Russia
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Basic Political Developments
• Russia and Mongolia plan closer cooperation – Summary: Russia and [pic]Mongolia signed a series of agreements on the "development of a strategic partnership" during a two-day visit by Russian President Dmitry Medvedev to the capital Ulaanbaatar ending Wednesday. Medvedev met with Mongolian President Tsakhiagiin Elbegdorj, Prime Minister Sanjaagiin Bayar and Speaker of Parliament Damdin Demberel.
o Medvedev to end Mongolia visit, attend Khalkhin-Gol victory events - Russian President Dmitry Medvedev will on Wednesday end his two-day state visit to Mongolia. It is planned that he will attend festivities devoted to the 70th anniversary of the joint victory on the Khalkhin-Gol River and hand state awards to Mongolian veterans.
o Russia, Mongolia will resist attempts to falsify results of WW II –Medvedev
• Russia deploys air defence on NKorea missile tests - "We have an S-400 division there," said General Nikolai Makarov, chief of staff of the Russian armed forces, confirming that Russia had deployed its most advanced anti-missile defence system near the border with North Korea.
• S-400 anti-missiles to shoot down failing Nth Korean rockets - A contingent of state-of-art air defense missiles S-400 has been deployed in Russia’s Far East to monitor North Korea’s missile launches and intervene in case they threaten Russia.
• RF president’s Far East envoy to discuss cooperation in S Korea - Projects of economic cooperation between Russia and South Korea will be discussed in Seoul by Russian president’s plenipotentiary representative in the Far Eastern federal district Viktor Ishayev. He is arriving in the South Korean capital on Wednesday evening heading a delegation of more than 20 heads of regions and businesspeople at the invitation of the South Korean Ministry of Foreign Affairs and Trade.
• Russia's Ties with South Korea Deepen - Despite the failure of South Korea's first rocket, developed with Russia, there's a growing industrial partnership between the old Cold War foes
• Overcoming of WMD proliferation threat among priorities for Russia -Sergei Ivanov - The proliferation of weapons of mass destruction and delivery vehicles is posing an increasingly more serious threat to Russia day by day, Russian Deputy Prime Minister Sergei Ivanov said at a session of the Russian export control commission at the House of Government on Wednesday.
• Informal meeting between Dmitry Medvedev and Alexander Lukashenko will take place on August 27, 2009 in Sochi
• Lukashenka left for Sochi unexpectedly - “The meeting has been mutually arranged the second half of the week,” Prikhodko said. According to him, Dmitry Medvedev sent an invitation to his Belarusian colleagues “some time ago”. An agenda for the meeting on bilateral trade and economic cooperation, Russian-Belarusian cooperation within the frames of EurAsEC and the Customs Union is being prepared, Prikhodko noted.
• Lukashenka stays in oligarch Deripaska’s hotel in Sochi
• Putin to Meet with Kokoity in Moscow - Russia’s Prime Minister, Vladimir Putin, will meet with South Ossetian leader, Eduard Kokoity, in Moscow on August 26.
• Abkhazia marks 1st anniversary of independence recognition by RF
• Joy & tears: Caucasian republics mark independence - The people of South Ossetia and Abkhazia are celebrating one year since Russia recognized their independence from Georgia. Moscow made the move following Tbilisi’s assault on South Ossetia last August.
• No plans for new currency discussion at G20 – Russia: There are no plans for separate discussions of the possible creation of a new international currency at next month's meeting of G20 finance ministers, Russian deputy finance minister told Reuters on Tuesday.
• Barents Rescue-2009 - Russia’s largest international rescue exercise – Barents Rescue, starts in Murmansk in two weeks. Minister for Emergency Situations Sergey Shoygu will lead the exercise, which includes personnel from Russia, Norway, Finland and Sweden
• Nerpa sub to be handed over to India right after testing - Gen. Staff - The moment the testing is completed and the crew is received, the submarines will be handed over to the Indian side, Makarov told the media on Wednesday."There is no deadline. But there are not reasons for delays, either," Makarov said.
• Russian military says to check Arctic Sea cargo - Russia's top general said on Wednesday that the military would search the Arctic Sea merchant ship for a possible secret cargo when it returns to Russia from a maritime odyssey that has made headlines around the world.
• Russia says Arctic Sea ship was monitored throughout hijacking - Russia's Foreign Ministry has said that the Arctic Sea cargo ship, earlier reported to have gone missing before being found with hijackers on board, was constantly monitored throughout the incident.
• Only Russian Federal Security Service possess full information on freighter Arctic Sea
• News of Arctic Sea crew detention in investigation ward denied, suspicious cargo not yet reveal on vessel’s board
• Sochi 2014 organizers ask Vancouver for assistance in replacing key official - The organizers of the Sochi 2014 Winter Games have turned to Vancouver for help in trying to replace a key official whose untimely death has created problems for the Olympics.
• Russian Customs Seeks To Reduce Border Control Bodies – Russia's Federal Customs Service has developed a draft bill seeking to reduce the number of enforcement agencies operating at the country's borders, according to a note to the draft bill seen by the Prime-Tass news agency Tuesday.
The draft bill is aimed at simplifying and speeding up the transit of goods and vehicles across Russia's borders.
• Cherkizovsky Charges Filed - Investigators have charged 10 customs officers in a criminal case opened into the smuggling of $2 billion worth of goods from China to Moscow’s Cherkizovsky Market.
• Sheikh-ul-islam Haji Allahshukur Pashazadeh marks his 60th birthday - Chairman of the Caucasian Muslims Office Sheikh-ul-islam Haji Allahshukur Pashazadeh marks his birthday today. APA reports that he was born in Cil village of Azerbaijan on August 26, 1949.
• Why Capitalism Is Doomed in Russia - By Yulia Latynina
National Economic Trends
• Citi: Macro: stabilization becomes more apparent
• Russia c.bank injects 84.3 bln roubles via repos
• Corporate Profits Picked Up in Q2 - Corporate profits declined less in the second quarter than in the first, the State Statistics Service said Tuesday.
• COMMENT: Russia's spontaneous stabilization – by Evgeny Gavrilenkov of Troika Dialog
• WSJ: Russia Bank Lending Still Sags - The Russian economy's nascent recovery is helping to ease the country's bad-debt crisis, although conditions for banks remain tough, according to the head of a major lender.
Business, Energy or Environmental regulations or discussions
• Russian Firms Ramp Up Share Issues - The re-emergence of Russian share sales is likely to accelerate into 2010 as companies seek to pay down the debt that fueled their growth during boom times, provided that global equity markets continue on the road to recovery.
• Russia’s First IPO in Year Planned for Fall - The Stem Cell Institute is seeking to attract some 150 million rubles ($4.75 million) from investors in what would be the country’s first initial public offering in more than a year, the firm’s head said Tuesday.
• Russia's steel sector is ailing, recovery mid-2010
• Russia VTB to take control of developer Don Story
• Mechel establishes agency in the South Korea
• Russia's auto output declines 61% in seven mths
• Russian Technologies proposes Mr Komarov as CEO of Avtovaz
• Alyoshin Quits as AvtoVAZ President
• Slowdown signs - GAZ Group reduces car sales in 7 months by 65pct
• Renova Outs Oerlikon CEO Amid Disappointing Results
• Russia's Rambler Media H1 net loss widens
• MTS could complicate the structure of the Comstar acquisition... why?
• Comstar Connects Moscow and Rostov-on-Don
• Russian drug distributor seeks Veropharm bankruptcy
• Russia offers to introduce 10-12-year moratorium on catching sturgeon in Caspian to restore population
• Russia's Magnit H1 net rises to $117.9 mln
• Russian Parliament Feeding Foreign Hauliers - The international cargo trucking market in Russia has virtually been taken over by foreign companies for quite some time. The RusBusinessNews observer has found out why a quarter of these companies work in the country illegally, why the conflict with the Lithuanian hauliers arose, and how to get rid of the Western European middlemen when transporting cargo.
Activity in the Oil and Gas sector (including regulatory)
• Oil - July production drilling fell by 0.7% MoM driven by 0.7% decline in West Siberia
• Rosneft - Average Russian oil well flow grew in July by 0.3% MoM and 1.3% YoY
• Nord Stream Pipeline one step closer - The public referral period in Sweden for the Nord Stream Pipeline has ended, marking a step forward for the proposed project.
• Oil terminal for Transneft Pipeline - Transneft has plans to construct an oil shipment terminal to receive oil from the Baltic Pipe System-2 (BPS-2) Oil Pipeline at Ust Luga Port, Russia.
• Carbon fund set up by EBRD and EIB in 1st Russian venture - In the first such transaction in Russia, carbon credits generated by utilising gas which would otherwise be flared at an oilfield in eastern Siberia are to be purchased through a carbon fund set up by the EBRD and the European Investment Bank (EIB), the Multilateral Carbon Credit Fund (MCCF).
• Georgia: Russian Oil Behemoth Goes To Abkhazia - Russian state oil company Rosneft has set up a subsidiary in the breakaway region of Abkhazia to produce oil from the Black Sea shelf, and to set up a gas-distribution network.
Lukoil - Uzbekistan plans to tighten tax regime for foreign participants of gas PSA ventures
• Lukoil - has been pre-qualified for second round of tender for Iraqi oil fields
• TNK-BP Seeks $204M From Customs - TNK-BP Holding said it is seeking 6.39 billion rubles ($204 million) from the Federal Customs Service for overpaid levies, three months after winning a similar case.
• Tatneft joy as Ghadames wildcat roars - Russian player Tatneft and Libya's National Oil Corporation (NOC) have hit oil with their first wildcat drilled in Area 82 in Libya's Ghadames basin play.
• Tatneft: Depleted fields in Russia, green fields abroad - Tatneft strikes oil in Libya. Russian newswires, citing Libyan National Oil Corporation (LNOC), yesterday reported that Tatneft (TATN - Hold) had struck oil at one of its four exploration blocks in Libya.
• SIBUR acquires leading international petrochemical trader CITCO
• Volga Gas reports two more producing wells in Karpenskiy area, targets 2,500 bopd in Q4
• Putin touts Russia's oil reserves; seeks funding
• Vankor and nearby crude oil prospects could greatly increase Russian avails
• Russia - Prime Minister Vladimir Putin met with Transneft President Nikolai Tokarev - First of all, as you know, in the North, in East Siberia, in Yamal, one of the main issues for full-scale, major, broad-ranging operations is the participation of Transneft in increasing the capacity of the pipeline transport for oil deliveries to the east, eventually the Pacific Ocean, and to the west. This is the first issue. In your opinion, what plans and opportunities exist in connection with this endeavour?
Gazprom
• Gazprom Q1 net profit falls 61 pct, beats f'casts - Q1 profit 110.18 billion roubles vs year-ago 286.05 bln; Beats analyst forecast of 84.75 billion roubles; Q1 net sales 931.40 billion roubles; Net debt 1.191 trillion roubles as of Mar. 31, 2009
• Gazprom First-Quarter Net Falls 62%; Beats Analyst Estimates
• Gazprom reports its consolidated interim condensed financial results under international financial reporting standards (IFRS) for the three months ended 31 March 2009
• Central Asia A Major Factor In Gazprom Profit Drop - The high price of Central Asian gas, the devaluation of the ruble and limp demand in Europe are key factors in what may be the worst quarterly performance in Gazprom’s history.
• Patriarch Kirill decorates the head of Gazprom with an order - Patriarch Kirill of Moscow and All Russia awarded the Order of St. Seraphim of Sarov (1st degree) to Alexey Miller, Chairman of the Board of Gazprom. Patriarch Kirill gave this award for merit to Miller at a meeting at the Patriarch's residence in Chisty Pereulok, Moscow, "to pay tribute to his continuous efforts for the benefit of the Russian Orthodox Church," the Patriarchate's official website reports Wednesday.
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Full Text Articles
Basic Political Developments
Russia and Mongolia plan closer cooperation - Summary
Wed, 26 Aug 2009 08:25:21 GMT
Ulaanbaatar, Mongolia - Russia and [pic]Mongolia signed a series of agreements on the "development of a strategic partnership" during a two-day visit by Russian President Dmitry Medvedev to the capital Ulaanbaatar ending Wednesday. Medvedev met with Mongolian President Tsakhiagiin Elbegdorj, Prime Minister Sanjaagiin Bayar and Speaker of Parliament Damdin Demberel.
Regional security issues, tensions on the Korean peninsula, improving infrastructure and mining raw materials were on the agenda.
The pacts included an investment of 250 million dollars to rebuild Mongolian railways, overhaul the 1949 railway contract and increase the efficiency of the mining companies Bergbauunternehmen Erdenet and Mongolrostsvetmet.
A joint Mongolian-Russian company was founded in December 2008 to obtain investment for the expansion of transport links to sources of raw materials in the east and south of the country.
After 20 years during which Mongolian-Russian military cooperation was broken off, there have been joint military manoeuvres since last year.
An agreement between the countries' defence ministries envisages annual joint military exercises.
A training programme to prepare Mongolian soldiers for international peace-keeping duties and upgrading weapons is also planned.
The Mongolian People's Republic was one of the USSR's closest satellites until the political and economic changes in the early 1990s.
Today's democratic [pic]Mongolia is trying to limit its dependence on its powerful neighbours, Russia and China. To that end the country is also seeking to improve ties with the US, the European Union and Japan.
Russia is again seeking close cooperation because of Mongolia's wealth of raw materials and its strategic location, as Russian Prime Minister Vladimir Putin's visit to Ulaanbaatar in May showed.
President Elbegdorj has emphasized the need the put long-standing political and economic relations between Russia and [pic]Mongolia on a new level.
There are, however, significant differences of opinion in the government, in democratic and in the widerpublic over the right policy for [pic]Mongolia. Critics are especially worried that Mongolian interests are not being protected when selling natural resources.
The visit also marked was the 70th anniversary of the Soviet-Mongolian victory over the Japanese army in the Battle of Khalkhyn Gol at the beginning of the Second World War in 1939.
Medvedev to end Mongolia visit, attend Khalkhin-Gol victory events
ULAN-BATOR, August 26 (Itar-Tass) - Russian President Dmitry Medvedev will on Wednesday end his two-day state visit to Mongolia. It is planned that he will attend festivities devoted to the 70th anniversary of the joint victory on the Khalkhin-Gol River and hand state awards to Mongolian veterans.
The Battle of Khalkhin Gol was the decisive engagement of the undeclared Soviet-Japanese Border War, or Japanese-Soviet War, fought between the Soviet Union, Mongolia and the Empire of Japan in 1939. The battle was named after the river Khalkhin Gol passing through the battlefield. In Japan, the battle was known as the Nomonhan Incident after a nearby village on the border between Mongolia and Manchuria.
Besides, the Russian president will attend the national holiday Naadam that the Mongolian authorities hold specially in his honour.
Medvedev said on Tuesday that the “Khalkhin-Gol victory is an example of combat brotherhood.” This battle, he noted, “considerably influenced the progress of combat actions in the Far East during the Second World War.” In 1939, the USSR and Mongolian troops managed to stop the Japanese invasion. On July 2, the Japanese troops that started counteroffensive were defeated and thrown back to the east bank of the river, after which the enemy troops were pushed out of Mongolian borders. As a result, Mongolia managed with the help of the Soviet Union to preserve its territorial integrity and independence, and the enemies no longer took the risk to invade these territories.
