Russia - WikiLeaks
Russia 090629
Basic Political Developments
• Medvedev to discuss energy, trade during Azerbaijan visit - According to the source, bilateral trade grew by 39.3% to $2.4 billion in 2008, but decreased by 16.9% in the first quarter of 2009 year-on-year due to the global financial crunch.
• Gas and border issues for Medvedev in Baku - Iran, the EU and Israel have expressed a desire to get gas from Shah Deniz, but Russia might get the edge when Medvedev signs the gas cooperation deal between Russia and Azerbaijan.
• Heads of Russia and Azerbaijan to discuss projects of two countries in gas sphere - The Chairman of the Board of Directors of Gazprom, Alexey Miller, said last Friday that Gazprom plans to conclude an agreement with the State Oil Company of Azerbaijan (SOCAR) on gas supplies from Shah Deniz. "Gazprom could buy Azerbaijani gas since 2010. Initially it will be small volumes, but further purchases can increase," he said.
• Russia ready for more NATO cargo transits to Afghanistan - "As for military transits, we have signed agreements with Germany, France and Spain. We are also considering a request from Italy," Alexander Grushko told a news conference late on Sunday after an informal meeting of the Russia-NATO Council.
• Problem of CFE Treaty is not "dead-end" – Lavrov
• Medvedev Discusses OPEC in Angola - "We're not entirely satisfied with the state of the market," he said. "The oil market shouldn't be dependent on the situation in a single economy."
• Israel asks Russia to cancel arms deal with Iran - Relations between Israel and Russia have grown tense over a significant change in Moscow's attitude regarding the possible sale of S-300 air defense missiles to Iran. Prime Minister Benjamin Netanyahu called his Russian counterpart Vladimir Putin and asked him to prevent the arms deal from going through.
• [pic]Israel pressing Russia to cancel arms deal with Iran [pic]
• Russian, U.S. MPs discuss bilateral ties ahead of July summit
• Obama Will Speak At School Graduation - U.S. President Barack Obama will make a commencement speech to 1,000 guests at the New Economic School and hold talks with Prime Minister Vladimir Putin, officials said, as details emerged of Obama's much-anticipated visit to Moscow on July 6 to 8.
• General Surprises U.S. by Pledging Deal - "We have outlined the main issues of military cooperation for 2009 and beyond," the head of the General Staff, General Nikolai Makarov, said Friday after a 90-minute meeting with his U.S. counterpart, Admiral Michael Mullen.
• US, Russia in dispute over computer attacks - Less than two weeks before President Barack Obama’s visit to Moscow, the United States and Russia cannot agree how to counter the growing threat of cyberwar attacks that could wreak havoc on computer systems and the Internet, The New York Times reported Saturday.
• Putin says Russia will continue cheap energy supplies to Belarus
• CIS remains key priority of Russia, says Putin - "Cooperation is profound. We have common transportation and energy networks and speak Russian," Putin was quoted by the Itar-Tass news agency as telling leaders of political groups in Russia's State Duma, the lower house of parliament.
• Russians can go to Argentina without visas - Russian citizens will be able to go to Argentina without visas soon after the relevant intergovernmental agreement enters into force on June 29, an official at the Russian consular office in Buenos Aires told Itar-Tass.
• Abkhazia allocated land to Russian Federation’s FSB Border Guard Service
• Large-scale military drills start in southern Russia- The exercises, dubbed Caucasus -2009, comprise a series of operational drills with North Caucasus District troops, including South Ossetian and Abkhazian brigades, as well as units of the Black Sea Fleet, the Caspian Flotilla, the Air Force and the Airborne Troops.
• Russia starts drill in North Caucasus
• Russia begins large-scale military exercises in North Caucasus - The Caucasus 2009 war games are being seen by many experts as a warning shot for nearby Georgia, where the government says it has rearmed armed forces and where NATO recently wrapped up its own exercises.
• Russia holds largest war games since war with Georgia - in signal to Georgia, and to US
• Georgia fears of provocation in Russian exercises "Caucasus 2009"
• Chechen group behind Beslan claims Ingush attack - "This operation was carried out by the rebel battalion Riyadus Salikhin," the group said in a statement posted on , an internet site with ties to the Chechen separatist movement.
• Medvedev urges 'adequate blow' to attempt on Ingush leader's life
• Duma Passes NGO Law
• Ivanov Links NATO Rights To Drug War - The Federal Drug Control Agency said Friday that Moscow should stop the transportation of cargo across its territory to U.S.-led forces in Afghanistan if they do not do more to cut the flow of heroin to Russia
• Flood of Afghan heroin fuels drug plague in Russia
• State Tells Jews to Fight Case in Russian Courts - The Russian government told a U.S. court on Friday that American judges have no authority to tell it how to handle sacred Jewish documents held in its state library that were seized by the Nazi and Soviet armies.
• Russia’s rich turn to cash during difficult times - “There has been a flight to safety on behalf of wealthy investors, and they have gone more actively into low risk type investments like cash deposits, gold and U.S. Treasury bonds.”
National Economic Trends
• Putin Says Russia Budget Won’t Recover for ‘Foreseeable Future’
• Russia should aim for deficit of 2-3 pct – Putin
• Russian budget revenue to account for 16% of GDP in 2009 - Putin
• Putin suggests spending cuts to reduce budget deficit
• Russian economy: May is worse than April
• Russia's slow-motion banking crisis - Bankers are in a frustrating position, as even those who have been prudent and implemented good risk management are seeing their loans go bad, simply because the real economy is slowing and killing off companies that were making healthy profits only nine months ago.
Business, Energy or Environmental regulations or discussions
• AFI Development, Gazprom, Gazprom Neft: Russian Stock Preview
• Domestic vs foreign fund flows: market pulled in two directions
• Russian corporates are lining up for new issues - In June, after a 10-month break, Gazprom and Russian Agricultural Bank reopened the Eurobond market for Russian issuers with the first deals on the syndicated loan market, placing a combined USD 3.25bn in bonds.
• Duty-Free Restrictions Plan - The Federal Customs service plans to cut the amount of duty-free goods travelers can bring back into Russia, in a bid to boost sales by local producers, Kommersant reported Friday.
• Bill Creates State Road Firm - The State Duma on Friday passed in a third reading a bill creating a state company to run federal roads and nearby property, giving it the authority to rent out roadside land.
• Sberbank May Quit Opel Bid as GM Raises Price, Kommersant Says
• 'Anything Could Happen' in Deal to Buy Opel - Sberbank warned on Friday that a deal to buy Opel with Canada's Magna International could still fall through as a deadline, less than three weeks away, to move ahead with the deal looms.
GM plant in St Pete resumes operation after three-week break
• S&P sees up to 38% of Russia bank loans problematic by end-2011
• Sberbank buys back $135m of its subordinated Eurobonds
• Gref Sets Sberbank Bad Debt Target - Speaking at the same meeting, Central Bank Chairman Sergei Ignatyev said the increase in provisions, which rose to 7 percent of the portfolio by June 15, necessitated close examination of a possible takeover of Kazakh BTA.
• Polymetal plans to place 5 bln rubles in bonds
• Polyus Gold: Going for state support
• SU-155 signs another real-estate contract with Russian defence ministry
• Exiled by Russia: Casinos and Jobs - The government is shutting down every last legal casino and slot-machine parlor across the land, under an antivice plan promoted by Vladimir V. Putin that just a few months ago was widely perceived as far-fetched. But the result will be hundreds of thousands of people thrown out of work.
Activity in the Oil and Gas sector (including regulatory)
• Putin signs resolution raising oil export duty from Jul 1
• Russia to raise oil export duty to $212.6 per ton from July 1
• Putin: Russian oil and gas companies sure to be recapitalized
• Putin: this year's average oil price may reach $55 per barrel
• Surgutneftegaz Approves Boosting Dividend for 2008 to $1 Billion
• Putin offers surprise deal to Shell
• Russia change policy as Shell invited to Sakhalin gas project
• Shell Welcomes Putin's Sakhalin Offer
• 73 tankers from Varandey - Located 22 kilometres offshore, Lukoil’s ice-resistant export terminal in the eastern part of the Barents Sea has operated for one year.
• Gas Forum Still Lacks OPEC Sway - "The very idea of a 'gas OPEC' would be understandable only if they were talking about LNG," said Maria Radina, oil and gas analyst at UBS in Moscow. "But you can't do it with gas transported in pipelines. Anyone can put oil in a bucket and keep it there until prices rise. But with gas you simply cannot do that."
Gazprom
• Azerbaijan begins natural gas supplies to Russia for Gazprom
• Gazprom's oil arm raises its stake in Sibir Energy - Russian state-controlled group acquired its stake through the purchase of Orton Oil Company last week.
• Gazprom Neft Buys Half of Sibir’s Largest Shareholder
• South Stream Exports May Sideline Ukraine - Miller's statement implies that Gazprom is hoping to export about 180 bcm of gas to Europe in 2015. The company and its partners, Germany's E.On and Wintershall and Holland's Gasunie, are planning to build another pipeline, Nord Stream, under the Baltic Sea that would transport 55 bcm in 2012.
• $1.2Bln for Namibia Project - A power-station construction project in Namibia for which Gazprombank agreed to organize financing is valued at as much as $1.2 billion, Boris Ivanov, head of Gazprom International, told reporters in the Angolan capital Luanda on Friday.
• Turkmenistan: No Deal For Gazprom, But Negotiations Continue
• GDF Suez can count on 9 pct in Nord Stream-Gazprom
• The French want in on Nord Stream
• Gazprom elects 11 new Board of Directors
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Full Text Articles
Basic Political Developments
Medvedev to discuss energy, trade during Azerbaijan visit
MOSCOW, June 29 (RIA Novosti) - Russian President Dmitry Medvedev will visit Azerbaijan on Monday to discuss trade and economic cooperation, including in the energy sector, a Kremlin source said.
"Talks between the leaders of the two countries will focus on the development of trade and economic ties, including effective cooperation during the global economic crisis," the source said.
According to the source, bilateral trade grew by 39.3% to $2.4 billion in 2008, but decreased by 16.9% in the first quarter of 2009 year-on-year due to the global financial crunch.
One of the key areas of cooperation to be discussed during the visit is the supply of natural gas from Azerbaijan to Russia.
Azerbaijan has proven natural gas reserves of some 1.5 trillion cubic meters. The South Caucasus country annually consumes 14 billion cubic meters of gas.
Gazprom's CEO Alexei Miller said last Friday the Russian energy giant was planning to sign an agreement with Azerbaijan's state oil and gas company on natural gas supplies from Shah Deniz, the country's largest gas field. Azerbaijani President Ilkham Aliyev has said Baku sees no obstacles to the gas deal.
Gas and border issues for Medvedev in Baku
29 June, 2009, 11:13
Russia’s President Dmitry Medvedev is expected to sign two accords during his Monday visit to Azerbaijan’s capital Baku.
Russian gas giant Gazprom is on the hunt for access to more of the blue fuel. The company is seeking to secure more gas supplies from the Caspian state.
Gazprom aims to buy off all the gas produced from the offshore Shah Deniz gas field.
Iran, the EU and Israel have expressed a desire to get gas from Shah Deniz, but Russia might get the edge when Medvedev signs the gas cooperation deal between Russia and Azerbaijan.
Another document expected to be signed is to clarify the use of freshwater reserves of the Samur River on the border between two countries. This issue is vital for the Russo-Azeri border delimitation.
Heads of Russia and Azerbaijan to discuss projects of two countries in gas sphere
28.06.09 17:42
During his visit to Baku, which will take place on Monday, Russian President Dmitry Medvedev will discuss with his Azerbaijani counterpart Ilham Aliyev trade and economic cooperation between the two countries, including cooperation in energy sphere, a source in the Kremlin told to RIA Novosti.
"The focus of current negotiations between the leaders of the two countries will be further strengthening trade and economic cooperation, including in terms of effective interaction in the context of global financial and economic crisis," the same source said.
The Chairman of the Board of Directors of Gazprom, Alexey Miller, said last Friday that Gazprom plans to conclude an agreement with the State Oil Company of Azerbaijan (SOCAR) on gas supplies from Shah Deniz. "Gazprom could buy Azerbaijani gas since 2010. Initially it will be small volumes, but further purchases can increase," he said.
Amongst the key areas of interaction between the two countries, the Kremlin representative described fuel and energy complex. During his visit, Medvedev is supposed to specifically discuss the prospects and concrete projects in the gas sphere.
Formerly, on March 27, Gazprom and State Oil Company of Azerbaijan (SOCAR) signed a memorandum on the supply of Azerbaijani gas through the Novo Filya pipeline starting from 1 January 2010, with European price for the supply of the republics of the North Caucasus.
Russia ready for more NATO cargo transits to Afghanistan
CORFU (Greece), June 29 (RIA Novosti) - Russia is ready to extend the transit of military cargoes through Russia to other key member nations of the International Security Assistance Force (ISAF) in Afghanistan, a deputy foreign minister has said.
Russia already has bilateral transit deals with Germany, France and Spain, and Moscow also signed an agreement with NATO in 2008 on rail transits of non-lethal supplies to Afghanistan.
"As for military transits, we have signed agreements with Germany, France and Spain. We are also considering a request from Italy," Alexander Grushko told a news conference late on Sunday after an informal meeting of the Russia-NATO Council.
Due to worsening security on the main land route from Pakistan, NATO is seeking alternative routes to supply the U.S.-dominated ISAF in Afghanistan.
There are 62,000 foreign troops in Afghanistan, and U.S. President Barrack Obama has pledged to deploy another 17,000 U.S. military personnel to the war-ravaged country.
The informal foreign ministerial meeting of the Council on Saturday was the first high-level talks since last August's five-day war between Russia and Georgia, after which contacts were frozen. Russia then recognized Abkhazia and South Ossetia, which was attacked by Tbilisi in an attempt to bring it back under central control.
Relations between Russia and NATO have also been frayed in recent years over the military alliance's eastern expansion. Ukraine and Georgia, both former Soviet republics, have applied to join, but their U.S.-backed bids were turned down due to pressure from Germany and France at a 2008 NATO summit in Bucharest.
NATO and Russia have recently taken measures to step up cooperation on international security, including anti-piracy efforts in the Gulf of Aden.
Problem of CFE Treaty is not "dead-end" – Lavrov
CORFU. June 29 (Interfax) - The situation surrounding the
Conventional Armed Forces in Europe (CFE) Treaty is not hopeless,
Russian Foreign Minister Sergei Lavrov said.
"I would not say that this topic means a dead-end. Efforts
continue, which we welcome," Lavrov told a news conference after a
session of the Russia-NATO Council on Saturday.
A meeting of experts dealing with the CFE Treaty is to take place
in Germany soon, the Russian minister said. Russia has recently put
forth its new proposals regarding this issue, he added.
"The reaction these proposals have created raises our hopes. It
means that discussions will continue," he said.
At the same time, Lavrov called on all the countries concerned not
to tie discussions on problems related to the CFE Treaty to other
issues.
Medvedev Discusses OPEC in Angola
29 June 2009 Combined Reports
President Dmitry Medvedev on Friday ended a four-day African trip with a visit to OPEC member Angola, where he held talks on closer coordination of oil policy with the cartel.
The countries also vowed to work together in areas including energy, mining and telecoms in a bid to bolster ties between the former Cold War allies.
Cooperation with the Organization of the Petroleum Exporting Countries is "particularly important in the current situation, when the oil market is going through serious changes," Medvedev told reporters after talks with Angolan President Jose Eduardo dos Santos.
"We're not entirely satisfied with the state of the market," he said. "The oil market shouldn't be dependent on the situation in a single economy."
He also said state-oil company Zarubezhneft and Angolan state-run oil firm Sonangol were in talks to explore for hydrocarbon deposits.
