Russia - WikiLeaks
Russia 090423
Basic Political Developments
• Lavrov starts visit to Pyongyang visiting Kim Il Sung Mausoleum
• Itar-Tass: Russian Foreign Minister Sergei Lavrov arrives in Pyongyang
• AFP: Russian Foreign Minister Sergei Lavrov arrives in Pyongyang
• Russian minister arrives in NKorea: state media
• RT: Russian FM seeks to mediate Korean nuclear issue - Russian FM seeks to mediate Korean nuclear issue
• Bloomberg: Lavrov Visits North Korea in Effort to Revive Nuclear Talks
• Reuters: Russian envoy to press North Korea on arms project
• Russia opens efforts to get NKorea back into talks - Foreign Minister Sergey Lavrov arrived in North Korea for a two-day visit that could include a meeting with leader Kim Jong Il. The North's Korean Central News Agency reported Lavrov's arrival in Pyongyang in a brief dispatch.
• Armenian president pays a working visit to Russia - A Kremlin source told Itar-Tass the agenda of the forthcoming talks would include a wide range of issues related to Russian-Armenian relations, l measures to overcome the negative consequences of the global financial crisis, the situation in the Caucasus and other international problems.
• Russian, Armenian leaders to talk energy, N. Karabakh conflict - The agenda for the talks at the presidential residence at Zavidovo, will include "a broad range of issues in Russian-Armenian relations, measures to overcome the negative consequences of the global financial crisis, the Caucasus situation and topical international problems," the source said.
• Japan PM says he does not back agt with Russia on Kurils division - Japanese Prime Minister Taro Aso on Thursday disproved allegations that he is for reaching an agreement with Russia on the division of the Southern Kurils and signing of a peace treaty on its basis
• Security talks to be held in Georgia-Ossetia conflict zone - The first meeting since the Russia-Georgia conflict will be held in the zone of Georgia-Ossetia conflict in Ergneti on April 23.
• Russia, South Ossetia, Georgia & the EU to hold four-sided meeting - Russia, South Ossetia, Georgia and the European Union will hold a four-sided meeting on Thursday. It will take place in Ergneti, a populated area in the Georgian territory on the border with South Ossetia.
• Lavrov says Russia does not see NATO as a threat
• NATO, Russia to Resume Formal Political Contacts at End of April
• Russia's protest against NATO military training in Georgia is element of "exchange" in Moscow-Washington dialogue: experts
• Russian deputy FM: Obama administration shows signs of easing position on strategic arms - “There are many signs that allow me to state with a sufficient level of certainty that the current administration will take into consideration our priorities and preferences to a larger extent than the George Bush administration,” Deputy Russian Foreign Minister Sergei Ryabkov told Interfax in an interview on Tuesday.
• Russia, Hong Kong to scrap visas - Russia and Hong Kong will sign an agreement on Thursday in Beijing cancelling visa requirements for visitors on short trips, a spokesman for the Russian consulate in South China's territory said.
• Ukraine leader to review gas accords with Moscow - Agreements reached in January to end the gas dispute between Kiev and Moscow should be reviewed as they disadvantage Ukraine, the country's president, Viktor Yushchenko, said Wednesday.
• Russian gas dependence worries Lithuanian leader - In an interview with The Associated Press, Lithuanian President Valdas Adamkus said the former Soviet republic is likely to become fully reliant on Russian natural gas supplies once it shuts down a Chernobyl-style nuclear plant later this year.
• Russia: Presidential Aide Arkady Dvorkovich’s Responses to Questions from Reporters - Russia signed the Energy Charter, but did not ratify it. This means that we do not consider ourselves bound by obligations under the Energy Charter. As for the Energy Charter Treaty, we also do not feel that we are bound by obligations under it.
• Russia-Canada: Why the bear and the beaver should make nice together – by Piotr Dutkiewicz
• Arms Dealer May Not Fill All Orders - State-owned arms exporter Rosoboronexport may not be able to fill all of its international orders this year, Alexander Brindikov, chairman of the company's board of advisers, said Wednesday.