Medvedev will also lay a wreath at the Zhukov Monument that was opened in 1979 and last year it underwent cardinal reconstruction. The military cooperation that was actively developing between the two countries during the Soviet period, is also continuing now. Thus, the joint manoeuvres Darkhan-2 are underway. The RF president is expected to visit the range where the exercise is held and familiarise himself with the progress of repairs of military equipment of the Mongolian army.
The programme of Medvedev’s two-day state visit to Mongolia will be ended with his participation in the people’s holiday Naadam that by Mongolian traditions is regarded also a military parade.
Naadam is a traditional type of festival in Mongolia. The festival is also locally termed “eriin gurvan naadam” – “the three games of men.” The games are Mongolian wrestling, horse racing and archery and are held throughout the country during the midsummer holidays. Women have started participating in the archery and girls in the horse-racing games, but not in Mongolian wrestling.
The biggest festival is held in the Mongolian capital Ulan-Bator during the National Holiday from July 11 – 13, in the National Sports Stadium. Other cities and towns across Mongolia and those with significant Mongolian populations population in China, have their own, smaller scale Naadam celebrations. It begins with an elaborate introduction ceremony featuring dancers, athletes, horse riders, and musicians. After the ceremony, the competitions begin.
Naadam is the most widely watched festival among Mongols, and is believed to have existed for centuries in one fashion or another. Naadam has its origin in the activities, such as military parades and sporting competitions such as archery, horse riding and wrestling, that followed the celebration of various occasions. Now it formally commemorates the 1921 revolution when Mongolia declared itself a free country.
Another popular Naadam activity is the playing of games using shagai, sheep knuckles that serve as game pieces and tokens of both divination and friendship. In the larger Nadaam festivals, tournaments may take place in a separate venue.
Russia, Mongolia will resist attempts to falsify results of WW II –Medvedev
ULAN BATOR. Aug 26 (Interfax) - Russia and Mongolia will resolutely
resist attempts to falsify the outcome of World War II, President Dmitry
Medvedev said at a ceremony marking the 70th anniversary of the joint
victory of Soviet and Mongolian forces in the Battle of Khalkin Gol.
"I deem unacceptable all falsifications and speculation, which
change the essence of this victory," he said.
"It was precisely the Soviet Union's victory in that war [World War
II] that gave Mongolia an opportunity to establish and defend its
sovereignty and independence," Mongolian President Tsakhia Elbegdorj.
"We will resolutely resist attempts to falsify the outcome of World
War II," he said.
"Today's celebration provides evidence of the rememberence and
respect for the heroic chapters linking out two nations," President
Medvedev said.
"Tested in the Battle of Khalkin Gol, our friendship has passed the
test of time, and we continue cherishing it today," he said.
"Such trustful relations between Russia and Mongolia are a solid
foundation for the further development of good neighborly cooperation,
for strengthening ties between our two countries and for maintaining
contacts between people," the Russian president said.
Russia deploys air defence on NKorea missile tests
(AFP) – 27 minutes ago
ULAN BATOR — Russia is worried about North Korean missile and nuclear tests and has deployed sophisticated air defences in its Far East region to protect against any potential test mishap, Russia's top general said here Wednesday.
"We have an S-400 division there," said General Nikolai Makarov, chief of staff of the Russian armed forces, confirming that Russia had deployed its most advanced anti-missile defence system near the border with North Korea.
S-400 anti-missiles to shoot down failing Nth Korean rockets
26 August, 2009, 12:10
A contingent of state-of-art air defense missiles S-400 has been deployed in Russia’s Far East to monitor North Korea’s missile launches and intervene in case they threaten Russia.
“We are taking preventative measures to secure ourselves from misfired missiles and to make absolutely sure their debris does not fall on Russian territory,” Head of Russian General Staff, Nikolay Markov, told journalists.
The deployment was in response to an increased number of test launches by the North Korean military is late May and June. Since one of the testing ranges is close to the Russian border, Markov said the move was needed in order to safeguard from possible mishaps, adding that S-400s “can be used” for this purpose.
The S-400 “Triumph” (NATO disambiguation SA-21 Growler) is an advanced air and missile defense system with a range of 400km, designed to repel a massive aerial attack. It can track and destroy several targets with speeds of up to 4,800 meters per second at altitudes up to 30km.
RF president’s Far East envoy to discuss cooperation in S Korea
SEOUL, August 26 (Itar-Tass) - Projects of economic cooperation between Russia and South Korea will be discussed in Seoul by Russian president’s plenipotentiary representative in the Far Eastern federal district Viktor Ishayev. He is arriving in the South Korean capital on Wednesday evening heading a delegation of more than 20 heads of regions and businesspeople at the invitation of the South Korean Ministry of Foreign Affairs and Trade.
The four-day visit programme envisages a meeting with South Korean President Lee Myung-bak, talks with the foreign minister and finance minister. The two countries’ cooperation projects include the development of oil fields on the western shelf of Kamchatka, the import by South Korea of Russian natural gas and the construction of ports and logistic centres.
The visit results “will promote the development of economic cooperation between the two countries,” it is stressed in a press release of the South Korean Foreign Ministry.
According to the Yonhap news agency, Victor Ivanovich Ishayev, Russia’ s presidential representative to the Far Eastern Federal District, plans to visit South Korea later this week to discuss economic cooperation projects, Seoul’s Foreign Ministry said Tuesday. Ishayev, a deputy prime ministerial official, is scheduled to arrive Wednesday for a four-day stay at the invitation of Foreign Minister Yu Myung-hwan, leading a 20-strong delegation including senior provincial officials and business leaders, according to the ministry.
He will pay a courtesy call on President Lee Myung-bak and meet the foreign minister, the finance minister, and the land and transport minister. Ishayev is expected to discuss the promotion of South Korea-Russia cooperation in the Far Eastern region, including on the development of an offshore oil field in west Kamchatka, the import of natural gas from Russia, and the construction of ports and logistical centres, the ministry added. “His trip is expected to boost the strategic cooperative partnership between South Korea and Russia and also provide a chance to bolster comprehensive, substantial cooperation,” it said in a press release.
Russia's Ties with South Korea Deepen
August 25, 2009, 2:30PM EST
Despite the failure of South Korea's first rocket, developed with Russia, there's a growing industrial partnership between the old Cold War foes
By Moon Ihlwan It was a day of disappointment in South Korea. On Aug. 25, the country made its long-awaited debut, launching its first rocket from the southern tip of the Korean peninsula. Initially the two-stage rocket, called the Naro, seemed to take off flawlessly, but soon the bad news came: The Naro had failed to put the satellite it was carrying into its intended orbit. Now the Korean government is pledging an investigation along with Russia's Khrunichev State Space Science & Production Center, which had developed the rocket's lower stage and the vehicle's design.
The setback is a blow to the growing ties between the Koreans and the Russians, who have played a key role in the development of South Korea's overall space program. Russian rockets have in the past carried Korean satellites, including a small high-resolution surveillance satellite known as KOMPSAT-2 in 2006. Last year Seoul sent its first astronaut into space aboard a Russian Soyuz rocket after completing training in Russia. The astronaut, Yi So Yeon, spent 11 days on the International Space Station, carrying out experiments for the government and industry.
The space cooperation is emblematic of a growing industrial partnership between Korea and Russia. Giant Korean conglomerates such as Samsung and LG hire between 100 and 200 engineers and scientists at their research centers in Russia, which are responsible for registering scores of international patents annually. "Probably more important for us is technology outsourcing," says spokeswoman Judy Pae at LG, which employs some 150 engineers and scientists in its lab at St. Petersburg and a further 50 people in its Moscow office who are devoting themselves to arranging technology outsourcing in Russia.
Two-Way Street
Tieups thrive as each country complements the other's weakness. Korea, home to leading makers of TVs, mobile phones, flat-panel screens, cars, and ships, is helping its Russian partners to commercialize technologies and apply them in mass production while tapping Russia's excellent research on basic sciences and original technologies. Both Samsung and LG, for example, develop in Russia software platforms for their mobile phones, chips used in digital products, and optical solutions.
Reluctance by Japanese and Western companies to share technologies with Korean rivals is also prompting the Koreans to forge partnerships with the Russians. "The Japanese, Germans, and Americans either deny access to their state-of-the-art technologies or charge exorbitant license fees to Korean rivals," says senior researcher Cho Joong Hoon at the state-funded Korea Institute for Advancement of Technology. "Russians are also more accommodative in negotiating terms for sharing intellectual properties after joint R&D."
The trend began early this decade when Korea's magnates tried to start leapfrogging their Japanese mentors with innovation. At the time there was no shortage of access to Russia's underemployed educated class because of economic difficulties in their nation. Many Russian engineers worked in Korea for years at labs run by companies and the government to help iron out problems in the course of rolling out leading-edge products.
Examples of Russian achievements abound in the lineup of popular Korean products. Russian brains helped Samsung develop the image-processing chips in its digital TVs and refine its frequency-filtering technology that significantly reduced noise on its now-ubiquitous handsets.
Russian scientists from Moscow State University also helped develop LG's efficient cooling pipes that bolster its air conditioners, while the technology that was once used to cool Soviet tanks was applied for a multicompartment appliance that chills, ferments, and stores kimchi, the spicy, pickled cabbage served on virtually every Korean dining table.
Wider Cooperation
Now with the Russian economy back on its feet, many Russians have returned home. But big Korean companies have already firmly established their research centers in Russia. So the Seoul government's current focus is on maintaining technological cooperation with Russia for Korea's small and midsize companies. "The government is running a pilot project this year to help smaller companies find Russian partners with original technologies," says Kim Gwang Seok, a deputy director at the Knowledge Economy Ministry, which is doling out up to $320,000 to each select startup seeking a technological breakthrough together with a respectable Russian engineering partner.
There are early signs the government project could prompt startups to seek innovation. "Partnership with the Russians allows us to tackle ambitious tasks that would be too complex and costly otherwise," says Chief Executive Ahn Saeng Youl of Wookwang Tech, a beneficiary of the government aid. Wookwang, an electronics components maker, plans to sell a power cable monitoring system that combines a chip-based sensor technology developed by Russia's St. Petersburg State Polytechnical University with wireless communications to quickly detect abnormal power distribution. "Government involvement also provides credibility when we seek ventures with Russian partners," adds Ahn.
The Seoul government plans to expand the aid project if the pilot project proves successful. "There are good business potentials for a win-win in this project," says ministry official Kim. "Both parties will benefit if the Koreans' production and application technologies could be married to advanced research results in Russia that have not been put into commercial use."
Overcoming of WMD proliferation threat among priorities for Russia -Sergei Ivanov
MOSCOW. Aug 26 (Interfax-AVN) - The proliferation of weapons of
mass destruction and delivery vehicles is posing an increasingly more
serious threat to Russia day by day, Russian Deputy Prime Minister
Sergei Ivanov said at a session of the Russian export control commission
at the House of Government on Wednesday.
"The danger of the proliferation of weapons of mass destruction in
the world has been in place in past years, but it has become
increasingly more real of late. The overall number of problems in this
area is not decreasing but, on the contrary, is snowballing. The
overcoming of the threat of the proliferation of weapons of mass
destruction is among the priorities for the Russian Federation, with its
long borders," Ivanov said.
"These threats are really significant for the Russian Federation,"
he said.
Judgments heard in some foreign countries about the threat of
proliferation of weapons of mass destruction are often selective and are
often formed under the influence of certain political and economic
interests, Ivanov said. These countries may view the problem the same
way with Russia in informal talks but may make contrasting statements
officially, he said.
Therefore, Russia needs to express its opinion on measures against
proliferation of weapons of mass destruction based on accurately
calculated national estimates and comprehensive analysis of its
interests, including in pursuing cooperation in the hi-tech field with
other countries, Ivanov said. "Russia should promote its approaches
toward the resolution of the emerging problems on the international
arena," he said.
announcement
Informal meeting between Dmitry Medvedev and Alexander Lukashenko will take place on August 27, 2009 in Sochi
Lukashenka left for Sochi unexpectedly
24.08.2009
The Belarusian ruler has already arrived to the resort, though the meeting with the Russian president is scheduled only for the second half of the week.
Alyaksandr Lukashenka was invited to Sochi by the Russian side, Russian president’s aide Sergei Prikhodko told journalists in Sochi on August 21.
“The meeting has been mutually arranged the second half of the week,” Prikhodko said. According to him, Dmitry Medvedev sent an invitation to his Belarusian colleagues “some time ago”.
An agenda for the meeting on bilateral trade and economic cooperation, Russian-Belarusian cooperation within the frames of EurAsEC and the Customs Union is being prepared, Prikhodko noed.
We remind that Lukashenka said during his working trip to Belarusian regions on August 20 that he was going to meet with Medvedev in Sochi to discuss “a range of important issues”.
“We arranged with the Russian president in Kyrgyzstan to put serious issues on the agenda and discuss them. Mr Dmitry suggested meeting in Sochi,” the Belarusian ruler said.
“I think we will have the meeting next week and we will discuss a wide range of difficult issues that are not solved,” Lukashenka said.
The press service of the Belarusian head of state doesn’t comment on the information that Lukashenka is already in Sochi.
Lukashenka stays in oligarch Deripaska’s hotel in Sochi (Photo)
25.08.2009
The Belarusian ruler is expected in Krasnaya Polyana residence after his meeting with Medvedev.
Alyaksandr Lukashenka flew to Sochi on August 21, Friday. He stayed in the hotel & spa Rodina, owned by Russian oligarch Oleg Deripaska, “Komsomolskaya Pravda v Belarusi” reports.
“Alyaksandr Lukashenka has been invited to Sochi by the Russian side,” RIA Novosti quotes Sergei Prikhodko, an aide to the Russian president.
According to official information, Dmitry Medvedev had a meeting only with the president of Moldova on August 21. He left for Beijing on the same day. As it was found out, a meeting with the Belarusian ruler is scheduled for August 27. Alyaksandr Lukashenka, who arrived in Sochi five days before the talks, stays there. According to official information, he is on a working trip to the Russian Federation.
The Grand Hotel and Spa Rodina is a luxurious hotel providing every possible conveniences: a beach, tennis courts, some conference halls, a concert ground, a yacht, and even a brewery. It is unknown whether Lukashenka’s young son Kolya arrived, but Rodina hotel has a huge game room with life size puppet and construction sets. The hotel is guarded as a secret object.
“Alyaksandr Lukashenka is always there. It is said Dmitry Medvedev and he arranged to discuss very difficult questions, so he evidently needs time to prepare for the meeting,” Russian journalists say. “Usually, Dmitry Medvedev invites guests to stay in the hotel and pay rooms, which are rather expensive – from 1500 to 3000 dollars per day.”
Service personnel and cooks are said to have arrived in Krasnaya Polyana. The Belarusian ruler is expected to come there after his meeting with Dmitry Medvedev. The Belarusian ministers and high-ranking officials will also fly there.
Putin to Meet with Kokoity in Moscow
Civil Georgia, Tbilisi / 25 Aug.'09 / 16:17
Russia’s Prime Minister, Vladimir Putin, will meet with South Ossetian leader, Eduard Kokoity, in Moscow on August 26.
“[Kokoity] will be paying a working visit to Moscow,” the Russian PM’s press office said in a brief statement on Tuesday.
Georgian Deputy Foreign Minister, Alexander Nalbandov, said on August 24 that the Russian PM, accompanied by mayor of Moscow, Yuri Luzhkov, planned to visit Tskhinvali on August 26 on the one year anniversary of Russia’s recognition of the region’s independence.
