same level as it is in Moscow and St. Petersburg," Romm said.
The rejection of Israeli security requirements was an "excuse" to limit the flights of Israeli airlines, he said, accusing the Russian agency of failing to conduct a dialogue. "So this has hit a dead end," Romm added.
"This to me looks unacceptable, and therefore I put a stop to it," he said, regarding his decision to stop all flights to the three cities.
"These disputes occur from time to time. I think eventually a solution will be found," Romm said.
New batch of IN stealth frigates to be delivered on-time: Russia news
29 June 2009
Moscow: Russia will deliver three stealth frigates worth $1.6 billion to the Indian Navy (IN) in line with the "contract deadline" of 2012, a senior official of a Russian shipyard has said. He was speaking on the sidelines of the 4th International Maritime Defence Show in St. Petersburg.
"The contract's deadline is 2012. We are not expecting any delays at this point," said Igor Orlov, director general of the Kaliningrad-based Yantar shipyard. "Russia will fulfil its obligations on schedule to supply three Project 1135.6 frigates to India by 2012,'' he said.
"The first ship will be floated out this year, the second, probably, in spring 2010, and the third - a bit later," Orlov said. A RIA Novosti report also quoted him as saying that the Indian government had provided 'sufficient and timely' project financing.
Orlov's assurance needs to understood in the light of reports emerging in February of this year which suggested that there was a likelihood of delays in this project.
''The contract deadlines are very tough and there were indeed some disruptions in the construction,'' Rosoboronexport's general director Anatoly Isaikin said in a February interview with a Russian defence magazine.
''It took some time to deal with the problems. After additional work and testing were carried out, there were no complaints with regard to the frigate. Moreover, talks are being held for an additional order of this type of combat vessel,'' Isaikin said.
June 30, 2009
Russia stokes tensions with Georgia as troops gather near border
Tony Halpin in Moscow
Russia was accused of stoking tensions with Georgia yesterday as it mounted a huge military exercise, in an ominous echo of last summer’s war. Thousands of troops and hundreds of armoured vehicles began the “Caucasus 2009” manoeuvres across southern Russia, close to the border with Georgia.
Soldiers based in the Georgian breakaway regions of Abkhazia and South Ossetia were also taking part, as well as elements of the Russian Black Sea Fleet, the air force and the elite airborne troops.
Lieutenant-Colonel Andrei Bobrun, a Russian military spokesman, said: “The aim of the exercises is to establish the state of battle readiness and troop mobilisation deployed in Russia’s southwest region.” The military held similar drills before the war between Georgia and Russia over South Ossetia last August. The Kremlin later defied international pressure and recognised South Ossetia and Abkhazia as independent states.
The latest war games are Russia’s largest since the conflict and are being overseen directly by General Nikolai Makarov, the Chief of General Staff. The Defence Ministry said that 8,500 troops, 200 tanks, 450 armoured vehicles and 250 artillery pieces were involved in the exercises, which last until July 6, the day on which President Obama is due to arrive in Moscow on his first official visit to Russia.
Georgia accused Moscow of “playing with fire” by staging the event so close to the conflict zone. Alexander Nalbandov, the Deputy Foreign Minister, said: “This is aimed at further increasing tensions in the region.”
Some are fearful that the exercises are a prelude to fresh hostilities with the aim of entering the Georgian capital, Tbilisi, and toppling President Saakashvili. Andrei Illarionov, a former Kremlin adviser to Vladimir Putin, said that Russia may take action shortly after Mr Obama’s visit and claim that the United States was tacitly accepting its decision.
“The main goal is to turn Georgia into something like porridge from a political, military and ethnic point of view,” he told reporters. “Most important is the destruction of the political stability of Georgia.”
The Kremlin loathes Mr Saakashvili and is determined to wreck his drive to pull Georgia out of Russia’s orbit by gaining membership of Nato and the European Union. President Medvedev has called his Georgian counterpart a “political corpse” and says that he will never meet him.
Pavel Felgengauer, a military analyst who predicted last year’s conflict, also said in a new book, The Guns of August 2008, that powerful forces in the Kremlin regarded Georgia as unfinished business. He wrote: “The Russian troops did not go to Tbilisi in August 2008 but this does not imply that they will never do so.” He noted that overstretched supply lines halted the Russian advance last year. This year, Russia had already set up forward bases in South Ossetia and Abkhazia that were capable of supplying an invasion force.
The Russian Ambassador to Nato yesterday threatened Georgia with the loss of more territory, a day after the alliance resumed military ties with Russia, frozen since the war. Dmitri Rogozin told Georgia to “abstain from military operations” against South Ossetia and Abkhazia, adding: “Each time Georgia takes this step, it runs the risk of shrinking in size.”
Troops Enter Caucasus for Exercises
30 June 2009 The Associated Press
Thousands of troops -- backed by hundreds of tanks, artillery and other heavy weaponry -- began rumbling through the North Caucasus on Monday as Russia began its largest military exercises since last year's war with Georgia.
The Caucasus 2009 war games are being seen by many experts as a direct threat to nearby Georgia, where the government says it has rearmed armed forces and where NATO recently wrapped up its own exercises.
Experts say the exercises may also be a signal to the United States that Russia will give no ground in its efforts to maintain its sphere of influence in former Soviet republics. The exercise runs through July 6, the day that President Barack Obama arrives in Moscow for a summit with President Dmitry Medvedev.
Defense Ministry officials say more than 8,500 troops will take part, along with nearly 200 tanks, armored vehicles, 100 artillery units and several units from the Black Sea Fleet.
The exercises, which are being personally overseen by General Nikolai Makarov, chief of the General Staff, are structured around a theoretical crisis situation that spirals out of control into open fighting, the Defense Ministry said.
Former Kremlin adviser Andrei Illarionov told reporters that if Russia were to take military action against Georgia, it would take place directly after Obama's visit and that Moscow would portray its decision as having been made with Washington's approval.
In Tbilisi, Georgian Deputy Foreign Minister Alexander Nalbandov called the exercises a "dangerous provocation."
‘Scent of War’ Spreads Across CIS, Moscow Commentator Says
June 29, 2009
Paul Goble
Nearly a year after the Russian Federation violated the longstanding assumption that no post-Soviet state would use military force against another, “the scent of war” is spreading across the Commonwealth of Independent States, according to a leading Moscow commentator.
In an essay in “Nezavisimaya gazeta” today, Yuri Simonian, who regularly comments on events in the former Soviet republics, says that perhaps one should “consult an astrological calendar for the past week” because wherever one looks the situation seems to have fallen under the influence of Mars, the god of war (ng.ru/week/2009-06-29/8_sng.html).
Across the CIS, tensions appear to be growing, in some cases perhaps only at the level of rhetoric – Belarus and the Russian Federation are engaged in what many call “a milk war” – but in many others, Simonian suggests, the language being used represents a threat of military action or perhaps even points to that sad outcome.
Moldova’s communists are talking about military confrontation and the loss of sovereignty if the July 28 parliamentary elections go the wrong way, Simonian says, and he could have added but didn’t that many in Ukraine are fearful of a possible Russian move in Crimea.
More serious, the “Nezavisimaya gazeta” writer says, are developments in the South Caucasus and Central Asia. In the former, “Armenia and Azerbaijan are again accusing one another of being unwilling to find a compromise on Nagorno-Karabakh, and they have passed over to militant rhetoric.”
“Baku,” he writes, has declined its ability to resolve the situation by force, [and] Yerevan has parried” by saying just try and you’ll get what’s coming to you. And Georgia has been filled with rumors and predictions about a new Russian attack, especially given the maneuvers of the Russian military in the North Caucasus.
As both Georgians and others recall, it was precisely after similar maneuvers a year ago, that Moscow ordered its military to move into Georgia nominally to provide protection to the Abkhazians and the South Ossetians but in fact to punish Tbilisi and underscore Moscow’s new sense that it is free to act in this way (polit.ru/event/2009/06/29/peace.html).
In Central Asia, meanwhile, Simonian continues, there have been “mysterious explosions in Andijan and Khanabad and clashes between Uzbek and Kyrgyz forces at various points along their borders. And in Tajikistan, at the end of the week, the authorities arrested a group of activists who have been involved in violent resistance to Dushanbe.
Because it is not his subject, Simonian does not mention the militant rhetoric within the Russian Federation in the wake of the assassination of Ingush President Yunus-Bek Yevkurov, but that has been in some respects even more hyperbolic than the comments he cites, with the Russian and Chechen leaders promising the application of overwhelming force.
Obviously, such rhetoric may not lead to a real war, but its spread is troubling. On the one hand, such language by itself makes conflicts more likely: At least some of those using it will not be sure that such words do not presage action, will prepare to react, and, by taking that action, make a conflict more rather than less likely.
And on the other hand, this militant language, seldom used in the CIS region until Russia invaded Georgia, is as the anniversary of that conflict approaches just one more tragic consequence of that event -- and of the subsequent willingness of many around the world to act as if Moscow did not violate international law by its actions then.
Russian in Extradition Battle Says U.S. Agents Violated Law
By THOMAS FULLER
Published: June 29, 2009
BANGKOK — Viktor Bout, a Russian businessman suspected of arms trafficking who faces possible extradition to the United States, is pursuing what his lawyer calls a rare legal procedure that accuses American officials of overstepping their jurisdiction in a sting operation here last year.
The procedure could delay the extradition process and, if successful, result in criminal charges filed against three agents of the Drug Enforcement Administration who took part in Mr. Bout’s arrest, according to the lawyer, Chamroen Panompakakorn.
Mr. Chamroen said Monday that American agents had violated Thai law by apprehending Mr. Bout on their own before calling the Thai police to arrest him. They were also carrying firearms in violation of Thai law, he said.
“They invaded a public place without a search warrant,” Mr. Chamroen said in an interview. “They have no power to do this.”
The accusations may resonate among Thai officials who sometimes complain of a heavy-handed approach among the large contingent of American intelligence and law enforcement officials stationed here.
The new case will be brought before a judge on July 13 and is separate from the extradition proceeding. Mr. Bout will also meet with the judge on Tuesday for a procedural hearing, mandatory under Thai law, that encourages plaintiffs and defendants to reach a settlement before trial.
Michael Turner, the spokesman for the American Embassy in Bangkok, said the D.E.A. was aware of the proceedings but would not be represented at the hearing.
The case is the latest snag in extradition hearings that have been dogged by delays and animated by Mr. Bout’s courtroom theatrics. A judge is scheduled to rule on the extradition request in August.
Mr. Bout, who was the inspiration for the 2005 film “The Lord of War,” denies any links to arms trafficking and told the judge in the extradition case that he was being held in “extremely inhumane” conditions. He was arrested in March 2008 at a hotel in Bangkok after agreeing to sell millions of dollars’ worth of arms to undercover D.E.A. agents posing as rebels from the Revolutionary Armed Forces of Colombia, or FARC, according to the extradition request.
Mr. Bout told the agents he could deliver 700 to 800 surface-to-air missiles, 5,000 AK-47 assault weapons, millions of rounds of ammunition, land mines, C-4 explosives and remotely operated aerial vehicles, according to the United States indictment.
The case has put Thailand in the awkward position of adjudicating between Russia, with whom its relations have warmed in recent years, and the United States, a longstanding ally.
Russia to launch U.S. telecoms satellite from Baikonur
MOSCOW, June 30 (RIA Novosti) - A Proton-M rocket with a U.S. telecommunications satellite will be launched on Tuesday from the Baikonur space center in Kazakhstan, the Russian Federal Space Agency said.
Russian-American joint venture International Launch Services (ILS) signed a contract in March to launch two Sirius satellites to expand the existing SIRIUS Satellite Radio constellation.
ILS, owned by the Khrunichev Center, RSC Energia, and U.S. firm Space Transport Inc. provides spacecraft launch services on board Proton-M carrier rockets.
The launch of the Sirius FM5 satellite will be the fifth involving a Proton-M carrier rocket in 2009 and the 346th throughout the history of Proton launches.
ILS launched SIRIUS' initial constellation of three Radiosat satellites in 2000.
Sirius Satellite Radio is a satellite radio (SDARS) service operating in the United States and Canada, owned by Sirius XM Radio. Headquartered in New York City, Sirius was officially launched on July 1, 2002 and currently provides 69 music channels and 65 sports, news and entertainment channels for listeners.
Russia Boosts Security at Chemical Weapons Sites
Monday, June 29, 2009
Russia has placed additional security personnel at its chemical weapons storage and destruction sites, Interfax reported Friday (see GSN, June 18).
"Military guards and paramilitary security units with special gear and guard dogs will be in charge of our facilities," said Russian chemical weapons official Nikolai Khlebnikov. "Antiterror forces, armed with automatic weapons, grenade launchers and sniper rifles, have been formed to tighten the defense in line with the General Staff's instruction."
The sites are also to be placed under continuous watch through use of security technology, he said.
Khlebnikov ruled out the possibility of "unauthorized entry ... into the storage facilities."