• Russian arms exports holding steady
• Two dead in south Russia car blast - Two people have died after a car blew up near the southern Russian city of Nalchik, emergency services said on Thursday.
• Over a dozen Wahabi groups "neutralized" in North Caucasus - Russian ministry
• Prosecution to present evidence in new case against Khodorkovsky
• Russian Army is short of men, President Medvedev says
• Russian president laments unfit conscripts - Russian President Dmitry Medvedev said on Wednesday that over 40 percent of those eligible for military service were not fit enough, amid a government drive to modernise the armed forces.
• Medvedev reaches out to Russia's unruly bloggers
• Russians Bet on a Market for Dampening Dissent
• BBC: Russian police readied for unrest - Russia's paramilitary police units are being reorganised to guard against "extremism" amid fears of growing social unrest, an official says. A senior interior ministry official told the BBC the definition includes protests provoked by the credit crunch.
• Putin Wants Access to State Secrets - Prime Minister Vladimir Putin will preside over a meeting Thursday that will consider a rule giving the prime minister and other top government officials access to state secrets.
• Survey: People Doubt Medvedev Is the Boss
• Russian Unemployment Figures Rapidly Rising - according to the Russian State Statistics Committee, among the country's entire population of 142 million, only 75.6 million (53 percent) are economically active. By late February 2009, 6.4 million (8.5 percent) of the economically active population qualified as unemployed under the International Labor Organization (ILO) standards. Meanwhile, only 2.2 million are officially registered in Russia as unemployed, with 1.7 million of them receiving state support (gks.ru).
National Economic Trends
• Russian international reserves up $0.9 bln in week
• Kudrin Says Reserve Fund to Be Spent by '10 - Finance Minister Alexei Kudrin said Wednesday that the Reserve Fund would be "practically exhausted" in 2010, and the government will have to cut spending to trim a budget deficit that is estimated at 7.4 percent this year.
• Central Bank expects Russia’s bank lending to go up 10-12% this year – Kudrin
• Cash in circulation down 16.3% to $107.5 bln in Russia in 1Q09
• Russia’s inflation reaches 6% by April 20 – statistics
• Russia's Putin unveils plan to aid small businesses
• Putin Offers Measures To Recapitalize Banks - President Vladimir Putin on Wednesday outlined aggressive new measures for recapitalizing the banking sector and spurring lending to cash-strapped enterprises.
Putin gives banks, borrowers a boost
• Putin to End Rule On Cash Registers - The government will ease life for small businesses by simplifying their taxes and ditching a requirement that they must all use cash registers, Prime Minister Vladimir Putin said Wednesday.
• Pension funds investment restrictions eased - Russia's Federal Service for Financial Markets says it will ease the rules on what pension funds can invest into and so broaden the number and kinds of assets available to fund managers.
• UralSib: 1Q09 macro statistics reveal a mixed picture
Business, Energy or Environmental regulations or discussions
• 'Climate Doctrine' Outlined - The Natural Resources and Environment Ministry wants to see steeper penalties for environmental violations as part of a "climate doctrine" that it composed, a policy paper predicting that parts of Russia may go underwater after 2025, Minister Yury Trutnev said Wednesday.
• Russian Stocks Decline, Paced by Severstal, Rosneft; VTB Gains
• Rencap: Russian eurobond segment weaker
• Russian bank VTB's year profit beats forecasts
• VTB Posts $104 Million Fourth-Quarter Loss, Less Than Expected VTB forecasts revenue to rise 10%-20% in 2009
• Alfa to Get VEB Loan
• Sberbank Q1 Profit Sinks
• Sberbank to hold talks with Kazakh officials on BTA acquisition in May
• Peter Hambro Mining PLC completion of Aricom acquisition and move to main market
• KAMAZ to stop its main production line until May
• Russia's Magnit downgraded to hold by Citigroup
• Foreigners will not be able to buy Russian land in border areas
• Railway transport plummets - The railway transports of timber and wood products along the Russian Northern Railway line is down 24 percent this year compared with the same period in 2008.