"We also discussed cooperation in other areas and hope we can realize projects that are worthy of the new age," he said.
One such project is Russia's funding of the construction of two major dams in Angola's Kwanza River.
Another is a $300 million Russian loan from Vneshekonombank, VTB Group and Roseximbank to improve Angola's telecommunications sector with the launch of a satellite branded Angosat.
The countries signed six agreements to cooperate in several sectors of the economy in hopes of increasing trade between them, which stood at just $76 million last year.
Medvedev's visit to Angola, the first to the southern African country by a Russian head of state, follows stops in Egypt, Nigeria and Namibia. Medvedev said in Namibia on Thursday that Russia was "almost late" in returning to Africa. "We should have started working with our African partners a long time ago."
In Nigeria, Gazprom and state-run Nigerian National Petroleum agreed to create a joint venture, NiGaz Energy, worth at least $2.5 billion.
Israel asks Russia to cancel arms deal with Iran
Today, 10:42 PM
Relations between Israel and Russia have grown tense over a significant change in Moscow's attitude regarding the possible sale of S-300 air defense missiles to Iran. Prime Minister Benjamin Netanyahu called his Russian counterpart Vladimir Putin and asked him to prevent the arms deal from going through.
Ahead of a meeting between US President Barack Obama with his Russian counterpart Dmitry Medvedev next week, Israel has began an international effort to pressure Russia not to complete the sale of the advanced air defense system.
The deal between Russia and Iran for the sale of the air defense system was signed more than a year ago, but external pressure, primarily from the United States and Israel, led the Russian political leadership to delay its implementation.
The Russian response to Israeli inquiries on the matter had been that they do not intend to complete the deal. The same message was reiterated during Russian Foreign Minister Sergey Lavrov's visit to Israel last month.
A senior political source in Jerusalem said that in recent weeks there has been noticeable change in Russia's position on the matter of the arms sale.
The deterioration was first noticed during the visit of Foreign Minister Avigdor Lieberman to Moscow several weeks ago. Lieberman, who prides himself on his close ties with the Russian leadership, was surprised to hear the Russians presenting a position on the missile deal contrary to their earlier stance.
Medvedev told Lieberman that Russia has a signed contract with Iran and some payments had already been made.
"It is a lot of money," Medvedev told Lieberman. "There is an economic crisis at this time and we are having a very difficult time," the Russian president explained to the Israeli minister.
According to a report in the daily Maariv, Medvedev had even suggested to Lieberman that Israel purchase the defense system instead, or convince a third country to buy them.
Haaretz has learned that Lieberman's response to the Russian proposal was vague.
As a result of the negative impressions that Lieberman had during his visit to Russia on the matter of the arms deal, Israel commenced intensive diplomatic efforts vis-a-vis Russia, the U.S. and European countries in order to restore the earlier Russian commitment not to complete the deal.
Netanyahu's call to Putin was part of this effort. The prime minister argued that delivering the defense system to Iran would undermine the military balance in the region. There have not been any reports on Putin's response.
Defense Minister Ehud Barak met a week ago at the Paris Airshow with the Russian chief of staff, General Nicolai Makarov, and asked that he also intervene to prevent the arms sale.
"Arms that will subvert the military balance in our region and which will threaten stability should not be delivered in our region," Barak said.
The S-300 is considered to be one of the most advanced air defense systems in the world, and its capabilities allow it to intercept aircraft flying 30,000 meters up, from 150 kilometers away.
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[pic]Israel pressing Russia to cancel arms deal with Iran [pic]
By Barak Ravid
Relations between Israel and Russia have grown tense over a significant change in Moscow's attitude regarding the possible sale of S-300 air defense missiles to Iran. Prime Minister Benjamin Netanyahu called his Russian counterpart Vladimir Putin and asked him to prevent the arms deal from going through.
Ahead of a meeting between U.S. President Barack Obama with his Russian counterpart Dmitry Medvedev next week, Israel has began an international effort to pressure Russia not to complete the sale of the advanced air defense system.
The deal between Russia and Iran for the sale of the air defense system was signed more than a year ago, but external pressure, primarily from the United States and Israel, led the Russian political leadership to delay its implementation. The Russian response to Israeli inquiries on the matter had been that they do not intend to complete the deal. The same message was reiterated during Russian Foreign Minister Sergey Lavrov's visit to Israel last month.
A senior political source in Jerusalem said that in recent weeks there has been noticeable change in Russia's position on the matter of the arms sale.
The deterioration was first noticed during the visit of Foreign Minister Avigdor Lieberman to Moscow several weeks ago. Lieberman, who prides himself on his close ties with the Russian leadership, was surprised to hear the Russians presenting a position on the missile deal contrary to their earlier stance.
Medvedev told Lieberman that Russia has a signed contract with Iran and some payments had already been made.
"It is a lot of money," Medvedev told Lieberman. "There is an economic crisis at this time and we are having a very difficult time," the Russian president explained to the Israeli minister.
According to a report in the daily Maariv, Medvedev had even suggested to Lieberman that Israel purchase the defense system instead, or convince a third country to buy them.
Haaretz has learned that Lieberman's response to the Russian proposal was vague.
As a result of the negative impressions that Lieberman had during his visit to Russia on the matter of the arms deal, Israel commenced intensive diplomatic efforts vis-a-vis Russia, the U.S. and European countries in order to restore the earlier Russian commitment not to complete the deal.
Netanyahu's call to Putin was part of this effort. The prime minister argued that delivering the defense system to Iran would undermine the military balance in the region. There have not been any reports on Putin's response.
Defense Minister Ehud Barak met a week ago at the Paris Airshow with the Russian chief of staff, General Nicolai Makarov, and asked that he also intervene to prevent the arms sale.
"Arms that will subvert the military balance in our region and which will threaten stability should not be delivered in our region," Barak said.
The S-300 is considered to be one of the most advanced air defense systems in the world, and its capabilities allow it to intercept aircraft flying 30,000 meters up, from 150 kilometers away.
Russian, U.S. MPs discuss bilateral ties ahead of July summit
MOSCOW, June 29 (RIA Novosti) - Members of the U.S. House of Representatives are in Russia on June 29-30 to discuss urgent issues of bilateral relations ahead of U.S. President Barack Obama's visit to Moscow on July 6-8.
Opening an extended meeting of the members of foreign affairs committees to address bilateral trade, regional stability and U.S. missile defense plans in Europe, the speaker of the Russian lower house, Boris Gryzlov said: "Bilateral ties currently enjoy new possibilities and are being driven forward with increasing pace."
According to Leonid Slutsky, a deputy chairman of the State Duma committee on foreign affairs, the participants of the meeting will discuss plans for a U.S. missile shield in central Europe, and other issues related to NATO.
A discussion of the Jackson-Vanik amendment is also expected.
The Jackson-Vanik amendment was passed in 1974 and restricted trade with the Soviet Union over human rights violations. The amendment, which still applies to Russia, puts restrictions on Russian-American trade relations, but Russia's accession to the World Trade Organization would require the amendment be lifted.
"We will also discuss topics that have emerged recently in the light of the move to 'press the reset button' in bilateral relations and 're-launch' the START treaty," Slutsky said.
Russia and the U.S. have been involved in comprehensive talks over a new nuclear arms reduction deal to replace the START 1 treaty, which expires in December.
The START 1 treaty obliges Russia and the United States to reduce nuclear warheads to 6,000 and their delivery vehicles to 1,600 each. In 2002, a follow-up agreement on strategic offensive arms reduction was concluded in Moscow. The agreement, known as the Moscow Treaty, envisioned cuts to 1,700-2,200 warheads by December 2012.
Russian President Dmitry Medvedev and Obama agreed to launch the discussions during their first meeting, in London in early April.
Russia, which proposed a new arms reduction agreement in 2005, expects Washington to agree on a deal that would restrict not only the numbers of nuclear warheads, but also place limits on all existing kinds of delivery vehicles.
Medvedev has also said that any strategic arms cuts would only be possible if the United States alleviated Russia's concerns over Washington's plans for a missile shield in the Czech Republic and Poland.
The U.S. military has recently reiterated its commitment to missile defense, citing a growing threat from North Korea and Iran, but suggested plans for a European site may change.
U.S. Defense Secretary Robert Gates has suggested that Russian facilities could be part of the missile defense system, but Moscow has rejected this idea, saying there could be no partnership "in building facilities that are essentially designed to counter Russia's strategic deterrence forces."
Obama Will Speak At School Graduation
29 June 2009
By Anna Malpas / The Moscow Times
U.S. President Barack Obama will make a commencement speech to 1,000 guests at the New Economic School and hold talks with Prime Minister Vladimir Putin, officials said, as details emerged of Obama's much-anticipated visit to Moscow on July 6 to 8.
Obama will discuss the economic crisis and security issues during the graduation ceremony at the school on July 7, White House spokesman Robert Gibbs told reporters.
"The speech will be an opportunity for President Obama to discuss areas of mutual interest between the United States and Russia such as nonproliferation, global security and economic growth," Gibbs said Thursday, according to a transcript published on the White House web site.
The graduation ceremony will run from 10 a.m. to 1 p.m. and be attended by about 1,000 people, said the New Economic School, a privately funded graduate school founded in 1992. "We are honored that President Obama will participate in our graduation ceremonies," school rector Sergei Guriyev said in a statement. "Our graduates, their families and the NES faculty, staff and alumni are looking forward to President Obama's address, particularly at a time when both the U.S. and Russian economies face such great challenges."
Gibbs said Obama would also attend a "civil society event" and a business forum during his visit. The forum of U.S. and Russian business leaders is scheduled for July 7 and is being organized by the Russian Union of Industrialists and Entrepreneurs and the American Chamber of Commerce.
Gibbs said he did not know which U.S. business executives might accompany Obama on the trip.
He said the centerpiece of Obama's visit would be talks on securing a follow-up arms control treaty to START I, which expires in December. The global economy will also be on the agenda.
Obama and President Dmitry Medvedev also will sign an agreement on military cooperation, General Nikolai Makarov, head of the General Staff, said Friday, in an announcement that caught the U.S. military off guard. The Pentagon said the deal would amount to a sign of goodwill and declined further comment. (Story, Page 3.)
Meanwhile, a White House spokeswoman confirmed Friday that Obama would hold talks with Prime Minister Vladimir Putin.
In May, Putin told reporters that he would be pleased to meet Obama if their schedules matched but that "the president of the United States is the partner of the president of the Russian Federation." Putin's spokesman Dmitry Peskov later said Putin would meet Obama after he met with Medvedev.
The White House spokeswoman could not say whether Obama would meet with Putin one-on-one or on which day it would take place.
Separately, gay activists applied to Moscow City Hall on Friday to hold a 25-person rally outside the U.S. Embassy at 1 p.m. on July 7 asking Obama to legalize same-sex marriage in the United States. The activists, who plan to hold a banner reading "Yes You Can," said they would hold a protest at another location on July 7 if city authorities refused to sanction their rally.
General Surprises U.S. by Pledging Deal
29 June 2009 Combined Reports
A top general has surprised the U.S. military by announcing that Russia and the United States would sign a military cooperation deal when U.S. President Barack Obama visits Moscow next month.
"We have outlined the main issues of military cooperation for 2009 and beyond," the head of the General Staff, General Nikolai Makarov, said Friday after a 90-minute meeting with his U.S. counterpart, Admiral Michael Mullen.
"Our intention is that those documents should be signed when U.S. President Barack Obama arrives here in Moscow in July," Makarov said.
Mullen, the chairman of the U.S. Joint Chiefs of Staff, made no mention of any military agreement after the talks but said he was looking forward to the outcome of Obama's visit to Russia on July 6 to 8.
"I can't emphasize enough my belief that we need to work on these very hard challenges to improve security not just in Europe but in the world," Mullen said.
At the Pentagon, U.S. Defense Department spokesman Bryan Whitman said U.S. officials "had no idea" that Russian leaders were going to announce the intention to sign the agreement.
He called the expected agreement a sign of good will but would not discuss details.
"It's good for two countries to have strong, bilateral military-to-military relations," Whitman told reporters Friday. "We think it's valuable."
Makarov said he and Mullen discussed the U.S.-Russian talks on a successor to the 1991 START I arms control treaty, which expires Dec. 5, as well as U.S. missile defense plans, Afghanistan, Pakistan, North Korea and possible joint action against sea piracy.
Mullen, on his first visit to Moscow, said the meeting was frank and open.
The top military brass gave no further details about the talks.
The military talks follow renewed efforts by the two countries to reset relations that have become strained by events such as last year's Georgia war and NATO's expansion eastward.
"I'm very encouraged by our meetings and our mutual commitment to address these issues and strengthen our military-to-military cooperation," Mullen said.
"We have many common challenges … whether in Afghanistan or the challenges in missile defense, or in Iran or particularly for security in Europe," he added.
US, Russia in dispute over computer attacks
Published: June 29, 2009
WASHINGTON (AFP) - Less than two weeks before President Barack Obama’s visit to Moscow, the United States and Russia cannot agree how to counter the growing threat of cyberwar attacks that could wreak havoc on computer systems and the Internet, The New York Times reported Saturday.
Citing an unnamed senior State Department official, the newspaper said that both nations agree that cyberspace is an emerging battleground, and the two sides are expected to address the subject when Obama visits Russia next month and at the General Assembly of the United Nations in November.
Russia favours an international treaty along the lines of those negotiated for chemical weapons and has pushed for that approach at a series of meetings this year, the report said.
Meanwhile, the United States argues that a treaty is unnecessary and instead advocates improved cooperation among international law enforcement groups, the paper noted.
“We really believe it’s defence, defence, defence,” The Times quotes as saying the State Department official, who asked not to be identified.
“They want to constrain offence. We needed to be able to criminalize these horrible 50,000 attacks we were getting a day.”
According to the paper, any agreement on cyberspace presents special difficulties because the matter touches on issues like censorship of the Internet, sovereignty and rogue actors who might not be subject to a treaty.
US officials say the disagreement over approach has hindered international law enforcement cooperation, particularly given that a significant proportion of the attacks against US government targets are coming from China and Russia, the report said.
Recognizing the need to deal with the growing threat of cyberwar, many countries, including the United States, are developing weapons for it, like “logic bombs” that can be hidden in computers to halt them at crucial times or damage circuitry, “botnets” that can disable or spy on websites and networks, or microwave radiation devices that can burn out computer circuits miles away, the paper said.
Obama is due to visit Russia on July 6-8 in a bid to improve relations with Russia that were badly strained under the administration of his predecessor, George W. Bush.
Putin says Russia will continue cheap energy supplies to Belarus
NOVO-OGARYOVO, June 28 (RIA Novosti) - Russia will continue for the near future to sell oil and gas to Belarus at subsidized rates to support the country's economy, Prime Minister Vladimir Putin said on Sunday.
"For the near future we intend to continue this, while bearing in mind the tendency toward switching to world price levels for hydrocarbons," Putin told leaders of factions in the State Duma, the lower house of parliament.
Putin's pledge comes amid a dispute with Belarus over payments for Russian natural gas, which was massively discounted until 2007.
Gazprom announced on Friday it had sent Belarus a letter demanding it pay $244 million in gas debts, and warning that supplies could be cut if the sum is not cleared.
The debt has arisen due to differences between contract and average prices. In the first quarter Belarus paid $210 per 1,000 cubic meters, but by the end of the year this figure should have dropped to under $100. In line with verbal agreements the price should average out at $150 per 1,000 cubic meters.
Belarusian First Deputy Prime Minister Vladimir Semashko said on Friday that the government expects Russian gas prices to reach $166 per 1,000 cubic meters on January 1, 2010 if oil prices remain around the $70 per barrel mark this year. The rate is still well below the average rate Russia charges European Union countries for its gas.