Abkhazia marks 1st anniversary of independence recognition by RF
SUKHUM, August 26 (Itar-Tass) -- Abkhazia observes the first anniversary of Russia’s recognition of the republic’s independence. In the morning President Sergei Bagapsh, Parliamentary Speaker Nugzar Ashuba, and Prime Minister Alexander Ankvab laid wreaths and flowers at the Memorial of Glory in Sukhum and at the Monument to Russian peacekeepers who lost their lives since the Georgian-Abkhazian war. The monument to 113 peacekeepers killed in the conflict zone from 1994 to 2008 was erected on the territory of the “Sukhum” sanatorium of the Moscow military district.
A celebration meeting and a concert will take place in the hall of the Abkhazian State Philharmonic Society and a concert of Abkhazian entertainers will be given in the Theatrical Square in the evening. Twenty-minute fireworks will crown the celebration.
Joy & tears: Caucasian republics mark independence
26 August, 2009, 09:41
The people of South Ossetia and Abkhazia are celebrating one year since Russia recognized their independence from Georgia. Moscow made the move following Tbilisi’s assault on South Ossetia last August.
Ossetians say it’s a big holiday for them.
“Thank God this is happening. To South Ossetia’s independence and our new life” – toasts are pronounced all across this small land.
Despite the fact it’s a celebration, the atmosphere is still subdued. Many memories and emotional wounds are still as fresh as if they happened yesterday, so some toasts of the locals sound tragic:
“It’s difficult to talk without tears. Let’s remember those who gave their lives to protect their motherland, and to our brothers who rescued us from extinction”.
On the second day of last August’s conflict, some districts in Tskhinval – the capital of South Ossetia – were deliberately flooded by Georgian troops. Basements were the only places the people could take shelter in during constant bombing, so they had to run from one to another as bullets flew over their heads, trying to find dry shelter.
The Georgian attacks only stopped after Russian forces pushed them out, fulfilling its peacekeeping obligations.
“The Georgians named their plan ‘empty field’, and I really thought it had been made reality,” said local resident Aleksandr Khabalov.
“As we were taking cover in that basement I was sure nearly half of the city was dead”.
The conflict was officially over on August 16, with the signing of the Medvedev-Sarkozy six point peace plan, mediated by the European Union.
During the eight days of fighting, nearly 80 per cent of the South Ossetian capital’s buildings were either destroyed or damaged. Many people were still in shock, fearing Georgia would launch another attack. There had been several since the collapse of the Soviet Union
That’s why the news that Russia was recognizing the independence of South Ossetia and Abkhazia, as well as offering protection, caused unprecedented celebration in both republics. Thousands took to the streets to celebrate.
“I remember everybody kept asking each other if it was really true,” said Izolda Gagloyeva from the South Ossetian ministry for press and mass communications. “We’d been waiting for so long it was hard to believe it finally happened.”
Moscow said it never planned to recognize these republics’ independence, but was forced to do so in order to protect the two na
No plans for new currency discussion at G20 – Russia
Wed Aug 26, 2009 9:46am IST
MOSCOW (Reuters) - There are no plans for separate discussions of the possible creation of a new international currency at next month's meeting of G20 finance ministers, Russian deputy finance minister told Reuters on Tuesday.
The idea of a new currency -- which could offer an alternative to the dollar for global reserve holders -- has been mooted by Russia and China.
"There are no special discussions planned on this issue (at the G20)," Pankin said, adding that regulation of world oil prices also does not feature as a special item on the agenda.
Pankin said the G20 meeting would likely focus on progress that had been made on the decisions of the previous summit, rather than on any new proposals.
The BRIC countries -- which include India and Brazil as well as Russia and China -- are once again likely to issue a separate communique after their representatives meeting during the G20 summit, he said.
Barents Rescue-2009
2009-08-26
Russia’s largest international rescue exercise – Barents Rescue, starts in Murmansk in two weeks. Minister for Emergency Situations Sergey Shoygu will lead the exercise, which includes personnel from Russia, Norway, Finland and Sweden.
Barents Rescue is a series of international field training exercises that are organized and conducted by the countries within the framework of the Barents Euro-Arctic Council. Hosting of the exercise rotates between the four countries.
Risk scenarios for major accidents, natural disasters, and man-made emergencies show many similarities in the Barents Region. There are long distances between economic centers, sparsely populated rural communities, limited rescue personnel and equipment, and restricted means for transport and hospital resources available in case of larger accidents.
The aim of the Barents Rescue cooperation is to improve the possibilities for rescue agencies to cooperate on emergency and rescue issues across county and national borders in the Barents Region.
Barents Rescue-2009 is the fourth Barents Rescue exercise to be held since 2001. For the first time the exercise will take place in Russia, more exactly in Murmansk in the period September 8-10. The exercise will be led by Sergey Shoygu, Head of the Russian Ministry for Emergency Situations, B- reports.
The participants in the exercise will be training on joint actions in different types of accidents and crisis. This year the scenarios include: Mutual alarm between countries in the Barents region in case of a major emergency; search and rescue operations at sea; extinguishing of forest fire in the border zone between countries; rescue operations after a major traffic accident; rescue operations after a major oil spill on water, Barents Press writes.
Nerpa sub to be handed over to India right after testing - Gen. Staff
ULAN BATOR. Aug 26 (Interfax) - The nuclear-powered submarine Nerpa
will be handed over to India without delay, said Russian General Staff
Chief Nikolai Makarov.
The moment the testing is completed and the crew is received, the
submarines will be handed over to the Indian side, Makarov told the
media on Wednesday.
"There is no deadline. But there are not reasons for delays,
either," Makarov said.
Earlier reports said that 20 people were killed and 41 others were
injured after an unauthorized startup of the automated fire
extinguishing system during the Nerpa's testing in the Sea of Japan on
November 8, 2008. The testing was halted for an inquiry into the
incident.
On July 10, the Nerpa took to the sea for further testing.
The submarine is expected to be leased to the Indian Navy in 2009
for ten years for a charge of $650 million, according to the India
media.
Russian military says to check Arctic Sea cargo
Wed Aug 26, 2009 8:03am BST
ULAN BATOR (Reuters) - Russia's top general said on Wednesday that the military would search the Arctic Sea merchant ship for a possible secret cargo when it returns to Russia from a maritime odyssey that has made headlines around the world.
Russia says the Maltese-registered Arctic Sea -- officially carrying timber from Finland to Algeria -- was hijacked by eight men off the coast of Sweden on Aug 24. Russian navy warships intercepted the vessel off the coast of Cape Verde.
"We do not know yet what it is carrying, we only know it is timber. But what else it is actually transporting -- it has yet to be clarified," Nikolai Makarov, chief of Russia's general staff, told reporters during an official visit to Mongolia.
The saga of the Arctic Sea sparked concern across Europe after media reported the ship may have been smuggling arms or even nuclear material to the Middle East.
(Writing by Dmitry Solovyov; editing by Guy Faulconbridge)
Russia says Arctic Sea ship was monitored throughout hijacking
09:5026/08/2009
MOSCOW, August 26 (RIA Novosti) - Russia's Foreign Ministry has said that the Arctic Sea cargo ship, earlier reported to have gone missing before being found with hijackers on board, was constantly monitored throughout the incident.
Russian officials earlier said that the freighter loaded with timber was "found" on August 17 and freed from hijackers by the Ladny missile frigate a few hundred kilometers from Cape Verde.
However, the Foreign Ministry said in a statement on Tuesday evening: "Of course this bulk freighter with deadweight of 7,000 tons was never lost. Its movements were monitored, and its coordinates were provided by several sources, including our foreign partners."
The Arctic Sea, which had 15 Russian crewmembers, is currently being towed to the Russian port of Novorossiisk on the Black Sea. Four of the crew remain on board, while the other 11 have been flown to Moscow for questioning. Eight alleged hijackers, found on board when the freighter was released, have been arrested and are face piracy charges.
The ministry said several questions remain unanswered in the incident, for example whether the reported seizure of the freighter on July 24 was preceded by another attack, and whether there were other hijackers involved.
Russia's top investigators had earlier suggested the ship was carrying not only timber, but the Foreign Ministry said the vessel has now been searched, and that no suspicious cargo has been found.
"The preliminary search of the ship did not reveal the presence of suspicious cargo on board. A more thorough search will be conducted at one of the ports on the way to Russia," the statement said.
Only Russian Federal Security Service possess full information on freighter Arctic Sea
25.08.2009
The new biography facts of the arrested alleged hijackers of freigher the Arctic Sea emerge, daily Moskovsky Komsomolets (MK) reports. The paper says the 31 y.o. Yevgeny Mironov from Tallinn, Estonia, only this spring has left the prison where he spent four years for unintentional murder in a bar where he worked as a security guard.
An Estonian online forum’s user has given description of his friends, Andrey Lunyov and Alexey Andryushin. Lunyov is a sailor and in the past he has been a hostage of pirates therefore perfectly understands how such an affair can end. Probably, someone has employed the deceived young people by promising big money and then there was already late to change something. Andryushin, leaving his previous work in July, has told that he is leaving for Russia to work in construction.
While all attention of media is aimed at the sailors and alleged hijackers of the freighter who are in Moscow, the cargo ship itself has disappeared again, MK writes today, reminding that the captain and three crew members remained on its board. It is strange why the sailors till now have not allowed to contact their relatives, the paper marks. Moreover, the owner of the vessel does not know exactly where there is the freighter and when the sailors who have remained on it will return home. The full information is possessed only by the FSB, MK points out.
Meanwhile the online paper Dni.ru writes that the cargo ship has illegally transported weapons. It alleges that the group of arrested "pirates" has been ostensibly employed by a secret service of one of the European Union countries. The actions of the Russian Armed Forces regarding the Arctic Sea can be the additional certificate of "something important and valuable" on its board, online paper marks. It notes that even the spetsnaz special-task troops were involved in the operation of the General Staff’s Main Intelligence Directorate (GRU). The paper’s conclusion is that illegal arms were on board the cargo vessel, however it is not known to whom they belonged and what was the real destination.
And the hijackers most likely were used "blindly", they knew only that they need to seize the vessel and to deliver it to a certain point, writes Moskovsky Komsomolets.
News of Arctic Sea crew detention in investigation ward denied, suspicious cargo not yet reveal on vessel’s board
25.08.2009
The Federal Penitentiary Service (FPS) of Russia has denied a mass media report that crew members of the Arctic Sea dry cargo ship, on being freed from the hijackers’ detention, are held in the Lefortovo investigation ward in Moscow, news agency ITAR-TASS reports, referring to a FPS spokesman. He said investigation FPS ward-2, just as any other investigation ward in Russia, holds persons only on court ruling.
The Federal Penitentiary Service did not specify the whereabouts of 11 crew members of the Arctic Sea taken to Moscow, ITAR-TASS adds. According to some media outlets, the Russian secret services have been hiding the crew members of of the Arctic Sea in one of Moscow hotels, AIA reported yesterday.
eanwhile the Russian Foreign Ministry stated in a commentary today that no suspicious cargo had been revealed on board of the Arctic Sea as far, news agency Interfax reports. More thorough probe is to be carried out at one of the next ports, the Russian Foreign Ministry marks.
Sochi 2014 organizers ask Vancouver for assistance in replacing key official
By Jeff Lee, Vancouver SunAugust 25, 2009 10:01 PM
VANCOUVER — The organizers of the Sochi 2014 Winter Games have turned to Vancouver for help in trying to replace a key official whose untimely death has created problems for the Olympics.
On Tuesday, Dmitry Chernyshenko, the head of the Sochi, Russia committee, said he asked John Furlong, the chief executive of the Vancouver Organizing Committee for assistance in replacing Bob Stiles, who died Aug. 20.
Stiles was Sochi's vice-president and author of its bid book, and as such was a key person in getting Sochi on track, said Chernyshenko, who is in Vancouver this week for meetings.
"We discussed it with John Furlong today, in between the sessions. It was very valuable to learn from my colleague, who is four years ahead," Chernyshenko said.
"He gave me some practical advice and I learned from his experience of building a successful corporate team."
Chernyshenko didn't say whether Vanoc had offered to loan him any of its senior staff while they seek Stiles' replacement, and he smiled when asked if he'd offered the job to Furlong.
"I don't think there are some open positions John deserves after his success as CEO here," he joked.
The loss of Stiles, who had worked on many Olympic committees, hit Sochi hard.
"He was a major source of the real experience in the Olympic movement that we were using in all our functions. Now we are suffering, not only mentally as his friends but also because it is a big challenge to organize these Games."
Chernyshenko said he also is discussing with Vanoc plans to send a large team of observers to Vancouver next February. Sochi has already seconded a number of employees to Vanoc in order to gain experience. But he said during the Games upwards of 100 Russians will be working in Vancouver.
Chernyshenko said the recession has affected all three of the Olympic organizers - Vancouver, London and Sochi - in different ways. With more than four years to go, the Russian Games still has time to overcome the downturn in the economy, he said. Sochi has already signed about $750 million US in domestic sponsorships, including a $100 million deal with Aeroflot, the Russian national airline last week.
While Vancouver has rewritten some of its plans in light of the recession, including cutting some service, Sochi is proceeding as planned.
"We are not going to change our vision despite the economic downturn," Chernyshenko said.
The complicated protocol of how Vancouver will hand over the Games to Sochi was on the table Tuesday as well. Chernyshenko said he met with David Atkins, the producer of the closing ceremonies, who has given Sochi an eight-minute window for a Russian welcoming performance after Furlong officially hands over the Olympic flag.
Sochi is also still in discussions with Vanoc over buying some excess equipment and venue overlay material after 2010, he said, but have yet to make a commitment.
The Russians also plan to use the Vancouver Games to unveil their new Olympic logo. Unlike most organizing committees, which reserve such events for domestic audiences, Sochi will reveal its new logo at Science World, which it has rented for the 2010 Games. Other details, including an international media strategy, will also be revealed there, Chernyshenko said.
jefflee@
Russian Customs Seeks To Reduce Border Control Bodies – Agency
Publié le 25 aoû 2009
MOSCOW -(Dow Jones)- Russia's Federal Customs Service has developed a draft bill seeking to reduce the number of enforcement agencies operating at the country's borders, according to a note to the draft bill seen by the Prime-Tass news agency Tuesday.
The draft bill is aimed at simplifying and speeding up the transit of goods and vehicles across Russia's borders.
If the bill is passed, the customs service would take on additional responsibilities. Specifically, the bill transfers all vehicle enforcement functions at the borders to the customs service and empowers customs to partially carry out sanitary-quarantine, veterinary, and phytosanitary control.
Web site: prime-
Cherkizovsky Charges Filed
Investigators have charged 10 customs officers in a criminal case opened into the smuggling of $2 billion worth of goods from China to Moscow’s Cherkizovsky Market.
Three officers of the Baltics customs terminal were charged with abuse of power and another five with smuggling, the Investigative Committee said in a statement Tuesday.
Five have been arrested, and three were put on a federal wanted list, the statement said. No information was given about the other two, and none of them was identified. (MT)
Sheikh-ul-islam Haji Allahshukur Pashazadeh marks his 60th birthday
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[ 26 Aug 2009 11:41 ] [pic]
Baku – APA. Chairman of the Caucasian Muslims Office Sheikh-ul-islam Haji Allahshukur Pashazadeh marks his birthday today. APA reports that he was born in Cil village of Azerbaijan on August 26, 1949.