• Saturn Bid Delayed - The Federal Anti-Monopoly Service said Wednesday that it would wait until June to consider state-owned Oboronprom's application to acquire 75 percent of engine maker Saturn.
• Russian Arctic helicopter company for sale - The Russian state is selling shares in the Naryan-Mar United Air Fleet, the biggest helicopter company in the Nenets Autonomous Okrug.
• Ingosstrakh Notes Skyrocketing Fraud - Insurance fraud hit a high in the first quarter as a growing number of individuals felt compelled to take criminal measures to avoid paying off loans, Alexander Grigoryev, chairman of insurer Ingosstrakh, told journalists on Wednesday.
• Evroset Appoints VimpelCom’s Alexander Malis as President
• MTS vs. Vimpelcom: Vimpelcom winning the retail war
• Billionaires Disappear From Russian Art Auction at Sotheby’s
Activity in the Oil and Gas sector (including regulatory)
• Russia sees no need for oil cuts as shortage looming
Effect of oil output cuts to be short-lived
Oil shortage looms in medium term
Sees progress on South Stream gas pipeline project
Surgut's purchase of MOL stake not hostile bid
• Russian gas demand rebounding - Overall gas consumption in March, according to Vedomosti, amounted to some 35.5 bcm, 0.8% less than in the same period last year. Industrial and utilities consumption in March continued to decline, by 2.6% and 5.2%, respectively.
• Novatek's management board gets shares
• Sibneftegaz Starts Gas Production at Northern Pyreynoye Field
• TNK-BP Bids for Minority Sibir Stake
• TNK BP may make an offer for Zhaikmunai
• Belokamenka crude terminal to handle 9mil tonnes
• Russia tries to control gas supplies to Europe through new deals: experts - "Russia is making every effort to get volume of gas, including, offering deals at market prices. This is a big geopolitical game," the Russian Alfa-Bank Oil and Gas Senior Analyst Shirvani Abdullayev told Trend Capital over phone.
• WSJ: EU-Ukraine Gas Deal Is No Pipe Dream - A real plan to improve the network should please Europe and Russia.
• Russia must offer maximum high price for Azerbaijani gas: Interview with head of Russian Gas Association - Russian Gas Association President Valery Yazev spoke with Trend Capital in an exclusive interview.
Gazprom
• Gazprom, E.ON could close Siberian asset deal in summer
• Gazprom Neft on Bourse
• Gazprom primes South Korea study - Russian gas giant Gazprom is poised to carry out an investment study covering shipments of natural gas to South Korea and is looking at possible transportation routes.
• Gazprom Neft Buys Italy Assets
• Gazprom lets Ukraine off gas fine - After a lot of sabre rattling, Gazprom has backed down on its threat to fine Ukraine for buying less gas in the first quarter than it is contractually obliged to.
• Gazprom: GDF Suez may get 9% stake in Nord Stream pipeline
• Kommersant: Liberalized European markets to prevent Gazprom from pressuring consumers
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Full Text Articles
Basic Political Developments
Lavrov starts visit to Pyongyang visiting Kim Il Sung Mausoleum
PYONGYANG, April 23 (Itar-Tass) - Russian Foreign Minister Sergei Lavrov began his stay in Pyongyang with visiting the Kim Il Sung Mausoleum on Thursday. He made an entry in the mourning book.
After that the RF foreign minister laid a wreath at the Liberation Monument to the Soviet soldiers.
Talks with North Korean Foreign Minister Pak Ui Chun are beginning. It was earlier reported with reference to informed sources that the Russian diplomacy head might meet North Korean leader Kim Jong Il on April 23.
The main issue of Lavrov’s discussions in Pyongyang is expected to be the future of the six-sided talks on the Korean Peninsula’s nuclear problem. The sides, in particular, will discuss prospects for the settlement of the situation caused by the North Korean decision to withdraw from the six-sided nuclear talks after the UN Security Council condemned the recent launch by Pyongyang of a powerful rocket. Russia has repeatedly called on North Korea to return to the dialogue in the interests of strengthening stability in Northeast Asia.