The countries have in the past also clashed over Russian oil sales to Belarus, which had also been heavily discounted until the end of 2006. After Russia raised the oil price for Minsk, while keeping it below international prices, Belarus imposed a tariff on oil pipeline transit via its territory, triggering a temporary cut-off in early 2007.
CIS remains key priority of Russia, says Putin
MOSCOW, June 28 (Xinhua) -- Countries of the Commonwealth of Independent States (CIS) are pivotal political and economic priority of Russia, said Russian Prime Minister Vladimir Putin on Sunday.
"Cooperation is profound. We have common transportation and energy networks and speak Russian," Putin was quoted by the Itar-Tass news agency as telling leaders of political groups in Russia's State Duma, the lower house of parliament.
The CIS, an alliance of 11 former Soviet Republics, groups Russia, Belarus, Kazakhstan, Kyrgyzstan, Azerbaijan, Armenia, Moldova, Tajikistan, Uzbekistan, Ukraine and Turkmenistan. Georgia withdrew from the bloc due to the South Ossetia conflict last year.
Putin also said that entering the World Trade Organization (WTO)remains on Russia's agenda, but "the customs union of Belarus and Kazakhstan has come to the forefront."
Russia, Belarus and Kazakhstan agreed on June 9 to start new talks on WTO accession as a single customs union, and thus suspend individual talks.
Russia, which has been seeking WTO membership for more than 15 years, is the largest economy remaining outside the global trade watchdog.
Putin also recalled the recent Yekaterinburg summits of the Shanghai Cooperation Organization (SCO) and BRICs (Brazil, Russia, India and China).
"We will build up cooperation in these formats," he said.
Russians can go to Argentina without visas
BUENOS AIRES, June 29 (Itar-Tass) - Russian citizens will be able to go to Argentina without visas soon after the relevant intergovernmental agreement enters into force on June 29, an official at the Russian consular office in Buenos Aires told Itar-Tass.
The relevant agreement was signed by the two countries’ foreign ministers in March.
In compliance with the agreement citizens of Russia and Argentina, who have valid passports, may enter, transit and stay on the territory of the relevant countries for no more than 90 days out of a 180-day period starting from the first entry.
Those who intend to stay in Argentina or Russia for more than 90 days or to work on the territory of these countries should get a visa in compliance with the relevant legislations.
Argentina’s Foreign Minister Jorge Taiana said the cancellation of visas “proves the two countries’ wish and readiness to boost relations.” The agreement on visa-free rules is “a new step in practical dimension that will help to strengthen contacts between the two countries’ business people, boost tourism and cultural exchanges,” he said.
Abkhazia allocated land to Russian Federation’s FSB Border Guard Service
28.06.2009
The separatist parliament of Abkhazia has „allowed" to transfer some hectares of the land in urgent using to the Russian Federal Security Service’s Border Guard Service in Abkhazia, news agency RIA Novosti reports.
Earlier the leader of Abkhazia Sergei Bagapsh declared that the Russian military bases would stay in the territory of republic for 49 years.
The Russian border guards will receive land in Gali area (Pichori, Pakhulani and Taghiloni), 9.9 hectares in total. In Gudaut area they will be given 0.7 hectares of land in the village of Khypsta.
The land has been given for the term of operating duration of the agreement between the Russian Federation and Abkhazia on joint efforts in border protection. The document which was signed on April 30, provides operation of the Border Guard Service directorate under control of he Russian Federation in the territory of Abkhazia until the separatist regime will not create its own bodies of border protection. Russia has concluded a similar agreement with South Ossetia, too.
Large-scale military drills start in southern Russia
ROSTOV-ON-DON, June 29 (RIA Novosti) - Large-scale military drills start on Monday in 10 southern subjects of the Russian Federation, a spokesman for the North Caucasus military district said.
The exercises, dubbed Caucasus-2009, comprise a series of operational drills with North Caucasus District troops, including South Ossetian and Abkhazian brigades, as well as units of the Black Sea Fleet, the Caspian Flotilla, the Air Force and the Airborne Troops.
"During the exercise, the troops will practice a wide range of military measures aimed at ensuring security for Russian citizens, main transport and energy routes, strategically important infrastructure, and protecting Russia's economic interests in the southwest region," Andrei Bobrun said.
According to the Defense Ministry, a total of 8,500 troops, about 200 tanks, 450 armored vehicles, and up to 250 artillery pieces will take part in the exercises.
The exercise is led by Army Gen. Nikolai Makarov, chief of the General Staff of the Russian Armed Forces. The drills will end on June 6.
Russia starts drill in North Caucasus
29.06.09 10:52
Russia kicks off the "Caucasus-2009" massive strategic military exercise in the North Caucasus area on Monday, Xinhua reported according to local media.
The exercise will be held until July 6.
Russia begins large-scale military exercises in North Caucasus
Today, 10:39 PM
Thousands of troops, backed by hundreds of tanks, artillery and other heavy weaponry, began rumbling through the North Caucasus on Monday, as Russia began its largest military exercises since last year's war with Georgia.
The Caucasus 2009 war games are being seen by many experts as a warning shot for nearby Georgia, where the government says it has rearmed armed forces and where NATO recently wrapped up its own exercises.
Experts say the exercises may also be signal to the United States that Russia will give no ground on its efforts to maintain an exclusive sphere of influence in Georgia and other former Soviet republics. The games run through July 6 — the day that President Barack Obama arrives in Moscow for a highly anticipated summit with Russia's Dmitry Medvedev.
Defense Ministry official say more than 8,500 troops will take part, along with nearly 200 tanks, armored vehicles, 100 artillery units and several units from Russia's Black Sea naval fleet.
The exercises, which are being personally overseen by Gen. Nikolai Makarov, the chief of Russia's General Staff, are structured around a theoretical crisis situation that spirals out of control into open fighting, the ministry said.
Tensions remain high between Russia and Georgia, which lost authority over the regions of South Ossetia and Abkhazia during the war in August. Russia has been building military bases, storage facilities for supplies and roads in the two regions, which Moscow recognized as independent, and around 6,000 troops are based in each region.
Moscow has been openly hostile to Georgia's ambitions to join NATO and has signaled that it would not tolerate any other ex-Soviet republics from joining the alliance.
Still, Georgian President Mikhail Saakashvili has not backed down on his drive for NATO membership and his efforts to draw closer to the United States.
Last month, NATO wrapped up a month of its own training exercises in Georgia, though just a few hundreds troops participated. Despite the small size of the games, Russia was irked, calling them a provocation.
Deputy Defense Minister Col. Gen. Alexander Kolmakov was quoted by Russian media on Monday as saying that the Caucasus 2009 exercises were adjusted as a result of the NATO games and would be "quite major, as compared with those that were conducted in Soviet times."
NATO and Russia over the weekend agreed to resume military ties that had been frozen after the Georgian war.
Russia holds largest war games since war with Georgia - in signal to Georgia, and to US
MIKE ECKEL, Associated Press Writer
11:24 PM PDT, June 28, 2009
MOSCOW (AP) — Thousands of troops, backed by hundreds of tanks, artillery and other heavy weaponry, began rumbling through the North Caucasus on Monday, as Russia began its largest military exercises since last year's war with Georgia.
The Caucasus 2009 war games are being seen by many experts as a warning shot for nearby Georgia, where the government says it has rearmed armed forces and where NATO recently wrapped up its own exercises.
Experts say the exercises may also be signal to the United States that Russia will give no ground on its efforts to maintain an exclusive sphere of influence in Georgia and other former Soviet republics. The games run through July 6 — the day that President Barack Obama arrives in Moscow for a highly anticipated summit with Russia's Dmitry Medvedev.
Defense Ministry official say more than 8,500 troops will take part, along with nearly 200 tanks, armored vehicles, 100 artillery units and several units from Russia's Black Sea naval fleet.
The exercises, which are being personally overseen by Gen. Nikolai Makarov, the chief of Russia's General Staff, are structured around a theoretical crisis situation that spirals out of control into open fighting, the ministry said.
Tensions remain high between Russia and Georgia, which lost authority over the regions of South Ossetia and Abkhazia during the war in August. Russia has been building military bases, storage facilities for supplies and roads in the two regions, which Moscow recognized as independent, and around 6,000 troops are based in each region.
Moscow has been openly hostile to Georgia's ambitions to join NATO and has signaled that it would not tolerate any other ex-Soviet republics from joining the alliance.
Still, Georgian President Mikhail Saakashvili has not backed down on his drive for NATO membership and his efforts to draw closer to the United States.
Last month, NATO wrapped up a month of its own training exercises in Georgia, though just a few hundreds troops participated. Despite the small size of the games, Russia was irked, calling them a provocation.
Deputy Defense Minister Col. Gen. Alexander Kolmakov was quoted by Russian media on Monday as saying that the Caucasus 2009 exercises were adjusted as a result of the NATO games and would be "quite major, as compared with those that were conducted in Soviet times."
NATO and Russia over the weekend agreed to resume military ties that had been frozen after the Georgian war.
Georgia fears of provocation in Russian exercises "Caucasus 2009"
29.06.09 12:29Georgia, Tbilisi, June 29 /Trend News, N.Kirtzkhalia/
Georgian parliamentary Vice-Speaker from opposition Paata Davitaya offers to make all efforts to prevent provocation by Russia. Davitaya commented on the Russian military exercises "Caucasus-2009" which were launched on June 29.
The exercises began on June 29 and will finish on July 6.A total of 8,500 military servicemen are attending them under the command of Russian Armed Forces General Staff Chief General Nikolay Makarov.
"These exercises are a great threat for us. We must maximum avoid a response to provocation," Davitaya said.
One of leaders of the parliamentary majority Giorgi Gabashvili sounds two reasons for which Russia will not launch a war against Georgia.
Gabashvili commented on the Russian military exercises "Caucasus-2009" and said there is not a full guarantee that Russian will not launch a war, but there are two reasons which make us assume that the "Caucasus-2009" exercises will not finish as the "Caucasus-2008".
"The country's interior situation is calm and this fact is one of guarantees and the international community's strict position will not allow Russia's domination in the region which is the second reason," the parliamentarian said.
Chechen group behind Beslan claims Ingush attack
Mon Jun 29, 2009 12:12am IST
MOSCOW (Reuters) - The Chechen rebel group behind the 2004 Beslan school massacre has claimed responsibility for a suicide bombing last week that badly wounded the president of Russia's southern region of Ingushetia.
"This operation was carried out by the rebel battalion Riyadus Salikhin," the group said in a statement posted on , an internet site with ties to the Chechen separatist movement.
It said the June 22 attack on Ingush president and Kremlin appointee Yunus-Bek Yekurov was ordered by Chechnya's most wanted separatist leader, Doku Umarov.
Chechnya's pro-Kremlin leadership said on June 8 that Umarov had been severely wounded in a special operation that killed four of fighters. It has been unclear since then whether he is dead or alive.
Russia has stabilised Chechnya after two separatist wars since the mid-1990s, but nearby Ingushetia and Dagestan have replaced it as the main centres of violence on the country's volatile southern flank. The restive regions pose a challenge to Kremlin rule and provide a foothold for Islamist militants.
Describing the bomb attack, the Riyadus Salikhin group said: "At 8.30 in the morning, a car packed with explosives rammed into the armoured Mercedes belonging to Yekurov."
Yevkurov, 45, underwent surgery after the bombing, which killed one of his relatives, and is now in a stable condition. Russian President Dmitry Medvedev has condemned the attack as a "terrorist act" and vowed a "direct and severe response".
Units of the Riyadus-Salikhin group, then run by Chechen warlord Shamil Basayev, who died in 2006, carried out the 2004 Beslan school siege in southern Russia in which more than 320 people died. Most of the victims were children.
Medvedev urges 'adequate blow' to attempt on Ingush leader's life
BOCHAROV RUCHEI (Sochi) - Russian President Dmitry Medvedev urged the country's security forces to deal "an adequate blow" to the assassination attempt on Ingushetia's leader.
Yunus-bek Yevkurov, the president of Russia's North Caucasus republic of Ingushetia, received serious head and internal injuries on Monday when his motorcade was hit by an explosion believed to have been detonated by a suicide bomber. He was airlifted to Moscow after undergoing surgery in Ingushetia.
"I would like you to report to me what has been done and what we are going to do in the near future to deal a right response blow," Medvedev said at a meeting with the Russian Security Council members in his Black Sea residence on Saturday.
Yevkurov's spokesman said Saturday that the Ingush leader is showing small signs of improvement but remains in a coma.
"Small improvements are seen in the president, and overall he is stable. Doctors do not expect any sudden changes," press secretary Kaloi Akhilgov said by telephone, adding that Yevkurov had still not regained consciousness.
Duma Passes NGO Law
The State Duma on Friday passed in a first reading a presidential bill that would ease tight regulation of nongovernmental organizations, despite opposition from Communists, who called it a gift to U.S. President Barack Obama.
Communist Deputy Sergei Obu-khov said during debates that President Dmitry Medvedev had proposed the bill Wednesday to appease Obama, who will visit Russia in early July. "Not everything that is good for Obama is good for Russia," Obukhov said.
Communists also opposed the bill's elimination of a controversial clause in the current law that allows the government to close down NGOs that threaten Russia's "national unity, uniqueness and cultural heritage."
"The clause played a defensive role even if it did not work," Obukhov said.
The bill passed with a vote of 391 to 57.(MT, AP)
Ivanov Links NATO Rights To Drug War
29 June 2009 Combined Reports
The Federal Drug Control Agency said Friday that Moscow should stop the transportation of cargo across its territory to U.S.-led forces in Afghanistan if they do not do more to cut the flow of heroin to Russia.
"The granting of transport corridors to NATO forces in Afghanistan should be conditioned on a commitment to destroy sown areas, laboratories, stocks and other infrastructure of the Afghan drug business," agency head Viktor Ivanov told a meeting of ministers and lawmakers.
"This would ... start the real process of improving the drug situation in Russia as well as in Central Asian and European countries," he said.
Earlier this year, Russia and its allies in Central Asia established a transit route for nonlethal supplies to the international forces in Afghanistan to complement a dangerous route via Pakistan.
Citing United Nations data, Ivanov said Afghanistan's output of opiates had grown more than 40-fold since 2001, when the U.S.-led coalition launched its assault on the Taliban. He said the 2008 raw opium crop topped 7,000 tons.
The U.S. envoy for Afghanistan, Richard Holbrooke, said Saturday that Washington was shifting its strategy against Afghanistan's drug trade, phasing out funding for opium eradication while boosting efforts to fight trafficking and promote alternate crops.
Flood of Afghan heroin fuels drug plague in Russia
By Tom Lasseter | McClatchy Newspapers
CHELYABINSK, Russia — Young men with sores on their arms shuffled up the stairs of a dark, underground shopping arcade and into the daylight to plop dingy wads of rubles into the drug dealers' hands. The dealers casually reached into their pockets or plastic shopping bags and handed over tablets of synthetic morphine, a type also used as a horse tranquilizer, and paper packets that appeared to contain heroin.
Across the street in this gray, post-Soviet industrial town, two Russian policemen sat in a faded wooden booth, and a couple more sat in a police truck outside. They didn't seem the least bit interested.
A police officer walked by but didn't interrupt the transaction. Asked whether he was worried, one of the dealers, a young man with a white driving cap tipped down over his eyes, leaned back against a railing and giggled.
In Miass, a small town west of Chelyabinsk near the foothills of the Ural Mountains, Elena Shapkovskaya wasn't laughing. She works at the No. 40 pharmacy and often has to call the police when heroin addicts crowd
[pic]
the shop and begin shooting up in plain view.
"Sometimes instead of calling the police, we call an ambulance, because they're lying on the floor," Shapkovskaya said, looking down at the tile floor beneath her feet.