Russia did not report any security breaches or other emergencies at its chemical weapons storage or treatment sites last year, according to Interfax. The nation holds its remaining chemical arsenal in six facilities across its Bryansk, Kirov, Kurgan, Penza and Udmurtia regions (Interfax I, June 26).
The Kirov region's Maradykovsky destruction site is expected to eliminate more than 230 metric tons of chemical-weapon agents in 2009, the area's government announced.
In total, Russia plans to destroy 6,054 metric tons of chemical warfare material this year, according to the announcement.
"The capacities of chemical arms destruction facilities in the Kirov and Penza regions are expected to be increased in order to achieve this goal. The Maradykovsky facility will dispose of 232.6 [metric tons] of chemical agents, mostly ammunition containing sarin" nerve agent, the government said in its statement.
Russia has already destroyed 12,000 metric tons of the deadly chemicals in its stockpile, and it is obligated to increase that total to 18,000 tons -- 45 percent of its total original stockpile -- by the end of the year, according to Interfax (Interfax II, June 26).
Senior militant killed in Chechen police operation
GROZNY, June 30 (RIA Novosti) - A senior militant was killed during a special operation in Russia's North Caucasus Republic of Chechnya, the republic's interior minister said on Tuesday.
The operation was conducted in the central Chechen town of Shali late on Monday, Ruslan Alkhanov said. As police tried to arrest two militants, they offered armed resistance and were killed in return fire.
Among the dead was Abubakar Musliyev, the "emir" of the Shali gang, who had been placed on a federal wanted list, Alkhanov said.
Officers discovered two artillery shells and a bomb during a search of the militant's car.
Police also detained five locals in Shali suspected of providing assistance to militants. A major stash containing explosives was discovered in the area and later destroyed, a police source said.
In a separate incident in neighboring Daghestan, one police officer was injured after gunmen opened fire in the town of Khasavyurt on Monday night. Two other officers were unhurt in the attack.
Two gunmen killed in Chechnya, including gang overlord
GROZNY, June 30 (Itar-Tass) - Chechnya destroyed two bandits, including a gang overlord in the town of Shali, Itar-Tass learnt on Tuesday from Chechen Interior Minister Ruslan Alkhanov.
According to the minister, “on Monday evening, two members of an armed gang were killed in the Naberezhnaya Street in Shali in an attempt to detain them and as a result of an armed resistance offered by them”.
In the minister’s words, law enforcers surrounded a Lada car with members of an armed gang”. Police later found in the car two artillery shells and an oxygen cylinder, ready for a blast.
As a result of the operation, law enforcers killed Abubakar Musliev who became (according to police data) the so-called emir of Shali Town shortly after the destruction of his predecessor and who was on the federal Wanted List.
Alkhanov also said that law enforcers had not suffered any casualties during the operation. The operation involved officers of the Shali district police precinct, troops of the Yug (South) Battalion of the Russian Interior Troops, officers of the Terek section of the Russian Interior Ministry for the Southern Federal District and of the local branch of the Russian Federal Security Service.
One killed, 3 injured in militant attack on convoy in Chechnya
MOSCOW, June 30 (RIA Novosti) - One soldier was killed and a further three injured when militants attacked a police convoy in the Vedeno District of Russia's North Caucasus republic of Chechnya, a police source said on Tuesday.
"The convoy - a GAZelle and two UAZ vehicles - was traveling from Khankala," when it was attacked by around 10 militants, the spokesperson said.
The source said that a priest was among the injured.
The latest incident follows an explosion in western Chechnya on Sunday which left three police officers wounded.
The recent increase in violence coincided with Moscow's decision to formally end its decade-long counterterrorism operation in Chechnya, which witnessed two brutal separatist wars in the 1990s and early 2000s.
Russia's North Caucasus has seen an upsurge in violence of late, with the killing of Daghestan's Interior Minister Adilgerei Magomedtagirov and an assassination attempt on the Ingush President Yunus-bek Yevkurov this month.
The Return of the Siloviki
Monday, 29 June 2009 11:49 Anders Åslund
STOCKHOLM - Russian Prime Minister Vladimir Putin recently announced that Russia, Belarus, and Kazakhstan have abandoned their separate talks to join the World Trade Organization. Instead, they would seek to enter the world trade body as a single customs union. In effect, this means that Russia seems to be casting aside its accession to the WTO - a major reversal of Russian strategy.
Putin's statement hit like a bolt from the blue. Two days earlier, United States Trade Representative Ron Kirk and European Union Trade Commissioner Catherine Ashton had completed successful talks on Russia's accession to the WTO with Putin's first deputy, Igor Shuvalov, Finance Minister Alexei Kudrin, and Minister of Economy and Development Elvira Nabiullina. As late as June 3, Putin had declared himself sure of Russia's "swift joining of the WTO."
The leaders of Belarus or Kazakhstan seemed equally surprised by Putin's statement, especially as Russia had just prohibited almost all imports of dairy products from Belarus in a protectionist ploy. After 16 years of negotiations, Russia appeared poised to join the WTO within a couple of months.
Indeed, only three difficult hurdles remained. First, Ukraine demands a bilateral protocol on market access, which would force Russia to abolish roughly 100 trade sanctions, primarily in agriculture. The second obstacle is border controls with Georgia, a mainly political issue: whether Abkhazia and South Ossetia are independent, as Russia maintains, or are part Georgia, as the rest of the world believes. Finally, the EU insists that Russia abolish planned prohibitive export tariffs on lumber. Only the Georgian issue is really serious.
A customs union with Belarus and Kazakhstan is no alternative to Russia's WTO accession. No countries have ever entered the WTO collectively, nor is this legally possible says WTO head Pascal Lamy. Moreover, while the customs union was proclaimed in 1995, the earliest it can be formed is in July 2011, which is unlikely.
Predominantly a commodity exporter, Russia has less need for the WTO than a manufacturer like China. Even so, one-fifth of Russia's exports comprise metals and chemicals that are sensitive to anti-dumping measures. A series of World Bank and Russian studies have estimated that Russia can gain 0.5-1.0 percentage points in economic growth for half a decade if it joins the WTO.
Membership is also important for Russia's international standing. It is the only G-20 country outside of the WTO, which accounts for 96% of global trade. The WTO also represents a choice of economic and political strategy. Before Putin resigned as president in May 2008, he presented his "Russia 2020" program. Its heart was an "innovation strategy" based on more market reforms and investment in human capital, leading to annual growth of 6-7%. In their rhetoric, President Dmitri Medvedev and his technocrats embrace this vision.
But Putin and his siloviki (political allies whose power base is in the security apparatus) seem to prefer an "inertia strategy," the worst of the Russia 2020 scenarios. This strategy amounts to state capitalism, living on Russia's energy wealth, and doing nothing to curtail Russia's massive red tape and corruption.
By reversing course on the WTO, Putin has again shown himself to be Russia's master. He did the same thing last summer by lashing out against a successful mining and metallurgical company, Mechel, and provoking the war in Georgia.
During the winter, Putin's poor policy choices on the financial crisis undermined his power. Rather than shielding Russia's private enterprises, he engineered a domestic liquidity freeze, which led to a sharp drop in GDP of 9.5% in the first quarter of 2009, despite Russia's huge foreign reserves. The pragmatic technocrats took over, but the subsequent doubling of oil prices signals that the danger for Russia's economy is over for now, so the siloviki are resuming command.
The question is what their next step will be. The prominent Russian military analyst Pavel Felgenhauer insists that their prime aim is to finish off Georgia and its president, Mikheil Saakashvili, who remains in power and defiant. Georgia has received no military support and is virtually undefended. The Kremlin continues its propaganda offensive against Georgia, and has vetoed prolonging the mandate for United Nations observers in Georgia and Abkhazia. A major Russian military maneuver, Caucasus 2009, is underway. The last such maneuver, Caucasus 2008, was followed by the invasion of Georgia.
During the latter part of this maneuver, July 6-8, US President Barack Obama is supposed to meet President Medvedev in Moscow. Medvedev obviously hopes to reach out and improve Russia's and his own standing in the world. The siloviki , however, prefer Russia isolated and authoritarian, with power securely in their hands.
The Kremlin wants a new strategic arms control agreement, but the siloviki desire nothing more. Obama's administration had hoped for a final breakthrough in Russia's WTO talks, but Putin's actions have eliminated prospects for such an outcome. The US also wants progress on the territorial integrity of former Soviet states, such as Georgia, but that, too, is unlikely. Putin or his collaborators seem to be setting up Medvedev for a failure, suggesting that their jealousy of Medvedev's limited power is greater than their interest in defending Russia's national interests.
Yet there is still hope that Putin encounters a sufficiently negative reaction that he changes his stance on WTO accession. After all, he suspended Russia's WTO accession talks after the August 2008 war in Georgia, only to allow them to restart this spring.
Anders Åslund is a senior fellow at the Peterson Institute for International Economics. His latest book, with Andrew Kuchins, is The Russia Balance Sheet.
Copyright: Project Syndicate, 2009.
Mitvol Accepts Job As Moscow Prefect
30 June 2009
By Anna Malpas / The Moscow Times
Oleg Mitvol, the outspoken former environmental inspector, said Monday that he had accepted an offer by Mayor Yury Luzhkov to become the prefect of Moscow's Northern Administrative District.
Luzhkov will officially announce the appointment on Tuesday, Mitvol said.
Mitvol will replace the acting head, Fazil Izmayilov, a brother of embattled multimillionaire Telman Ismailov, whose Cherkizovsky Market is caught in a criminal investigation being monitored by Prime Minister Vladimir Putin.
Luzhkov fired the previous prefect, Yury Khardikov, in February after expressing dissatisfaction with his record on repairing apartment blocks.
"We believe that we need to work in the municipal districts," Mitvol told The Moscow Times. "What's more, I was born and live in the northern district."
The prefect of each of the city's 10 administrative districts is in charge of day-to-day municipal affairs. Prefects are appointed by the mayor.
The northern district, which runs north from Belorussky Station up to the Moscow Ring Road, recently introduced a "name and shame" section on its web site where residents can post complaints about specific officials.
Mitvol's pending appointment comes after he registered to run for mayor of Odintsovo in the Moscow region. The area includes the mansions of the superrich along Rublyovskoye Shosse. The early election was set for July 19 but has been postponed by a court ruling.
Mitvol said candidates from his Green Alternative environmentalist group would run in the elections, which will also select a deputy mayor and local lawmakers. Mitvol heads Green Alternative, which is campaigning for seats in local government. Its candidate won the election for the mayor of Mozhaisk in the Moscow region in March.
Mitvol rose to fame with campaigns against dachas illegally built in nature reserves in the Moscow region. He also led an environmental investigation into Royal Dutch Shell's Sakhalin-2 project in 2006 that ultimately led to the company handing over control to Gazprom.
He quit his job as the deputy head of the Federal Inspection Service for Natural Resources Use in April.
Last year, another deputy head at the agency, Ivan Klemenkov, resigned unexpectedly to take the post of chief of staff for the prefect of Moscow's Western Administrative District.
Russia's military in national service dilemma
30 June, 2009, 10:30
Russia’s army needs to fill its biggest draft quota in years, but there may be not enough men to call up.
Army chiefs have vowed to meet the targets, but human rights groups are ringing the alarm after cases of illegal recruitment.
Many young Russian men are among the last recruits checking in for conscription. The spring draft of 2009 is nearly over and soon they will try on the military uniform and join the school of life.
“Of course we have to give everything we can to our motherland. I want to serve!” Ivan, a recruit says.
But not everyone is showing such military readiness. Last year, Russia cut compulsory service time from two years to one. Now a record 305,000 ranks need filling. Demographers say it’s a mission, almost, impossible.
“In the 1990s, Russia saw a massive fall in the birth rate, because of political and economic turmoil. Now we have half as many men of draft age to enlist as in previous years. This year, we are seeing the most significant decline of about 120,000 in the contingent. In the next few years, the number of 18 year-old men will keep falling,” says demographer Sergey Vassin.
The physical condition of the draftees is another head ache for the enlisters. This year, due to health problems, only every third recruit was considered fit for service.
“If we analyze the situation, we can see that the number of mobility problems and eye diseases is growing among today’s young men,” recruitment doctor Viktor Marchenko says.
Desperate to hit the target, enlisters sometimes resort to previously-illegal ways to fill their ranks.
Zamir Shukhov suffered multiple fractures and a broken neck in a car accident, but this spring he was called up to join the armed forces. He is still considered fit for service.
“I’m hiding out, because I cannot go to my own town – I’m going to be grabbed by the military service. My passport was taken away, I can’t go abroad, I have to be in Russia – within the borders – so basically, I’m fighting for my rights from underground,” Shukhov says.
Zamir is suing the Russian army. Doctors consider him handicapped, but military medics altered his diagnosis. Lawyers say, this spring, students who were previously protected from conscription by their universities have also become victims of the round-ups.
“This year the situation is tougher for the recruits because the enlisters have to fulfill a record draft plan. Enlisters are cheating. Students are picked up after exams even if their deferrals are still in place,” lawyer Aleksey Timofeev says.
Enlistment chief, Magomed Ismailov, however, denies the army is doing anything illegal.