After the UN Security Council’s presidential statement denouncing the launch of the North Korean rocket Pyongyang expelled from the country inspectors of the International Atomic Energy Agency (IAEA). It stated the intention to resume the suspended operation of its only nuclear reactor at Yongbyon capable of producing weapons grade plutonium.
Touching upon the Korean nuclear problem recently in an interview to Itar-Tass, the Russian foreign minister stressed that “all the sides should fulfil the agreements reached.” “There are obligations that North Korea assumed, there are obligations assumed by the other participants in the six-nation talks,” he recalled. “Russia has totally fulfilled all its obligations, we want the other countries to fulfil their obligations as well,” Lavrov stated.
The Russian foreign minister last visited Pyongyang in 2004.
Russian Foreign Minister Sergei Lavrov arrives in Pyongyang
PYONGYANG, April 23 (Itar-Tass) - Russian Foreign Minister Sergei Lavrov has arrived for a two-day visit to the Democratic People’s Republic of Korea (North Korea) to discuss bilateral relations and the North Korean nuclear program.
The Russian foreign minister will hold talks with his North Korean opposite number Pak Ui-chung and the speaker of parliament Kim Yong Nam. On April 23, the Russian Foreign Minister may meet the North Korean leader Kim Jong-il.
The future of the six-way talks on the nuclear problem of the Korean peninsula is expected to dominate the Russian-Korean talks. The sides will discuss the DPRK’s intention to withdraw from the six-way talks after the United Nations Security Council condemned North Korea for a powerful rocket launch.
Russia has repeatedly called on North Korea to get back to the negotiation table.
Russia hopes that the six-way process would soon re-start. At the same time, the Russian foreign minister spoke against tougher sanctions against Pyongyang.
“A threat of sanctions to North Korea is counterproductive,” Lavrov emphasized.
After being criticized for the rocket launch, North Korea expelled the International Atomic Energy Agency inspectors and said it would resume the creation of a nuclear reactor in Yongbyon that will produce weapons-grade plutonium.
Speaking about North Korea’s nuclear program, the Russian foreign minister said that all the parties should stick to their commitments.
“There are commitments taken by North Korea and there are commitments taken by the other participants in the six-way talks,” Lavrov went on to say. He added that Russia had fulfilled all of its commitments and would like other nations to follow suit.
During his visit Lavrov is expected to sign an inter-governmental plan for cultural cooperation between Russia and the DPRK. He will also be present at the opening of a Russian cultural centre on the basis of the Institute of Foreign Languages.
Lavrov’s last visit to Pyongyang was in 2004. He will leave the DPRK for Seoul on April 24.
Russian minister arrives in NKorea: state media
SEOUL (AFP) – Russian Foreign Minister Sergei Lavrov arrived Thursday in North Korea, state media said, in the first high-level visit since the communist state announced it was quitting nuclear disarmament talks.
The official news agency announced the arrival but gave no details of his itinerary.
Moscow has said Lavrov will visit North Korea April 23-24 and South Korea April 24-25 to discuss bilateral relations with both countries, "the situation on the Korean Peninsula and in northeast Asia and other relevant international questions of mutual interest."
Russia is a member of the six-party nuclear talks which also group the two Koreas, China, Japan and the United States.
Regional tensions are high after the North's purported satellite launch on April 5, widely seen overseas as a disguised missile test.
The North, angry at UN censure of the launch, has announced it is quitting the six-party talks and restarting its atomic weapons programme. It has expelled US and UN nuclear inspectors.
South Korea's Yonhap news agency, quoting a diplomatic source, has said Lavrov would discuss the aftermath of the rocket launch and was expected to urge the North to return to the six-way talks.
He hopes to meet North Korean leader Kim Jong-Il but it is unclear whether that will be possible, the source added.
Russian FM seeks to mediate Korean nuclear issue
23 April, 2009, 09:30
The future of the six-way talks on the nuclear problem of the Korean peninsula is expected to dominate the Russian-Korean talks. Russian Foreign Minister Sergey Lavrov is now in Pyongyang on a two-day official visit.
Lavrov is expected to meet North Korean leader Kim Jong-il, and also hold talks with his counterpart Pak Ui-chung, and parliament speaker Kim Yong Nam.