Drugs have become yet another scourge of post-communist Russia, with millions addicted to heroin and an annual death toll reportedly in the tens of thousands from overdoses and other drug-related causes.
• Russian authorities seized 2.4 metric tons of heroin in 2006, about three times the seizures in 2002, according to United Nations figures. That's a small fraction of the estimated 60 metric tons that are thought to arrive in Russia from Afghanistan each year.
• In 2008, Russian officials said that the country had more than 5 million frequent drug users, up from 3 million in 2002. U.N. estimates are lower — drug usage is notoriously hard to calculate — but they indicate that the percentage of Russians who use opiates is the highest in the world for countries with populations larger than 100 million. Opiate usage in the United States, which receives very little Afghan opium or heroin, is about one-third of Russia's.
• Russia had some 940,000 HIV-positive adults and children in 2007, up from 390,000 in 2001, according to the U.N., and an estimated 80 percent of Russians currently living with HIV were infected by dirty needles. AIDS killed about 40,000 Russians in 2007, but the U.N. says the toll could be as high as 71,000. It was 1,900 in 2001.
"It is difficult to be anything other than pessimistic when it comes to forecasting what the future holds for Russia vis-a-vis heroin abuse and trafficking," said a report last year by the U.N. office on drugs and crime.
Russian officials publicly blame America for the plague because almost all the heroin comes from U.S.-dominated Afghanistan, but they won't discuss in detail how drugs move through their country. They've yet to devise a comprehensive plan to address the issue. Trials of high-level traffickers are conducted in secret. Even midlevel police officials usually don't talk, and when they do, it's privately and away from their workplaces.
'THE AMERICANS HAVE DONE NOTHING'
Chelyabinsk, a city of more than 1 million in southwest Russia, once was known as Tankograd — "tank city" — for its World War II production of T-34 tanks. It later gained notoriety as the center of a region swamped by radioactive waste from a nearby nuclear-weapons facility.
A different poison is spreading today: Chelyabinsk has become a major transshipment center for Afghan opium and heroin, which enters Russia from Central Asia.
The drugs usually reach Russia from Tajikistan and Kazakhstan in trucks or, in smaller amounts, tucked away in train compartments or nervous travelers' stomachs.
The trade is nothing new in Russia, but after the U.S.-led invasion of Afghanistan in 2001, it exploded. Afghan opium production climbed from 3,400 metric tons in 2002 to a record 8,200 metric tons in 2007, partly because U.S. and NATO-led troops put a low priority on curbing it. Heroin flooded into Central Asia, and on to Russia.
"When I heard the Americans were going to enter Afghanistan I thought they were going to solve the problem, to stop the drugs," said Yevgeny Roizman, who had connections with Russian organized crime before he became a member of parliament. He now runs an anti-drug organization in the city of Yekaterinburg, another big heroin-distribution hub north of Chelyabinsk.
"But in the period after they came, there was a big increase in the region . . . ," Roizman added. "It makes me think the Americans have done nothing to stop the drug trafficking."
Although it's an unintended consequence of the U.S. action in Afghanistan, some Russian officials trace the growing problem to an American plot.
Viktor Ivanov, the head of Russia's Federal Drug Control Service, the national drug enforcement agency, told parliament in May that it was reasonable to "call the flow of Afghan opiates the second edition of opium wars." He was referring to the 19th-century war between Britain and China sparked by exports of opium from British India to China.
Ivanov isn't alone.
"I can name you a lot of politicians in Russia who said that the Americans specially arranged the situation in Afghanistan so that we would receive a lot of drugs, and this is the real aim of their occupation," said Andrei Klimov, the deputy head of the foreign affairs committee in Russia's lower house of parliament. "I'm not sure this is true, but who knows."
The U.S. government takes no direct responsibility for fueling Russia's drug problem.
"I would say the entire international community is responsible. The U.N. Security Council looked favorably on the U.S. and NATO doing what they're doing in Afghanistan," a State Department official said, referring to the U.N. mandate backing the foreign presence in the country. "So when critics like Russia say the U.S. and NATO aren't doing enough, well, it's really the entire international community that needs to take action on this."
A second State Department official pointed to the lack of Russian effort to provide assistance in Afghanistan.
"The Russians have had opportunities to come to the table on this and to provide alternative options," the official said. "If this really was a priority for them, we could work something out."
Both officials were authorized to speak to a reporter only if they weren't identified.
In Russia, it's much easier to blame a U.S. conspiracy than to bring up the subject of corrupt officials, the Russian mafia and their involvement in the drug trade.
Russia's Federal Drug Control Service wouldn't respond to McClatchy's questions over the course of a month, nor would the Interior Ministry or the national intelligence service. The Russian government routinely suppresses basic information about drug-related trials, even the names of defendants.
Igor Khokhlov, a senior researcher at the Academy of Sciences, a government-funded research institute, has researched the drug trade and concluded that high-level authorities aren't involved.
"They have safer and better ways to benefit from their high offices," he said in an e-mail interview.
However, it's almost impossible to do business in Russia, legal and otherwise, without a "krysha" — a Russian word that means "roof" — a patron to protect a businessman from corrupt government officials, criminals and other realities of modern Russia. It seems unlikely that kryshas could operate in Russia's estimated annual $15 billion drug-trafficking industry without high-level government contacts.
A 2008 U.N. report concluded that Russian organized-crime groups "provide protection to drug trafficking networks in exchange for a share of the proceeds."
The former deputy director of the Federal Drug Control Service, Alexander Mikhailov, said that Tajiks usually ran the wholesale heroin business at the border and delivered the drugs to gypsy communities, who handled retail distribution. He acknowledged that both groups have patrons whose "job is to corrupt those who affect his business: police, customs, narco-police, the people who should be fighting drugs."
Who protects the drug dealers, and how do narcotics get from the border to places such as Moscow? Mikhailov, who served for 25 years in the KGB, the Soviet intelligence service, ignored the questions. "I don't like to give names in the drug business," he said. "Most people don't."
Sporadic news reports suggest that narco-corruption occurs at senior levels of law enforcement. In 2003, five federal anti-narcotics agents were arrested, accused of taking bribes from a drug dealer. During 2004, an Interior Ministry lieutenant colonel was charged with leading a group of former police officers who were caught selling heroin in the Moscow region. Russian news wires reported in 2006 that more than 160 staff members of the federal anti-narcotics service had been caught for drug-related crimes.
'I PAID BRIBES TO GET LET GO'
As his friends died drooling and shaking with Afghan heroin burning through their veins, Alexei knew that things were getting out of control. In 2002 or 2003, it seemed as if a dam had burst: The number of heroin dealers in his north Moscow suburb grew from three to a few dozen, and the supply was purer than anything he'd had before.
Alexei, who spoke on the condition of anonymity because of legal concerns, started shooting up heroin every day and earning cash as a drug courier.
After 2002, more than a dozen of Alexei's friends didn't survive overdoses after vomiting in nightclub bathrooms or on their apartment floors. Roman, 23, died in a hospital ward after shooting up in a stairwell. Christina, 21, overdosed at home. Pyotr, 37, went to a party, used some heroin and had a fatal heart attack at his girlfriend's apartment.
Nevertheless, Alexei, a 28-year-old with a buzz cut who favors black jeans and bright white sneakers, said he didn't worry much about getting caught ferrying packages of heroin between Moscow and outlying towns
"I was arrested in clubs and apartments, but . . . I paid bribes to get let go," he said.
A federal anti-narcotics officer who works in a region near the Kazakh border sat down recently with a McClatchy reporter for a meal of grilled pork and vodka, but agreed to an interview only if his name wasn't used; his agency had said that its agents weren't allowed to talk to journalists.
"I've heard about a lot of cases of local police taking bribes to protect drug dealers," said the agent, who had a pink face, thick shoulders and a gold tooth that shone when he smiled. Those cases, he said, are investigated by police departments' internal affairs bureaus, which aren't above suspicion themselves.
The agent said he earned $540 a month for working to control a trade worth millions of dollars in his area. Local police, he said, make even less.
A second federal officer, who met a reporter in his car in a parking lot, sighed when he talked about the subject. "I can't tell you that there's not much police corruption," said the officer, a thin man wearing a cheap brown jacket who drove up in a small white Lada, a matchbox-like Russian car.
"I can't say the situation is getting any better," he said, speaking anonymously for the same reason as the first federal officer. "The amount of heroin coming in increased a lot during the past two years."
Vladimir Bogomolov, who's run a drug treatment center in the city of Chelyabinsk for 10 years, started to describe the network to a visiting American reporter.
"The Russian (criminal) groups are above the Tajiks and gypsies; they allow them to sell drugs and take a percentage of what they make," he said between sips of coffee. The police, he said, "are extremely corrupt."
An associate who sat in on the interview interrupted Bogomolov: "We shouldn't talk about what's happening right now."
So Bogomolov, who's committed much of his life to fighting the drug problem in his city, stopped talking about it.
He had the look of a defeated man.
State Tells Jews to Fight Case in Russian Courts
29 June 2009
By Nedra Pickler / The Associated Press
WASHINGTON — The Russian government told a U.S. court on Friday that American judges have no authority to tell it how to handle sacred Jewish documents held in its state library that were seized by the Nazi and Soviet armies.
The documents are at the center of a lawsuit brought by members of Chabad-Lubavitch, which follows the teachings of Eastern European rabbis and emphasizes the study of the Torah. The group is suing the government in U.S. court to recover thousands of manuscripts, prayers, lectures and philosophical discourses by leading rabbis dating back to the 18th century.
The case is being handled by the chief judge of the U.S. District Court in Washington, Royce Lamberth, who in January ordered the government to preserve the documents over Chabad's fears that they are not being properly cared for and could be sold on the black market.
The government said in its filing Friday that even though it respects the U.S. court, it would not participate in the litigation on order to protect its sovereignty. The government said the United States should use diplomatic channels to deal with any problems it has about the collection, and Chabad can pursue claims in Russian courts.
"This court has no authority to enter orders with respect to the property owned by the Russian Federation and in its possession, and the Russian Federation will not consider any such orders to be binding on it," said the Russian filing.
Lamberth agreed to take the case in U.S. court because he said both the Nazi seizure and the Russian government's appropriation of the collection, which Chabad says totals 12,000 books and 50,000 rare documents, violated international law.
The collection was formerly held by Rabbi Joseph Isaac Schneersohn, a leader of Chabad-Lubavitch who was born in Russia but forced by the Soviets to leave in 1927. He took the documents to Latvia and later Poland but left them behind when the Nazis invaded and he fled to the United States. The collection was seized and taken to Germany and then recovered by the Soviet Army in 1945.
Lawyers representing Chabad at the law firm Bingham McCutchen said that after five years of litigation, the Russian government "is now acting like a child who has lost the game and wants to start all over on its home court."
"Obviously, Russia cannot justify why it has refused to return Jewish manuscripts which were stolen by the Nazis and then looted by the Soviet Army during the Second World War," the lawyers said in a statement. "The plundering of religious texts during war is contrary to the Hague convention and the norms of any civilized society."
Russia’s rich turn to cash during difficult times
29 June, 2009, 10:21
Russia's capital has hosted yet another celebration of the country's rich - the Millionaire Fair. That's just days after a report from Merrill Lynch, said the net worth of the world's top earners has fallen by a fifth.
The number of millionaires in Russia has been slashed by a third due to the economic slowdown. Volatile stock markets are driving high net worth individuals into less profitable but also less risky investments according to Jean-Marie Deleurmoz from Merrill Lynch International.
“There has been a flight to safety on behalf of wealthy investors, and they have gone more actively into low risk type investments like cash deposits, gold and U.S. Treasury bonds.”
They're taking a critical eye to alternative investments – shunning coins, antiques and memorabilia – and turning to art and jewelry instead. These investments of passion are thought to hold their value better in the long term.
But they're even more keen to invest in themselves. The have-it-alls are cutting their spending on collectibles, in favour of their own healthcare and medicine.
Research earlier this year shows that in contrast to other BRIC countries affluent Russian's shun risky investment instruments. Veronika Zhukova, from the Wealth Management Department of CitiBank says cash attracts most.
“Our people are very conservative, but I think they have a reason for that. If we look at the 10 years history of Russia we had a lot of turbulent times, so people who managed to grow their wealth, they will to keep it and preserve it. Most of the people prefer to keep many in cash, more than half of them actually.”
The image of Russia's rich as big-spenders is true to life. But, Jean-Marie Deleurmoz says they also show good sense when it comes to asset management.
“In general the Russians are very demanding, are very accurate, they are very good mathematicians. So for them its not very difficult to understand financial markets.”
Despite its gloomy findings this year, Merrill Lynch believes the appetitive for risk-taking is slowly returning. But far from the heady pace of the past decade, over the next four years the wealth of the rich will grow by only 8% annually.
National Economic Trends
Putin Says Russia Budget Won’t Recover for ‘Foreseeable Future’
By Paul Abelsky
June 29 (Bloomberg) -- Russian Prime Minister Vladimir Putin said it will take years for the government’s finances to recover from the worst economic slump in more than a decade and called for more spending cuts to limit future deficits.
Revenue will probably plummet to about 16 percent of gross domestic product through 2011, from between 23 percent and 24 percent in 2007, Putin said at a meeting with lawmakers yesterday, according to a transcript posted on his Web site.
“It’s unlikely in the foreseeable future” that Russia will have the kind of windfall oil revenue it enjoyed before the crisis, Putin said. The government must therefore curb spending to hold down the deficit, contain inflation and safeguard its foreign currency reserves, he said.
This year’s deficit, the first since the 1990s, will reach about 8 percent of GDP, Putin said. Russia should seek to cut its annual deficit to 2 percent or 3 percent of GDP, he said.
To contact the reporter on this story: Paul Abelsky in St. Petersburg at pabelsky@.
Last Updated: June 29, 2009 02:28 EDT
Russia should aim for deficit of 2-3 pct – Putin
06.29.09, 02:22 AM EDT
MOSCOW, June 29 (Reuters) - Russia should aim for a budget deficit of 2-3 percent of gross domestic product (GDP), down from the 7.4 percent planned for this year, Prime Minister Vladimir Putin was quoted on Monday as saying.
This year's planned 3 trillion rouble ($96.43 billion) deficit is the first in a decade as the state keeps spending high to see Russia out of a recession, while tax revenues shrink. The government expects the deficit will ease to 5 percent next year and 3 percent in 2011.
'First of all we must rein in the budget. Already next year we must reduce its deficit,' Kommersant business daily quoted Putin as telling party leaders on Sunday.
'Of course we cannot allow ourselves such deficits as in some Western countries, of 13 percent. We should aim for 2-3 percent.'
The budget for 2010-2012 is expected to be discussed at a government meeting on Monday, when the scale of spending cuts could be determined.
(Writing by Toni Vorobyova; Editing by Kim Coghill) ($1=31.11 Rouble) Keywords: RUSSIA BUDGET/
Russian budget revenue to account for 16% of GDP in 2009 - Putin
NOVO-OGARYOVO, June 28 (RIA Novosti) - Federal budget revenue will account for about 16% of national GDP in 2009, and the same figure is expected in 2010-2012, Russian Prime Minister Vladimir Putin said on Sunday.
At a meeting with the heads of State Duma factions, Putin said that some estimates put this figure at 15.7%-16.5% of GDP.
"This is a normal and stable level of revenue, which we count on," he said, adding that budget revenue made up 23-24% of GDP in the pre-crisis years.
Russia has been hard hit by the global financial crisis, which has forced the government to review spending amid declining revenues, while maintaining social commitments.
The premier said that the budget deficit should not exceed 2-3% of GDP in the future.