He got his primary religious education from the local religious persons. In 1968, he entered Mir-i-Arab Madrasah in Bukhara and finished his religious education in Tashkent Islamic University in 1975.
In 1975, he became responsible secretary of Caucasian Muslims Office, akhund, deputy chief of Teze-pir mosque. In 1980 he was elected chairman of the Caucasian Muslims Office and became Sheikh-ul-islam.
In 1986, he was elected member of Royal Academy of Jordan. He is the professor of Baku State University, doctor of historical sciences. In 1992, he was elected chairman of Supreme Religious Board of Caucasian peoples by the religious people of Azerbaijan, Dagestan, Kabardino-Balkaria, Georgia, Ingushetia, Chechnya, Karachay-Cherkessia, Adigey.
Allahshukur Pashazadeh is the member of the Management Board of World Islamic Congress, Management Board of Eurasia Islamic Council and a number of other international organizations. He was elected co-chair of CIS Interreligious Council in 2004.
He was awarded “Friendship among peoples” order (1988, USSR), “Al-elm va amal” (1992, Egypt), “Glory” order (1994, Egypt), “Independence” order (1999, Azerbaijan), First Grade St. Vladimir order (2001, Russian Orthodox Church), “Honor” order (2001, Georgia).
Why Capitalism Is Doomed in Russia
26 August 2009By Yulia Latynina
A farmer named Khrebtov lives in the republic of Altai. He had always worked on 16 hectares of land, but for the past three years the government refused to renew the rental agreement for his plot of land. Khrebtov needed a stacking machine for his farm to gather hay, but when the authorities did not renew the rental agreement on his land, he was left with no collateral and was unable to get a loan from the bank. Only after Khrebtov slashed his wrists did he finally receive funding for his stacking machine.
There is another farmer in Altai named Onishchenko who has a sawmill and almost 4 hectares of land on the banks of a river. A few years ago, a top official told Onishchenko that he had no legal rights to his land. But Onishchenko found out on the Internet that land plots were being sold only 500 meters from his own plot for 4.5 million rubles ($143,000). He sued the authorities and won. When Onishchenko spoke with me, he sighed and said, “I spent so much time and money on that lawsuit. I could have built a banya or hotel for tourists with that money.”
The cases involving Khrebtov and Onishchenko illustrate the key points made in “The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else,” a fantastic book written by Peruvian economist Hernando de Soto Polar.
De Soto contends that the overall amount of assets held by the poor in countries without a market economy exceeds the total amount of foreign investment in those countries many times over. But since property is not registered and held privately, the people cannot use property to secure loans that would otherwise fuel investment and economic growth in free market economies.
Although there were many economic problems in the 1990s under President Boris Yeltsin, Russia made tremendous progress in the one area that is a defining feature of capitalism: the protection of private property. Under Vladimir Putin’s rule as both president and prime minister, however, we have gone in reverse. Farmers and small entrepreneurs are no longer the source of economic growth. Russian laws are written and designed so that businesses have little other choice than to operate outside of the law. As a result, they are easy prey for bureaucrats extorting bribes.
Farmers are unable to use their property as collateral with the banks since they have no legal right to it. Bureaucrats, for their part, cannot put up their assets as collateral with the banks since their greatest asset is their jobs, which allow them to collect bribes. Although it is true that the country’s largest and most powerful businesses are able to get bank loans, you would have trouble finding a businessman stupid enough to invest that money in Russia, a country where your investments can be seized at any moment.
Justice and order are more important than freedom in a developing economy. Freedom with no private property protection is highly unstable and can easily lead to dictatorship. Capitalism generates not only profit, but also freedom.
We are constantly told that Putin consolidated the vertical power structure and restored Russia to its status as a great power. But nobody says he restored justice. If the “vertical power structure” is understood as the right to abuse the poor and rob the rich, then Putin has indeed built a powerful institution. At the same time, however, he destroyed the institution of private property rights that was built during Yeltsin’s rule.
Yulia Latynina hosts a political talk show on Ekho Moskvy radio.
National Economic Trends
Macro: stabilization becomes more apparent
Citi
August 26, 2009
In July, GDP contraction moderated to 9.3%YoY suggesting an increase of 0.5%MoM on a seasonally-adjusted basis according to preliminary estimates by the Russian Ministry of Economics (MoE). Industrial output grew 4.7%MoM representing a seasonally adjusted increase of 0.9%MoM. Construction remained depressed, due to limited access to financing and low demand. Agricultural production contracted for the first time since August 2006.
Trade balance widened by US$9bn in July to US$52.7bn on the back of an improving external environment. In January - July, exports totalled US$151bn (down by 46% Yoy), gradually expanding from month-to-month on the back of higher commodity prices. In year-on -year terms, exports contracted by 46% during the first seven months of 2009 with gas sales falling by 36% YoY. As Russia's major trading partners seem to be on the verge of an economic recovery we expect the prospective increase in external demand will provide a basis for exports growth going forward. Imports amounted to US$98.3bn in January-July (down by 40% YoY). In our view, the 2.7% MoM increase in machinery imports and the 48.6%MoM jump in textiles could indirectly suggest possible improvement in the private consumption and investment data in August-September. We believe a sharp surge in imports is unlikely as disposable income remains subdued.
July's GDP data is in line with our view that the Russian economy has reached the bottom, however we would like to emphasize that MoE's figures are preliminary estimates subject to significant changes as more accurate statistics come out.
Elina Ribakova
Natalia Novikova
Russia c.bank injects 84.3 bln roubles via repos
26-AUG-2009 09:33
MOSCOW, Aug 26 (Reuters) - The Russian central bank injected 84.3 billion roubles ($2.67 billion) of one-day funds into the banking system at a rate of 8.43 percent in its first repo auction of the day on Wednesday. The minimum interest rate was set at 7.75 percent. A maximum of 90 billion roubles had been on offer for two repo auctions scheduled for the day.
Following are results of the latest auction, provided by the central bank on its Web site (cbr.ru):
Date Aug 26 Aug 25 Aug 25
Session 1st 2nd 1st
Amount (bln rbls) 84.29 0.68 74.98
Bids (bln rbls) 84.29 14.79 86.11
Average rate 8.43 9.75 8.39
NOTE - For details of central bank repo tenders click here .
($1=31.54 Rouble) Keywords: RUSSIA REPO/FIRST
(Moscow Newsroom; +7495 775 1242; moscow.newsroom@)
Corporate Profits Picked Up in Q2
26 August 2009Combined Reports
Corporate profits declined less in the second quarter than in the first, the State Statistics Service said Tuesday.
The combined net income of all Russian companies except financial institutions and small businesses declined 34 percent from the same period last year to 1.27 trillion rubles ($40.5 billion), compared with a 71 percent decline in the first quarter, the service said.
Utilities fared best in the first half of 2009, seeing their profits rise 94.6 percent compared with the same period in 2008. The manufacturing sector saw the worst drop, their profits falling 78 percent to 280.5 billion rubles.
The share of loss-making companies in the first half of 2009 increased to 35.5 percent, up from 28.4 percent year on year. The period saw 42,900 profitable organizations, which brought in 2.4 trillion rubles, while 23,600 companies were loss-making, bleeding 808.2 billion rubles.
(Bloomberg, MT)
COMMENT: Russia's spontaneous stabilization
Evgeny Gavrilenkov of Troika Dialog
August 26, 2009
A growing number of countries are demonstrating either signs of stabilization or even recovery, so that not only did the second quarter look much better than the first quarter for the entire global economy, but most recent leading indicators also provide some optimism. Even though the news flow remains mixed, it now looks as if positive sentiment dominates, which is a stark contrast with what was seen several months ago, when the majority of forecasters kept downgrading their outlooks. Most recent leading indicators for Germany and France suggest that the service sector in the former and manufacturing in the latter expanded in August. Existing home sales in the US jumped 7.2% in July, pointing to a recovery in economic activity and improvements in the financial sector.
It appears that government efforts in many countries to stimulate economies have had some results, even though the effect may be relatively short lived - the US government, for instance, announced that it plans to withdraw the "cash for clunkers" programme - and it is not completely clear how the advanced economies will develop after stimuli are withdrawn. Meanwhile, the "cash for clunkers" plan also worked well in many European countries where demand for vehicles kept the industry afloat, justifying the massive increase in government spending.
Home grown
Russia's economic performance demonstrated signs of improvement in mid-year as well. Industrial output, for instance, grew strongly in June and July (up a respective 4.5% and 4.7% on month). Investments and retail sales also showed signs of month-on-month stabilization. However, as opposed to Western countries, Russia's stabilization originated not from the state's efforts, but largely on its own. The government did not directly stimulate consumers as in the West.
In the case of the automobile industry, subsidies went directly to the producer AvtoVAZ, which kept producing cars even though people displayed limited enthusiasm for buying them, as the vehicles remain incorrectly priced. As a result, stocks began to rise again even though production fell by around 60%. In recent years, production and sales continued to rise amid soaring consumer lending, which together with ruble appreciation helped to over-inflate domestic prices. Given the devaluation in November 2008-January 2009 was rather modest so that domestic prices remained relatively high, it is not surprising that car production has been suspended several times. Meanwhile, the Russian version of support for the automobile industry (with money going from the budget straight to the producer and consumers omitted from this scheme) should be better interpreted as a "clunkers for cash" scheme. Even though it was budgetary money, it was eventually the taxpayers that paid for unsold cars.
The government announced that next year it would start subsidizing consumers instead of giving subsidies to producers, ie. switch from "clunkers for cash" to a Western-style "cash for clunkers" scheme (Russians are supposed to enjoy RUB50,000, or around $1,500, in this version of a trade in purchase). Even though it will probably not be very timely, it is better late than never. This scheme may boost industrial growth even more next year.
More spending
Russia is going to increase federal budget expenditures by around 30% this year, which is more or less in line with what other governments are doing, though the difference between Russia and other countries is that such increase in expenditures is "normal" for Russia, while for Western countries it is an exception. We have reiterated many times in the past that Russia's double-digit inflation stems from a permanent "fiscal stimulus" so that budgetary expenditures have kept rising by around 25-40% every year and the economy has become used to it. That said, this year we see almost no increase in fiscal stimulus relative to previous years. Hence, it follows that Russia's stabilization and/or recovery this year looks more natural, as it is more market based, meaning that it should be more sustainable than in other countries. Russia's recovery may be slower than was expected, but government stimulus can accelerate growth next year (if it is eventually targeted properly, ie. directed toward consumers).
It appears that so far the month-on-month recovery in industry mid-year (amid relatively stable domestic demand) was largely caused by increased exports, such as gas, not by internal factors. Next year, domestic factors will start playing a more important role.
There are certain risks to this scenario, and too much government spending (especially if it occurs "overnight") is one of them. We have analyzed government draft budget proposals for 2010-12 and characterized state budgetary policy as "unsustainable," as expenditures look excessive and incorrectly allocated. How the budget is being executed this year gives another illustration of such inefficiency.
According to most recent amendments, the government is going to spend around R10 trillion from the federal budget in 2009, while only RUB4.7 trillion was allocated in January-July (ie. RUB670bn per month), meaning that RUB5.3 trillion (around RUB1.1 trillion per month) is going to be spent in the remaining five months. The fiscal deficit, which slightly exceeded RUB920bn in January-July, is supposed to reach RUB3.4 trillion by year-end (thus the deficit should reach RUB2.5 trillion in August December) meaning that the economy will be attacked by excessive government spending - most likely a major attack will come in late November or early December. Should the government keep spending in August - December by about say RUB0.7 trillion per month as up till now, so that the economy was able to stabilize, then total expenditures would not exceed RUB8.2 trillion, which means that the deficit would be under RUB1.6 trillion.
Even though in reality the budget deficit may be smaller than the planned RUB3.4 trillion (as revenues may be more than expected if the oil price remains at current highs) an enormous inflow of ruble liquidity is what one can expect at year-end. This can obviously create a storm on the forex market and translate into high inflation in January February 2010, which is Russia's usual problem. It looks as if the economy will once again receive money at year-end that it does not need, while the financial system (the forex market in particular) will experience volatility, which is also not needed.
Even though the ruble currently appears to be in equilibrium, as the balance of payments remains strong and there is no need for artificial appreciation or depreciation (as some commentators suggest), the massive inflow of ruble liquidity may fuel even more speculation and extra volatility as a result. This potential volatility, however, would be short lived and likely evaporate in mid-first quarter 2010, as government spending will not be that generous next year. In the forthcoming Russia Economic Monthly we will broach this issue in more detail.
Evgeny Gavrilenkov is Chief Economist of Troika Dialog, Russia
AUGUST 26, 2009
Russia Bank Lending Still Sags
By ANDREW LANGLEY
MOSCOW -- The Russian economy's nascent recovery is helping to ease the country's bad-debt crisis, although conditions for banks remain tough, according to the head of a major lender.
"Clients have begun repaying loans better since the summer as economic conditions improved," Oleg Vyugin, the chairman of MDM Bank, said. "We've been profitable since July because of this and management efforts to save costs and boost margins."
Russia's economy shrank more than 10% in the first half of 2009 as the big lending effort by state banks proved insufficient to offset the contraction in loan portfolios at private institutions. The Economy Ministry said Monday that Russia has begun pulling out of recession, but analysts agree that access to credit is key to that turnaround.
Non-state-controlled banks have been reluctant to lend as the economic downturn triggered a wave of defaults. The latest official data put nonperforming loans at 5% of nationwide lending portfolios, although some bankers say the figure is probably much bigger due to flawed methodology.
Mr. Vyugin, who previously headed Russia's financial-markets watchdog and has also been first deputy chairman of the central bank, said he expects nonperforming loans in Russia's banking sector to peak at 12% to 15% under international standards.
He said MDM, part-owned by the European Bank for Reconstruction and Development and the International Finance Corp., hopes to break even this year.
Moscow-based MDM completed a merger with Siberian lender URSA earlier this month to become Russia's second-largest non-government-controlled bank by assets, behind Alfa Bank.
Mr. Vyugin said more such mergers are unlikely in the near term, because of the special interests of many bank owners.
"Most of the biggest private banks are owned by financial-industrial groups, making mergers between them impossible. Similarly, some have strong ties to a particular municipality," he said.
Some observers had suggested the rise in bad loans and subsequent lending slowdown would trigger consolidation within the fragmented industry, which has more than 1,000 lenders at present.
Write to Andrew Langley at andrew.langley@
Business, Energy or Environmental regulations or discussions
AUGUST 26, 2009
Russian Firms Ramp Up Share Issues
By ANDREW LANGLEY and WILL BLAND
MOSCOW -- The re-emergence of Russian share sales is likely to accelerate into 2010 as companies seek to pay down the debt that fueled their growth during boom times, provided that global equity markets continue on the road to recovery.
New equity deals this summer have proved popular among investors, and banks are now working on more for the autumn and beyond.
But companies will have to accept lower valuations than those seen during Russia's initial public offering bonanza in 2007 and 2008, while new listing rules could damp demand among international investors.
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"Companies need to rebuild their balance sheets and the best way to do that is through new equity," said Andrew Cornthwaite, deputy chief executive at investment bank Renaissance Capital. Mr. Cornthwaite said he expects the deal flow to peak in the first or second quarter of 2010.
"We've seen this process already in the U.S., the U.K. and in Europe, and I simply don't believe it's not going to happen in Russia, which has been a year to 18 months behind in terms of how the crisis has developed," he said.