The sides will discuss the North Korea’s intention to withdraw from the six-party talks after the United Nations Security Council condemned the country for a powerful rocket launch on April 5.
On April 13, the Security Council unanimously condemned the launch. The compromise statement – drafted by the United States, China, Russia, Britain, France, and Japan – did not contain a call for sanctions which the U.S. originally suggested.
Read more
North Korea responded to the condemnation saying it will boycott the six-party UN talks on its nuclear program, and will restart its nuclear power plant.
Russia has repeatedly called on North Korea to get back to the negotiating table. At the same time, the Russian foreign minister has repeatedly spoken against tougher sanctions against Pyongyang.
“A threat of sanctions to North Korea is counterproductive,” Sergey Lavrov said.
Lavrov Visits North Korea in Effort to Revive Nuclear Talks
By Michael Heath
April 23 (Bloomberg) -- Russian Foreign Minister Sergei Lavrov arrived in North Korea today for talks with government officials after the regime vowed to pull out of nuclear disarmament negotiations.
The visit comes after Kim Jong Il’s government declared April 14 it was quitting the six-party talks and expelled United Nations inspectors in retaliation for Security Council condemnation of its suspected ballistic missile test.
Lavrov will discuss “the situation on the Korean Peninsula and the northeast Asia region and international issues of mutual interest,” the Russian Foreign Ministry said in a statement earlier this week. He will hold talks with his North Korean counterpart Pak Ui Chun and may also meet with Kim, before traveling to South Korea tomorrow.
Russia, along with China, Japan, South Korea and the U.S., is pressing the regime to dismantle its nuclear program. The country also shares a 19-kilometer (12-mile) border with North Korea. The state-run Korea Central News Agency announced Lavrov’s arrival in the capital, Pyongyang, without giving details of his itinerary.
Kim’s government, which tested a nuclear weapon in 2006, has said it plans to resume reprocessing spent atomic fuel at its Yongbyon plant, the source of the regime’s weapons-grade plutonium, and will consider building new reactors.
Secretary of State Hillary Clinton said yesterday the U.S. won’t give in to North Korea’s “unpredictable behavior,” while adding that the Obama administration has also made it clear it is prepared to resume the negotiations.
“The North Koreans have not demonstrated any willingness to resume the six-party process,” Clinton told the House Foreign Affairs Committee in Washington. “I think we have to be strong, patient, persistent and not give in to the kind of back- and-forth, the unpredictable behavior” of North Korea.
Kim’s regime agreed in February 2007 to scrap the program in return for energy aid and normalized diplomatic ties with the U.S. and Japan. The disarmament talks had stalled after North Korea refused to let inspectors remove samples from Yongbyon.
To contact the reporter on this story: Michael Heath in Sydney at mheath1@.
Last Updated: April 23, 2009 01:17 EDT
Russian envoy to press North Korea on arms project
Thu Apr 23, 2009 1:17am EDT
By Jack Kim
SEOUL (Reuters) - Russian Foreign Minister Sergei Lavrov will press North Korea not to restart its nuclear arms project when he meets officials in Pyongyang after arriving for a two-day visit Thursday.
"Sergei Viktorovich Lavrov, foreign minister of the Russian Federation, and his party arrived here today," the North's official KCNA news agency said in a typically brief dispatch.
North Korea kicked out U.N. nuclear inspectors and threatened to resume operations at a nuclear plant that makes bomb-grade plutonium last week after the U.N. Security Council condemned the North for launching a long-range rocket on April 5.
Frustration with North Korea has been growing after Pyongyang said it was quitting six-party nuclear disarmament talks and nullifying agreements reached with South Korea, the United States, Japan, Russia and China since their start in 2003.
U.S. Secretary of State Hillary Clinton said Wednesday Washington wanted the six-party talks among those countries to resume and urged the world to not "give in" to the North's "unpredictable behavior."
Lavrov said he would try to press the North to return to the talks and expected Pyongyang to do so, Interfax news agency said Wednesday.