In 2009, Russia is expected to post a budget deficit for the first time in recent years. Russia's Finance Ministry expects the budget deficit to reach 7.5%-9% of GDP in 2009, and up to 10% of GDP in 2010 taking into account spending from the National Welfare Fund.
Putin said the yearly price of oil could average $50-55 per barrel in 2009, compared with the price of $41 projected in the federal budget.
The global financial crisis has forced Russia, which receives a large part of its revenue from oil exports, to gradually devalue the ruble amid capital flight and a fall in global oil prices, which declined from their peak of $147 per barrel in July 2008 to around $40 per barrel in early 2009, before climbing back in recent weeks to about $70.
Putin also said that Russia would continue its ban on imports of agricultural equipment this year and next year.
"We will not yield to pressure to open up our market for imported agricultural equipment," Putin said.
Putin suggests spending cuts to reduce budget deficit
Unicredit, Russia
June 29, 2009
Topic: Russian Prime Minister Vladimir Putin said Russia should proceed with broad budget cuts to reduce the budget deficit to 2%-3% of GDP, Kommersant reports. Putin insisted that social commitments should remain intact, while new construction projects could be postponed.
The statement came during Putin's meeting with the leaders of four parliamentary parties, which the prime minister called an opening reading of the 2010 federal budget.
Our view: We see the statements as an indication that the government's ability to provide fiscal stimulus is becoming increasingly limited, which suggests considerable downsizing of anticrisis measures in the near future. Given that the large anti-crisis package, the major reason for the 7%-8% federal budget deficit, is one of the few driving forces of economic growth this year, we see the statements as a negative development for the prospects of a Russian economic recovery next year.
Moreover, Putin has again indicated that social projects are the top priority for the government, while suggesting future government investment activity may be subdued. The latter might also indicate that investment demand in Russia is likely to remain depressed, which could be negative for sectors exposed to it.
Conclusion: The prospects of a reduction in anti-crisis measures next year could be seen as negative for Russian markets, especially for sectors exposed to investment demand, such as construction, construction materials, real estate and construction related steel.
Russian economy: May is worse than April
Renaissance Capital, Russia
Monday, June 29, 2009
On 19 June, Rosstat issued preliminary data on Russian economic development in May 2009. May results were gloomy and even worse than April.
Industrial production in May declined at the same speed as in April: down 17% YoY. The greatest IP reduction was again in manufacturing (23.7% YoY in May 2009 while slightly lower than the decline of 25% YoY in Apr 2009). Surprisingly, the mining sector declined 3.4% YoY in May despite oil prices already starting to climb. Utilities showed a sharp decline of 9.5% YoY in May vs a moderate decline of 2.6% YoY in April.
Investment declined 23% YoY in May from a decline of 16% YoY in April. Construction declined 21.9% YoY in May and 19.2% YtD in Jan-May 2009. The sharp reduction in investment indicates that enterprises cut investment programmes drastically because of 1) declining demand (both external and internal) and 2) the necessity to cut expenditure and protect business.
Retail sales declined 5.6% YoY in May after a decrease of 4.5% YoY. We expect retail sales to deteriorate as gross demand and real income decline. We expect a further deterioration in retail statistics.
Real wages were down 3.3% YoY in May and real disposable income declined 1.3%. A relatively small decline in real wages can be explained by the significant increase in unemployment. While the slight decline in real income is due to statistical accounting of operations with foreign currencies, net of this effect, we estimate a real income decline of 4.5% YoY in May.
The only positive news is in the unemployment rate which declined to 9.9% in May from 10.2% in April. However, we believe this is a seasonal effect of an increase in demand for labour (primary, construction, repairing, and agriculture) and not an increase in real demand from the economy.
The Ministry of Economic Development estimated a GDP decline of 11% YoY in May and a decline of 10.2% YoY in Jan- May. This implies that the GDP decline will exceed 10% YoY in 2Q09 (GDP contracted 9.8% YoY in 1Q09).
The Russian economy continued to fall in 2Q09. The oil price is not the only driver of economic growth in Russia.
However, significant oil revenues are directed to the state budget and the efficiency of public policy is critical in times of crisis.
Russia's slow-motion banking crisis
Ben Aris in Berlin
June 29, 2009
At first the Russian government believed the banking sector would breeze through the crisis if they simply threw enough money at it. By the start of this year and some $23bn later, officials at the Central Bank of Russia started to get worried, fearing there wasn't enough money in the state's coffers to deal with mounting bad debt that could lead to a systemic meltdown. Now, as summer approaches, the attitudes have shifted again. Russia's banking sector is facing a climb to the 13th floor because the lift is broken: it will be a real slog and not everyone will make it, but it is doable if the effort is put in.
Russian banks are going through a slow-motion crisis that doesn't necessarily have a dramatic ending. The drama of September when the likes of KIT Finance teetered on the edge of collapse has passed. Now comes the boring, but potentially much more damaging, part of the crisis. Bankers are in a frustrating position, as even those who have been prudent and implemented good risk management are seeing their loans go bad, simply because the real economy is slowing and killing off companies that were making healthy profits only nine months ago.
Exactly how many floors banks will have to climb is still not entirely clear – it could be the 7th floor or maybe the 56th floor. A lot will depend on just how bad the problem with non-performing loans (NPLs) gets.
On the one hand, the economy's 9.8% contraction in GDP over the first quarter has caused a lot of damage, driving up NPLs uncomfortably fast. On the other hand, oil prices over $70 in May have taken some of the pressure off and the CBR actually increased its reserves by $10bn in June. An increasing number of analysts are predicting a faster-than-expected recovery in the second half of this year, but with the year-end GDP predictions ranging from minus 6.8% to zero, clearly the situation is as clear as mud. Let's say everyone's mood has brightened since March and leave it at that.
Bad loans
What happens to NPLs is key to what happens next and even the more cheerful observers admit the problem of bad debt will get worse before it gets better. Still, the issue will take about six months to hits levels where it threatens the stability of the system, giving the banks and state plenty of time to prepare.
Banks have been hording cash and ploughing profits back into their capital in an effort to create cushions to soften the bad-debt blow. April was one of the worst months for rising NPLs, but it was also one of the best for an increase in banks' capital adequacy ratio (CAR) - the cash that a bank keeps on hand to pay out to customers expressed as a ratio of total liabilities.
The sector's average CAR increased to a robust 18.1% in April, which is well above the 8% minimum that the Bank for International Settlements, the central bankers' central bank, recommends and also above the 14-15% of cash emerging market banks tend to keep in the till. This is good news, as it buys more leeway for banks in that they have more cash use for covering bad debts before they are forced to tap their capital, which is when the problems start.
Speculation over where NPLs will end the year has been continuous and the range extends from the CBR's official estimate of 10% of the total loan book by the end of this year (clearly too low) to the emerging market crisis norm of 35% (clearly too high). However, as banks start reporting their first-quarter results, some clarity is beginning to emerge and the good news is that the level of NPLs will be higher than the CBR was expecting at the start of the year, but still within the realms of what the state can cope with – some banks will have to be recapitalised, but a full-blown bank crisis will be avoided.
By the end of April the sector average of NPLs was 4.2%, according to the CBR, up from 1.6% last October when the crisis first struck, and are continuing to rise. The worst affected banks in the sector include leading commercial lender Alfa Bank, which already has NPLs of over 10%, but says that it has been provisioning and will cope.
Likewise, Alfa Bank's main rival MDM Bank reported results in June and has NPLs of 7.2%, up from 4.8% at the start of the year. However, the bank is expecting bad debt to reach 12% for the full year and, as it has already built up loss provisions of 7.5% of total loan book, the bank says it is confident it will be able to cover all its bad debt through to the end of the year. After that things will start to get better, as most observers are expecting the Russian economy to start growing and NPL levels to recede; MDM says next year it is confident it can recover half of its bad debt.
MDM and Alfa's experience compares with Bank St Petersburg, which expects to see a slowdown in the pace of asset-quality deterioration in second quarter and Bank Vozrohdenie is expecting levels of bad debt to start falling as soon as the second half of this year.
Bank recapitalisation
The big banks that account for the bulk of Russia's banking assets are a bit more confident about surviving to the end of the year, but not everyone is going to make it. The government was clearly hoping that the $23bn it has already pumped into the banking sector would be enough, but by June it became clear more money would be needed.
Moody's Investors Service said in a report at the start of June that Russian banks would require an additional $40bn in recapitalisation over the rest of the year and estimates the true average level of NPLs is already more than double the official estimate, or about 11%, as of the end of the first quarter. NPLs could reach 20% by the end of the year, the rating agency predicts, but if oil prices hold up, then the situation will be easier.
If it does come to recapitalisation, then a lot of small banks will go bust. So far, almost all the fresh capital that has been injected into the sector has gone to state-owned banks while small and medium-sized banks have received almost nothing; the number of banks in Russia has already fallen from over 1,200 at the start of last year to 1,087 as of the end of June. Thus Moody's believes that, "the Russian banking sector might experience further consolidation in the form of mergers and acquisitions as a result of weakening credit fundamentals of banks not directly benefiting from government support."
So who will get the money? At June's St Petersburg Economic Forum Russian President Dmitry Medvedev announced the Kremlin was planning a voluntary recapitalisation of troubled banks by buying their preferred shares.
During his opening speech at the biggest gabfest on the Russian calendar, Medvedev told delegates the Russian authorities had rejected the idea of a so-called bad bank to clean up bank balance sheets. Chief presidential economics advisor Akardy Dvorkovich elaborated, saying that banks are expected to do the workouts themselves. However, for banks that can't cope with their NPLs, the government is offering to buy their preferred shares on a need-only basis. And the deputy chairman of the CBR, Alexei Ulyukaev, went on to say that the government will buy commercial banks' preferred share issues on a voluntary basis using the OFZ government bonds as payment (which can be sold to the CBR in repo deals for cash). However, the recapitalisation will come next year and Ulyukaev said the money already budgeted for recapitalizations – some RUB435bn ($14.5bn) – will be enough to deal with the immediate needs of the sector.
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AFI Development, Gazprom, Gazprom Neft: Russian Stock Preview
By Denis Maternovsky
June 29 (Bloomberg) -- The following companies may have unusual price changes in Russian trading. Stock symbols are in parentheses and share prices are from the previous close.
The dollar-dominated RTS Index rose 0.8 percent to 955.45. The 30-stock Micex Index slipped 0.1 percent to 960.16.
AFI Development Plc. (AFID LI): VTB Capital initiated coverage of the Russian property developer controlled by billionaire Lev Leviev with a “hold” rating. “We do not see any short-term triggers for the stock as we do not expect any upward correction in rental rates and decrease in vacancies,” analysts Maria Kolbina and Tatiana Prokina wrote in a note to investors on June 26. The shares fell 2.1 percent to $1.40 in London trading.
OAO Gazprom (GAZP RX): Russia is prepared to cooperate with Royal Dutch Shell Plc. on oil and gas projects in the Russian Far East known as Sakhalin-3 and Sakhalin-4, Russian Prime Minister Vladimir Putin said June 27 during a meeting with Shell CEO Jeroen van der Veer. Shell and Gazprom are partners in the Sakhalin-2 project. Shares of Russia’s biggest company advanced 1 percent to 150.50 rubles.
OAO Gazprom Neft (SIBN RX): The oil arm of Russia’s gas export monopoly acquired a 50 percent stake in Bennfield Ltd., the biggest shareholder of Sibir Energy Plc., the company said in an e-mailed statement late Friday. The company’s shares fell 0.6 percent to 99.58 rubles.
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@
Last Updated: June 29, 2009 00:00 EDT
Domestic vs foreign fund flows: market pulled in two directions
bne
June 29, 2009
Who is right? The RTS soared over the last couple of months as speculative foreign money flowed into Russian stocks. Some $14bn was invested in Russian stocks sending the RTS index up from its low of just under 500 to over 1000.
The market has now corrected, down to 930 at the open of trade today, as a 15-week long bull run comes to an end.
However, analysts say that all the money coming into Russian equities from outside is speculative, looking for outsized returns, but not based on fundamentals. Thus the chance of a big correction is high.
Having said that most analysts believe there is still some 30% upside from current prices as things like p/e ratios remain low, and stocks could rise even higher if the prospects for the global economy pick up towards the end of the year - the ongong growth global emerging markets will put in will mean investment funds will disproportionately favour the BRIC countries.
Against all this is the worrying phenomena that Russia's domestic mutual funds are still seeing outflows. While the foreign investment into Russian stocks dwarf the volumes of domestic mutual fund flows, what should worry is most of the recent gains have been driven almost exclusively by foreign investors; the Russians have a lot less faith in their own market and in the past have shown themselves to be very savy investors. In the midst of the 2004 mini-bank crisis foreigners flooded out of the market in June just as the domestic investors - and we are talking day traders here, not professionals - piled in. The locals were right and called the bottom perfectly while the foreigners were shown to be about three months behind the curve.
Investors should be cautious until the domestic mutual funds start taking in money again.
Russian corporates are lining up for new issues
Unicredit, Russia
June 29, 2009
In June, after a 10-month break, Gazprom and Russian Agricultural Bank reopened the Eurobond market for Russian issuers with the first deals on the syndicated loan market, placing a combined USD 3.25bn in bonds. According to newswires, TNK-BP received a USD 750mn loan, with a margin of 400bps over Libor, while Lukoil and Tatneft are in talks on raising USD 1.0bn-1.5bn and USD 0.6bn-1.0bn loans respectively. The improvement in the liquidity situation on the domestic market, coupled with growing confidence in Russia, should limit the need for another round of ruble devaluation and thaw the internal debt market. In just the first two weeks of June Russian banks and companies have placed domestic bonds worth almost RUB 42bn (USD 1.4bn), with another USD 1.5bn scheduled for later this month.
For the time being, cash is short and only available to high-quality names, although we expect the improvement to spread. Nonetheless, despite the reemergence of risk appetite among investors, only top-tier issuers can raise money on capital markets at the moment. Moreover, with few exceptions, the loans are short-term (1-2 years), with relatively high yields. We believe that unless the situation on commodities markets notably deteriorates, capital markets will continue to reopen for Russian companies. We do not expect second-tier issuers to find demand for their debt or equity earlier than next year, although the emerging trend is a positive sign, as many quality companies are regaining access to sources of funding besides state banks. Moreover, the thawing credit markets allows companies that attracted loans in 4Q08-1Q09 to mitigate currency risks caused by ruble devaluation, as they can now roll them over on more beneficial terms.
Duty-Free Restrictions Plan
The Federal Customs service plans to cut the amount of duty-free goods travelers can bring back into Russia, in a bid to boost sales by local producers, Kommersant reported Friday.
The service is planning to lower the limit of the value of goods that can be brought into the country tax free to 20,000 rubles ($640) from 65,000 rubles, the report said, citing customs service documents.(Bloomberg)
Bill Creates State Road Firm
The State Duma on Friday passed in a third reading a bill creating a state company to run federal roads and nearby property, giving it the authority to rent out roadside land.
Avtodor will be responsible for the building, reconstruction, planning and maintenance of major roads using federal budget funds and private investments, as well as through the creation of the country's first toll roads, according to the bill.
It will oversee 18,300 kilometers of road, including 6,100 kilometers of highway that it will build. The company will also be able to give permission to build new roads in areas under its jurisdiction and for placing advertisements. (MT)
Sberbank May Quit Opel Bid as GM Raises Price, Kommersant Says
By Ilya Khrennikov
June 29 (Bloomberg) -- OAO Sberbank, Russia’s biggest lender, and Canadian car-part maker Magna International Inc. may abandon their joint bid for Opel after General Motors Corp. raised the price for its unit, Kommersant said.
GM is seeking more from Sberbank and Magna than the partners pledged when they were selected as the preferred bidder for Opel before GM’s June 1 bankruptcy, the Russian newspaper said, citing unidentified people familiar with the matter.