This year, Russian stock markets have managed to recoup some of the huge losses they sustained in 2008. The benchmark RTS index has shot up 75% so far this year on higher oil prices, calmer global markets and bargain-hunting by investors who considered last year's collapse an overreaction.
But the RTS still is at less than half its May 2008 peak, meaning interest in Russian placements is at lower valuations than in the past. At the same time, the economy has contracted sharply, putting pressure on corporate profits and companies' ability to repay debts. That has prompted some to test this year's recovery in global equity markets.
Alliance Oil Co. raised $390 million by selling new shares and convertible bonds in June, while London-listed steelmaker Evraz Group SA sold $900 million in the same two instruments the following month. Both transactions were heavily oversubscribed.
Aluminum giant United Co. Rusal plans to use proceeds from an IPO, due by 2011, to pay down debt of more than $15 billion -- a move that could be essential for its survival and one that highlights the predicament of other indebted companies.
Other deals are likely well before Rusal's 2011 deadline. Analysts expect some of the biggest issuers of new stock to be banks reeling from bad debts and steelmakers suffering from a drop in demand.
The government has pledged to buy 180 billion rubles ($5.73 billion) in new shares issued by state-controlled lender OAO Bank VTB, but other investors also may take part. A pre-emptive rights period ended Monday.
"Market conditions permitting, there will be some chances in the medium term for both primary and secondary equity offerings, but owners will need to be prepared to do so at prices lower, sometimes significantly lower, than 12 to 18 months ago," said Peter Allen, a partner at Linklaters law firm in Moscow, who handles capital markets.
Aside from more realistic valuations, bankers say companies will lure investors with bonds that can be converted into stocks, giving a mix of safety and the potential for larger gains.
But interest from abroad could be damped by plans to curb the amount of stock Russian firms are allowed to place overseas when listing in both Moscow and on a foreign bourse, most often the London Stock Exchange.
Investment banks have written to the market regulator to voice concerns that the regulations would reduce the liquidity of depository receipt programs, making them less attractive.
Market participants have long said Russia should improve the structure of its domestic market rather than forbid companies to list large amounts of stock overseas.
"The domestic equity market remains unacceptable to some international funds," Mr. Allen said. "Trading, clearance and settlement remains overly complicated in practice."
Write to Andrew Langley at andrew.langley@ and Will Bland at william.bland@
Russia’s First IPO in Year Planned for Fall
26 August 2009Reuters
The Stem Cell Institute is seeking to attract some 150 million rubles ($4.75 million) from investors in what would be the country’s first initial public offering in more than a year, the firm’s head said Tuesday.
The Stem Cell Institute, which has been valued at 500 million rubles, plans to place 25 percent of its capital in mid-November on the innovation and growth companies sector of the MICEX. “We are counting on fairly major investors. Now there is a big number of well-to-do people who are looking for direction for their investments,” said Maxim Dryomin, corporate finance director at Alor Group, which is organizing the placement.
The institute, which was founded in 2003, has its own bank of stem cells and develops its own medicines. Cash raised from the IPO will be spent on new projects in Russia and the CIS and on the development of new products.
Russia's steel sector is ailing, recovery mid-2010
2009-08-26 11:45:00
NEW YORK (Commodity Online): Russia’s crude steel sector is seriously hurt in 2009 with drastic fall in average monthly consumption of major industries utlising metals but a rapid recovery for the steel and aluminium sector by mid-2010 is foreseen by ResearchandMarkets in their just released Russia Metals Report.
Intervention from the government and state banks have helped the two sectors to hold on despite the worst crisis in recent history, the report said.
In the first five months of 2009, Russian crude steel output fell 32% year-on-year (y-o-y) to 21.94mn tonnes. While monthly output was up 7.1% y-o-y in May at 4.68mn tonnes, it was still down 31% y-o-y overall. The steel industry saw large cutbacks in Q109.
Russia's largest producer of longs products, Evraz, reported that its production of construction steels in the quarter dropped by around 36% y-o-y to 960,000 tonnes. Average monthly consumption from the automotive industry, which is a major user of steel flat products, fell to just 6,500 tonnes, compared to an average of 170,000 tonnes in 2008, as a result of a collapse in the car industry.
Russia VTB to take control of developer Don Story
Wed Aug 26, 2009 2:13am EDT
MOSCOW, August 26 (Reuters) - VTB (VTBR.MM: Quote, Profile, Research, Stock Buzz), Russia's No.2 lender, obtained rights to a controlling stake in developer Don Stroy, the bank reported on Wednesday.
"VTB and the shareholders of DON-Stroy group signed a memorandum of agreement, which provides the bank with the right to acquire 50 percent plus one share of ZAO DON-Stroy Invest," the bank said in a statement.
(Reporting by Dmitry Sergeev, + 7 495 775 12 42, dmitry.sergeev@)
Mechel establishes agency in the South Korea
Wednesday, 26 Aug 2009
Mechel OAO one of the leading Russian mining and metals companies, announces establishing its official representative office in Seoul, the Republic of Korea.
Currently Mechel's representative office in the Republic of Korea is the first Russian corporate representative office in the mining and metals industry in the country. Other large Russian companies having permanent representative offices in South Korea are Russian Technologies State Corporation and Aeroflot national air carrier.
The representative office of the company will support Mechel's business in the Republic of Korea, interact directly with South Korean partners, promote establishing new business contacts and assist in broadening Mechel's activities in South Korea.
Mechel OAO pays much attention to broadening its business geographically. Asia-Pacific region, including South Korea, is one of the priority directions in Mechel's business development. Thus in February 2009 within a visit to South Korea of the Russian governmental delegation, Mechel signed a long-term agreement with Hyundai Steel of South Korea, providing annual supply of coking coal.
In addition to South Korea, Romania and Republic of Bulgaria are the countries of successful operation of Mechel's representative offices.
Russia's auto output declines 61% in seven mths
Itar-Tass/ PTI / Moscow August 26, 2009, 11:13 IST
Russia's auto production decreased by 61.4 per cent in the first seven months of the year, a report said.
The production of vehicles - cars, trucks and buses - stood at 414,100 units in comparison to 1,071,000 in 2008, a report by ASM Holding, country's automobile industry monitoring agency said.
Between January-July, production of Russia-designed cars dropped by 36.3 per cent in contrast to 2008 and amounted to 185,020 cars, report said, adding that the output of foreign-brand cars in Russia went down by 46.9 per cent.
In the same period, car production by Russia-located assembling plants amounted to 114,300 cars or 53.4 per cent lesser than in January-July 2008, the agency said.
In the first seven months of the year, Russia's truck production decreased by 71.4 per cent to 48,700 trucks in comparison to 170,262 vehicles in 2008.
The production of buses also dropped by 61.6 per cent to 16.113 units, as compared to 41,914 buses in 2008.
Russian Technologies proposes Mr Komarov as CEO of Avtovaz
Wednesday, 26 Aug 2009
Interfax cited Mr Igor Zavyalov deputy director of the state corporation as saying that Russian Technologies has proposed that Mr Igor Komarov, the executive vice president of Avtovaz, take over the carmaker as CEO following the resignation of Mr Boris Alyoshin.
Mr Zavyalov said Mr Sergei Kogogin who earlier was reportedly nominated to head a new auto holding being set up on the core of Kamaz Avtovaz and Avtodiesel will remain general director of Kamaz.
(Sourced from Interfax)
Alyoshin Quits as AvtoVAZ President
26 August 2009The Moscow Times
AvtoVAZ president Boris Alyoshin is stepping down from his post, the company said in a statement Tuesday.
Alyoshin will continue to take part in the plant’s activities as a board member, and his resignation will be reviewed at the next meeting of the board of directors, the statement said.
Alyoshin denied rumors of his departure in late July in an interview with Russian Newsweek. He has led the firm since 2007 and was the longest-serving of the four successive presidents since 2005, when AvtoVAZ came under control of Rosoboronexport and ultimately Russian Technologies.
Igor Komarov is expected to serve as acting president, but a nominee for Alyoshin’s replacement has not been
announced.
AvtoVAZ has 93.4 billion rubles ($3 billion) of debt, according to company financials for the first six months, released Tuesday.
Slowdown signs - GAZ Group reduces car sales in 7 months by 65pct
Wednesday, 26 Aug 2009
Interfax cited Mr Sergei Zanozin CEO GAZ Group said at a press conference in Nizhny Novgorod that Russian automotive producer GAZ Group reduced sales of light commercial vehicles 65% to 23,770 cars in January to July compared to the same period of 2008.
He said that "The situation on the automobile market is far from good. The total decline on the market ranges from 50% to 75% depending on the group."
Mr Zanozin said individual entrepreneurs make up about 60% of its clientele. In the H1 of 2009, banks were offering unfavorable crediting terms and reduced lending sharply due to the risk of loans not being repaid. He said that the GAZ Group plans to sell 35,000 LCVs in the H2 of 2009.
He added that "We clearly understand today that growth in sales volume is connected with clientele that has money. Government structures have money and we are actively taking part in state run programs. These are programs related to the Defense Ministry, the Emergency Situations Ministry and the Interior Ministry in addition to sales via the Regional Development Ministry for a total of RUB 30 billion of which the GAZ Group will take in more than RUB 10 billion. There's also a leasing program launched by the Transportation Ministry. The State Transportation Leasing Company has been set up and we intend to take about RUB 3 billion in equipment from it this year."
Mr Zanozin said the GAZ Group is working actively with corporate clients, including oil and gas companies as well as Russian Railways. GAZ also signed an agreement with Gazprom last week on supplies of equipment.
The GAZ Group produces cars, commercial transport and road construction equipment. The holding includes 18 auto plants as well as sales and service structures.
(Sourced from Interfax)
Renova Outs Oerlikon CEO Amid Disappointing Results
26 August 2009Reuters
ZURICH — Oerlikon’s main shareholder, Renova, pushed chief executive Uwe Krueger out of the Swiss technology group Tuesday as it posted its latest set of disappointing results and began another round of cost cutting.
Oerlikon, in which Viktor Vekselberg holds a 45 percent stake through his Renova Group holding, recorded a first-half net loss of 99 million Swiss francs ($93.4 million) as demand tumbled in its textile unit.
“The results were not satisfactory. One reason for them is the economic downturn, but this is not sufficient,” Oerlikon chairman Vladimir Kuznetsov, who is also Renova’s chief investment officer, told reporters Tuesday.
“We have the heavy burden of debt, and we have to make fast decisions,” Kuznetsov said. “We’re facing tough times. The board needs to get involved not only in strategy deliberation but also in strategy implementation.”
Board member Hans Ziegler, who one Zurich-based trader said has a good reputation as a turnaround manager, will take the helm with immediate effect until the board picks a CEO, which could take four to nine months.
“Renova Group is convinced that [Ziegler] is the right person to steer Oerlikon through a challenging economic environment and guarantee the interests of all company stakeholders,” said the shareholder, which holds three out of five seats on Oerlikon’s board.
The shakeup comes after Renova oversaw the election of Juergen Dormann as chairman of Swiss engineering group Sulzer, in which the Russian company holds a 31 percent stake, after forcing out former chairman Ulf Berg.
Oerlikon, which issued several profit warnings last year and posted a full-year loss for 2008, said it would look to save another 400 million francs. The company plans to ax another 2,500 jobs after cutting 1,500 positions in the first half. The group has 16,500 workers.
Russia's Rambler Media H1 net loss widens
MOSCOW, Aug 26 (Reuters) - Russian Internet firm Rambler Media's net loss widened to $2.1 million in the first six months of 2009, from $0.5 million a year ago, as advertising revenue declined, the company said on Wednesday.
Rambler, which operates Russian-language Internet sites, said in a statement revenue fell 18 percent to $30.8 million in the first half of the year. The company forecast full-year 2009 revenue would fall 15 percent, year-on-year, in rouble terms.
"The operating environment was particularly challenging for Rambler due to low business confidence, decreasing GDP and production in Russia and a prevailing lack of visibility, which limited advertising spending," Rambler CEO Olga Turischeva said.
Rambler said earnings before interest, taxation, depreciation and amortisation (EBITDA) fell to $2.6 million in the first half of 2009 from $8.9 million a year earlier. EBITDA margin fell to 8.4 percent from 17.3 percent.
"While we are seeing early signs of stabilisation in the economy, including the stabilisation of the dollar-rouble exchange rate, a recovery in the oil price and a rebound in stock markets, we remain cautious on the outlook for the rest of the year," Turischeva said.
(Reporting by Robin Paxton; Editing by David Holmes) Keywords: RUSSIA RAMBLER/ (robin.paxton@; +7 495 775 1242; Reuters Messaging: robin.paxton.@)
MTS could complicate the structure of the Comstar acquisition... why?
Rencap
August 26, 2009
Event: According to Vedomosti today (26 Aug), the Federal Antimonopoly Service (FAS) allowed OOO Kapital to buy 100% of Comstar. OOO Kapital is owned by Alexander Timofeev, a partner in the law firm Liniya Prava, which advises MTS on the purchase of Comstar. MTS at the same time received FAS approval to buy 100% of OOO Kapital. The article suggests that such a deal structure might be aimed at avoiding shareholder approval for the purchase of Comstar by MTS.
Action: Neutral in our view.
Rationale: Previously the FAS allowed MTS to by up to 100% of Comstar. The purchase of Comstar is an interested party transaction. As it exceeds the 2% of assets balance value of MTS (approximately $200mn as of 1H09), it requires the approval by 51% of non-interested shareholders. In our view MTS does not need to avoid getting shareholder approval because the purchase is being done at low levels of valuation and is value-accretive for minorities (given MTS buys minorities out in Comstar in addition to the purchase of the Sistema's stake). The fact that MTS could avoid the extension of the offer to Comstar minorities as well as avoid obtaining shareholding approval for the deal, does not bode well for the company's image as a good corporate citizen, in our view.
Ivan Kim
August 25, 2009
Comstar Connects Moscow and Rostov-on-Don
By Anuradha Shukla
TMCnet Contributor
Comstar has soft launched a backbone multiservice fibre-optic network connecting Moscow and Rostov-on-Don. The overall investment in the project reportedly was over $4.6 million.
The construction of the new telecommunications network, which now spans approximately 1,350 km, commenced in 2008 on the basis of ECI equipment and applied Dense Wavelength Division Multiplexing technology.
Boasting a data transmission speed capacity of 10 Gigabits per second, the new telecommunications network passes through Tula, Lipetsk, Voronezh, Kamensk-Shakhtinsk, Shakhty and Novocherkassk.
Sergey Pridantsev, president and chief executive officer of Comstar UTS, sees the soft launch of the backbone multiservice network as a milestone in the implementation of their transport network development program. The backbone network will help in successful operations of a national telecommunications operator.
The Comstar Science and Technology Committee approved the overall concept of transport network development in November 2008, and the group is consistently working on its implementation.
Pridantsev expects their proprietary backbone networks will allow them to significantly reduce their costs related to channel rent. In addition, it will expand their presence in long-distance connection segments, such as exchange of traffic between operators and international transit.
“Our reduced dependence on the large backbone network operators lending us their networks will enable us to decrease the costs of traffic transmission and, through that, reduce the service costs for our regional subscribers.”
Comstar notes their transport optic infrastructure enables transmission of both voice and data telecommunication traffic on an IP protocol basis. With this capability, they are able to provide their local subscribers with a full range of fixed-line telecommunications services, including long-distance connection, broadband internet access and pay-TV.