China, the North's closest ally and biggest benefactor, has called on the United States to engage Pyongyang directly in dialogue to ease escalating tension after it and Russia joined the Security Council censure for the rocket launch.
The two countries have the strongest ties to the isolated communist state but North Korea has shown the limits of their influence by pressing ahead with its nuclear arms project and ballistic missile tests.
North Korea, which was also hit with U.N. sanctions after a missile test in July 2006 and after its only nuclear test a few months later, has used its military threat for years to gain global attention and squeeze concessions out of regional powers.
In rare talks with Seoul, North Korea Tuesday refused to discuss the fate of a South Korean worker it had been holding for almost a month for allegedly insulting its political system, and demanded higher wages and rent from firms that operate factories in an industrial enclave in its territory.
North Korea, angered by the decision of South Korean President Lee Myung-bak after he took office a year ago to cut a steady flow of aid to his impoverished neighbor, has disrupted work at the Kaesong factory park to put pressure on Seoul to drop its hard line.
Lavrov is scheduled to visit Seoul Friday.
Russia opens efforts to get NKorea back into talks
By JAE-SOON CHANG – 41 minutes ago
SEOUL, South Korea (AP) — Russia launched a mission Thursday to try to get North Korea back into international disarmament talks, sending its top diplomat to Pyongyang after the North announced it would restart its nuclear program.
Foreign Minister Sergey Lavrov arrived in North Korea for a two-day visit that could include a meeting with leader Kim Jong Il. The North's Korean Central News Agency reported Lavrov's arrival in Pyongyang in a brief dispatch.
North Korea last week expelled all international monitors of its plutonium-producing facilities, vowed to restart them and quit six-nation disarmament talks, after the U.N. Security Council condemned its April 5 rocket launch.
Pyongyang says the rebuke is unfair because the liftoff was a peaceful satellite launch. But the U.S. and others believe it was a test of long-range missile technology.
Lavrov is expected to focus on trying to persuade the North to return to the nuclear negotiating table. South Korean and Russian media reports said he could meet with the North's reclusive leader and deliver a letter from Russian President Dmitry Medvedev.
International Atomic Energy Agency chief Mohamed ElBaradei said earlier this week that the North could restart its nuclear facilities within months — a move that could lead to production of weapons-grade plutonium.
North Korea's relations are not as close with Russia as they were during Soviet times, but the two sides maintain cordial ties. Moscow is a member of the six-party nuclear talks and usually avoids openly criticizing Pyongyang.
In Washington, State Department spokesman Robert Wood said the U.S. is working on trying to get Pyongyang's decision reversed.
Secretary of State Hillary Rodham Clinton told a House hearing that Washington is ready to resume the nuclear talks and that she thinks "strong support that we see among the parties against what North Korea's doing will eventually yield fruit," according to Yonhap news agency.
"We have to be strong, patient and consistent and not give in to the kind of back and forth and the unpredictable behavior of the North Korean regime," Clinton was quoted as saying.
Lavrov also plans to visit South Korea on Friday after the North Korean trip.
Tensions on the divided peninsula have been also been running high. The two sides held their first official dialogue Tuesday since Seoul's conservative President Lee Myung-bak took office last year, but the meeting ended without progress.
North Korea rejected the South's request for the release of a Seoul worker being held at a joint industrial zone in Kaesong, just north of the border, for allegedly denouncing Pyongyang's political system. The North also demanded the South pay more to use the factory park.
Relations between the two Koreas have frayed badly as North Korea has denounced the South Korean government's tougher stance. It cut off reconciliation talks and suspended key joint projects, leaving the industrial zone as the only major remaining project.
Under a 2007 six-party deal, North Korea agreed to disable its main nuclear complex in Yongbyon north of Pyongyang in return for 1 million tons of fuel oil and other concessions. In June 2008, North Korea blew up the cooling tower there in a dramatic show of its commitment to denuclearization.
But disablement came to halt a month later as Pyongyang wrangled with Washington over how to verify its past atomic activities. The latest round of talks, in December, failed to push the process forward.
Armenian president pays a working visit to Russia
MOSCOW, April 23 (Itar-Tass) - Armenia’s President Serge Sargsyan will on Thursday pay a working visit to Russia at the invitation of Russian President Dmitry Medvedev.