GM wants a pledge to invest as much as 7 billion euros in Opel, 14 times more than Sberbank offered last month, Kommersant said.
To contact the reporter on this story: Ilya Khrennikov in Moscow ikhrennikov@
Last Updated: June 29, 2009 02:08 EDT
'Anything Could Happen' in Deal to Buy Opel
29 June 2009 Combined Reports
Sberbank warned on Friday that a deal to buy Opel with Canada's Magna International could still fall through as a deadline, less than three weeks away, to move ahead with the deal looms.
Asked whether the deal could collapse, Denis Bugrov, a member of Sberbank's management board, said he "did not exclude the possibility."
"Anything could happen," Bugrov said at Sberbank's annual shareholders meeting.
German officials have stressed that the deal is preliminary and have said that until a final agreement is nailed down, other potential suitors could at least theoretically still be in play.
Sberbank expects a final deal to be signed no earlier than September in the most optimistic scenario, Sberbank chief German Gref said Friday.
Magna and Sberbank are expected to agree by July 15 whether to push ahead with the deal to buy Opel from General Motors after signing a nonbinding agreement last month, which envisions Sberbank taking a 35 percent stake and Magna a 20 percent stake.
The deal was seen as a major coup for Russia's troubled carmaking industry based on signals that Magna would produce Opel cars in Russia.
On Friday, Oleg Deripaska's Basic Element holding said carmaker GAZ was training workers at GM's Opel plants n Germany and Austria. The program is part of the quality-management system of Opel's that GAZ has adopted, Basic Element said in a statement.
GM plant in St Pete resumes operation after three-week break
ST PETERSBURG, June 29 (Itar-Tass) - General Motors’ car assembling plant outside St Petersburg resumes operation after a three-week mandatory vacation of employees linked with preparation for a commercial launch of the all-new Chevrolet Cruze sedan.
On Monday, employees will return to their workplaces and begin to assemble Open Antara crossover and Chevrolet Captiva SUV, Sergei Lepnukhov, PR director of GM CIS, told Itar-Tass.
GM maintains its plans for launching commercial production of its compact sedan Cruze. According to preliminary estimates, the new model will be on sale already in autumn. After a serial production of new sedans is launched, GM plans to return to a five-day working week, he said.
However, the plant’s management will have a final say judging by “the current market situation,” Lepnukhov said.
GM opened its plant in Shushary on November 7, 2008. The investments into the plant’s first stage with the annual production of 60,000 cars exceeded 300 million U.S. dollars.
The plant is expected to switch to designed capacity in late 2010.
S&P sees up to 38% of Russia bank loans problematic by end-2011
Simon Nellis of Citibank
June 29, 2009
According to Standard & Poor's, "troubled assets" of Russian banks could total $213bn and banks may have to write off as much as 14% of all loans, or $80bn, over the next 2 1/2 years as companies struggle to repay debt, Bloomberg reported.
S&P plans to review the rating of Russian banks in the coming weeks. The ratings agency has already downgraded Russia's Raiffeisenbank, Unicredit Bank, Promsvyazbank and Bank Uralsib, and put on negative watch seven more Russian banks, including Alfa Bank and Gazprombank.
S&P's forecast on asset quality is the most pessimistic so far. In the report on the banking sector prospects, the agency forecasts bad debt including restructured loans to reach 35-50% by the year-end in a base case, and to surge to 60% in a "catastrophic" scenario that could be triggered by defaults of several large borrowers and continuing recession in the economy. According to S&P, the true level of bad debt stands at 15-20% compared with the CBR number of 4.2% as of May 1.
Sberbank buys back $135m of its subordinated Eurobonds
Troika, Russia
Monday, June 29, 2009
Sberbank has bought back from the open market $135m in principal amount (out of a total $1bn) of its subordinated Eurobonds maturing in 2015 (callable in February 2010), the bond issuer reported in a statement on Friday. Taking into account the bonds' recent market prices, we estimate that the borrower could thus pick up about 15 pp. Thus the bank could receive around $20m extra gain from the purchase.
The news hardly comes as a surprise to market participants, as earlier last week Sberbank's management commented that the bank intends to execute the call option on the subordinated Eurobonds in February 2010. VTB has been even more active in managing its public debt and making profit on market correction, and has already bought back 58% of the subordinated VTB 2015 (also callable in February 2010) and only $316m of the issue is currently outstanding.
Andrew Keeley
Gref Sets Sberbank Bad Debt Target
29 June 2009 Combined Reports
State-controlled Sberbank will clear the bulk of current bad loan provisions within three to four years, chief executive German Gref said Friday at the bank's annual shareholders meeting.
Speaking at the same meeting, Central Bank Chairman Sergei Ignatyev said the increase in provisions, which rose to 7 percent of the portfolio by June 15, necessitated close examination of a possible takeover of Kazakh BTA.
"I am a very cautious and conservative person. The bank [BTA] is a big one and with big problems. So, it should be examined thoughtfully," Ignatyev, who is also the head of Sberbank's supervisory board, told a news conference. The Central Bank is Sberbank's controlling shareholder.
Gref reiterated that Sberbank would be profitable this year because of cost cuts, despite rising nonperforming loans. The government has set aside funds to recapitalize state banks, but Sberbank has said it will not avail itself of them this year.
"In three to four years, we can get back most of the provisions for bad loans, in part by selling off collateral," Gref said.
Bankers and analysts have said state-run banks holding the lion's share of potentially lucrative industrial assets could parlay the collateral into huge profits.
Sberbank, home to half of Russian bank accounts, saw deposit inflows of 58 billion rubles ($1.86 billion) in June, making a total inflow of 195 billion rubles so far this year.
The head of the bank's finance department, Alexei Morozov, said provisions would only start to clear at the end of 2010 and were likely to rise until then. Sberbank has now made provisions for bad loans exceeding 7 percent of its portfolio, while 3 percent have already gone sour, Gref said.
"The rate of NPL growth is slowing. But we can't say for now whether it is a trend or whether there will be a spike."
Shareholders also voted to approve a 2008 dividend payment of 48 kopeks per ordinary share and 63 kopeks per preferred share, or 10 percent of the company's profit according to Russian accounting standards, Interfax reported.
With profit of 109.9 billion rubles in 2008, the total dividend payment will be 10.99 billion rubles. Sberbank paid 11.67 billion rubles of dividends for 2007, also 10 percent of that year's profits.
Asked why Sberbank's interest rates for deposits were not as high as at other lenders, Gref bristled.
"We're not a casino. There are plenty of banks that are offering 20 percent [per year]. People who want to lose, I'll send to those banks. We'll see later how they're going to get their money back out," he said, RIA-Novosti reported. He defended Sberbank's 12 percent rates for ruble deposits as "balanced."
Polymetal plans to place 5 bln rubles in bonds
MOSCOW. June 29 (Interfax) - The board of directors of Russia's top
silver producer Polymetal (RTS: PMTL) has approved placement of three-
year bonds totaling 5 billion rubles, the company said in a statement.
Polymetal plans to sell the 5 million 1,000-ruble bonds in an open
placement.
Polyus Gold: Going for state support
UralSib, Russia
June 29, 2009
Trying to obtain $320 mln for Yakutsk infrastructure. Polyus Gold (PLZL - Buy) and Geoprommining (a mining company) intend to raise $320 mln (RUB10 bln) from the state infrastructure investment fund. Polyus needs additional funding to support its Nezhdaninskoe project in Yakutsk, which is to be developed jointly with Kinross. The company plans to spend the money on building a road and two power lines to the deposit. Its partner Geoprommining is to develop the Verkhne-Menkechensk polymetallic deposit.
20% of Nezhdaninskoe capex to be financed from the infrastructure investment fund. The Nezhdaninskoe gold deposit has around 40 mln oz of reserves. Polyus General Director Yevgeny Ivanov mentioned the possibility of building a mining and refinery complex for nearly $1 bln with an annual capacity of 12 tons (375 koz) of gold. Even taking into account that the state support would be shared with other infrastructure spending in the region (Geoprommining, possibly Mechel), its bulk (up to 70%) will go to Polyus's project and provide substantial support for spending on Nezhdaninskoe.
Positive, but may face difficulties. Although this case has been investigated by a regional commission headed by Yakutsk's President Vyacheslav Shtyrov, it may not be possible to raise the money this year. Deputy Prime Minister Dmitry Kozak said earlier this year that the state infrastructure fund is closed for new projects in 2009. However, it is more likely that the companies hope for this support in the longer term (2010-2011), which is more feasible at the moment.
Moreover, they stated that should they not receive money from this fund, they would apply to Vnesheconombank (VEB). All in all, we view this news as slightly positive for the company, as Polyus is showing some signs of activity on projects in a quiet part of its project pipe-line.
Michael Kavanagh
SU-155 signs another real-estate contract with Russian defence ministry
Renaissance Capital, Russia
Monday, June 29, 2009
Russia's Ministry of Defence has acquired 178 apartments, with a total footprint of 13.2 km2, from real-estate developer SU-155. The contract is valued at RUB477.6mn ($14.4mn) and the apartments are located in St Petersburg (23), Nizhny Novgorod (44), Kaliningrad (52) and Kaluga (59). Earlier this month, the ministry obtained 66 flats taking up 4,4284 m2 in Nizhny Novgorod and Kstov from the company for RUB141.4mn ($4.3mn). In addition, SU-155 has taken out a EUR118mn loan from Sberbank to finance its residential projects including the construction of housing for the military.
Demand for residential property can be driven by both state and private purchases. Given ongoing lower demand from the private sector, developers' ability to secure government contracts is important for the delivery of 2009 earnings. In this regard we see LSR as well positioned having already been awarded a RUB4,685mn contract (about $150mn) for the sale of 1,704 apartments (105.8 m2) to the Ministry of Defence and a RUB11,385mn contract (about $350mn) to act as contractor in the construction of 49 houses (each 9-17 floors) also for the Ministry of Defence. In addition to being a driver of demand these government contracts come with up to 30-50% of the cash required up front, which is helpful from a working capital perspective. Though already included in our forecasts, these contracts give additional certainty around LSR's 2009 earnings outlook.
David Ferguson
Exiled by Russia: Casinos and Jobs
By CLIFFORD J. LEVY
Published: June 28, 2009
MOSCOW — One of the largest mass layoffs in recent Russian history is to occur on Wednesday, and the Kremlin itself is decreeing it, economic crisis or not.
The government is shutting down every last legal casino and slot-machine parlor across the land, under an antivice plan promoted by Vladimir V. Putin that just a few months ago was widely perceived as far-fetched. But the result will be hundreds of thousands of people thrown out of work.
And in a move that at times seems to have taken on almost farcical overtones, the Kremlin has offered the gambling industry only one option for survival: relocate to four regions in remote areas of Russia, as many as 4,000 miles from the capital. The potential marketing slogans — Come to the Las Vegas of Siberia! Have a Ball near the North Korean Border! — may not sound inviting, but that is in part what the government envisions.
All the same, none of the four regions are prepared for the transfer, and no casino is expected to reopen for several years. As of July 1, not even two decades after casinos began proliferating here in the free-for-all post-Soviet era, the industry’s workers will be out on the street.
“This is shaking my life to the core — such a blow for me and my family,” said Irina Mysachka, 32, a single mother who is a supervisor at the Shangri-La Casino in Moscow, which appears as orderly and preened (if your tastes run to fire-breathing neon dragons and other Oriental kitsch) as any similar luxury attraction in the United States.
“The authorities are taking this step without thinking at all,” she said. “They have not considered what this decision means for the workers. With the crisis, it is going to be very difficult for us.”
Unable to find a job in Moscow, she said she was going to leave her 5-year-old son, Yegor, with her mother and venture abroad.
Aleksandr Osin, 24, who has been at Shangri-La for five years, said he would try his luck in the insurance business, but was not hopeful. “We all thought that this was some kind of government thing that would not happen,” he said. “But now we know.”
The law that started the whole process was introduced in 2006 by Mr. Putin, then the president and now the prime minister, who spoke of the perils of the blackjack tables and the one-armed bandits, of shady characters having a grip on the industry.
The casinos have repeatedly asked for a reprieve, proposing a regulatory body to cut down on abuses, and lately pointing out that the ban would create hardships for workers during the crisis. The industry has also said it pays more than $1 billion a year in taxes. But Mr. Putin and his protégé, President Dmitri A. Medvedev, have not yielded. “The rules will not be revised in any way,” Mr. Medvedev said last month, “and there will be no backsliding, although various business organizations have been lobbying for precisely this.”
The gambling industry here does not have the loftiest of reputations, and many Russians will not grieve for it. Still, many of the 40 or so casinos in Moscow sought in recent years to behave more respectably, even as hundreds of slot-machine parlors retained a seedy, enter-at-your-own-risk feel.
The gambling industry says the ban will leave more than 400,000 people without work in Russia, at a time when it has been hard hit by the economic downturn: the World Bank predicts the economy will contract by 7.9 percent this year. The government has put the figure at 60,000 people, though industry analysts say that is absurdly low.
Storm International, a gambling conglomerate controlled by a British expatriate, Michael Boettcher, said that until recently, it alone employed 6,000 people at Shangri-La and several other casinos in Moscow.
Casinos in Russia are now to be confined to the Altai region of Siberia; the coastal area of the Far East, near the border with North Korea and China; Kaliningrad, a Russian enclave between Poland and Lithuania; and the Azov Sea region in the south. Until casinos open there, Russia will be one of the few countries in Europe without them, though underground ones are likely to be established.
After the law passed, federal officials and casino executives seemed certain that it would be watered down, which is apparently why neither the casinos nor the four regions did anything to prepare. “You know, in our country, the decisions are made by only one person,” said Samuil Binder, deputy executive director of the Russian Association for Gaming Business Development. He was referring to Mr. Putin.
After the Soviet Union’s fall in 1991, gambling sprang up everywhere in Russia, from first-class locations in Moscow to side-alley hangouts in the provinces. The crazy-quilt growth was something of a metaphor for capitalism here, full of possibilities and schemes and corruption.
The industry has been largely unregulated, and especially in recent years, almost anyone could get a license, for as little as $50. Russia is not a strait-laced place — rates of smoking and drinking are high — but an outcry about gambling ensued. “It is not only young people, but also retirees who lose their last kopecks and pensions through gambling,” Mr. Putin said in 2006.
His plan was announced during a spy scandal between Russia and its neighbor Georgia, and the timing suggested that Mr. Putin was in part seeking to wound the Georgian diaspora here, which is said to have an influential role in the industry.
As with the workers, it seems to have dawned on the gamblers themselves only recently that the casinos are closing.
“It is going to be strange, and even now, it’s hard to believe,” said Aleksei Ustinenko, 29, a construction executive who was playing at Shangri-La.
“Here we are, in one of the biggest, most beautiful, most expensive cities in the world,” he said. “And yet other people can decide that I cannot gamble if I want to.”
Some casinos said they might try to devote some space to private poker clubs, which they believe will be allowed under the law. But executives say such clubs are far less lucrative, and will employ very few workers.
And so laborers have been pulling down gambling signs and carting slot machines from sites all over Moscow.
“There was a time when all these clubs and casinos grew like a cancer tumor,” said Moscow’s mayor, Yuri M. Luzhkov. “We will close them all. By July 1, Moscow will be clean.”
Activity in the Oil and Gas sector (including regulatory)
Putin signs resolution raising oil export duty from Jul 1
MOSCOW, June 29 (Itar-Tass) - Russian Prime Minister Vladimir Putin has signed a resolution on raising the crude oil export duty (starting from July 1) from 152.8 US dollars per tonne to 212.6 US dollars per tonne. The document’s text is placed on the website of the RF cabinet of ministers and published by the Rossiiskaya Gazeta newspaper, Prime-Tass reports.