“All 21 grounds for deferral are being considered as they were in previous years. We can’t recruit the unfit. That’s why we have double check-ups,” Ismailov says.
But in its drive to find recruits, he says the Russian army still holds to its main principle: it’s every man’s duty to serve the Motherland.
Russian Military Now Drafting ‘Anyone who Moves,’ Rights Activists Say
June 29, 2009
Paul Goble
Caught in a bind between the largest draft quota in years – 305,000 -- and the smallest cohort of draft age men from which to fill it – those born in the difficult year of 1991 -- the Russian military, in violation of the law and its own regulations, is taking in “anyone that moves,” according to two activists who work on military manpower issues.
In a joint interview posted on the Kasparov.ru site today, Tatyana Kuznetsova of the Soldiers Mothers Movement and Ivan Samarin, a specialist at the Center of Legal and Medical Help for Draftees, described the “typical” violations in this cycle and the dangers ahead if draft legislation is passed (kasparov.ru/material.php?id=4A486A11802F8).
In this draft cycle, Kuznetsova said, the military committees “are taking into the army all who move,” regardless of their condition. Sometimes, she says, these bodies have young people come in under “false pretenses” and then draft them. They “have carte blanche, and they operate according to the principle –the plan at any price.”
Another special feature of the draft this time around is that many of those taken are immediately sent to the Caucasus, despite promises at various times that draftees would not serve in hot spots. “Practically all young men from Moscow oblast,” she continued, “are sent there to serve” their time in the military.
Kuznetsova said that there had been violations at every stage of the draft procedure this spring – the draft began on April 1 and has been extended to July 15 – and Samarin said that the worst had involved the drafting of students who have a legal right to deferment, sometimes even staging raids on student dormitories to find candidates for the draft.
Kuznetsova provided information on an especially troubling aspect of this part of the draft. Moscow military officials, she said, have been unhappy that up until now, they could not touch students from other parts of the country studying in Moscow. But now they are taking those students, an action that is simplified because such student have no one to defend them.
The Kasparov.ru interview asked the two experts to comment on the possible impact of the adoption by the Russian government of a new draft law on the military obligations of Russian citizens that was recently prepared by and posted on the website of the country’s defense ministry ().
Kuznetsova pointed out that it is “simply unconstitutional” because it takes away from those who believe they have been improperly drafted the right to have their cases heard by a court. If the new legislation is passed, then the individual would have to serve until his case was heard, a complete violation of his rights.
Samarin, for his part, said that the law was “completely insane.” Not only does it eliminate the chance for those in the draft to appeal to the courts, but the draft measure also violates the right of Russian citizens to an education by restricting their right to study at a foreign educational institution.
Under the terms of the draft legislation, those studying abroad would have to return to be drafted if the military asked that their passports not be extended. And the draft also violates the country’s labor code by requiring anyone applying for a job to show that he had performed his military service or had a legal deferment.
Tragically, the two agreed, the draft committees do not appear to care “what kind of an army” Russia will have. Their members have “only two tasks – either to take a bribe from a sick man or to send him into the army in order to fulfill the plan.” Kuznetsova added she did not understand why doctors go along so often with the committees, except for the bribes.
The Soldiers Mothers Committee leader made three other points. First, she said, the appearance of professionals in the military has not solved the problem of “dedovshchina,” the Russian term for the often brutal hazing of more junior soldiers by more senior ones. Instead, the “professionals” have simply taken over this task of imposing order.
Second, she said, it is “a myth” that most young Russians serve only a year. In fact, “they serve three and a half” because they are deceived or forced into signing up as “professionals” in order to get or not to lose somewhat better “human” conditions like “clean clothes, food,” and the like than those they are serving among.
And third, Kuznetsova remarked, if parents see that the rights of their sons are being illegally taken away by the draft process, they should “raise a storm and turn to the media.” Unfortunately, in the media environment of Russia today, there is no guarantee that such appeals will either be disseminated or lead the powers that be to change course.
Russian gays ready to protest during Obama visit
Tue Jun 30, 2009 12:09am IST
MOSCOW (Reuters) - Gay rights activists in Moscow plan to ignore a ban and rally in favour of same-sex marriages when U.S. President Barack Obama visits next week, one of their leaders said on Monday.
In a statement, Nikolai Alexeyev said the Moscow authorities had banned a proposed demonstration outside the U.S. embassy next Tuesday, the second day of Obama's July 6-8 trip.
"Moscow authorities have again violated the law by denying us the right to freedom of assembly," Alexeyev said in a statement.
"We don't intend to abandon our plans and in the near future we will determine the format of action on July 7 during the visit of Barack Obama in Russia."
A Moscow municipal spokeswoman confirmed city authorities had turned down a request from gay activists to protest in front of the U.S. embassy on July 7. She said the area had already been booked for another event and that Muscovites were against the gay protest.
Russia decriminalised homosexuality in 1993 but tolerance is not widespread and Moscow's authorities often ban protests in support of gay rights.
In May, a lesbian couple failed in their attempt to be officially married and a few days later Russian riot police broke up a gay rights protest on the day of the Eurovision Song Contest final.
National Economic Trends
Russia c.bank may cut rates by 150 bps in '09
MOSCOW, June 30 (Reuters) - Russia's central bank could cut interest rates by another 1.5 percentage points this year without creating additional risks for the economy, a senior central bank official said on Tuesday.
Georgy Gambarov, deputy head of the central bank's open market operations department, said officials were currently in discussion over whether to cut rates in 25 or 50 basis points moves.
(Reporting by Yelena Fabrichnaya, writing by Gleb Bryanski) Keywords: RUSSIA CBANK/ (gleb.bryanski@ ; +7 495 775 1242; Reuters Messaging: gleb.bryanski.@ )
Russia power prices to rise with gas in '10-EconMin
Tue Jun 30, 2009 3:18am EDT
MOSCOW, June 30 (Reuters) - Russia will allow power and gas prices to rise by a similar amount in 2010, which is likely to be minimal, Economy Minister Elvira Nabiullina said on Tuesday.
She told a conference the government was nevertheless maintaining its long-term goal of fully liberalising the power sector. (Writing by Dmitry Zhdannikov, Editing by Simon Shuster, + 7 495 775 12 42,
Russian budget deficit could exceed 6% in 2010 - Kremlin aide
MOSCOW. June 30 (Interfax) - Russia could have a federal budget
deficit of more than 6% in 2010, Arkady Dvorkovich, aide to the Russian
president, told a conference in Moscow.
"The deficit will probably be more than 5% if oil prices do not go
up sharply, but it could even be higher than 6%,"Dvorkovich said.
But "by our estimates, the 2010 deficit will be lower than this
year, when it will be just under 8%," he said. "We'll be trying to avoid
a repeat of this," he said.
"Most countries are so far planning higher deficits next year, but
we're so far planning a lower one," he said.
Economics: Official forecast gloomier as 2010 budget planning starts
UralSib, Russia
June 30, 2009
Government sees deeper contraction in the economy ... Interfax reports that yesterday an unnamed source leaked the major parameters of the new official macro forecast for 2009. The new forecast, which is to be discussed at a government meeting next week, is much more pessimistic than previous forecasts. The Ministry for the Economy now estimates that Russia's GDP could contract by 8.5% YoY this year versus a forecast of minus 6% made one month ago and a contraction of 2.2% YoY contained in the current budget forecast.
The pessimism of the new forecast may not reflect the likely reality and instead be driven by political considerations as the Cabinet starts working on the draft 2010 federal budget. A weaker macro environment forecast will impact budget revenue and spending projections and enable the government to easily resist any future pressures to increase state spending.
... despite higher oil prices. Based on the new forecast the government does not expect the Russian economy to return to YoY growth before 1Q10. And even after that economic performance is expected to be weak with 2010 GDP growth not exceeding 0.1% YoY. Industrial production is forecast to fall for two consecutive years: down 12.5% YoY in 2009 and down 0.3% YoY in 2010. Also the ministry believes that this year, fixed investment will shrink by one-fifth, retail sales will fall 5.8% YoY while real incomes will shrink by 4.1% YoY. The two positive changes in the new forecast are: lower inflation (12-12.5% in 2009 vs 13% earlier) and a stronger trade surplus (average Urals crude oil price forecast was upgraded from $41/bbl to $54/bbl in 2009).
URALSIB maintains a more positive view. While the current fragile state of balance at very low levels for both the Russian and global economy makes a case for a range of forecasts - from extremely pessimistic to overtly optimistic - we continue to maintain a positive view on the prospects for Russian economy.
We believe that Russia's GDP will manage to post growth YoY later this year and in 2010 the economy could expand by up to 4% YoY. Despite disappointing statistics of the first five months of 2009, we are not yet inclined to change our GDP growth forecast for 2009 (minus 2.8% YoY) but prefer to wait to see what the next few months bring for Russia and the global economy.
Vladimir Tikhomirov
Economic Development Ministry lowers forecasts for GDP in 2009
MOSCOW, June 29 (Itar-Tass) -- The Russian Economic Development Ministry has lowered its forecasts for the Gross Domestic Product (GDP) and industrial output, but upgraded a forecast for the trade balance and inflation in 2009, the Prime Tass economic news agency cited an official at the ministry as saying on Monday.
According to the Ministry’s preliminary estimates, Russia’s GDP will decrease by 8.5 percent, instead of the earlier forecasted 6-8 percent, Prime Tass said.
In compliance with an updated macroeconomic forecast, the GDP will edge up by 0.1 percent in 2010, Prime Tass said, adding that the indicator will grow by 3.2 percent in 2012.
The GDP may reach 38,400 billion roubles (USD 1 = RUB 31.29) by the end of 2009, as well as 41,920 billion roubles in 2010 and 45,790 billion roubles in 2012, Prime Tass said, recalling that initially this year’s GDP was forecasted at 38,800 billion roubles.
The Economic Development Ministry is more optimistic about the country’ s inflation rate, Prime Tass said, adding, the updated macroeconomic forecast envisages that this year’s inflation can make up 12-12.5 percent instead of 13 percent, which were projected earlier.
The Ministry also forecasts that Russia’s exports may increase as compared to initial projections, Prime Tass said.
According to the Ministry’s preliminary estimates, the country’s import may total 190 billion U.S. dollars (as against initially planned 194 billion U.S. dollars), while export will reach 274 billion U.S. dollars (initially forecasted 254 billion U.S. dollars), Prime Tass said.
Therefore, Russia will preserve a trade surplus, even though it will drop more than twofold from 2008, Prime Tass cited the ministry’s official.
Last week, the World Bank downgraded its forecast for Russia’s GDP in 2009.
“Given a much larger GDP contraction in the first two quarters of 2009 than anticipated, Russia's economy is now likely to contract by 7.9 percent in 2009, despite higher oil prices assumed in the current forecast. Most of the adverse impact in Russia is concentrated in the first two quarters of 2009,” Prime Tass quoted the World Bank’s report entitled, “Russia: From Crisis to Recovery.”
According to the World Bank’s report, “Looking into the medium term, with the current growth profile, real GDP levels in Russia will reach the pre-crisis high only at the end of the third quarter of 2012,” Prime Tass said.
At the same time, Deputy Minister of Economic Development Andrei Klepach said last Tuesday: “The decline [of the Gross Domestic Product] still continues. No reversal has occurred so far.”
“In May 2009, the country’s GDP dropped by eleven percent as compared to last May,” Klepach told reporters. In his words, the May GDP was 0.5 percent smaller than in April due to the seasonal factors.
In his words, the decline in Russia’s GDP was mainly caused by the decrease in investments, Prime Tass said.
The deputy minister believes that the situation with investments in Russia continues worsening, Prime Tass said, adding that the country’s investments shrank by 15.8 percent in January-May.
In May 2009, Russia’s investments dropped by 17.7 percent as compared to this April, Prime Tass cited Klepach as saying.
Moreover, a certain slowdown was registered in the construction industry, Prime Tass said, adding, Russia’s construction amounts went down by 5.9 percent in this May, as against April 2009, and dropped by 21.9 percent versus May 2008.
The deputy minister is also doubtful pertaining to the forecasted GDP index for 2009, which envisaged a six to eight percent decline.
“It will be practically impossible to make 6-8 percent decline in the country’s GDP by the yearend, if the indicator dropped by 10.2 percent over the first five months of the year,” Prime Tass cited the deputy minister as saying.
10 constituents of Russian Federation have trade turnover of at least $100 million a year
Baku, Fineko/abc.az.
Direct relationships with federal subjects of Russia create a basis for trade and economic links between Azerbaijan and Russia.
An Azeri government source says that today Azerbaijan has trade and economic ties with 30 constituent entities of the Russian Federation.
“Annual trade turnover with 10 of them exceeds $100 million with each.
Relying on the goals of increasing the level of mutual co-operation coordinated with Russia we will continue developing direct relations with constituents of Russia,” the source said.
In 2008 Azerbaijan-Russia trade turnover overtopped $2.4 bn. In 2009 it is currently under decline, but the two countries do not refuse from plans on its increase up to $2.4 bn.