A Kremlin source told Itar-Tass the agenda of the forthcoming talks would include a wide range of issues related to Russian-Armenian relations, l measures to overcome the negative consequences of the global financial crisis, the situation in the Caucasus and other international problems.
Trade and economic issues will dominate the talks. Russia is Armenia’s main foreign economic and investment partner. In 2008, the trade turnover between the two countries stood at 899.9 million dollars (it had grown by 9.5% since 2007). Russia’s investments in Armenia’s economy exceeded 1.8 billion dollars. The main investment spheres include energy, the banking sector, the construction industry, communications, mining and metallurgy.
Several major Russian companies such as Gazprom, Inter RAO EUS energy holdings, the Russian Railways, the VTB Bank, the Sistema company, etc.
The two presidents will pay special attention to energy cooperation. Russian companies meet Armenia’s demands in natural gas and nuclear fuel. The two countries implement joint gas and energy projects, the Kremlin source went on to say.
Priority areas of cooperation include modernization of Armenia’s railway infrastructure with assistance from the Russian Railways Company and the development of a railway ferry crossing Caucasus-Poti-Caucasus.
Partnership and cooperation within the Collective Security Treaty Organization (CSTO), of which Armenia is holding a rotating chairmanship, and integration processes in the CIS territory are a separate topic for discussion.
“The heads of state will discuss the Karabakh problem. Russia, which is an international broker and a co-chairman of the OSCE Minsk Group on the Nagorno-Karabakh settlement remains unchanged. Moscow will continue assisting Yerevan and Baku in finding mutually acceptable solutions,” the Kremlin source emphasized.
Russian, Armenian leaders to talk energy, N. Karabakh conflict
MOSCOW, April 23 (RIA Novosti) - Russian President Dmitry Medvedev will meet with Armenian President Serzh Sargsyan near Moscow on Thursday to discuss energy cooperation and the Nagorny Karabakh conflict, a Kremlin source said.
The agenda for the talks at the presidential residence at Zavidovo, will include "a broad range of issues in Russian-Armenian relations, measures to overcome the negative consequences of the global financial crisis, the Caucasus situation and topical international problems," the source said.
"Great attention will be paid to the issue of energy cooperation," he said.
A landlocked mountainous Caucasus state, Armenia is dependent on Russia for its gas and nuclear fuel supplies. Major Russian companies, including Gazprom, have energy projects in Armenia.
The talks will also focus on "boosting cooperation in trade and the economic sphere," the source added.
Trade between Armenia and Russia reached around $900 million in 2008, a 9.5% increase, year-on-year. Russia invested over $1.8 billion in Armenia's economy, mainly in energy, banking, mining and the construction sectors.
Russia signed an agreement with Armenia in February to grant a $500 million loan to the country to provide assistance during the financial crisis.
The presidents will also discuss the conflict in Nagorny Karabakh, the source said adding: "Moscow plans to provide further assistance to Baku and Yerevan to search for mutually beneficial decisions."
The armed conflict in Nagorny Karabakh, a region in Azerbaijan with a largely Armenian population, first began in 1988. The region declared its independence from Azerbaijan in late 1991 at a referendum and has been a source of conflict ever since. A ceasefire was signed in 1994.
Japan PM says he does not back agt with Russia on Kurils division
TOKYO, April 23 (Itar-Tass) - Japanese Prime Minister Taro Aso on Thursday disproved allegations that he is for reaching an agreement with Russia on the division of the Southern Kurils and signing of a peace treaty on its basis. Answering a question at a committee in the lower house of parliament, he also rejected the authorship of the concept of the “original unconventional approach” to the territorial dispute with Russia.
He said that in his view, the main thing is the settlement of the issue of the ownership of all the four islands. “When we settle it we will be able to decided what to do at talks with Russia. This is a consistent stance of the Japanese government,” Aso noted.