Export duties on light petroleum products are raised from 115.2 US dollars per tonnes to 155.5 US dollars per tonne, and on heavy petroleum products – from 62.1 US dollars per tonne to 83.8 US dollars per tonne.
The light petroleum products to which the duties are applied are light distillates, medium distillates, gas-oils, benzene, toluene and xylols. The heavy petroleum products are liquid fuels, oils, waste oils, petroleum jelly, mineral waxes and analogous products, petroleum coke, oil bitumen and other petroleum residues obtained from bituminous rocks.
The oil export duty in RF starting from December 2008 is calculated on a monthly basis.
Russia to raise oil export duty to $212.6 per ton from July 1
MOSCOW, June 29 (RIA Novosti) - Russia will increase oil export duty from the current $152.8 to $212.6 per metric ton from July 1, following trends on global oil markets, the Russian government said on its website on Monday.
The decree was signed by Russian Prime Minister Vladimir Putin on June 26.
As of July 1, the duty on light petroleum products will rise to $155.5 from the current $115.2 per ton and for heavy petroleum products to $83.8 from the current $62.1 per ton.
Last year, the government abandoned its previously accepted bimonthly adjustments of export duties based on the price of the Urals blend on global oil markets, and from December 1 switched to setting duties for oil and oil products on a monthly basis to respond more swiftly to changes in world oil prices.
The global financial crisis has forced Russia, which receives a large part of its revenues from oil exports, to gradually devalue the ruble amid capital flight and a fall in global oil prices, which declined from their peak of $147 per barrel in July 2008 to around $40 per barrel in early 2009, before climbing back to about $70.
Putin: Russian oil and gas companies sure to be recapitalized
NOVO-OGARYOVO, near Moscow. June 28 (Interfax) - Prime Minister
Vladimir Putin on Sunday expressed confidence that Russian oil and gas
companies would eventually regain capital they have lost in 2009 because
of lower prices for their output.
"Our oil and gas companies are developing successfully, their
capitalization reached very large magnitudes last year. This year, due
to a drop in prices for raw commodities, it has gone down. We don't see
this as any kind of catastrophe. It'll all be restored. I wouldn't doubt
this for a second," Putin said at a meeting with leaders of political
groups in the State Duma.
Putin: this year's average oil price may reach $55 per barrel
NOVO-OGARYOVO, near Moscow. June 28 (Interfax) - This year's
average annual price of oil may reach $55 per barrel, Russian Prime
Minister Vladimir Putin said on Sunday.
"[Russia's] 2009 budget sets a price of $41 per barrel. Possibly,
the actual price will be somewhat higher - 50 to 55 dollars per barrel,"
Putin said at a meeting with leaders of political groups in the State
Duma.
Surgutneftegaz Approves Boosting Dividend for 2008 to $1 Billion
By Brad Cook
June 29 (Bloomberg) -- OAO Surgutneftegaz, the Russian oil producer with the most cash, said shareholders agreed to pay 31.6 billion rubles ($1.01 billion) in dividends for 2008, after record prices in the first half buoyed profit.
Surgut will increase the payout for preferred stock to 1.326 rubles a share, while leaving the dividend for common shares at 60 kopeks a piece, the company said in an e-mailed statement today, citing the results of its annual shareholders meeting on June 27.
Last Updated: June 29, 2009 00:33 EDT
Putin offers surprise deal to Shell
Wire services
Russian Prime Minister Vladimir Putin moved again to ease his government's clasp over the energy sector at the week-end, capping off a week of foreign energy deals with a surprise offer for Royal Dutch Shell.
Weaker oil prices, now half of what they were a year ago, have persuaded Russia to scale back its resource nationalism. Moscow now looks to be balancing the dogged protection of its energy wealth with the need to have foreigners invest in it.
The offer to Shell, which comes days after Russia struck major deals with France's Total, is emblematic of the renewed openness, because Shell was the victim of Russia's most aggressive drive to re-take control of its natural resources.
In 2006, under intense government pressure, it ceded control of the vast Sakhalin-2 project to Russia's Gazprom. But on Saturday, Putin invited Shell to help develop the giant Sakhalin-3 and Sakhalin-4 projects off Russia's Pacific coast.
"These require offshore production in difficult deep sea areas where your experience will be very valuable," Putin told Shell chief executive Jeroen van der Veer at a meeting in his summer residence outside of Moscow.
Van der Veer accepted the invitation and said it was an ideal time to move ahead with these projects, as the financial crisis has brought down the price of construction.
"We are ready to work quickly," he said. "It is a good signal that investments start to flow again, a good signal for Russia and, of course, a good signal for Shell."
In February, gas export monopoly Gazprom inaugurated Sakhalin-2, a $22-billion liquefied natural gas project, in which Shell has 27.5% after giving up control to Gazprom.
Sakhalin-3 and Sakhalin-4, also based on the Pacific island of the same name, are at far earlier stages and big money is still needed even to nail down how much oil and gas they hold.
The informal agreement with Shell on Saturday did not lay out the Anglo-Dutch major's future role in these projects.
When asked by Reuters whether it would have a direct stake in either one, Shell chief financial Peter Voser said, "I think it's a natural progress now, having built Sakhalin-2."
A key aim of Van der Veer's visit to Moscow, the final one of his career as Shell's chief executive, was to introduce Voser as his successor. Voser will take his place as of Wednesday.
Over the past decade, Putin has built close ties with the heads of many foreign energy giants and has a habit of meeting them face to face before allowing any major deal to go forward.
Because the two of them share fluency in German, Van der Veer said it would be easy for them to get along.
"I can assure you that this Swiss-accented German is not easy to understand," said Putin, who learned to speak the language during his early career as a KGB spy in Dresden.
Putin said that Shell has met all of its contractual obligations in Russia and was a welcome partner, despite the public controversy with Gazprom over Sakhalin-2.
"We have a dialogue that has not been easy, but we have reached an agreement to meet each other half way and come to an agreement that has allowed us to build a firm foundation for future cooperation," Putin said.
Van der Veer added: "Cooperation with Gazprom has been very smooth."
At the Saturday meeting, Shell also signed a cooperation deal with Russian shipping company Sovcomflot to develop shipping infrastructure for the transport of LNG.
Monday, 29 June, 2009, 01:43 GMT | last updated: Monday, 29 June, 2009, 01:46 GMT
Russia change policy as Shell invited to Sakhalin gas project
By Daily Mail Reporter
Last updated at 10:48 PM on 28th June 2009
How times have changed for Shell - and the Russian authorities.
For the Anglo-Dutch oil major has been invited to invest in the third and fourth phases of the giant Sakhalin gas project in the Pacific.
It marks a major change in Kremlin policy and comes just three years after Shell was forced to cede control of Sakhalin-II to Russia's Gazprom.
Given those difficulties, you might have thought Jeroen van der Veer, head of Shell, would be slightly nervous of signing this new pact with prime minister Vladimir Putin.
Shell Welcomes Putin's Sakhalin Offer
29 June 2009
By Nadia Popova / The Moscow Times
Prime Minister Vladimir Putin offered Royal Dutch Shell a role in the Sakhalin-3 and Sakhalin-4 natural gas projects on Saturday, just 2 1/2 years after Europe's biggest oil producer was forced to cede control of Sakhalin-2 to Gazprom.
Shell welcomed the proposal, which analysts said illustrated Gazprom's need for technologies and money to develop the difficult offshore fields rather than a government change of heart toward foreign investors.
"We consider it possible to continue a partnership with Shell on other fields, namely Sakhalin-3 and Sakhalin-4," Putin told Shell chief executive Jeroen van der Veer during a meeting Saturday at his Novo-Ogaryovo residence in the Moscow region.
"Your company's competence and experience will be in demand in the remote and deep sea offshore areas," he said, according to a transcript posted on the Kremlin's web site.
Van der Veer, whose company now controls 27.5 percent of Sakhalin-2, said Shell was ready to begin work on the proposed projects. "We are ready to begin work on Sakhalin-3 and Sakhalin-4 if there is such an opportunity," van der Veer told Putin. "There are ideal conditions for that now from the economic viewpoint — prices in construction are quite low, and the expenses will be lower correspondingly."
Gazprom took control of Sakhalin-2 from Shell in 2006 after federal regulators threatened to close the $22 billion project on environmental grounds. In 2007, Shell sold its controlling stake in the project to Gazprom for $7.5 billion.
Shell spokesman Maxim Shoob said Sunday that no official decision had been made on his company's participation but Sakhalin-3 looked appealing.
"We want to have Gazprom as a partner in the Sakhalin-3 project, but it's too early to talk about the form of this partnership," Shoob said, declining to comment on Sakhalin-4.
"In complex, large oil and gas projects like those in Sakhalin, we are interested in the entire value chain, which may include the exploration, building all kinds of infrastructure like pipes and sea platforms and the extraction," he said by telephone.
Gazprom spokesman Sergei Kupriyanov said Sunday that no talks have been held between Gazprom and Shell on Sakhalin-3 or Sakhalin-4.
Gazprom could develop the Sakhalin-3 fields of Kirinskoye, Ayashskoye and Eastern Odoptinskoye, which Gazprom just received licenses for last month, said Valery Nesterov, an oil analyst with Troika Dialog.
Sakhalin-4 is a project that British Petroleum and Rosneft gave up on in March when drilling came up empty. Rosneft backed out of its license for the field afterward.
Gazprom and Shell declined to specify Sunday which fields they might work on together. Shoob also said it was too early to discuss how much Shell might invest in Sakhalin-3 and Sakhalin-4.
Putin's spokesman Dmitry Peskov said Shell had the know-how that Gazprom needed to tap the offshore fields and praised its track record in Russia.
"Shell has made a good showing in Russia," Peskov said Sunday. "It knows the market well, it has worked with Russian companies. And it has the technologies we need to develop Sakhalin-3 and Sakhalin-4."
Peskov said Shell could cooperate with Gazprom and other companies in the projects. He dismissed the idea that the government might be more open to foreign investment in the energy sector now than in 2006, when Shell was pushed out of Sakhalin-2.
"Russia has always been open to foreign investors," Peskov said.
Shoob said, however, that Shell has recently seen more cooperation and openness from the Russian government. "We can see that the Russian government has been paying more attention to foreign investors in the oil and gas sector," Shoob said. "The government seems to understand that Russia does need the best internationally available technologies to develop the innovative economy.
"Developing Sakhalin is like sending a person to the moon — it can't help but be done through international cooperation," Shoob added.
Ronald Smith, chief strategist with Alfa Bank, said not much has changed since the Sakhalin-2 fiasco. "The state's goal is the same as in 2006, which is to have a Russian company in majority control in any major project but to have the substantial participation of international majors who have experience in technology, either in LNG or offshore," he said.
Nesterov noted that more than a third of the world's oil is extracted offshore, but only 1.5 percent of Russia's oil is extracted that way.
Nesterov said Shell might either create a joint venture with Gazprom to work on Sakhalin-3 and Sakhalin-4 or use the model developed for the Shtokman gas field. To develop Shtokman, Gazprom, Total and StatoilHydro established Shtokman Development AG, a special purpose company in which Gazprom owns half and the other investors have about a quarter each.
Neither Putin nor van der Veer specified Saturday what kind of partnerships on Sakhalin-3 and Sakhalin-4 projects were discussed.
"I think it's a natural progress now, having built Sakhalin-2," Shell chief financial officer Peter Voser, who is going to take over from van der Veer this Wednesday, said when asked about the specifics, Reuters reported.
Van der Veer came to Moscow to introduce Voser as his successor — and told Putin that the two could communicate in German, which Putin learned as a KGB spy in Germany in the 1980s.
"Mr. Voser speaks German as well as you do, so you will be able to speak to him directly," van der Veer said. "He is from the German-speaking part of Switzerland. You have many times heard my bad German. It will not be repeated with Peter Voser."
Putin said he wasn't quite sure he would understand Voser. "The Swiss-accented German is not easier, I assure you," Putin said. "But I can understand particular sentences in the Swiss dialect."
Shell also signed a cooperation agreement with Sovcomflot, the state-run owner of Russia's largest shipping fleet, to provide transport for liquefied natural gas produced on Sakhalin Island and the Yamal Peninsula. Shell launched Russia's first liquefied natural gas plant in Sakhalin in cooperation with Gazprom in February.
Saturday's developments were preceded by France's Total and Novatek, Russia's largest independent gas producer, sealing a $900 million project to develop a Siberian gas field last Wednesday. Total and Novatek signed a cooperation agreement in May 2007 and had been trying to partner up on projects for the past two years without success.
73 tankers from Varandey
afghan
2009-06-29
Located 22 kilometres offshore, Lukoil’s ice-resistant export terminal in the eastern part of the Barents Sea has operated for one year.
The terminal opened in June last year. So far, the three special designed ice-class oil-tankers operated by Sovkomflot have made 73 journeys with crude oil. The oil comes from the onshore Yuzhno Khylchuyu field located in Timan-Pechora area in Nenets Autonomous Okrug, Lukoil reports on their website.
Yuzhno Khylchuyu field is operated by the Lukoil owned Naryanmarneftegaz and ConocoPhillips in Joint Venture. The design oil production level in the field is expected to reach an annual level of 7.5 million tons during the first full-production year 2009.
The Varandey terminal is located in the coastal area of the eastern Barents Sea. The sea is ice-covered for almost eight months a year.
Lukoil says the terminal's overall annual throughput is 12 million tons of crude (240,000 barrels/day). Lukoil is Russia's biggest private owned oil company.
From Varandey, the 70,000 tons DWT ice-breaking tankers mainly sail to the Kola Bay where the oil is reloaded into the floating storage tanker Belokamenka. Other bigger tankers then takes the oil to the world marked by sailing from Murmansk and around the northern coast of Norway.
Earlier in June, reported that the Norwegian government has decided to open up for year-around ship-to-ship reloading of oil in the fjord outside Kirkenes, near the border to Russia. The oil supposed to be reloaded outside Kirkenes will come from the terminals in the eastern part of the Barents Sea and onshore terminals in the White Sea area.
Some 12 million tons of oil was shipped from northern Russia around the northern coast of Norway in 2008.
Gas Forum Still Lacks OPEC Sway
29 June 2009 Reuters
DUBAI, United Arab Emirates -- The world's biggest gas powers will discuss an unprecedented slide in global demand and prices when they meet in Qatar on Tuesday, but there is little they can do about it -- yet.
The global economic downturn and its impact on gas consumption will be high on the agenda when ministers from a club of countries holding more than three-quarters of the world's gas reserves meet in Doha.
"At current prices, I don't know if investment in gas will continue," said Mohammad Ali Khatibi, Iran's representative to the Gas Exporting Countries Forum.
"There is no return for investors. We will review the market and see what we can do to help stability."
Weak demand and sagging prices in some markets may give impetus to GECF moves to increase cooperation, said Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies.
"Gas exporters have never seen demand drop by as much as it is dropping this year," he said. "Cartels are only effective when prices are low. When prices are high, there is no need to form a cartel."
Previous meetings of the GECF have caused consternation among consumers, who fear that the group may develop the same influence over gas markets that the Organization of the Petroleum Exporting Countries has over oil.
The body's 11 members in December signed a charter, yet to be made public, aimed at transforming the group into a formal organization from an informal talking shop. In Qatar, the group is expected to choose a secretary-general.
The GECF may eventually gain sway over prices, but the gas and crude trades are so different and the forum so immature that there is little chance of members working together for now.
"We should not be dismissive of this organization," Stern said. "But we should not expect it to be a price and volume setter any time soon."
OPEC was formed in 1960 and took about a decade to become a force in global oil markets. The GECF, a loose group of 11 of the world's gas powers, is at a similar stage of development as OPEC was at inception, analysts said.