According to Russian side’s data, today 72 out of 83 constituent entities of the Russian Federation are participating in economic relationships with Azerbaijan. Simultaneously 9 entities have trade turnover with Azerbaijan at the level of at least $100 million each. Among them are Moscow, Moscow Region, St. Petersburg, Nizhny Novgorod, Stavropol Territory, Sverdlovsk Territory and Samara Territory, Tatarstan and Dagestan.
Earlier Russian President Dmitry Medvedev decreed to give the right to seven constituent entities of the Russian Federation for signing of intergovernmental co-operation agreements with Azerbaijan.
This year 5 or 6 entities of Russia can sign intergovernmental co-operation agreements with Azerbaijan.
For instance, yesterday it was signed an agreement between Azerbaijan and Kabardino-Balkaria, a federal subject of Russia.
Russian unemployment still falling
bne
June 30, 2009
Unemployment is still falling, as the government says it will take the economy longer to recover than it thought.
The number of officially registered unemployed fell by 0.8% to 2.177 million people between 17-24 June, the Healthcare and Social Development Ministry said reports Prime Tass.
The number of officially registered unemployed persons decreased in 75 of Russia's 83 regions in the period, the ministry said.
The regions of Chukotka and Khanty-Mansi saw unemployment fall fastest. The total officially registered unemployed is still over the 1.516m registered as of the start of the year. The unofficial number of unemployed as per the ILO standard is typically three times higher or still just under 10% of the working population.
Business, Energy or Environmental regulations or discussions
Gazprom, VTB Bank, Polyus Gold: Russia Stock Market Preview
By Yuriy Humber
June 30 (Bloomberg) -- The following companies may have unusual price changes in Russia trading. Stock symbols are in parentheses and share prices are from the previous close.
Russia’s 30-stock Micex Index added 3 percent to 989.30 at the close in Moscow after slipping 5.6 percent last week. The dollar-denominated RTS Index of 50 stocks slid 0.4 percent to 951.46.
OAO Gazprom (GAZP RX): Qatar signed its first agreement to ship gas to Poland in Eastern Europe, which depends on Gazprom for most of its supplies. Qatar agreed to supply Poland with one million tons of LNG annually from 2014. Gazprom rose 4.6 percent to 157.36 rubles in Moscow on the Micex Stock Exchange.
OAO VTB Bank (VTBR RX): Andrei Kostin, VTB chief executive officer, said overdue loans are likely to reach 8 percent of the total by the end of the year and VTB may increase provisions accordingly. VTB is in the “advanced stages” of planning a sale of bonds denominated in Swiss francs and doesn’t plan a share sale in 2010, Kostin said. Russia’s second-largest lender was unchanged at 3.45 kopeks at the close in Moscow on the Micex Stock Exchange.
OAO Polyus Gold (PLZL RX): Wandle Holgings Ltd. and Nafta Moskva said in a regulatory filing that on June 26 they acquired 4.6 percent of Polyus for $18.20 per common share. Russia’s biggest gold producer fell 0.03 percent to 1,201.53 rubles ($38.56) in Moscow on the Micex Stock Exchange.
To contact the reporter on this story: Yuriy Humber in Moscow at yhumber@
Last Updated: June 29, 2009 22:00 EDT
VTB chief says CHF Eurobond plans at "fairly advanced stage"
MOSCOW. June 30 (Interfax) - A Eurobond placement denominated in
Swiss francs by VTB (RTS: VTBR) is in a "fairly advanced stage," Andrei
Kostin, the bank's chairman, told a press conference late Monday.
"As far as I know the issue is at a fairly advanced stage," Kostin
said, when asked about the prospects for placing a CHF bond.
"All the paperwork is ready, so we're in a position to hit the
market, test it out or, if the price and volume are not right, change
our mind and come back in a week, two weeks, three. So we're flexible in
this respect," Kostin said, adding that the fact the bank was unable to
place dollar-denominated bonds in the middle of June was no tragedy.
"We'd like to return to the market, but the market isn't that good
right now," he said.
This is a major source of funding for the bank, but borrowing at
high rates would not be effective, Kostin said.
"Apart from the high rates, we think a new wave of borrowers can be
expected on the market, some of them from Russia. So our liabilities are
currently growing from two local sources, which are Central Bank funds
and deposits," Kostin said.
"Funding must be carried out at reasonable prices, so we go for
long maturities of five years or more," Kostin said. High-cost borrowing
would impact on the bank's results in time, he said.
Reports say VTB plans to meet with investors in Switzerland in the
first few days of July with a possible view to placing a CHF bond.
The bank held a road show in London for a possible $1 billion in
bonds at 9% annually. It considered placing seven-year bonds with a put
option in three years. But the bank decided against this after seeing
the reaction of investors, as it did not think it would be able to sell
the bonds on good terms.
VTB Plans Layoffs As Bad Loans Swell
30 June 2009
By Courtney Weaver / The Moscow Times
VTB Group may lay off as many as 1,000 employees at its retail banking operations as overdue loans threaten to reach 8 percent of its portfolio, executives said Monday at the annual shareholders meeting.
VTB's nonperforming loans have tripled to 6 percent so far this year, chief executive Andrei Kostin said, adding that "an absence of losses in 2009" was "unlikely."
"To count on a profit this year would be difficult," he said. "Everything will depend on how quickly the Russian economy exits the crisis."
The grim predictions followed a similar warning from Sberbank chief German Gref on Friday.
VTB, Russia's second biggest lender, finished the first five months of 2009 with a net loss of 24.2 billion rubles ($776 million) under Russian accounting standards after pulling a net profit of 26.9 billion rubles for 2008.
Kostin said VTB was open to the possibility of a buyback program, in which minority shareholders would receive deposits in exchange for their stock. "I think we're prepared to consider this plan, if you can formulate how to do it," he told shareholders.
He also said, however, that it was still early to consider a buyback, since only two years have passed since VTB first sold shares to the public in 2007.
VTB's so-called people's IPO was one of several issues by state companies seeking to involve ordinary Russians in the then-booming stock market. VTB shareholders have clamored for the company to buy back their shares after the bank's stock plummeted from an offering price of 13.6 kopecks a piece to 3.45 kopecks, where it closed Monday.
The bank, which has received 829 billion rubles ($26.6 billion) in government support, is reviewing the costs of the properties it leases and considering a hiring freeze to cut back on expenses, financial director Nikolai Tsekhomsky said at the meeting.
"At VTB-24 we're talking about 1,000 people who are to be laid off or transferred to different jobs," he said, referring to the bank's retail arm.
While VTB had been considering an additional issue of 9 trillion shares, each valued at a nominal 1 kopek, that plan now seems unlikely, Tsekhomsky said.
"There's now a high possibility that we might place a significantly smaller sum," he said.
VTB angered shareholders in January when it said it might issue the shares this year, a move that would further devalue the shares and add to shareholders' misery.
In 2008 VTB was forced to help its foreign subsidiaries as operations in Ukraine, Georgia, Austria and London ended the year in the red, as was the newly formed VTB Europe, Kostin said.
AIG Says 'Nyet' to Russia
06/29/09 - 05:59 PM EDT
Continuing the process of divesting itself from all four corners of the globe, American International Group(AIG Quote) is saying "nyet" to Russia.
The insurer said it will sell 98% of its shares in its consumer-finance operations in Russia to Banque PSA Finance SA, a subsidiary of PSA Peugeot Citroën Group.
Banque PSA Finance also holds an option, not exercisable until March 2011, to buy the remaining 2%. Terms of the deal were not disclosed.
The Russian unit, OOO AIG Bank, was created last June and has a dozen employees.
This is yet another move by AIG to sell off assets to repay the massive $180 billion government bailout. Last week the company said it plans to spin off two life-insurance businesses as part of a plan to repay $25 billion of debt.
Other pieces up for grabs include: Stowe Mountain Resort and International Lease Finance.
Shares in the company closed Monday trading down almost 9%, to finish at $1.33.
AIG to Sell Russian Banking Subsidiary
Monday, June 29, 2009; Posted: 03:05 PM
NEW YORK, Jun 29, 2009 (A. M. Best via COMTEX) -- AIG | Quote | Chart | News | PowerRating -- American International Group Inc. said it has sold 98% of the shares of OOO AIG Bank (Rus), its consumer finance operations business in Russia, to France-based Banque PSA Finance, a subsidiary of PSA Peugeot Citroen Group.
AIG said it is not disclosing terms of the transaction, and that the remaining 2% of the shares are part of a sale option that will not be exercisable until March 2011.
The deal is subject to approval from the Central Bank of Russia.
OOO AIG Bank was set up in June 2008 and has 12 employees.
AIG was hit hard by the global financial crisis and had to be bailed out by the U.S. government. It reached an agreement with the U.S. Federal Reserve Board on Sept. 16, 2008 to access a two-year, $85 billion (60.4 billion euros) loan facility through the Federal Reserve Bank of New York. The company has since been selling off subsidiary businesses in an effort to repay the money it was loaned.
The federal rescue program has since grown to up to $182.5 billion in loans and other assistance (BestWire, April 21, 2009).
Most AIG insurance companies currently have a Best?s Financial Strength Rating of A (Excellent) with a negative outlook.
Shares of AIG (NYSE: AIG | Quote | Chart | News | PowerRating) were $1.42 in morning trading on June 29, down 2.74% from the previous close.
(By Marc Jones, London news editor: marc.jones@)
AIG to sell Russia bank subsidiary to Peugeot unit
Mon Jun 29, 2009 9:39am EDT
NEW YORK (Reuters) - American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) on Monday said it agreed to sell a 98 percent stake in its Russian consumer finance business to Banque PSA Finance SA, a unit of France's Peugeot SA (PEUP.PA: Quote, Profile, Research, Stock Buzz).
Terms were not disclosed. The Russian unit, OOO AIG Bank, was created last June and employs a dozen people. The transaction includes an option for AIG to sell the remaining 2 percent to Banque PSA after mid-March 2011. It is subject to conditions including approval by the Central Bank of Russia.
Once the world's largest insurer by market value, AIG nearly collapsed last year because of losses from credit default swaps, a bet on the credit-worthiness of other issuers.
AIG is selling assets to repay the government after roughly $180 billion of bailouts to rescue the company. Last week, AIG set plans to spin off two life insurance businesses as part of a plan to repay $25 billion of debt.
Deutsche Bank Securities Inc and the law firm Debevoise & Plimpton LLP advised AIG on the transaction. CMS in Russia advised Banque PSA.
(Reporting by Jonathan Stempel, Editing by Maureen Bavdek)
EIB supports with EUR 115 million upgrading of Russia's mobile telecommunications networks
Tuesday 30 June 2009
The European Investment Bank (EIB) is lending EUR 115 million to Mobile TeleSystems OJSC
(“MTS” – NYSE: MBT), for the upgrading and further development of mobile networks to increase the quality and accessibility of broadband services in the Russian Federation. This is the first EIB loan supporting a telecommunication project under the Bank’s mandate covering financing in Russia, Eastern Europe and Southern Caucasus.
The project, which is jointly financed by the European Investment Bank, the European Bank for Reconstruction and Development and the Nordic Investment Bank, is focused on the rollout of 3G/UMTS-based mobile broadband services in the Russian Federation in terms of the purchase and installation of equipment and software licences for UMTS-based 3G access and core network. EIB funds will allow MTS to increase its rollout of 3G networks to additional cities in Russia in 2009. This will facilitate efficient communications through improved access to internet, multimedia and telecommunication services, thus contributing to increased connectivity and economic growth.
By improving the access to modern information and communications technology networks, the project will support the EIB’s lending priority of promoting investment that leads to the establishment of a knowledge-based society and contribute to the development of an information society in Europe.
Russia's MTS gets 413 mln euro loan
06.29.09, 07:42 AM EDT
MOSCOW, June 29 (Reuters) - MTS, Russia's top mobile phone operator, said on Monday it had obtained a 413 million euro ($578.2 million) loan from three international lenders to finance investments in network development.
MTS said in a statement it had signed credit agreements with the European Bank for Reconstruction and Developement (EBRD), Nordic Investment Bank (NIB) and European Investment Bank (EIB).
EBRD provided 218 million euros, NIB gave 80 million euros and EIB granted 115 million euros, the company said.
(Reporting by Maria Kiselyova; editing by Toni Vorobyova) ($1=.7143 Euro)
Russia's Alfa halts talks with Telenor –exec
Tue Jun 30, 2009 1:11pm IST
MOSCOW, June 30 (Reuters) - Russia's Alfa Group, locked in a five-year boardroom war with Telenor (TEL.OL: Quote, Profile, Research), has halted talks with the Norwegian telecoms group on a potential merger of their Russian and Ukrainian assets, an Alfa official said on Tuesday.
"No talks are under way right now," Kirill Babayev, senior vice president of Alfa's telecoms management unit, said by telephone.
Russian daily Vedomosti had reported on Friday that the companies were close to reaching agreement on combining their businesses in both countries. [nLQ658162]
Telenor is at risk of losing its stake in Russia's second largest mobile carrier Vimpelcom (VIP.N: Quote, Profile, Research), which was seized after a Siberian court's $1.7 billion damages ruling in favour of a tiny shareholder claiming Telenor held back Vimpelcom's business in Ukraine.