Comstar-UTS is a major fixed-line telecommunications company in Moscow. The company was in news last week for announcing the completion of another stage of expansion of its intercity and international communication network.
Russian drug distributor seeks Veropharm bankruptcy
Tue Aug 25, 2009 8:07am EDT
* Wholesale firm Protek files for Veropharm bankruptcy
* Protek says Veropharm was guarantor on 22 million debt
* Veropharm's indebted owner 36.6 says debts were paid
By Maria Plis
MOSCOW, Aug 25 (Reuters) - A payment dispute between Russian pharmacy chain 36.6 (APTK.MM: Quote, Profile, Research, Stock Buzz) and drugs distributor Protek heated up on Tuesday when Protek said it was suing for the bankruptcy of 36.6's drug making unit Veropharm (VFRM.MM: Quote, Profile, Research, Stock Buzz).
"Despite the court's backing of Protek's demands, 36.6 is in no hurry to meet its payment commitments for goods that have been delivered," Protek said in a statement.
But 36.6 said it had settled debts with Protek at the end of last year and there was no reason for Protek to file for Veropharm's bankruptcy.
Veropharm acted as the guarantor in a 22 million rouble ($697,300) deal between Protek and another unit of 36.6 and Protek said the guarantee made Veropharm liable for payment in the deal, which it said it never received. "We have settled all payments owed to Protek for which Veropharm acted as guarantor," 36.6 spokeswoman Irina Lavrova said. "We do have unpaid debts to Protek, but they are in no way connected to Veropharm guarantees."
Russia's largest pharmacy chain, 36.6 owes a total of 225 million roubles to Protek, the owner of Russia's second largest drug retailer, Rigla.
Since the end of last year, Protek has filed more than 140 legal claims against 36.6 and its subsidiaries over payments for delivered goods.
The total debt for drug purchases of 36.6 at the end of the first half of 2009 amounted to $166 million, according to a report released by investment firm Rye, Man & Gor Securities, which cited the management of 36.6.
The indebted pharmaceutical chain has defaulted on 1.9 billion roubles in bonds and is now in talks to restructure its outstanding bonds and loans.
It had planned to settle its debt issues by selling off a controlling stake in Veropharm, but has delayed the sale, saying it had not received any attractive offers for the stake, according to the Rye, Man & Gor report.
Protek has 18 percent of the market for wholesale pharmaceuticals and has its own chain of 580 pharmacies.
36.6 has a retail chain of around 1,100 stores and had $125 million in revenue in the second quarter of 2009. Its main beneficiaries are Artem Bektemirov and Sergei Krivosheyev. (Reporting by Maria Plis; Writing by Simon Shuster; Editing by David Holmes) ($1=31.55 Rouble)
Russia offers to introduce 10-12-year moratorium on catching sturgeon in Caspian to restore population
Baku, Fineko/abc.az. Russia offers to introduce a long-term moratorium on fishing of sturgeon breeds in the Caspian Sea.
Leader of the Federal Agency on Fishing Andrei Krainiy says that if all Caspian bordering countries introduce moratorium on fishing sturgeon, this species of fish can be restored in 10-12 years.
“To restore the species, it is necessary to struggle against illegal fishery as well as conduct work to restore sterlet, sturgeon and beluga,” A. Krainiy said.
In Russia a moratorium on industrial catching sturgeon has been operated as early as 5 years. In the state six plants and one research institute function to reproduce sturgeon fish, which produce annually 55 million alevins. According to the Russian data, Kazakhstan reproduces 7 million sturgeon fish, Iran - 12 million, Azerbaijan -10 million per year. Turkmenistan is not engaged in reproduction of sturgeon fish.
Russia's Magnit H1 net rises to $117.9 mln
MOSCOW, Aug 26 (Reuters) - Magnit, Russia's largest grocery store chain, said on Wednesday net profit rose 147 percent to $117.9 million in the first half after adding 226 stores and increasing its selling space.
Analysts polled by Reuters had forecast a $108.1 million net profit for the period.
Magnit said in a statement first-half 2009 revenues rose 33 percent year-on-year, in rouble terms, to 78.63 billion roubles. Like-for-like sales rose 10.2 percent.
Revenue in dollar terms decreased by 3.7 percent to $2.38 billion, in line with the average forecast.
Earnings before interest, taxation, depreciation and amortisation (EBITDA) rose 96.5 percent to $224.2 million.
(Reporting by Robin Paxton; Editing by Lincoln Feast) Keywords: MAGNIT/ (robin.paxton@; +7 495 775 1242; Reuters Messaging: robin.paxton.@)
Russian Parliament Feeding Foreign Hauliers
26.08.2009 — Analysis
The international cargo trucking market in Russia has virtually been taken over by foreign companies for quite some time. The RusBusinessNews observer has found out why a quarter of these companies work in the country illegally, why the conflict with the Lithuanian hauliers arose, and how to get rid of the Western European middlemen when transporting cargo.
In the middle of August 2009 there was a traffic jam on the Russia-Latvia border consisting of more than a thousand Lithuanian trucks transiting into Russia. The officially declared reason was the decision of the Federal Customs Service of the RF on intensifying the monitoring of Lithuanian truckers due to ever more frequent cases of missed deliveries of goods and transporting vehicles to destination customs warehouses. The situation had lightened up only after the Lithuanian Customs Department had promised to withdraw international haulage permits from companies which have violated customs laws of the RF.
Aleksandr Trakhtenberg, the Deputy Director General on the Strategic Development of OJSC Lorry (one of the largest trucking companies in Russia), reckons the source of the conflict lies much deeper. In his opinion the need is ripe for redistribution, for the benefit of domestic business, of the international cargo trucking market where companies from neighbouring countries reign currently.
- Mr. Trakhtenberg, what happened to the Lithuanian truckers?
- Russia simply reminded our Lithuanian colleagues of the existence of Russian laws, essentially beginning to apply the non-tariff limitation to the access of foreign companies to the domestic international cargo haulage market. The Lithuanians, however, complained to the EU about the discrimination on national grounds. And thus the purely economic issue acquired the political tinge.
- What share of international cargo trucking do foreign companies take in the Russian market?
- Unfortunately the international cargo haulage market in our country is not Russian. Domestic hauliers take less than 40% (in the most recent five years their share has grown only by a few percent). The situation in the Urals Federal District is even worse with less than 20% of haulage carried out by local trucking companies. The rest are foreign, predominantly from the Baltic states, Poland, Belarus, and some from the Ukraine. Hauliers from Kazakhstan transport a lot of cargo to Russia too, this is, predominantly, fruit and vegetables from the Central Asia, these routes are of no interest to us, they are not a threat, this is not even our competition. Most of the competition is occurring on destinations to Europe. Also, taking into account the Silk Road revival project, the routes to China are the future highly competitive market.
- How could these Eastern European companies have managed to conquer the Russian market? These companies are large international holdings, are they not?
- No, they are not. Fortunately the cargo trucking, by definition, cannot be monopolised, in contrast to railways for instance. Generally, the share of large hauliers is not critical here. The largest Russian company has four-five hundred trucks maximum. Our foreign competitors are not that large either.
Urals industrial companies have a preference to foreign hauliers thinking they offer better trucks and service than Russian companies and, therefore, are more reliable. However, this is far from the truth. In the Urals we see foreign haulier with the average age of their trucks just under five years. Average age of trucks in our company is just over two years. This does affect the reliability of the vehicle and the speed of cargo delivery.
The main paradox is in that very often the "primary" haulier is a Western European company while it would be a company from Poland, Baltic states or Belarus that physically carries the cargo to Russia. We have never seen English, German, French, Italian, or Czech hauliers in the Urals.
- Why is this happening?
- It was a usual practice before - to obtain tied funding when everything is stipulated in advance, the manufacturer and other project participants including the company organising and providing haulage. So, Italian equipment was transported by an Italian haulier, German equipment - by a German haulier, Czech equipment - by a Czech haulier etc. All these "primary" hauliers subcontracted the actual trucking to Eastern European companies, and a very small proportion - to Russian hauliers.
So, the chain for the transportation of cargo from Italy to the Urals may include three or four middlemen. This takes approximately a third of the price of haulage from abroad which amounts to 2-4% of the value of cargo. So, equipment worth 50 million Euro is not yet installed, but the losses already amount to 1-2 million Euro.
At the moment, however, most of the foreign trade projects of our companies in the Urals, including those involving the supply of production equipment, are funded by Russian banks. Nevertheless the situation of foreign hauliers dominating here remains the same. This raises a question where does a German or a Czech haulier come from when the funds are provided by the Urals Bank of the Sberbank of Russia? This seems to translate into the State owned Sberbank's and VTB's money feeding foreign business?! It is exactly so, yes.
Our banks, unfortunately, even those owned by the State, do not understand or do not want to understand that when the system is well tuned, like in Europe, some of the money will simply stay in Russia. Moreover, there are real savings for the end consumer - a company in the Urals - through the haulage of cargo without middlemen. There's no special wizardry required here, a state-like approach is needed in the State owned banks, which is all it will take to get things moving.
At the moment, as it stands, the country is wasting vast amounts of money. In 2008 the value of Russian international cargo trucking market amounted to almost eight billion US dollars, five billion out of which went to Europe.
All this would be tolerable, if all foreign hauliers in Russia worked in accordance with the law. Up to a quarter of them, however, drive around the country not entirely legally.
- A quarter is quite a lot. What countermeasures are being undertaken?
- The official penalty for foreign hauliers working in Russia without an appropriate permit is only 1,500 roubles. Then you pay and get on your way. If a Russia transport company finds itself in a similar situation within the borders of the European Union, it would risk a fine of up to 15,000 Euro and the truck would be impounded. That is rather costly.
For about five years now a bill has been in the Sate Duma which stipulates a 50-60 thousand roubles fine with the truck being impounded, but nothing has changed so far. This bears witness to the lack of political will in the matter of reciprocity in the Russian legislation.
We do have the Association of International Road Carriers (ASMAP). The association's leaders had raised in the Government the issue of the support for domestic transport companies, of the reciprocity of the appropriate legislation. The reply was "we have no time for you now; we have to sort out the meat imports first".
- How are things with the development of routes to China which you mentioned?
- China is even tougher than the European Union; the country does support their own hauliers. No foreign company has a right to drive further inland of China than 50-100 kilometres from the border. This is why non-Chinese hauliers deliver the cargo to one of logistic centres located along the border and drops it off there. From there the cargo is transported by Chinese hauliers. It is the same with cargo exported from China.
- Taking into account distances to Chinese destinations, would it not be cheaper to haul cargo by rail?
- The situation with the railway tariffs for cargo hauling in Russia is totally absurd. Even before the crisis we began to compete with the railways, at least when transporting cargo to the West. This is why, for instance, the Ural Mining and Metallurgical Company started using us for the haulage of their products in Russia.
The Russian Railways, substantiating their argument with the falling volumes of orders, raises the tariffs in order to compensate for the lost income. The situation, therefore, is getting even worse, as they lose some of their custom to trucks. This has to happen, objectively; the share of haulage by trucks is unjustifiably low in Russian economy.
Hauling cargo by trucks is more comfortable for clients, by definition. First of all, there are no transfers from railway carriages to trucks and back. Nobody has abolished the door to door principle yet. Secondly, the arrival time of the truck to the receiving end is known precisely.
- But Russian roads are bad!
- However badly the Russian roads are spoken of, crockery, crystal glass, and intricate electronic devices do get transported along them. In this case, simply, the requirements to the truck are tougher; there is the air suspension of the truck and the trailer and so on. And lastly, using Russian roads for international cargo hauling must become the prerogative right for domestic transport companies.
By Pavel Kober
Activity in the Oil and Gas sector (including regulatory)
Oil - July production drilling fell by 0.7% MoM driven by 0.7% decline in West Siberia
Citi
August 26, 2009
Most of the covered companies added 2-4% MoM in daily drilling rates with Lukoil and Tatneft being notable exceptions. Lukoil's numbers fell by 10.3% as a result of lower drilling across all regions but mostly in Timan-Pechora where drilling fell by 45% driven by declines both at Naryanmarneftegas (develops new South Khylchuya field) and Lukoil-Komi subsidiaries. Tatneft's numbers fell by 13.5% MoM possibly indicating a lack of financing given that most of the company's funds are now being allocated to construction of its new refinery.
Rosneft - Average Russian oil well flow grew in July by 0.3% MoM and 1.3% YoY
Citi
August 26, 2009
CDU TEK reported monthly operating wells stock data showing that in July the total number of oil producing wells remained flat MoM and YoY. However, given that July oil production grew by 0.2% MoM and 1.4% YoY, average daily flow rate increased by 0.3% MoM and by 1.3% YoY. We view it as a positive development as high flow rates could result in lower lifting costs.
Among covered companies, Rosneft showed the best performance with flow rates growing by 1.6% MoM and 5.4% YoY in July. We note that at the same time the company's operating wells stock declined by 0.5% MoM and 3.5% YoY. It appears that the company continues to replace underperforming wells by new ones at less mature fields. Such measures could drive Rosneft's lifting costs (the lowest in the sector) even lower. We view these numbers as positive for Rosneft.
Alexander Korneev
Nord Stream Pipeline one step closer
Wed, August 26, 2009
The public referral period in Sweden for the Nord Stream Pipeline has ended, marking a step forward for the proposed project.
The Swedish Government can now start preparing a decision on Nord Stream AG’s permit application.
Nord Stream AG Senior Management Advisor Lars O Grönstedt said “The end of the public referral period is an important milestone in our project.”
Construction on the 1,220 km gas pipeline is scheduled to start in early 2010, and has a planned capacity of 55 Bcm/a of natural gas. The pipeline will link Russia and the European Union via the Baltic Sea.
Nord Stream AG is an international joint venture between Gazprom, BASF/Wintershall AG, E.ON Ruhrgas AG and N.V Nederlandse Gasunie.
Oil terminal for Transneft Pipeline
Wed, August 26, 2009
Transneft has plans to construct an oil shipment terminal to receive oil from the Baltic Pipe System-2 (BPS-2) Oil Pipeline at Ust Luga Port, Russia.
The terminal will store and ship oil to offshore tankers. The BPS-2 Pipeline will be constructed in two stages, at which it will carry 30 and 38 MMt/a of oil, respectively.
Transneft began construction on the 1,170 km BTS-2 Oil Pipeline in July 2009. It will carry crude from Unecha to the Ust Luga Port, with a branch connecting to the Kirishi oil processing facility.
The BTS-2 Oil Pipeline is expected to operate at full capacity by 2011.
8/26/2009
|Carbon fund set up by EBRD and EIB in 1st Russian venture |
| |
In the first such transaction in Russia, carbon credits generated by utilising gas which would otherwise be flared at an oilfield in eastern Siberia are to be purchased through a carbon fund set up by the EBRD and the European Investment Bank (EIB), the Multilateral Carbon Credit Fund (MCCF).
The gas which will be re-utilised under this scheme is a by-product of oil extraction. The underlying project involves Irkutsk Oil. The EBRD holds an 8.15 percent stake INK-Capital, the primary holding of Irkutsk Oil.
The carbon credits being bought through the MCCF are to be generated via the Joint Implementation (JI) mechanism under the Kyoto Protocol in a project centred on Irkutsk Oil’s main Yarakta field.
The MCCF, whose other participants are the governments of Finland, Belgium (Flanders), Ireland, Luxembourg, Spain and Sweden, as well as six private sector participants, is one of the few such funds dedicated specifically to countries from central Europe to central Asia. This transaction is its first in Russia.