Most gas is delivered through pipelines on long-term contracts, physically tying suppliers to their customers, while oil trades globally and moves on tankers to the highest bidder.
A spot market for tankers of liquefied natural gas is growing and would likely eventually form a stronger link between regions. But for now, the gas market remains fragmented and prices vary by region, limiting the potential for any concerted action to change fundamentals globally.
"The very idea of a 'gas OPEC' would be understandable only if they were talking about LNG," said Maria Radina, oil and gas analyst at UBS in Moscow. "But you can't do it with gas transported in pipelines. Anyone can put oil in a bucket and keep it there until prices rise. But with gas you simply cannot do that."
Europe is the market over which the GECF holds the most potential power. Forum members Russia, Algeria and Libya together contribute about 36 percent of Europe's gas, according to consultants Wood Mackenzie.
But forum members are all competing for Europe's market, so working together there might be tough, especially with demand for gas ebbing because of the economic crisis, analysts said.
"Nobody wants to lose the market," said Mikhail Korchemkin, from think tank East European Gas Analysis. "Gazprom's exports to Europe dropped 39 percent in the first quarter, while Qatar exported 20 percent more than a year ago. I do not think Qatar wants to reverse that trend. Therefore, a gas OPEC has no chance."
Sagging demand and oversupply of oil and gas will likely make for a buyer's market for the next few years. While that may encourage cooperation, it could also increase competition among sellers.
"Cooperation is much more challenging in a market that tends to favor buyers," said Noel Tomnay, head of global gas at consultants Wood Mackenzie. "I think the GECF is a genuine force for the future, but it's baby steps at the moment."
Gazprom
Azerbaijan begins natural gas supplies to Russia for Gazprom
Baku, Fineko/abc.az. Russian leader Dmitry Medvedev is likely to come to Baku today.
According to Russian sources, his trip goal is to continue discussion launched during the April Moscow visit of his Azerbaijani counterpart.
A day before the Russian President’s visit Alexey Miller, Gazprom’s chairman of board, claimed that his Company hoped to sign an agreement on Azeri gas supplies with State Oil Company of Azerbaijan (SOCAR).
“Gazprom could buy Azeri gas for its portfolio already since 1st January 2010. At the moment speech is about comparatively not large volumes but in the future we can increase the purchase. Gazprom can propose very convenient conditions on gas purchases for Azerbaijan. We have very good trumps compared to any potential rivals on Azeri gas purchase,” Miller thinks.
In the course of Baku negotiations it will also be raised the issue of further co-operation in gas sector for the medium- and long-term prospects. In addition, the parties will cover partnership within Phase 2 of Shah Deniz Gas Project in Azerbaijani sector of the Caspian Sea.
“Our relationships with Azerbaijan are forming quite good. We hope that during the forthcoming Baku visit we will come to new important agreements,” Miller said.
Last year Gazprom bought 66.1 bn cu m in Turkmenistan, Uzbekistan and Kazakhstan.
Earlier this June Miller and SOCAR president Rovnag Abdullayev held meeting within the framework of XIII St. Petersburg International Economic Forum. In its course the sides stressed that they had all conditions for beginning of Azeri gas purchases already in the near future.
According to SOCAR vice president Elshad Nasirov, SOCAR and Gazprom are negotiating not only about those not large gas volumes that be delivered to the Russian market already in 2010, but also about large supplies within Phase 2 of Shah Deniz Project (extracted reserves of 1.2 trillion cu m of gas and 240 million tons of condensate) in Azerbaijani sector of the Caspian.
The parties are also discussing opportunities of Caspian gas transit to Europe. In this connection Nasirov indicated possible relevant co-operation between SOCAR, Gazprom and Turkmenistan for reduction of export costs, including in a way of Trans-Caspian Gas Pipeline construction.
Today Azerbaijan already has infrastructure for export of at least 5 bn cu m of gas a year to Russia.
Gazprom's oil arm raises its stake in Sibir Energy
Russian state-controlled group acquired its stake through the purchase of Orton Oil Company last week.
By Garry White
Published: 9:15PM BST 28 Jun 2009
Gazprom Neft, the oil arm of Russian state-controlled group Gazprom, has increased its stake in Aim-listed Sibir Energy by the acquisition of a 50pc stake in Bennfield.
Bennfield is the biggest shareholder in Sibir, with 47pc. Gazprom Neft acquired its stake through the purchase of Orton Oil Company last week.
Trading in shares of Sibir remains suspended in London, after controversial "unauthorised payments" were uncovered relating to property deals with Chalva Tchigirinski. Mr Tchigirinski and Igor Kesaev are major shareholders in Bennfield.
Earlier this year it emerged Mr Tchigirinski had borrowed $325m (£197m) from Sibir, rather than the $115m originally disclosed. He tried to sell property to the company in return for the money, but that deal later fell apart. Sibir is now suing Mr Tchigirinski for the return of the cash.
Gazprom Neft bought 16pc of Sibir in April after trumping rival TNK-BP, the Russian joint venture of BP, which last year offered to buy the company in a £2.3bn deal. Since then, Gazprom Neft has increased its direct holding in Sibir to 34pc. With the Bennfield stake, it now has effective control of Sibir. The City of Moscow owns an 18pc stake in Sibir.
Sibir and Gazprom Neft are equal partners in a venture that controls the Moscow Oil Refinery. Sibir also has rights to half of the 160,000 barrels a day produced by Salym Petroleum Development in Siberia, which is jointly run with Shell.
Alexander Dyukov, Gazprom Neft's chief executive, said the company was not currently in talks with other Sibir shareholders.
On June 19, Gazprom Neft installed a new chief executive at Sibir from its own legal team. Igor Tsibelman, head of international legal affairs, replaced chief executive Stuard Detmer, but Mr Detmer was reappointed last week. Sibir continues to pursue legal action against Henry Cameron, its former chief executive, and Mr Tchigirinski. Also named in the proceedings are Gradison Consultants – which Sibir claims is owned by Mr Tchigirinski, and Derbent Management.
Mr Cameron stepped down from the board in February and has since been dismissed.
Mr Tchigirinski, meanwhile, is subject to a temporary court order freezing his assets. Sibir has received a charge over the shares of a company that owns Mr Tchigirinski's Spanish villa, and proceeds of the sale of a house in Eaton Square.
Gazprom Neft Buys Half of Sibir’s Largest Shareholder (Update1)
By Denis Maternovsky
June 28 (Bloomberg) -- OAO Gazprom Neft, the oil arm of Russia’s largest company, acquired a 50 percent stake in Bennfield Ltd., the biggest shareholder of Sibir Energy Plc.
The Moscow-based company on June 22 bought Orton Oil Company Ltd., which owns 50 percent of Bennfield, Gazrpom Neft said in an e-mailed statement late Friday. Bennfield, which is controlled by Igor Kesaev and Chalva Tchigirinski, holds a 47 percent Sibir stake.
Gaining control of London-listed Sibir, which is 18 percent owned by Moscow city government, will help Gazprom Neft battle falling output from its aging fields. Sibir has rights to half of the 160,000 barrels a day produced by Salym Petroleum Development it jointly runs in Siberia with Royal Dutch Shell Plc.
Gazprom Neft is not currently in talks with other Sibir shareholders on acquiring their stakes, Chief Executive Officer Alexander Dyukov said in the statement. If a decision on buying more Sibir shares is made “we will conduct talks and, perhaps, reach an agreement on an acquisition,” he said.
Gazprom Neft has bought up 34 percent of Sibir from minority shareholders since making an offer for the company on April 23. Sibir Energy and Gazprom Neft are equal partners in a venture that controls the Moscow Oil Refinery.
The company moved to take operational control over Sibir earlier this month by appointing two of its representatives to the four-member board. Sibir shares have been suspended from trading since February following an investigation into the diversion of company funds.
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@
Last Updated: June 28, 2009 07:08 EDT
South Stream Exports May Sideline Ukraine
29 June 2009
By Anatoly Medetsky / The Moscow Times
Gazprom will use its planned South Stream pipeline to carry a third of its gas exports to Europe by 2015, chief executive Alexei Miller said Friday in an apparent warning to Ukraine, which now handles the bulk of the transit.
Gazprom and Italy's Eni recently agreed to expand the capacity of South Stream, which will run under the Black Sea, to 63 billion cubic meters of gas -- or 35 percent of Gazprom's exports to that region, Miller said.
Miller's statement implies that Gazprom is hoping to export about 180 bcm of gas to Europe in 2015. The company and its partners, Germany's E.On and Wintershall and Holland's Gasunie, are planning to build another pipeline, Nord Stream, under the Baltic Sea that would transport 55 bcm in 2012.
The figures suggest that Gazprom aims for an annual 118 bcm of its gas to bypass Ukraine by 2015. Ukraine transported roughly the same amount of Gazprom's gas last year, or 80 percent of the firm's exports to Europe. Belarus handled the rest.
Gazprom has had two major payment spats with Ukraine, most recently in January, when a dispute over transit halted European deliveries for days on end and led to widespread shortages in the middle of winter.
"The implementation of these projects are a strategic investment by Gazprom into increasing Europe's energy security," Miller said at Gazprom's annual shareholders meeting.
Miller also took a swipe at Europe for its desire to become less dependent on Russian gas imports by trying to arrange alternative supplies from countries like Azerbaijan, Turkmenistan and Iraq. Many gas-rich countries are politically unstable and are inexperienced at laying pipelines and servicing contracts, he said without naming any countries.
"That's why Europe's desire to diversify gas suppliers is understandable but shouldn't turn into a fetish," he said.
If Europe neglects ties with Russia in favor of securing new alternative supplies, it could risk a surprise result, Miller said.
"There will be more diversification but less stability and reliability."
Russia is seeking to buy as much gas as possible from these possible rival suppliers, a move that could undermine the Nabucco pipeline project, which aims to import gas from the Caspian Sea area and Central Asia.
In one such effort, Russia is in talks with Azerbaijan to buy some of its gas, and Miller said the countries might strike "new important deals" next week when he will accompany President Dmitry Medvedev on a trip to Baku.
Shareholders kept Gazprom's board largely intact, replacing two of the 11 members. Energy Minister Sergei Shmatko will sit on the board instead of Industry and Trade Minister Viktor Khristenko, while law professor Valery Musin will take the single independent member's slot, replacing Boris Fyodorov, a former finance minister who passed away last year.
Musin is chief of the civil law office at St. Petersburg State University's law department and a former teacher of President Medvedev and Prime Minister Vladimir Putin.
In other news from the AGM, the chairman of the board, First Deputy Prime Minister Viktor Zubkov, said board members would donate last year's remuneration to charity.
Miller, whose bonus for being a board member is 17.4 million rubles ($560,000), said he would donate it to the St. Petersburg Orthodox Spiritual Academy. The other five members that don't hold government posts will get 15.1 million rubles each. It was unclear Friday where their donations would go.
At a news conference after the meeting, Miller announced that Gazprom had reattained the level of daily sales to Europe that it made last year and said the company still hoped to reach the bold goal of having a market capitalization of $1 trillion some day.
"[Gazprom] is one of the world's most powerful companies," he said proudly. "A company with an unbelievable market might."
$1.2Bln for Namibia Project
A power-station construction project in Namibia for which Gazprombank agreed to organize financing is valued at as much as $1.2 billion, Boris Ivanov, head of Gazprom International, told reporters in the Angolan capital Luanda on Friday.
Ivanov said the plant would have a capacity of 800 megawatts, of which Namibia will take 300 megawatts. Talks on selling the remaining power to South Africa are at an "advanced stage," Ivanov said.(Bloomberg)
Turkmenistan: No Deal For Gazprom, But Negotiations Continue
6/26/09
A Gazprom delegation has departed Turkmenistan without resolving a pricing dispute. Alexander Medvedev, the deputy chairman of Gazprom, described his latest visit to Ashgabat as "very constructive" but added that "negotiations will continue."
Turkmen gas exports to Russia ground to a halt in early April following an explosion on a key pipeline. [For background see the Eurasia Insight archive]. Since then, Gazprom representatives and Turkmen officials have been haggling about the export price of gas. [For background see the Eurasia Insight archive].
Russian news agencies quoted Igor Sechin, Russia’s deputy prime minister, as saying Turkmenistan has not ruled out a discount. Reports suggest Turkmengaz may face a two-stage reduction in price: $220 per thousand cubic meters (tcm) from July to September 2009, and $160/tcm for the last quarter. Gazprom reportedly paid $300/tcm during the first quarter of 2009.
GDF Suez can count on 9 pct in Nord Stream-Gazprom
Fri Jun 26, 2009 11:05am EDT
MOSCOW, June 26 (Reuters) - France's GDF Suez (GSZ.PA: Quote, Profile, Research, Stock Buzz) will likely get a nine percent stake in the Nord Stream pipeline, running from Russia to Germany, the project leader, Russia's Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz), said on Friday.
"The level of participation of Gaz de France (GDF Suez) will be the same as of Dutch Gasunie," said Gazprom's export chief Alexander Medvedev.
Gazprom has 51 percent of the project, Gasunie has 9 percent and Germany's E.ON EONG.DE and BASF (BASF.F: Quote, Profile, Research, Stock Buzz) share the rest.
(Moscow Newsroom, + 7 495 775 12 42)
The French want in on Nord Stream
Alfa, Russia
Monday, June 29, 2009
According to this morning's Kommersant, GDF Suez (Gaz de France) is beginning detailed negotiations with Gazprom to join the Nord Stream pipeline project. In addition to increasing its purchase of Russian gas for its power plants, the French company wants a seat on the Nord Stream board of directors and the right to veto major transactions. Gazprom in turn wants participation in GDF's LNG regasification plants.
The current shareholders in Nord Stream are Gazprom (51%), German companies E.On (20%) and BASF (15.5%), and the Netherlands' Gasunie (9%). The latter company joined the consortium only in 2008 in exchange for 9% in the company's 20 bcmpa Balgzand-Bacton pipeline connecting the Netherlands and the UK. This deal looks likely to mirror that Dutch deal, as Gazprom is seeking deeper access into parts of the European gas distribution network. This deal is especially important given last week's newsflow that saw both Prime Minister Vladimir Putin and Gazprom CEO Alexei Miller indicate that the country will begin to develop LNG export capabilities in earnest.
Gazprom elects 11 new Board of Directors
Sunday, 28 Jun 2009
Based on the voting results the annual General Shareholders Meeting of Gazprom has formed the Company’s Board of Directors.
The cumulative votes for 11 candidates elected to the Board of Directors are as follows:
1. Mr Ananenkov Alexander Georgievich Deputy Chairman of the Management Committee of Gazprom
2. Mr Bergmann Burckhard Member of the Board of Directors of Gazprom
3. Mr Gazizullin Farit Rafikovich Member of the Board of Directors, Gazprom
4. Ms Karpel Elena Evgenievna Head of the Department for Pricing and Economic Expert Analysis, Gazprom
5. Mr Miller Alexey Borisovich Chairman of the Management Committee, Gazprom
6. Mr Musin Valery Abramovich Head of the Civil Procedure Department, Faculty of Law, Saint Petersburg State University
7. Ms Nabiullina Elvira Sakhipzadovna Economic Development Minister of the Russian Federation
8. Mr Sereda Mikhail Leonidovich Deputy Chairman of the Management Committee Head of the Administration of the Management Committee of Gazprom
9. Mr Shmatko Sergey Ivanovich Energy Minister of the Russian Federation
10. Mr Yusufov Igor Khanukovich Special Envoy of the Russian Federation President for International Energy Cooperation
11. Mr Zubkov Viktor Alexeevich First Deputy Prime Minister of the Russian Federation
The Shareholders Meeting also re-elected the 9-member Audit Commission and ratified a number of interested party transactions to be potentially executed by Gazprom in future within regular business activities.
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