Alfa says it has no relation to the plaintiff in the case, Farimex.
Telenor's director of communications in Russia, Anna Ivanova-Galitsina, reiterated Telenor's position that there would be no deal until the Siberian court case ends.
At 0739 GMT, Telenor shares were down 1 percent.
(Reporting by Anastasia Teterevleva; writing by Melissa Akin; editing by John Stonestreet)
RBC: Dispute indicates low chances for debt restructuring
UralSib, Russia
June 30, 2009
Yuri Rovensky ousted from company management. Yesterday RBC (RBCI - Sell) announced that the majority of its BoD members have voted to terminate the power of the company's General Director Yuri Rovenski, who was one of the company's founders. A formal decision by the BoD should be announced today. At the same time Rovensky was appointed as an adviser to Mikhail Prohorov's Onexim Group, which has offered RBC and its creditors a proposal for restructuring the company's debt. The news indicates that the struggle still continues between the company's management, minority shareholders and creditors over a debt restructuring scheme, and the chances for a successful resolution look low.
No accord foreseen on debt restructuring. RBC's total debt is estimated at more than $200 mln resulting from losses from operations in the financial markets. Onexim proposes to write off 45-65% of the debt and is ready to invest $35 mln into the company in exchange for a 65% stake in it. The rest of the debt should be repaid in 3-7 years and creditors could receive another 10% stake in RBC. However, so far creditors have not been ready to accept this scheme.
RBC management has also been reported to have reshuffled some of companies' assets to RBC subsidiaries, indicating that the conflict between creditors and the company may escalate further.
RBC Shares Jump as Director Says He's Leaving
30 June 2009 Bloomberg
RBC Information Systems, the owner of the country's only business television channel, jumped in Moscow trading after general director Yury Rovensky said he plans to quit.
RBC Information closed up 8.1 percent on the MICEX. Rovensky will become an adviser to the general director of billionaire Mikhail Prokhorov's Onexim Group, to work on Onexim's offer to help RBC Information restructure its debt, Rovensky said Monday.
"Rovensky's resignation could mean that the company's debt restructuring will stop being a dead issue," said Rostislav Musienko, an analyst at Bank of Moscow. "Any information meaning that the parties may come to some compromise is taken positively" by investors, he added.
In March, RBC Information failed to pay a 1.5 billion ruble ($48 million) bond as it sought to restructure debt. Also in March, investment bank Renaissance Capital, half-owned by Prokhorov, said he would buy new shares of RBC Information to help it pay down $216 million of debt. Renaissance Capital's parent company, Renaissance Group, is a creditor of RBC Information.
The debt restructuring plan suggested by Onexim is "efficient and gives good prospects" to RBC Information, Rovensky said in Monday's statement.
Reiman elected chairman of Svyazinvest
bne
June 30, 2009
He's back. The former telecoms minister Leonid Reiman, who has been accused of filling his pockets with the murky deals surrounding mobile phone company Megafon, has been elected chairman of Russia's state-owned fixed line operator Svyazinvest.
Reiman's election comes as the Kremlin suggests it wants to build a national telecoms champion that includes the leading mobile phone companies based on Svyazinvest's assets.
Reiman previous held the same job until he resigned in May 2008.
The Russian government holds 75% minus one share in Svyazinvest, while AFK Sistema holds 25% plus one share.
Kocharian Joins Russian Company Board
By Asbarez Staff on Jun 29th, 2009
YEREVAN (RFE/RL)–Former President Robert Kocharian has been formally appointed to the board of directors of a leading Russian corporation that controls Armenia’s largest mobile phone operator, it was announced on Monday.
In a written statement, the Moscow-based group AFK Sistema said the appointment was approved by its shareholders at an annual general meeting held over the weekend. It said Kocharian will have the status of an “independent director” in the 13-member board.
Kocharian was nominated for board membership by the Sistema management late last month. A company spokeswoman told RFE/RL’s Armenian service that it took into account Kocharian’s extensive experience in international relations and his “good knowledge of CIS markets.” She said the former Armenian leader is also respected by the Russian business community.
The official, Yulia Belous, made clear that Kocharian, who ruled Armenia from 1998-2008, will not have to relocate to Moscow as the Sistema board normally meets only twice a year. Nor will the new position place any limitations on his political activities at home, she said.
With a market capitalization of $29 billion, Sistema is Russia’s leading publicly listed financial corporation with extensive interests in telecommunications, energy, banking, mass media and other fields. Its key asset is Mobile TeleSystems (MTS), Russia’s largest mobile phone company.
MTS paid in September 2007 $430 million to buy a 80 percent stake in the Lebanese-owned company K-Telecom that founded and runs Armenia’s largest wireless network, VivaCell. K-Telecom had won its operating license in an essentially confidential tender held by the Kocharian government in late 2006.
Opposition politicians and media have for years alleged that Kocharian and members of his family have a major stake in VivaCell. But they have not offered any documentary proof of the claim.
Norilsk Nickel - AGM today, 45%+ votes will be from VTB and VEB, may bring surprise BoD decisions
Citibank, Russia
June 30, 2009
(GMKN.RU - 3H: Sell/High Risk, Target Price: USD89; Current Price: USD90.8)
The company will elect a new BoD today and the new board will vote on a number of issues. The new board may have as many as 4 state-owned banks' representatives. The newly elected BoD will vote on: 1) changes to the information request policy; and 2) approval of annual report and financial statements. Kommersant quotes sources in the Kremlin, VTB and VEB as saying that the latter may be rejected by the BoD. The change to the information request policy, which makes it more difficult to for the BoD to receive information, may also be rejected by the BoD. Kommersant dwells again on last autumn's transactions (Plug Power, Buy Backs, Russia Petroleum) which have drawn the attention of the government.
Our take: this detailed Kommersant report may bring negative newsflow and be potentially damaging for the share price of Norilsk in the near term similarly to the publication of Vedomosti's report in March which raised issues related to the government's interest in the transactions of last autumn. However, in the longer term, if VEB and VTB interests are confirmed to be aligned with those of minorities and the BoD's voting proves that, today the news may be taken positively by investors.
Daniel Yakub
RZD Raises $482M
Russian Railways said Monday that it raised 15 billion rubles ($482 million) from the sale of seven-year bonds.
The notes were priced to yield 14.25 percent. Bondholders have the option to redeem the debt at face value after 3 1/2 years. VTB Group, TransCreditBank, Gazprombank, Sberbank and Troika Dialog organized the sale, the company said.(Bloomberg)
Why GAZ Is Pinning Its Hopes on Opel
The ailing Russian automaker is a key player in the buyout of GM's Opel unit in Germany. But it's really GAZ that is looking for help from Opel
By Matthias Schepp
June 29, 2009, 1:12PM EST
Not far from the "Motor of the Revolution" metro station a huge billboard advertises a "legendary automobile factory." Portraits of the company directors who have headed Russia's second largest automaker since 1932, beam down from between red stars. A huge speedometer hits 80, 100, 120 kilometers per hour—and then abruptly jumps to 300.
The ambitions of the Gorky Automobile Plant (GAZ), located around 400 kilometers east of Moscow on the outskirts of the city Nizhny Novgorod, were always oversized. Over 17 million cars have rolled off the assembly line here. Stalin would personally choose the names for the newest models. He rejected "homeland"—because who wanted to measure that in terms of money and sales? Pobeda, Russian for "victory," was the name given to a functional passenger car designed in 1944. A mosaic in front of the factory entrance still announces a "victory in the socialist competition."
But capitalism has not been kind to the long-established company. Since the end of the Soviet Union, the number of employees has shrunk from 110,000 to 40,000. Reduced working hours, lay-offs, flawed production policies and debts exceeding a billion euros all plague the company. And this, of all companies, is to be the savior for German automaker Opel?
GAZ (GAZA.RTS) touts itself as an "industrial partner" of the Russian state bank Sberbank and the Austrian-Canadian supplier Magna (MGA), which is to acquire 55 percent of Opel's shares. The biggest part of that majority stake, 35 percent, will go to the Russians. The buyers, Opel's American parent company GM, and the German government have agreed on that much—the details, though, still need to be negotiated.
There are now increasing doubts about whether the deal will go well and whether a supplier can really help Opel. And the biggest concern of all is whether the Russian automaker can contribute when it needs help itself.
On July 24, 2008, the GAZ directors led three men through their realm who would later work hard towards securing the Opel deal: Prime Minister Vladimir Putin, who wanted to bring Russia's auto industry to a world-class level with the help of foreign partners, Magna founder Frank Stronach, who was in pursuit of his own automobile production, and GAZ principle stockholder Oleg Deripaska who, back before the financial crisis, dreamed of becoming the world's richest businessman. The trio combined exceptional creative power with a penchant for megalomania.
Andrey Slepushkin, an energetic production director in his mid-30s, has been pegged to perform a sort of miracle—turning a factory that recently was at an 1980s-level of technology into a platform that will launch Magna's bid to conquer the east. Magna believes there is great potential to increase Opel's low market share in Russia from 3 percent to 20 percent. A new plant, which produced the sports utility vehicle Opel Antara not far from St. Petersburg, would be too small for such growth.
Slepushkin has worked in General Motors factories and speaks outstanding English, much to the enchantment of Magna workers on site. In one and a half years, he managed to assemble a $290 million production facility which had been purchased in the US and brought to Nizhny Novgorod for producing Chrysler Sebrings.
Blind to the Desires of Its Customers
The engineer is proud of high-tech robots that apply adhesive to rear windows before carefully putting them in place. "In Russia, this level of automation is only available with us—just like at Opel in Rüsselheim," he said. He uses these kinds of phrases over a dozen times to envision the future collaboration. Quality control, computer-controlled precision—everything like at Opel. Andrey and his bosses leave no room for doubt that "in about nine months, we will be ready to switch from Volga production to an Opel brand."
GAZ and Magna have adapted the Sebring—making the car rounder and higher, because of potholes on Russian streets. They've also outfitted it with better rust protection. Only one problem remains: nobody wants to buy it. Production started in July 2008 and now car number 2,439 is rolling off the assembly line. The factory, though, is actually capable of churning out 150,000 cars a year—60 times what they have achieved thus far.
The engineers and managers at GAZ have mastered a leap in quality that only few believed was possible. But even they couldn't shake the chronic illness of the Soviet-communist economy: they have remained blind to the desires of their customers.
As a result, they came up with a car they dubbed the Volga Siber. The name combination of Volga, the repair-prone GAZ classic, and Sebring, an unknown American car, put off customers. Russians don't want the discontinued models of the West—instead they want budget-priced brands associated with quality.
During the debate about the name, Oleg Deripaska, notorious for his lone decision-making, reportedly had the last word. This significant model policy failure is fueling doubts about whether GAZ is the right partner for Opel.
Even in Moscow's government circles, people are discussing whether the GAZ managers are possibly following a fundamentally flawed strategy: They are using all their resources to pump life into the production of personal automobiles, a weak point for the company, but they are running the risk of neglecting their strength—the production of vans and light trucks. Since the mid-90s, the "Gazelle" has been the company's bestseller. The line of minibuses and pick-up trucks has reached a 58 percent market share in Russia. The quality is passable and the €8,000 price unbeatable.
Unbroken Optimism
Recently, however, GAZ lost a bid to manufacture ambulances for the Russian Ministry of Health to a joint venture between Fiat and the Russian manufacturer Sollers. It was a warning shot. The outdated GAZ bestseller urgently needs to be modernized. On top of that, the £50 million (€59 million) purchase of the British lorry company LDV ended in disaster. The company is now insolvent.
The Gazelle and the other GAZ vans and light trucks "aren't suffering losses during the crisis—we have had to reduce our production from the peak value of 15,000 vehicles a month in 2007, a boom year, to 5,000," says one manager. At the assembly shop in Nizhny Novgorod, there is only one shift still working—and then only three or four days a week. GAZ has just announced 5,000 more lay-offs to the employment office. The company's acting human resources director hanged himself in December in an office bathroom. "Because he couldn't bear the pressure," the newspapers wrote.
Nevertheless, Slepushkin's optimism is unbroken. He believes in Opel, even if the deal is not at all secure: The Germans are still flirting with interested parties in China. And Sberbank head German Gref suddenly predicted publicly that the Opel would also be a good partner for AvtoVAZ, a GAZ competitor, located in the southern Russian city of Tolyatti.
The GAZ directors hope that the market will rebound. In the first half of last year, Russia overtook Germany as the strongest auto sales country in Europe. The accumulated demand is huge in the massive country. In Russia, there are just over 200 cars per 1,000 people—in Germany, it is over 550. Experts are confident that the country will have sales of over 5 million automobiles in the year 2020.
If that is the case, GAZ might be able to succeed at accomplishing what is promised by a slogan posted at the exit of its headquarters—"a breakthrough in the Fatherland's automobile industry." With Opel's help, the failure of the Volga Siber could still turn into a fresh start.