Once Russian government approval has been obtained and various other conditions fulfilled, the carbon credits will be bought from Irkutsk Oil’s subsidiary, UstKutNefteGas.
The EBRD earlier this year agreed to lend Irkutsk Oil up to €90 million, part of which was ear-marked for implementing gas-flaring cuts. UstKutNefteGas is building a gas processing plant and installing re-injection equipment at the Yarakta field.
The plant will separate condensate from Associated Petroleum Gas (APG). The company plans to sell the condensate or mix it with oil. The dry gas will be re-injected into the field – with Liquid Petroleum Gas (LPG) to be produced at a second stage through the separation of butane and propane.
This process will allow some 95 percent of the total volume of APG produced over the whole life of the field to be re-used, resulting in significant reductions of greenhouse gas emissions.
Russia is the single biggest source of gas flaring in the world. To combat this, the government earlier this year set a 2012 deadline by which oil companies will have to raise utilization of associated petroleum gas to 95 percent or face crippling fines.
JI is a market-based approach for addressing global climate change that uses international relationships to achieve lower-cost reductions in greenhouse gas emissions. A JI project generates carbon credits (known as Emission Reduction Units), which may then be traded internationally or used to meet a buyer’s compliance obligations.
This transaction was negotiated for the MCCF by GreenStream Network Plc., which acts as a carbon manager for the MCCF in Russia.
|Source: | |
Georgia: Russian Oil Behemoth Goes To Abkhazia
8/25/09
Russian state oil company Rosneft has set up a subsidiary in the breakaway region of Abkhazia to produce oil from the Black Sea shelf, and to set up a gas-distribution network.
The new company, called RN Shelf of Abkhazia, will perform seismic oil prospecting, Russia’s Vedomosti newspaper reported on August 25. According to some preliminary estimates, the Abkhaz shelf could contain as much as 500 million tons of oil, Interfax reported. Other assessments provide more modest numbers.
The Russian oil giant’s entry into Abkhazia has left local companies and tourism agencies jittery. It also has drawn protests from Tbilisi. De facto Abkhaz leader Sergei Bagapsh dismissed the criticism, saying the Rosneft announcement will help spur competition. He also downplayed environmental concerns, noting that oil development is underway in other areas of the Black Sea, the Regnum news agency reported.
Lukoil - Uzbekistan plans to tighten tax regime for foreign participants of gas PSA ventures
Citi
August 26, 2009
Uzbekistan's parliament will review amendments to the tax code on 28 August that are supposed to introduce gas excise tax for foreign participants of gas PSA ventures. The excise tax rate is seen at 25% of customs value of gas.
We view the news as slightly negative for Lukoil which develops a number of large gas fields in Uzbekistan (Kandym, Usturt, South Gissar). We estimate that sensitivity of Lukoil's FY09 EBITDA to introduction of gas excise tax in Uzbekistan is -0.6%.
Alexander Korneev
Lukoil - has been pre-qualified for second round of tender for Iraqi oil fields
Citi
August 26, 2009
Lukoil, along with 40 other companies, was pre-qualified yesterday for participation in the second round of the tender for Iraqi oil fields including West Kurna-2. We view the news as neutral for the stock at this point but further progress in the re-actualisation of the pre-war West Kurna-2 project by Lukoil could be positive for the company.
Alexander Korneev
TNK-BP Seeks $204M From Customs
26 August 2009Bloomberg
TNK-BP Holding said it is seeking 6.39 billion rubles ($204 million) from the Federal Customs Service for overpaid levies, three months after winning a similar case.
The dispute stems from differences on the rates of customs duties paid from the end of 2005 through 2007, Nikolai Gorelov, a spokesman with TNK-BP, said Tuesday.
TNK-BP used the correct rate in its interim declaration, while the customs regulator charged higher duties valid at the time the final declaration was submitted, Gorelov said. “We are now trying to reclaim the excess money we paid,” he said.
A Federal Customs Service spokesman declined to comment on the case.
TNK-BP filed the suit with the Moscow Arbitration Court. In May, the Higher Arbitration Court ordered the customs service to pay TNK-BP 8.78 million rubles in a similar case.
Tatneft joy as Ghadames wildcat roars
By Upstream staff
Russian player Tatneft and Libya's National Oil Corporation (NOC) have hit oil with their first wildcat drilled in Area 82 in Libya's Ghadames basin play.
In a statement, NOC said the A1-82/04 wildcat was drilled to a total depth of 8605 feet, and hit hydrocarbons.
The well hit 36 feet of net hydrocarbon pay at an interval of between 5900 and 5908 feet, in the Ouan Kasa formation.
It flowed flowed 40 degree API crude at a rate of 400 barrels per day on a 32/64-inch choke during tests.
Area 82 which was awarded by NOC in December 2005.
Tatneft drilled the well as an operator under an exploration and production sharing agreement with NOC, which a 89.5% stake in the area. Tatneft holds the remaining 10.5%.
Tuesday, 25 August, 2009, 14:10 GMT | last updated: Tuesday, 25 August, 2009, 14:10 GMT
Tatneft: Depleted fields in Russia, green fields abroad
UralSib
August 26, 2009
Tatneft strikes oil in Libya. Russian newswires, citing Libyan National Oil Corporation (LNOC), yesterday reported that Tatneft (TATN - Hold) had struck oil at one of its four exploration blocks in Libya. Tatneft holds a 10.5% share in the production sharing agreement (PSA) concession, while LNOC controls the remaining 89.5%. The daily well flow is 55 tons (400 bpd), which is much higher than the average 2008 well flow of 4.2 tons in Tatarstan. The news is only marginally positive and will unlikely have any affect on immediate stock performance. It is important strategically although, as it indicates that the company continues to diversify from its core depleted region into new geological provinces, including those abroad. We believe that Tatneft production in Libya, even if put on stream, will be of small share of total production, (10 mtpa). LUKOIL's and Rosneft's projects in African comprise only 1-2% of production or reserves. Tatneft's Libyan project is one of three run by Russian oil majors in North Africa. The other two are LUKOIL's Meleiha project (approximately 0.9 mtpa of production; 34 mln tons of recoverable oil reserves) in Egypt, and Rosneft's Tesselit projects in Algeria (no production, but 36.5 mln tons of 1P oil reserves).
No additions to valuation through diversification yet. Tatneft operates mostly depleted fields in Tatarstan, with water cuts of up to 95% and low daily flows of three-five tons per well. Tatneft's upstream diversification was only into the sands (we refer to this as geological diversification rather than geographical), and its tar-sands projects are small (about 2% of total production) and were brought on stream when the oil price was above $100/bbl. This diversification into tar sands and foreign expansion is still negligible, and does not impact our valuation. We reiterate our Hold recommendation with target price of $3.9/share.
Victor Mishnyakov
SIBUR acquires leading international petrochemical trader CITCO
(26-8-2009)
In a bid to strengthen developments in global sales, SIBUR, Russia’s leading petrochemical company, has acquired Citco Waren-Handelsgesellschaft m.b.H. (CITCO). All relevant approvals for the acquisition have been received from the European Commission’s Competition Authorities and other antimonopoly authorities of European countries, non-members of EU. The acquisition will prop up SIBUR’s continuous global sales development - particularly to the European Union and Asia. The acquisition will boost SIBUR’s LPG distribution platform for oil and gas companies, leading to reduced petroleum gas flaring in line with Russian Government policy.
CITCO, a leading international petrochemical trader, was established in 2003 in Vienna. The Company specialises in liquid gas, petrochemical products and fertilisers exported internationally from Russia and Eastern Europe by providing financing, transportation, handling and intermediate storage services.
Tuesday, August 25, 2009
Volga Gas reports two more producing wells in Karpenskiy area, targets 2,500 bopd in Q4
Russian focused oil and gas producer Volga Gas plc (AIM: VGAS) released a positive production update on its drilling and development activities in the Karpenskiy license area today, sending its shares up 8% in early trade.
Volga Gas said the Uzenskaya #6 well is expected to be brought on stream, despite being announced as unproductive back in March. The well was later sidetracked, resulting in the discovery of net pay of 8 metres in the Cretaceous Aptian reservoir. Flow lines have been installed and production is expected to start imminently.
Volga also gave an update on its Yuzhno-Uzenskaya #8 development well, which has reached its planned target depth of 992.3 metres, achieving a flow rate equivalent to 1,512 barrels of oil per day from the Cretaceous Albian sandstone reservoir, tested at between 785 and 802 metres.
Volga Gas said production from the project has grown more than fivefold since the beginning of 2009 to 1,620 barrels of oil per day (bopd) as two more wells have been brought on stream, bringing the total to three.
New wells, including Yuzhno-Uzenskaya #8, are expected to be brought on stream in September, raising the total production to over 2,500 bopd as soon as Q4 2009.
"We are delighted with our recent successful drilling activities on Yuzhny Uzenskaya where we will have a total of six wells in production. We look forward to sustaining production from the Uzenskaya field area at significantly higher levels for the remainder of 2009 and to investigating further opportunities to expand our supra-salt development activity in the Karpenskiy Licence Area,” said CEO Mikhail Ivanov.
The company currently holds four licenses through its subsidiaries in the Volga region in Russia. Its immediate efforts are focused on proving the reserves in the Karpenskiy area and developing the Vostochny-Makarovskoe gas condensate field.
Putin touts Russia's oil reserves; seeks funding
Aug 24, 2009
Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, Aug. 24 -- Russia’s Prime Minister Vladimir Putin, on a visit to the town of Igarka in Krasnoyarsk Territory, boasted that the region will eventually provide more than 115 million tons/year of “additional oil and condensate” on reaching its estimated capacity.
"We ourselves find it hard to imagine the riches that fill our country,” said Putin at the launch of the Vankor oil field, adding that “It is possible and necessary to develop the resources that we have for hundreds of years.”
He said on national television that Vankor is “the first, and therefore a highly significant step in implementation of the large-scale, strategic project for the integrated development of hydrocarbon deposits in the north of Krasnoyarsk Territory and the Yamal-Nenets Autonomous Area.”
“In the coming years, a whole new Russian oil and gas region should appear here. Hundreds of kilometers of gas and oil pipelines will be laid,” Putin said. “Roads and power stations will be built, literally from scratch. Dozens of fields will be developed,” he said.
“According to specialists' calculations, this region will provide over 115 million tons of additional oil and condensate each year when it reaches its estimated capacity,” Putin said. “Of course, this will significantly strengthen the raw material base of the Russian economy and our export potential.”
Production in the oil and gas region should reach full capacity in around 10 years, said Putin, who also spoke about measures planned to improve infrastructure in the region.
“The government has taken a decision about integrated development of this, essentially new, oil and gas region,” said Putin, who proposed a partnership between the government and private oil companies.
“In our view, this approach will make it possible to consolidate the efforts of the state and resource-extracting companies and to significantly reduce costs,” he said.
Putin said such a partnership would also “create a common transport network, energy supply system and social provisions much more effectively, quickly and—the most important thing—cheaply, than if each company built such infrastructure individually, just for itself.”
Public-private partnerships should be used in the development process, said Putin, who said that “top-notch development of infrastructure needs to be ensured for the development of these new fields.”
Putin said, “We are talking about the construction and modernization of roads, pipelines, and power stations. It would be expedient to widely use the possibilities of state-private partnerships for this.”
Putin, who said that infrastructure bonds should be issued to help finance the projects, also suggested that a zero rate of tax on the extraction of subsoil resources could be extended to oil deposits in the Yamal-Nenets Autonomous Area.
“A subsidized, ‘zero’ rate of the subsoil resources extraction tax is already in effect for a whole series of oil deposits,” he said, adding that “this norm should be extended to the whole territory of the Yamal-Nenets Autonomous Area.”
Putin also urged the swift introduction of a zero rate of customs duty on oil exported from eastern Siberia.
“A fundamental decision has been taken regarding a ‘zero’ customs duty on the export of oil extracted from certain oil deposits in eastern Siberia,” he said, adding, “Vankor is on this list.”
At the launch, Putin said that fields in the Yamal-Nenets Autonomous Area and the north of Krasnoyarsk Territory contain 67% of Russia's natural gas, 15% of its oil, and 60% of its gas condensate.
“What’s more, geological exploration work here is far from complete and it promises new discoveries,” he said, adding, “The degree of resource exploration is 20% for oil, 35% for gas, and just 17% for condensate.”
Contact Eric Watkins at hippalus@.
Vankor and nearby crude oil prospects could greatly increase Russian avails
August 25, 2009
• Analysis by: Michael Lynch
• Analysis of: Rosneft Fires Up Oil and Gas Production at Vankor Field
• Published at:
Summary
Prime Minister Putin attended the ceremonial start up of giant Vankor oil field in Eastern Siberia on August 21. Vankor is an integral development project for East Siberia and the Far East. Oil from Vankor will be the main input for East Siberia- Pacific Ocean pipeline and the primary feedstock for a unique petrochemical complex planned for construction in the Russian Far East. Currently estimated reserves for the field are 3.865 billion barrels. Oil output will eventually reach 510,000 bbl/day.
Analysis
Petroleum Reservoir Consulting Engineers, DeGolyer & MacNaughton (Dallas), estimated proved oil reserves of 1.490 billion barrels with probable reserves of 1.604 plus potential reserves of 0.771 billion barrels for a total of 3.865 billion. Vankor was discovered in 1988 and in 2003 Rosneft acquired development rights. Exploration commenced in 2004 and now, 5 years later the field has gone on production. Equally important to Rosneft are 14 nearby license areas with potential reserves of of 3.2 billion barrels according to DeGolyer & MacNaughton. The cost of Vankor development including pipelines and related infrastructure stood at $4.4 billion as of the end of the first quarter of 2009 which means the capital cost of the oil will be about $1.15/bbl assuming both probable and possible reserves are eventually converted to the proved category which seems likely. Most of the wells have horizontal laterals. The 31 oil wells drilled in 2008 as a group totalled 142,100 meters or 4,584 meters/well (15,035 feet). The horizontal section is probably 3,000-4,000 feet which means that the oil will have to be lifted about 11,000 feet. Based on published data, Rosneft drilled 21 wells during 2006-07 and probably 17 in the first 7 months of 2009. They would have gone on production with perhaps 70 wells. The announced production rate for the field is currently 130,000 bbl/day which translates into about 1,800 bbl/day/well. While not huge producers, according to Rosneft, their average new well in 2008 came on line at 635 bbl/day. So the Vankor wells appear to be about 3 times as productive as those. They expect to increase offtake to 220,000 bbl/day by year end by continued drilling and perhaps installation of artificial lift. Even at this depth, lifting costs should not exceed $20/bbl so they can expect good profits at current prices. With the 14 nearby prospects, it seems clear they will follow a long term development plan for the entire region and possibly bring production up to a million bbl/day within the decade. This makes it an extremely important group of oil fields and it is easy to understand why Prime Minister Putin attended the ceremony. Eastern Siberia has a vast potential and is only moderately explored. With increasing demand forecast for the Far East long into the indefinite future, Rosneft appears to be in excellent position to capitalize on it.
Russia - Prime Minister Vladimir Putin met with Transneft President Nikolai Tokarev
Transcript of the start of the meeting:
Vladimir Putin: Mr Tokarev, as you know, I was recently in Vankor, where a new oil field was commissioned. A meeting with energy, gas and oil company officials was held there, with one of your deputies attending.