Moscow elite residential property prices stabilize in May
Renaissance Capital, Russia
Tuesday, June 30, 2009
According to Blackwoood Real Estate, prices for elite residential property in Moscow in May declined 0.1% MoM in the primary market and declined 0.3% MoM in the secondary market. Average asking prices were $16,740 m2 for primary and $24,340 m2 for secondary residential real estate.
In our view the data point to some stabilisation in prices with sellers becoming more reluctant to lower their prices below a certain level. Discounts are provided mainly in the primary market, where prices are negotiable.
The elite residential segment in Russia exists in St Petersburg and Moscow and prices in the market typically start at $10,000 m2 but can be in excess of $60,000 m2 in the secondary market. Elite residential property purchases are usually cash funded, not sensitive to changes in interest rates and therefore less indicative of trends in the overall Russian residential market.
David Ferguson
Russia's real world MBAs
Ben Aris in Berlin
June 30, 2009
The Moscow School of Management Skolkovo has big plans. Russia's leading oligarchs banded together to create a world-class business school just under three years ago and pledged half a billion dollars to make the project work. The school will take in its first batch of full-time MBA students in January and Dean of the school, Wilfried Vanhonacker, says that within the next 20 years he hopes to make Skolkovo one of the top schools in the world. And Vanhonacker is the man to do it: he already set up China's first business school a over a decade ago, which is now one of the world's 10 best schools.
The original idea for the school came from the CEO of the investment bank Troika Dialog, Ruben Vardanyan, one of Russia's most respected businessmen. The school is an extension of Vardanyan's "2012 club" – a group of self-made businessmen who have been working together to create a Russia that their children would want to live in (Vardanyan's son graduates from university in 2012, hence the name).
And the school is badly needed. A recent study by consultants McKinsey found that up to 80% of the gap between the US' productivity and Russia's was simply due to poor management. Virtually all of Russia's top companies complain that the lack of good managers is the single biggest impediment to business.
So Vardanyan found he was pushing at open doors when he did the rounds to raise money for the school. The list of Skolkovo's founders reads like a Who's Who of Russia's elite and includes luminaries like the founder of EvrazMetal Alexander Abramov and Russian tycoon Roman Abramovich. The then-president Vladimir Putin personally opened the school in September 2006 and current Russian President Dmitry Medvedev is on the advisory board.
Executive training courses were launched almost immediately for top managers at leading companies across the region. The student roster includes employees from most of Russia's blue chips as well as several regional administrations who are struggling to improve the quality of their management.
But the schools catchment area is not just Russia. Vanhonacker, who set up CEIBS (China Europe International Business School) in 1993, ranked number eight in the world last year by the Financial Times, says the plan is to attract a third of the students from Moscow and St Petersburg where the biggest Russian companies are found. Another third will come from the Russian regions and other countries in the CIS. And the final third will be drawn from the rest of the world, from young entrepreneurial people who see a future in the fast moving emerging markets of the region.
The executive training course is part time and last only a few weeks, but this January the school launched its "Executive MBA" course, which requires a bigger commitment as well as €90,000 in fees. Students are largely 40-something senior executives living in Moscow, but there are some students from other countries in the CIS as well as a few expats who live in Russia. The schedule is tough, with classes from Thursday through to Sunday once a month for a year and a half.
Full-time MBA
The school will become fully operational at the start of next year when the first 45 full-time students enroll for the €50,000 MBA course. "We call the programme an MBA, but the product is unique and it needs explaining. It is not a typical MBA for the typical applicant," says Vanhonacker. "We are looking for a more entrepreneurial type of person with energy and the desire to make a difference, as you need these qualities in the fast moving emerging markets."
Business schools like to bandy about clichés such as out-of-the-box thinking, but at the end of the day most simply repackage the same traditional ideas. Vanhonacker argues that developed world schools are orientated towards developed markets and this means an emphasis on the internet and Wall Street. This bias has crept into the rankings metric and so perpetuates the style of teaching.
What Vanhonacker has done is throw the box away completely and try to build a curriculum that is relevant to the fast moving emerging market economies. As a result, nearly everything about the course is unusual. Rather than stay on campus and pour over case studies, Skolkovo students will spend the first 12 months of the 16-month course on five projects that throw them into the real world. Their "exercises" are to solve real world problems in real world companies.
The emerging-market orientation is nowhere clearer than in their first project, which is a placement with a federal or regional government body in Russia. "This is a key project and is very important for their career, as government plays a much bigger role in the emerging markets so understanding how it works and how to work with it is an essential element of any successful business," says Vanhonacker. "It is an experiences that will play a very important part of their career."
The next three projects are spent with companies in one of Russia, India, China or the US to get some hands-on experience. In the final project, each student is expected to come up with a business idea and put it into practise. But here again the school shows its commitment to the real world and has a $100m venture capital fund to finance the ideas. If it turns out to be a good one, the company is put into an incubator and grown as a real business, which the student can take over after graduation.
The directness of the schools approach is also reflected in its marketing campaign. As it's looking for unusual students, the school has eschewed advertising in the mainstream international press (apart from a few ads in the Financial Times) and spends most of its time looking for students through social networking sites and similar forums on the internet.
Still, Vanhonacker has not abandoned tradition altogether. The school has hired 12 full-time academics, including two star lecturers from France's INSEAD, one of the two most famous business schools in the world. The difference is that these lecturers are not tenured and have an unprecedented freedom to experiment.
The real world emphasis means Skolkovo is verging on the edge of being a consultancy. For example, it already works closely with several regional administrations and counts the prime minister of Tatarstan, Rustam Minnikhanov, amongst its students, who has been taking courses in leadership and strategy. “We work very closely with governments like those of Tatarstan, where we have members of the administration on courses. The goal is to raise the general level of competence in the regional government,” says Vanhonacker.
But typically for the school, the course also has a practical goal as well, as the Tatar administration is hoping to improve the republic's ability to raise money on the international capital markets.
Much of what the school is proposing to do is a pretty radical experiment in new teaching methods. And given Vanhonacker's track record, established schools are following Skolkovo's progress closely. “We are being closely watched by other schools, especially in the US, as we are doing things they would like to do but can’t,” says Vanhonacker.
Activity in the Oil and Gas sector (including regulatory)
Russia 2010 gas price hike to top 10 pct – Kremlin
Tue Jun 30, 2009 4:19am EDT
MOSCOW, June 30 (Reuters) - Russia will likely raise gas prices by over 10 percent in 2010, while the power price hike would be closer to 5 percent, top Kremlin economic aide Arkady Dvorkovich told reporters on Tuesday.
The statement seemed to contradict an earlier statement by Economy Minister Elvira Nabiullina, who told the same conference that Russia will allow power and gas prices to rise by a similar amount in 2010 and the hikes will be minimal. (Writing by Dmitry Zhdannikov, Editing by Simon Shuster, + 7 495 775 12 42, dmitri.zhdannikov@)
Kudrin considers higher gas export duty a possibility
Troika, Russia
Tuesday, June 30, 2009
Finance Minister Alexei Kudrin said yesterday that higher gas MET, export duties and gasoline excise taxes were among the options for additional budget revenues, Reuters reported. At a meeting hosted by Prime Minister Vladimir Putin, Kudrin said that some taxes have not been indexed to inflation for several years. The minister's statement came as a response to Putin's suggestion to find additional sources of budget revenues. To be fair, Kudrin stated that no concrete measures have been discussed.
While we have already known about the government's intentions to raise gas MET next year, the encroaching on the export duty is new. We do not yet know the scope of a possible rise in the export duty, which currently stands at 30% and is levied on Gazprom's export revenues. Every 100 bps increase in export duties would lower Gazprom's EBITDA by 1% (i.e. a hike from 30% to 35% would lower Gazprom's EBITDA by 5%).
On the MET front, we already know about the Finance Ministry proposal to raise the tax by 57%, from R147 per 1,000 m3 ($4.45 per 1,000 m3) to about R230 per 1,000 m3 ($7.00 per 1,000 m3) as soon as 2010. If this tax is implemented, it would cost Gazprom about 4% of our projected EBITDA (and NOVATEK around 6%) based on an average oil price of $60/bbl next year (and only next year, as we already assume higher MET rates from 2011). A higher oil price would lessen the impact (due to a greater contribution from the liquids businesses of both companies) and vice versa.
Kudrin's statement on possible export duty hikes introduces a great deal of uncertainty over Gazprom's 2010 financials, especially if the government starts "indexing" gas export duties. It is not a done deal by any means, and Gazprom will fight it. However, Putin's suggestion to find money from taxes that have not been indexed is indeed threatening for Gazprom. According to our economists, the federal budget can face up to a R1 trln ($32bn) shortfall even at $60/bbl next year, assuming the government does not cut its expenditures. It is likely this possibility is making the state look for ways to raise the money quickly from the gas industry, which the Finance Ministry feels is under taxed. While Gazprom is expected to fight over this, it could be another cloud over the gas giant that is unlikely to blow over soon.
Oleg Maximov
Tax changes to bring more crude production and better profitability
30 June, 2009, 10:27
Russian oil companies have reversed their forecast that national production will fall over the next decade, after the government pledged new tax cuts.
Black gold traded above $70 a barrel on Monday. That's double the price on March.
For Russia's economy, which taxes oil firms up to 90 cents in the dollar, it's a blessing, according to Energy Minister, Sergey Shmatko.
“Thanks to the rise in price, second quarter oil revenue to the national budget will be well up on quarter 1. That makes it a cashcow for the Russian economy.”
But Shmatko admits he's killing the goose that lays the golden eggs. The Energy Ministry found most new oil projects in Russia won't be profitable under the existing tax regime, even if prices soar to $150 per barrel.
The government has now submitted proposals to scrap the Mineral Extraction Tax, and export tariffs for undeveloped fields. Ivan Mazalov, Director of Prosperity Capital management, says this changes the profitability outlook for oil producers.
“The oil companies will be extremely profitable actually. You have very low costs from new deposits which would run $4 or $5 per barrel. But then you have international oil price, which is even now between $60 and $70.”
The situation could be a win-win. The government will switch to taxing profits, which lets producers decide how they make that money.
Regulator to up Transneft’s oil transport tariff 4% starting Wed
MOSCOW, Jun 30 (Prime-Tass) -- Russia’s Federal Tariff Service has approved an average 4.4% increase in the tariff for oil transportation through the system of pipeline operator Transneft starting Wednesday, a spokesperson for the service said Tuesday.
Transneft asked the service to raise the tariff due to an increase in its expenditures on servicing borrowed funds.
Russia, China May Jointly Invest in Oil, Natural Gas Projects
By Bloomberg News
June 30 (Bloomberg) -- Russian companies may invest in oil exploration and natural gas distribution in China after the two nations signed an agreement to expand trade, the Chinese government said.
Russian companies may participate in the construction of underground natural gas storage tanks in China, the National Development and Reform Commission said on its Web site today, citing a Sino-Russian cooperation plan approved on June 17. Chinese companies are encouraged to develop oil and gas fields and build gas liquefaction plants in Russia, the commission said.
China and Russia signed an agreement worth $3 billion to cooperate in trade and investment in areas including light industries, high technology and energy, the Ministry of Commerce said on June 17. Oil exports from Russia to China over the next 20 years will surpass $100 billion, Russia’s Prime Minister Igor Sechin said then.
The two nations may set up a joint venture in China to manufacture equipment for nuclear power plants, the government said today.
-- Wang Ying. Editors: Ang Bee Lin, Clyde Russell.
To contact Bloomberg News staff on this story: Ying Wang in Beijing at +86-10-6649-7562 or ywang30@
Last Updated: June 30, 2009 01:27 EDT
E.ON’s Russian-Backed Baltic Pipeline Leads Europe’s Gas Race
By Amanda Jordan and Tara Patel
June 30 (Bloomberg) -- E.ON AG’s Russian-backed gas pipeline in the Baltic is gaining the advantage over rival projects as the European Union weighs $21.5 billion of import links to reduce its reliance on fuel shuttled through Ukraine.
Nord Stream AG, controlled by OAO Gazprom, is on schedule to ship Russian gas to Germany in 2011, said Paul Corcoran, the project’s financial director. Backed by President Vladimir Putin and chaired by former German Chancellor Gerhard Schroeder, Nord Stream already has contracts for 22 billion cubic meters of its 55 billion-cubic-meter annual capacity, he said.
The Nord Stream plan may get a three-year head start over the EU-backed Nabucco pipeline project, which has been delayed by a lack of commitments from customers and suppliers. The two ventures are vying to send gas to Europe, which is seeking to increase and diversify imports to counter declining North Sea output and avoid a renewed halt in supplies transiting Ukraine.
“North Sea gas production is trailing off rapidly,” Corcoran said in an interview in Brussels. “There will be a very significant import gap in the future.”
Since Russian shipments through Ukraine were cut in January amid a spat over pricing and debt, the EU has boosted calls for alternative import routes. These include the 7.4 billion-euro ($10.4 billion) Nord Stream project and OMV AG’s 7.9 billion- euro Nabucco link, which would pipe Caspian-region gas via Turkey to Austria. Europe faces an 18 percent jump in gas demand by 2020 from 2006, according to the International Energy Agency.