First of all, as you know, in the North, in East Siberia, in Yamal, one of the main issues for full-scale, major, broad-ranging operations is the participation of Transneft in increasing the capacity of the pipeline transport for oil deliveries to the east, eventually the Pacific Ocean, and to the west. This is the first issue. In your opinion, what plans and opportunities exist in connection with this endeavour?
Next, the northwest direction - the Baltic Pipeline System (BPS-2). And the southern direction. Please...
Nikolai Tokarev: As far as the construction of the Purpe-Samotlor connecting pipeline, this idea was first brought up at the start of the year by oil company executives themselves. We were interested in this proposal because in our view, this project would improve pipeline infrastructure and would include the resources in the Vankor oil field, as it is now called, for very timely supplies feeding the East Siberia-Pacific Ocean (ESPO) pipeline, both the whole project and the branch to China.
We plan to build a 550-kilometre connecting pipeline from Purpe to Samotlor. As early as the first stage, it will transport 25 million tonnes of oil to the east.
Vladimir Putin: How long did it take Rosneft to build 550 kilometres?
Nikolai Tokarev: Approximately four years, including both design and construction phases. Vankor will take a little bit more time.
Vladimir Putin: But isn't it also 550 kilometres long?
Nikolai Tokarev: The geography is a little bit different there, and the weather conditions are harsher.
We still have 16 million tonnes of reserves that can be supplied through Kholmogorskaya, so we will immediately be able to transport almost 50 million tonnes from this area.
Several oil companies have begun operations here.
Vladimir Putin: All 50 million tonnes, is that right?
Nikolai Tokarev: This would be the final, second stage of Purpe-Samotlor project.
Vladimir Putin: You once said 50 was enough to reach the ocean...
Nikolai Tokarev: Actually, yes. In addition, the capacity of oil supplies from the western direction via ESPO. This already provides and will continue to provide a total volume of 45 million tonnes for the first and second segments of ESPO.
We did not wait for a resolution to the question of financing for this year, and we will finance the project with our own funds. It will be ready before the end of the year.
Simultaneously, arrangements are being made in accordance with your directives. Regarding the meeting in Igarka, new, additional arrangements are being made to provide financing for this project. Today, we are designing and preparing it with our own funds. We intend for the work to be finished by 2011. If there are delays in the financing in connection with the directives currently being implemented, then we will begin financing using the Chinese loan, which has now been secured. The first loan is 5 billion roubles. This is what concerns the Purpe-Samotlor pipeline. Work is proceeding at full speed.
As far as ESPO-1 and ESPO-2, hydrotesting of the pipe at ESPO-1 has been completed. This is the first 2700-kilometre segment to Skovorodino. At present, the remaining third of this pipeline is being filled with oil. Pre-commissioning works are being done at the pumping stations and installation of equipment as well as remote monitoring and communications are in progress. At the oil terminal at Kozmino, we are finishing the installation of technological equipment and means of access. We are confident that by the end of the year, in accordance with the project schedule, all work on ESPO-1 will be completed.
Immediately, without delays and without wasting time, we will begin construction on the second stage, on ESPO-2. We will have detailed plans for this project in November. All inspections are finished, and all important decisions have been made. At present, we are preparing the path of the future pipeline for installation work. We negotiated for the purchase of pipes from pipe suppliers at a fixed price. There will even be a discount.
Vladimir Putin: Look here. Gazprom has begun active operations in the south of the Krasnoyarsk Territory, and they also plan to reach the Pacific Ocean...
Nikolai Tokarev: Along the same corridor as us.
Vladimir Putin: Along the same corridor as you. Therefore, when you begin the second stage, ESPO-2, you will need to coordinate construction with Gazprom. If not coordinate, then at least, keep in mind that this may be used by a second Russian company as well.
Nikolai Tokarev: Mr Putin, such cooperation is maintained in both the design documentation and in practical terms. Gazprom contractors will proceed from Khabarovsk to Nakhodka. We plan to develop this segment together with Gazprom contractors, because it will be along the same corridor.
Vladimir Putin: Fine. Let's move on to the northwest...
Nikolai Tokarev: Now as regards the BPS-2. The construction of its linear section started in mid-June, with 104 kilometers now constructed. The funds required for this project have been allocated in full. Luckily, we managed to resolve this problem promptly by issuing revenue-yielding bonds. The first payment - 35 billion (roubles) - has been earmarked already. The second payment will be completed in September. The BPS-2 project will be financed in full.
We have all the design documentation ready. We maintain regular contacts with the regional and municipal authorities. I can't see any big problems regarding the BPS-2. As regards the Ust-Luga branch, design and research are finished; the engineering documentation has been drafted. We are starting the construction of a terminal at our site in Ust-Luga. I am sure we'll manage to finish this project within the set deadline, maybe even before it.
Vladimir Putin: When?
Nikolai Tokarev: According to the Government executive order, in the third quarter of 2012. But I think we'll manage to commission it in the first quarter of 2012.
Vladimir Putin: Fine.
Nikolai Tokarev: As for the pipeline branch to China, we have practically completed the construction of its linear section. By mid-September all construction and assembly works will be finished: the channel section will be launched, and the line will be prepared for service. By the end of the year we will have prepared our section for the trials planned in the spring. A secure area on the Amur River bank has been prepared. Our Chinese partners began to send equipment and specialists to that area on August 1. They have embarked on their task to prepare an underwater pass across the bottom of the Amur. This work is being carried out in cooperation with Russian companies. We have met all the deadlines specified in your resolutions and directives.
Vladimir Putin: An environmental review has been carried out there, hasn't it?
Nikolai Tokarev: We have coordinated everything and received all authorisations. Everything has been finished.
Vladimir Putin: What about the South?
Nikolai Tokarev: As for the South, we have been discussing the expansion of the Urals-Samara oil pipeline with our Kazakh partners. Following Kazakhstan's request, we have prepared engineering solutions. Today we are studying opportunities and variants of relevant funding. Soon, by the end of this year, we will discuss practical aspects of the project's implementation at a meeting of the Intergovernmental Commission.
All in all, Transneft is fulfilling its export obligations. That's the general outlook.
Vladimir Putin: Good. Thank you.
Gazprom
UPDATE 1-Gazprom Q1 net profit falls 61 pct, beats f'casts
Wed Aug 26, 2009 3:13am EDT
* Q1 profit 110.18 billion roubles vs year-ago 286.05 bln
* Beats analyst forecast of 84.75 billion roubles
* Q1 net sales 931.40 billion roubles
* Net debt 1.191 trillion roubles as of Mar. 31, 2009
(Adds details, share price)
MOSCOW, Aug 26 (Reuters) - Russian gas export monopoly Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz) beat analyst forecasts on Wednesday with a 61 percent year-on-year decline in net profit the first quarter of 2009, on the back of lower gas sales at home and in Europe.
Net profit of the world's largest gas company fell to 110.18 billion roubles ($3.5 billion) in January through March from 286.05 billion in the first quarter of 2008. Operating expenses jumped by almost a fifth to 648.8 billion roubles.
Analysts polled by Reuters had expected net profit of 84.75 billion roubles for the first three months of the year. Gazprom shares slightly outperformed the broader MICEX .MCX index to trade up 0.1 percent by 0705 GMT.
A row over payments in January between Kiev and Moscow cut gas supplies to Europe, which gets about 20 percent of its gas from Russia via Ukraine.
Gazprom also said its net debt rose 17 percent over the quarter to 1.19 trillion roubles as of Mar. 31, 2009, due to the devaluation of the rouble.
The company said its subsidiaries had spent $1.67 billion to accumulate 55 percent of mid-sized oil producer Sibir Energy (SBE.L: Quote, Profile, Research, Stock Buzz) between April and June 2009. (Editing by David Holmes)
Gazprom First-Quarter Net Falls 62%; Beats Analyst Estimates
By Anna Shiryaevskaya
Aug. 26 (Bloomberg) -- OAO Gazprom, the world’s largest gas producer, said first-quarter profit fell 62 percent after posting a foreign-exchange loss.
Net income declined to 103.7 billion rubles ($3.3 billion) from 273.4 billion rubles in the year-earlier period, the Moscow-based company said in an e-mailed statement today. That beat the 74.9 billion-ruble median estimate of eight analysts surveyed by Bloomberg.
Gazprom recorded a foreign-exchange loss of 140.4 billion rubles as Russia’s national currency weakened as the country entered its worst economic crisis in a decade, according to a management statement posted on the company Web site.
Revenue rose to 931.4 billion rubles from 911.75 billion rubles a year earlier as the exports of fuel increased 28 percent to 433.2 billion rubles. The average price for gas to Europe, Gazprom’s main source of income, stood at $413.89 per 1,000 cubic meters, compared with $267.15 a year earlier.
To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@
Last Updated: August 26, 2009 02:42 EDT
Gazprom reports its consolidated interim condensed financial results under international financial reporting standards (IFRS) for the three months ended 31 March 2009
26.08.2009 10:00
On 26 August 2009 OAO Gazprom issued its unaudited consolidated interim condensed financial information prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (IAS 34) for the three months ended 31 March 2009.
The table below presents the unaudited consolidated interim condensed statement of comprehensive income prepared in accordance with IFRS for the three months ended 31 March 2009 and 2008. All amounts are presented in millions of Russian Roubles, unless otherwise stated.
Net sales of gas increased by RR 80,675 million, or 14%, to RR 676,467 million in the three months ended 31 March 2009 compared to the three months ended 31 March 2008. This increase was primarily due to higher prices for gas in all geographical segments.
For the three months ended 31 March 2009 net sales of gas to Europe and other countries increased by RR 94,202 million, or 28%, to RR 433,239 million compared to the three months ended 31 March 2008. This mainly results from the increase of average realized prices in RR terms (including excise tax and customs duties) by 55% which was compensated by the decrease of the volume of sold gas by 31%, or 16.4 bcm.
Net sales of gas to FSU countries increased by RR 1,902 million, or 2%, to RR 85,281 million in the three months ended 31 March 2009 compared to the three months ended 31 March 2008. The increase of sales in this segment is explained by higher average realized prices, which was compensated by the decrease of the volume of sold gas by 61%, or 15.3 bcm.
Net sales of gas in the domestic market decreased by RR 15,429 million, or 9%, to RR 157,947 million in the three months ended 31 March 2009 compared to the three months ended 31 March 2008. This is explained primarily by the decrease of the volume of sold gas by 11%, or 11.8 bcm, which was compensated by the increase in the average domestic price for gas set up by the Federal Tariffs Service.
Net sales of refined products decreased by RR 73,359 million, or 43%, in the three months ended 31 March 2009. The decrease was primarily due to the decline in prices for refined products and deconsolidation of the SIBUR Group.
In the three months ended 31 March 2009 net sales of crude oil and gas condensate decreased by RR 21,995 million, or 38%. The decrease of net sales of crude oil and gas condensate primarily resulted from the Gazprom Neft activities: net sales of crude oil decreased by RR 18,180 million, or 35%, to RR 33,705 million in the three months ended 31 March 2009 compared to the three months ended 31 March 2008.
Net electric and heat energy sales increased by RR 42,861 million, or 106%, in the three months ended 31 March 2009. The increase in electric and heat energy sales mainly resulted from operations of Gazprom Germania Group and OAO Mosenergo, and consolidation as subsidiaries of ОАО WGC-2 and ОАО WGC-6 (starting from III quarter of 2008).
Other revenues decreased by RR 5,449 million, or 18%, to RR 25,205 million in the three months ended 31 March 2009 compared to the three months ended 31 March 2008. Other revenues are different in their composition. This is explained by the fact that the Group includes a lot of companies involved in different types of activities.
Operating expenses increased by RR 102,687 million, or 19%, to RR 648,810 million in the three months ended 31 March 2009 compared to the three months ended 31 March 2008.
Major items whose growth resulted in the increase of the total amount of operating expenses are: purchased oil and gas (RR 166,111 million). The cost of purchased gas increased by RR 178,530 million, or 174%, and the cost of purchased oil decreased by RR 12,419 million, or 36%. The increase in cost of purchased gas was mainly caused by the increase in prices for gas from Central Asia and increase in gas trading activities on the European market and respective increase of gas purchases in Europe. This increase was partially compensated by the cost reduction within the following items: taxes other than on income (RR 22,762 million), staff costs (RR 12,480 million), other (RR 44,981 million).
In the three months ended 31 March 2009 our profit for the period attributable to owners of OAO Gazprom totaled RR 103,679 million which is RR 169,760 million, or 62%, lower compared to the three months ended 31 March 2008.
Our net debt balance (defined as the sum of short-term borrowings, including current portion of long-term borrowings, short-term promissory notes payable, long-term borrowings, long-term promissory notes payable and restructured tax liabilities, net of cash and cash equivalents and balances of cash and cash equivalents restricted as to withdrawal under the terms of certain borrowings and other contractual obligations) increased by RR 172,964 million, or 17%, from RR 1,018,346 million as of 31 December 2008 to RR 1,191,310 million as of 31 March 2009. This can be explained primarily by the revaluation of borrowings denominated in foreign currency.
More detailed information on the IFRS consolidated interim condensed financial information for the three months ended 31 March 2009 can be found here.
Central Asia A Major Factor In Gazprom Profit Drop
8/25/09
Gazprom will formally announce its results for the first quarter of 2009 on August 26, and analysts are predicting a massive fall in profits for the Kremlin-controlled conglomerate.
The high price of Central Asian gas, the devaluation of the ruble and limp demand in Europe are key factors in what may be the worst quarterly performance in Gazprom’s history.
Renaissance Capital, an investment bank, is predicting pre-tax earnings of $2.99 billion, some 66 percent lower than January-March 2008 when the company posted pre-tax profits of $8.7 billion, Russian broadsheet Vedomosti reported on August 25.
Analysts at JP Morgan said the devalued ruble and long-term contracts with Central Asian suppliers at what now seem like exorbitant prices could reduce quarterly profits by as much as $5 billion, Strana.ru reported.
The consequences of Gazprom’s fiscal woes are being felt by the Kremlin. Separately on August 25, the deputy head of the Federal Tax Service of Russia in Moscow, Alla Chugunova, revealed the company has more than halved the tax contribution it makes to the city budget which is struggling with a 27 percent shortfall.
26 August 2009, 11:57
Patriarch Kirill decorates the head of Gazprom with an order
Moscow, August 26, Interfax - Patriarch Kirill of Moscow and All Russia awarded the Order of St. Seraphim of Sarov (1st degree) to Alexey Miller, Chairman of the Board of Gazprom.
Patriarch Kirill gave this award for merit to Miller at a meeting at the Patriarch's residence in Chisty Pereulok, Moscow, "to pay tribute to his continuous efforts for the benefit of the Russian Orthodox Church," the Patriarchate's official website reports Wednesday.
Awarding the Order, Patriarch wished Miller the aid of God in his labour and success to his corporation for the benefit of Russia and its people.
A year ago, Patriarch Alexy II, the predecessor of Patriarch Kirill, decorated Miller with the Order of St. St. Sergius of Radonezh.
"Over a decade, Gazprom has been giving its best efforts to provide help and assistance to the Church, including the renovation of churches, several dozens of which have been renovated at Gazprom's expense," a spokesperson of the Synodal Department for Relations between the Church and Society told Interfax-Religion on Wednesday.
The spokesperson also noted that Gazprom was one of the largest benefactors of Christ the Savior Cathedral.
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