‘No Obvious Winners’
“Nord Stream is going to go through because it’s linked to the Ukrainian crisis as a way for Russia to reroute gas,” Thierry Bros, a utilities and gas analyst at Societe Generale, said on June 25 in Brussels. “I’m not optimistic about the other projects. There are no obvious winners.”
Aside from Nabucco, proposed pipelines in the so-called Southern Gas Corridor include the South Stream, Blue Stream and White Stream links, the Trans Adriatic Pipeline and the Interconnector Turkey-Greece-Italy, or ITGI.
Nord Stream, which will ship Gazprom’s gas mostly from the Yuzhno-Russkoye field in Western Siberia, has signed delivery contracts through 2035. Meanwhile Nabucco, whose other partners are Mol Nyrt., RWE AG, Transgaz SA, Bulgarian Energy Holding EAD and Botas AS, is yet to complete deals to fill the pipe’s planned 31 billion-cubic-meter capacity with non-Russian fuel.
“Gas traders are currently in negotiations with the countries of the Caspian region and Iraq,” Christian Dolezal, a spokesman for Nabucco Gas Pipeline International GmbH, said yesterday by e-mail.
Caspian Gas
Nabucco’s efforts to secure gas face competition from Moscow-based Gazprom, which has courted suppliers in Azerbaijan and Iran as it promotes its own export projects.
“There is no gas in the pipeline for the moment so people are saying ‘why develop it?’” Jean-Arnold Vinois, head of the EU’s energy policy security unit, said in Brussels last week in a reference to Nabucco.
Nabucco awaits agreements not only on supply but on route. Transit country Turkey, which has previously demanded 15 percent of the gas passing through the pipe at discounted prices for its own use, said in May it will sign an accord in July, a necessary step to start operating the link. Nabucco, initially planned for 2013, will deliver its first gas in 2014, Dolezal said yesterday.
Transit talks between ministerial working groups are “on the home stretch,” he said, adding that “we expect signing in Ankara soon.”
Turkey Accord
“The only way it will work is getting a transit agreement with Turkey,” Societe Generale’s Bros said. “If they can’t get a proper agreement then there is no point, because Europe would just swap the Ukraine risk for a Turkish risk.”
Ukraine’s lack of cash to pay monthly gas bills from Russia has raised concern that a further supply halt may be imminent, giving urgency to diversification. Following the January dispute, Ukraine agreed to pay for Russian gas within the first seven days of each month.
“We are in an early warning situation,” the EU’s Vinois said. “Everyone is waiting for July 7 to see what will happen. The new crisis looming is stimulating efforts to try and find the right answers.”
Nord Stream, which will run from Vyborg, west of St. Petersburg, to Lubmin near Greifswald in Germany, would benefit Russia and Europe as both are keen to cut reliance on Ukraine. It would also strengthen Russia’s grip on the EU, which already gets 25 percent of its gas from the country.
Nord Stream’s scheduled start in 2011 won’t affect Nabucco’s timing or financing, according to Dolezal. “Different project, different sources, different markets, different customers,” he said. “This does not affect our plans or funding in any case.”
Environmental Concerns
The Nord Stream development has, like Nabucco, faced controversy over its proposed route.
The pipeline will pass through Russian, Finnish, Swedish, Danish and German territorial waters and requires permission from all these countries before construction can begin. Germany has already objected to the route because it runs through military training areas. Finland has voiced environmental concerns and proposed alternative directions.
Nord Stream is “working intensely” on environmental considerations, Corcoran said. From a “permitting perspective, going through the Baltic is probably easier than going through a land route.”
Two-Phase Project
Project partners expect to get permits by the end of the year from the five countries, which will allow construction to start in April, he said. Nord Stream will be developed in two phases, with the first pipe due to deliver gas in the fourth quarter of 2011 and the second pipe a year later, he said.
Almost a third of Nord Stream’s financing will come from shareholders Gazprom, Wintershall Holding AG, E.ON Ruhrgas and Nederlandse Gasunie NV. Half of the remaining 70 percent is scheduled to come from commercial bank lending and the rest from export credit agencies.
“Of course, our liquidity position is substantially different from a year ago,” Corcoran said. “But the impact on the project is not so significant in terms of cost because interest rates have fallen.”
Nord Stream may receive further commercial backing from France’s GDF Suez SA, which is in talks on joining the project as a stakeholder and as a potential buyer of supplies for its customers, spokesman Antoine Lenoir said by telephone.
GDF Suez’s entry would bolster the project’s fund-raising abilities and “reflect the European Union nature of the project even more,” Corcoran said. “Nabucco is much more complicated. The fact that the European Union is putting money into it shows it needs extra support.”
The European Bank for Reconstruction and Development said this month it plans to be a “senior participant” in the financing of the Nabucco project. The EU on May 6 approved investing 200 million euros in the venture.
To contact the reporters on this story: Amanda Jordan in London at ajordan11@; Tara Patel in Paris at tpatel2@
Last Updated: June 29, 2009 18:01 EDT
Russia clinches gas contract with Azerbaijan
By Marina Lapenkova – 9 hours ago
BAKU, Azerbaijan (AFP) — Russian gas giant Gazprom clinched a deal Monday to buy natural gas from ex-Soviet Azerbaijan, as Moscow seeks to extend its grip on potential European energy supplies in the resource-rich Caspian Sea.
The agreement was signed by Gazprom chief executive Alexei Miller and Azerbaijani national energy company chief Rovnag Abdullayev in the presence of Russian President Dmitry Medvedev and his Azerbaijani counterpart Ilham Aliyev.
"I think that we will be able to take this work further, in view of greater opportunities and greater volumes, which will be increased," Medvedev told journalists in Baku.
Miller said Gazprom's purchases would start at 500 million cubic metres of gas annually as of January 1, 2010, with the agreement allowing for supply levels to increase later.
"The price will be commercially attractive for Azerbaijan because we are neighbouring countries so there are no transit states between us," Miller said, without providing further details.
"We can therefore begin to buy the gas quickly. There is already a gas pipeline between us," Miller said, adding that the gas would be used for Russian domestic consumption.
Miller said the deal will also see Gazprom listed as a preferential buyer for gas from the second development phase of Azerbaijan's enormous Shah Deniz offshore field.
"Among all potential buyers, preference will be given to Gazprom and the others will have to offer a more interesting price," Miller said.
Production at the Shah Deniz field, estimated to contain up 1.2 trillion cubic metres of gas, began in 2006 and a second phase of development is expected to see production ramp up by 2015.
Monday's deal could cast doubts on the viability of the European Union's ambitious Nabucco pipeline project, aimed at bypassing Russia to deliver Caspian Sea gas to western Europe.
Rich in oil and gas and strategically located between Russia and Iran, Azerbaijan has been courted by both Moscow and the West since gaining its independence with the 1991 collapse of the Soviet Union.
Backed by Western governments, companies such as Britain's BP have pumped hundreds of millions of dollars into the country's energy sector, building a corridor of oil and gas pipelines from Azerbaijan through Georgia and Turkey to Europe.
Azerbaijan is seen as a crucial potential provider for Nabucco, a 3,300-kilometre (2,050-mile) pipeline between Turkey and Austria scheduled to be completed by 2013.
The pipeline is aimed at reducing European reliance on Russian gas supplied through Ukraine -- a route that has seen chronic interruptions amid payment disputes between Moscow and Kiev.
Anxious to secure energy sources for its own export pipelines, Russia this year stepped up efforts to buy gas from Azerbaijan.
In March the two countries signed a preliminary deal on natural gas sales from 2010 and a month later Medvedev hosted Aliyev in Moscow to push the deal forward.
Russia is backing a rival pipeline to Nabucco, South Stream, being built by Gazprom and ENI of Italy. That project entails building a gas pipeline under the Black Sea from Russia to Bulgaria and then branches to Austria and Italy.
Independent Azerbaijani analyst Rasim Musabekov warned against interpreting Monday's deal as a sign that Baku was moving away from energy cooperation with the West.
"I do not think this is a signal that Azerbaijan will cooperate on gas with Russia more than with other countries ... One should understand these agreements in the context of Azerbaijan diversifying its oil and gas deliveries," he said.
"Azerbaijan will be able to fill the pipeline heading north and still remain a reliable partner in other projects, namely Nabucco," he said.
Azerbaijan last year produced 22.8 billion cubic metres of natural gas, according to government figures, and the country expects to nearly double gas production to 40 billion cubic metres by 2015-2020.
Russia ready to buy Azerbaijani gas at record price – paper
MOSCOW, June 30 (RIA Novosti) - Russia is ready to purchase Azerbaijani natural gas at a record price of $350 per 1,000 cu m to try and make a rival Western-backed gas pipeline project unfeasible, a business paper reported on Tuesday.
Russian President Dmitry Medvedev paid a visit to Azerbaijan on Monday, during which Gazprom signed an agreement with the State Oil Company of Azerbaijan Republic (SOCAR) to buy 500 million cubic meters of gas from Azerbaijan annually from January 1, 2010, with supplies expected to increase in the future.
According to Kommersant, it was reported later on Monday that an inter-governmental agreement on the construction of the rival Nabucco gas pipeline bypassing Russia could be delayed.
The agreed gas price with Azerbaijan is higher than the $300 per 1,000 cu m that Russia offered to Uzbekistan and Turkmenistan earlier in the year.
The $10 billion Nabucco pipeline, backed by the European Union and the U.S., is intended to link energy-rich Central Asia to Europe through Azerbaijan, Georgia, Turkey, Bulgaria, Romania, Hungary and Austria, bypassing Russia and Ukraine. Construction has been tentatively scheduled to begin in 2010.
Russia's transit disputes with its former Soviet neighbors have raised concerns that Europe is too dependent on Russia for its energy.
Lukoil awards pre-export finance mandate
29 June 2009
In total 12 banks have been awarded a mandate for Lukoil’s jumbo pre-export financing, its first secured financing since 2003.
Keywords (click to search): [Lukoil] [Russia] [BTMU] [Barclays] [BNPP] [Calyon] [Citi] [Deutsche Bank] [Pre-export financing]
Banks were mandated last week for a $1.2 million jumbo pre-export financing (PXF) for Russian oil producer Lukoil. The deal has been around four months in the making since banks returned proposals in March.
Lukoil approached banks at the start of the year looking for a pre-export financing of between $1 billion and $1.5 billion. The company asked banks for three and five-year tenors but bankers declined a five-year tranche when they returned their proposals.
Russia's Energy Rethink
Vidya Ram, 06.29.09, 12:15 PM ET
LONDON -
The credit crunch is forcing Russia to rethink its hard line on foreign energy companies, potentially offering great opportunities to the likes of British company Royal Dutch Shell, America's Exxon Mobil and France's Total.
Just two and a half years after forcing Royal Dutch Shell and its Japanese partners Mitsui and Mitsubishi to sell their majority stake in Sakhalin 2, the Russian prime minister is welcoming the Anglo-Dutch energy firm back to Sakhalin with open arms.
"We think it is wholly possible to continue cooperating with Shell on other projects; I am referring to Sakhalin-3 and Sakhalin-4," said Putin, in a transcript of a discussion with Jeroen van der Veer, the outgoing chief executive of Royal Dutch Shell, published on Putin's website. He was referring to the natural gas projects that are yet to be developed on the island of Sakhalin. Shell has retained a 27.5% stake in Sakhalin 2, after selling it to Gazprom for $7.5 billion in 2007.
The change of tone was remarkable. Having faced the threat of having their Sakhalin-2 permit revoked for flouting Russian environmental regulations--widely seen at the time as a political tactic to persuade them to give up their controlling stake--over the weekend Putin praised Shell's efforts on that very same project. "Our work efforts have not just seen success but are even ahead of schedule," he said.
"It’s clearly a sign of a change of approach," said Panmure Gordon analyst Peter Rowland Hitchens. Other beneficiaries of the turnaround could be Exxon, which is involved in Sakhalin-1, Total, the French oil major which has several joint ventures with Gazprom, including in the Shktoman fields in the Barents Sea, and BP, which has been wrestling with Russia over its joint venture TNK-BP.
The collapse in energy prices has left Russia in a tough position: On the one hand it needs higher production to keep the cash coming in, but on the other hand, it's struggling for sources of money. Russia built huge surpluses during the 2003-2008 oil boom but is worried that the reserves won't last as its economy struggles.
"It was already very well when oil prices were high and there was lots of money floating around the system, but suddenly things are turning around and big companies are running into problems," said Hitchens.
While President, Putin upended a lot of resource-sharing agreements that had been made during the years of Boris Yeltsin, using Russia's environmental laws as a guise for pushing through what was essentially a political change, says Jan Randolf, head of sovereign risk at IHS Global Insight. "Russia used its regulatory powers to trip Shell up and force them to take a minority stake," he said.
Gazprom slashed its capital expenditure by 21.5%, to 500 billion rubles ($16.1 billion), for this year, according to a statement from its Deputy Chief Executive Alexander Ananenkov, in mid-June, reflecting falling prices and weak demand for gas both in Europe and in Russia.
Gazprom
Gazprom to buy 0.5 bcm of Azerbaijani gas annually from 2010
30/06/2009 10:22 (00:52 minutes ago)
The FINANCIAL -- According to RIA Novosti, Gazprom will buy 500 million cubic meters of natural gas from Azerbaijan annually from January 1, 2010, CEO Alexei Miller said on June 29.
The Russian energy giant, which has not so far bought Azerbaijani gas, signed an agreement with the State Oil Company of Azerbaijan Republic (SOCAR) earlier in the day.
"Gazprom will buy Azerbaijani gas from January 1, 2010. Initially we will buy 500 million cubic meters of Azerbaijani gas," Miller said, without disclosing either the price or the pricing formula.
"The agreement signed today fixes a basic price that is commercially attractive to our Azerbaijani partners," the Russian businessman said.
The agreed volume of deliveries from SOCAR is less than one tenth of one percent of the 549.7 billion cubic meters of gas Gazprom itself produced last year.
Azerbaijan plans eventually to increase gas supplies to Russia, Azerbaijani President Ilham Aliyev said.
"We plan in the future to increase supplies as the volume of Azerbaijani natural gas production goes up," Aliyev said on Monday after talks with Russian President Dmitry Medvedev in Baku.
According to the Gazprom CEO, Azerbaijani gas to be pumped via a pipeline running between the two countries will be used in south Russian territories. He also pledged that similar volumes of gas would be reserved for European consumers.
Miller added that Gazprom was listed as a potential buyer of gas from the Shakh Deniz field with some privileges reserved for the company.
"We are confident that Gazprom has very good negotiating positions regarding long-term cooperation in the purchase of Azerbaijani gas," he said.
Speaking in early June at an oil conference in Azerbaijan's capital, Baku, U.S. Deputy Assistant Secretary of State for European Affairs Matthew Bryza said that in 2012-2015 Azerbaijan would supply Europe with 12 billion cu m of gas from its Shakh Deniz field alone, raising supplies to 15 billion by 2015, and increasing them further by 2015-2020.
Gazprom Gets Priority for Azeri Gas
30 June 2009
By Maria Antonova / The Moscow Times
Gazprom and Socar signed a deal Monday giving the Russian company first rights to Azeri gas previously seen as reserved for the Nabucco pipeline, capping President Dmitry Medvedev's "short but intensive" visit to Baku.
Medvedev said the agreement was based "absolutely not on political motives but on mutual benefits," although analysts said Gazprom was essentially staking out a claim for Azeri supplies to fill its South Stream pipeline project, the main rival to the European Union-backed Nabucco.
Under the deal -- signed by Gazprom chief Alexei Miller and Rovnag Abdullayev, head of the State Oil Company of Azerbaijan -- Gazprom will buy a relatively modest 500 million cubic meters of gas from Socar next year.
Speaking to reporters after the signing, Miller declined to comment on the base price outlined in the agreement. Purchases will be made using a pricing formula, while the "basic price outlined in the agreement is commercially attractive for our Azeri partners," he said.
Miller also said it would be possible to increase the volume later.
To be attractive for Azerbaijan, the sales would probably be tied to the market price in Europe and amount to "at least $180" per thousand cubic meters, said Vitaly Gromadin, an analyst at Arbat Capital.
Azerbaijan also recognized Gazprom as a priority buyer from Stage 2 of the Shah Deniz gas field.
"All things being equal among potential buyers, priority will be given to Gazprom," Miller said. "Other buyers would have to offer conditions that are more financially attractive," he said.
Medvedev also hinted that Monday's deal was just the beginning of Gazprom's plans for Azeri gas. "I think we can further continue this work, keeping in mind the big opportunities and big volumes, which will be growing," he said after the signing.
The agreement is the first gas import deal between Russia and Azerbaijan, which had been the only CIS country without a contract to sell the fuel to Russia. Miller said Friday that the gas would be used in southern Russia.
Azeri President Ilham Aliyev said his country would increase its gas output by 11 percent next year to 30 billion cubic meters.
Stage 2 of Shah Deniz was supposed to be a key source for the Nabucco pipeline, which European countries have pushed to diversify their energy imports and lessen reliance on Russia.
Gazprom has not looked favorably on these efforts. On Friday, Miller warned Europe not to turn diversification "into a fetish," and he called alternative suppliers too inexperienced.
For now, Gazprom does not need the Azeri gas because of lower demand, but the dea's priority clause may play an important role in the future as Russia lobbies for South Stream, Gromadin said.
"An agreement with Azerbaijan will show a stronger Gazprom position to potential Nabucco investors," he said, and it also gives the company extra security as Turkmenistan becomes a less reliable exporter.
Gazprom has expressed interest in developing and buying all the gas from Stage 2 of Shah Deniz, which can produce 16 bcm of gas annually. "It's a question of who builds the pipeline faster," Gromadin said.
Gazprom Neft says has under 49 pct of Sibir
Mon Jun 29, 2009 11:15pm IST
MOSCOW, June 29 (Reuters) - Gazprom Neft (SIBN.MM: Quote, Profile, Research) the oil arm of Russia's Gazprom (GAZP.MM: Quote, Profile, Research) said on Monday it has built up a stake just under 49 pct of mid-sized oil company Sibir Energy (SBE.L: Quote, Profile, Research), leaving its struggle to increase output in question.
Data from both companies, as well as some analysts' estimates, suggested Gazprom Neft may have surpassed the 50 percent mark of ownership in Sibir Energy, but a company spokeswoman said the size of its stake fell short of that mark.
"Gapzrom Neft directly owns a 48.7 percent of Sibir Energy," she told Reuters.
On Monday, Sibir Energy published several statements on changes in the company ownership structure, but the releases shed little light on the true size of the Gazprom Neft stake, listing three separate stakes held by two structures.
Sibir said Gazprom was indirectly interested in 34.10 percent held by a nominee, matching the size of a stake previously declared by Gazprom Neft after buying out minorities.
Sibir said an additional 14.67 percent was held by a wholly-owned subsidiary of Gazprom Neft, LLC GazpromNeftFinance, which was also the registered holder of 25.66 percent.
The Gazprom Neft spokeswoman was unable to clarify which shares were included in the 48.7 percent directly held by the company.
Last week Gazprom Neft CEO Alexander Dyukov said the company had not decided whether to buy further stakes after its structures bought out half of Sibir major shareholder. [ID:nL0898941]
The company formerly called Sibneft has been trying to curb a production decline since Gazprom bought it from its former owner, billionaire Roman Abramovich, in 2005 for $13 billion.
Analysts believe that consolidation of more than a half of Sibir Energy might help Gazprom Neft end this year with output growth.
"After consolidating control over Sibir Energy, Gazprom Neft might show single-digit production growth as early as this year," said VTB Capital in a research note.
According to Energy Ministry data, Gazprom Neft oil output fell 5.6 percent to 30.74 million tonnes in 2008. [ID:nLB672713]
In January-May the figure fell 6.1 percent from the year-ago period. [ID:nL2469529]
In 2008, Sibir Energy's total crude production was about 4.0 million tonnes, which accounts for more than 10 percent of Gazprom Neft's total crude production.
If it can, "Gazprom Neft will likely consolidate Sibir Energy in its own financials, increasing its consolidated output," said Troika Dialog brokerage, adding the company's oil output should "be just north of 30 million tonnes in 2009" with Sibir.
The deal would also give Gazprom Neft control of the 200,000 barrels per day Moscow refinery, now shared with Sibir, and refining capacity would rise by 25 percent. (Writing by Vladimir Soldatkin; Editing by Hans Peters)
Gazprom Stays the Course Under Putin's "Manual Management"
[tt_news]=35190&tx_ttnews[backPid]=7&cHash=c5f568fc55
Publication: Eurasia Daily Monitor Volume: 6 Issue: 124
June 29, 2009 12:14 PM Age: 15 hrs
By: Pavel K. BaevRussian energy super-giant Gazprom has taken severe blows in the still-deepening recession, and the worst setbacks have happened in its most profitable market - the European Union. Various assessments show that the volume of its export to Europe shrunk by 35-40 percent in the first four months of this year, and consequently its market share fell from 31 percent to 16 percent, while the forecast for export revenues in 2009 is some 40 percent below the previous year (Kommersant, June 25). Nevertheless, at the annual meeting last week Gazprom's CEO Aleksei Miller, confidently asserted that the lowest point of the decline had passed (gazeta.ru, RIA-Novosti, June 26). He dismissed the criticism over inflexible price policy and predicted that E.U. consumers would resume their normal demand for Russian gas, while the market expectations for the price of oil in 2010 shifted, in his opinion, towards the benchmark of $100 per barrel.
Falling revenues determined, nevertheless, some changes in Gazprom's guidelines, one of which involved cutting the dividends for 2008 by as much as 85 percent, which essentially means less money for the state budget -since the government is the majority shareholder (Vedomosti, June 25). Another alteration is the reduction of the investment program, perhaps by as much as 30-35 percent, but on that few details are released. Production plans for the huge Bovanenkovskoe field has been corrected towards the end of 2012, but Miller confirmed that the Shtokman project remained on track (RIA-Novosti, June 26; Kommersant, June 17). He also insisted that the South Stream pipeline faced no delays and would carry up to 35 percent of Russian gas export to Europe after 2015. In reality, however, Shtokman most probably will need re-scheduling towards 2015, while the prospects for the South Stream remain very uncertain.
One person who was noticeably absent from the "united-we-stand" gathering was Prime Minister Vladimir Putin, who is known for treating Gazprom's business very much like his own. His presence was strongly felt in the re-appointments of his loyal ally Miller as well as his more recent protégé Deputy Prime Minister Viktor Zubkov as the chairmen of the board and even in the appearance of a new "independent" in Gazprom's list of directors - Valery Musin, a professor of law from St. Petersburg University and Putin's former teacher (, June 26). Putin has clearly not lost interest in gas matters, as shown by his meeting with Total's CEO Christophe de Margerie, who spared no praise for Putin's "instructions" about doing business in Russia and was duly rewarded with a contract for the joint development of a medium size gas field in western Siberia (Kommersant, June 25).
Duties of prime ministers are certainly complex, but few apart from Putin have taken to making blitz appearances in unexpected places and performing small miracles by reviving paralyzed plants. It started in the small town of Pikalevo, Leningrad oblast earlier this month where TV crews arrived just in time to show Putin stepping out of the helicopter, making a brief tour around the empty enterprises and forcing the owners to strike a deal to re-start production, not even leaving them the pen with which the contract was signed as a souvenir (Nezavisimaya Gazeta, June 11). Then came the visit to Barnaul where the prime minister inspected the foundation of a new medical center, but the mere fact of his presence in Altai krai was enough to resolve the labor conflict at the Rubtsovsk tractor plant that suddenly saw demand from new customers (Kommersant, June 20). After the visit to Ilya Glazunov's personal art gallery where the artist was eagerly attentive to the prime-ministerial advice, some commentators started to worry about Putin's connection with reality (Ezhednevny Zhurnal, June 16). Last week he paid a surprise visit to a super-market in Moscow and expressed dissatisfaction with meat prices, accepting reassurances that they would be immediately revised down (Vremya Novostei, June 25). Yuri Kobaladze, the executive director of the company that owns the chain (and a former general from the Foreign Intelligence Service) had the nerve to clarify later that it was only light hearted, but July sales were nevertheless duly announced (Moscow Echo, June 25).
The resemblance of this "manual management" to the trademark style of North Korean "great-and-dear" leaders is more than a little amusing (grani.ru, June 26). The public relations effect from such attention to local problems is inevitably short-term, but it creates an increasing demand for quick fixes of such complex problems as, for instance, the stagnation of the "mono-cities" built around one or several industrial enterprises (Rossiyskaya Gazeta, June 26). The simple proposition that the depth of economic decline requires serious reforms in the overloaded system of bureaucratic rent-extraction from every business activity is not present in the recently revised anti-crisis program. The "ideology" of this plan boils down to the expectation that rising oil prices will restart the growth engine that worked so wonderfully during Putin's presidency, while the hands-on tackling of some local situations will help in defusing public protests.
Gazprom is both a tool and a victim of this "it-will-pass" policy that has already transformed the crisis into stagflation. Putin's micro-management of the company's activities is never advertised, but his hand is unmistakable in the brinksmanship tactics that defines the development of parallel gas conflicts with Ukraine and Belarus. Compromises in these quarrels are always only a means toward the end of denying them any independent say in gas matters. Putin quite sincerely does not see how this tough behavior damages Gazprom's reputation in Europe, much the same way as he cannot grasp the logic of the diminishing effectiveness of performance by this overgrown corporate behemoth under his enlightened guidance. Gazprom is allowed to reduce its contributions to the state budget and is granted permission to increase prices for domestic consumers despite their diminishing incomes, its every acquisition or investment in Europe is backed by all the necessary foreign policy resources - and it is still in far more trouble than its glossy annual report admits. Every crisis brings reinvigoration to businesses that can learn, but Putin remains adamant that his course has always been faultless.
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