Tokyo has repeatedly stated that the settlement of the issue of ownership of the Southern Kurils may be only one – recognition of Japan’s sovereignty over them. After that the country’s government says it will be ready to display a flexible approach to the forms and time of the territories’ transfer. In particular, there is an officially expressed variant envisaging preservation of the Russian administration there for some time, Moscow had rejected this proposal back in the late 1990s.
Answering a question of a parliamentarian Aso also stated on Thursday that he has never proposed to hold the talks based on the “original unconventional approach.” According to him, this term is used by the Russian side.
The Japanese prime minister called a “misunderstanding” the recent publication by a Tokyo-based newspaper of an interview by the government’s special envoy and former Vice Foreign Minister Shotaro Yachi who urged to drop claims for the Southern Kurils. In the view of Yachi, the islands should be divided in half by the area. However, the prime minister said on Thursday that Yachi later explained that he was misunderstood.
The Kyodo news agency reported that on Monday, Foreign Minister Hirofumi Nakasone reprimanded former Vice Foreign Minister Shotaro Yachi for his reported remarks regarding the disputed islands claimed by both Japan and Russia.
Vice Foreign Minister Mitoji Yabunaka told reporters that Nakasone issued a verbal warning to Yachi, who called for the return of “3.5” of the Russian-controlled four islands off Hokkaido rather than the reversion of all of them in a recent interview with the Mainichi Shimbun newspaper.
According to Yabunaka, Nakasone made a telephone call earlier in the day to Yachi, who currently is a government envoy on key diplomatic issues and is staying in the United States, and asked for an explanation about the interview published in the daily’s Friday morning edition, Kyodo reported.
Yachi told Nakasone during their telephone conversation that he did not actually say that the return of “three and a half” is acceptable but that there might have been some remarks in the interview that caused misunderstanding, according to Yabunaka. Yachi also said it is deplorable that he brought about misunderstanding among people concerned, Yabunaka told reporters.
Tokyo has been calling for control of all four islands - Kunashiri, Etorofu (Iturup), Shikotan and the Habomai islet group -- known in Japan as the Northern Territories and in Russia as the Southern Kurils. The territorial row has kept the two countries from signing a post-World War II peace treaty.
According to Kyodo, in the interview Yachi indicated it would be enough for Japan if the country regains control of Shikotan, Kunashiri and the Habomai islets plus half of Etorofu, which provides the largest share of the total acreage of the four islands. Yabunaka said the Foreign Ministry would not impose any further punishment on Yachi over the matter.
Yabunaka, meanwhile, emphasized that the government will stick to its longstanding policy of not concluding a peace treaty with Russia unless Japan's sovereignty of the four islands is confirmed, the agency reported. “It’s a serious problem if misunderstanding has been created (by Yachi), and negotiations on territorial issues should be proceeded prudently in light of national interest,” Yabunaka said.
Aso and Russian President Dmitry Medvedev agreed in their summit talks in February in Yuzhno-Sakhalinsk, the capital of Sakhalin region, to intensify efforts to resolve the decades-old territorial issue by taking a “creative and unconventional approach.” However, tangible steps toward resolving the dispute remain to be seen.
In the interview, Yachi indicated it would be enough for Japan if the country regains control of Shikotan, Kunashiri and Habomai islets plus half of Etorofu, which provides the largest share of the total acreage of the four islands, according to Kyodo. The envoy also said the two countries should tackle the territorial dispute under a “big strategic framework” involving energy, environmental conservation and development projects in north-eastern Siberia under the “unconventional approach.” He also suggested designating the four islands as a non-military zone once the two countries strike a deal on the territorial row.
Russia maintains that all of the Kuril Islands, including the disputed islands of Kunashiri, Etorofu, Shikotan and the Habomai rocks, became a part of Russia as a result of World War II, that Russia’s rights to the islands are guaranteed by the international agreements including the Yalta Agreement and the Treaty of San Francisco, and that Russia has unquestionable sovereignty over these islands.
The positions of the two sides have not substantially changed since the 1956 Joint Declaration, and a permanent peace treaty between Japan and Russia still has not been concluded.
In Russia most of the population, as well as the mass media, strongly oppose any territorial concessions to Japan. A common view is that Russia won the Kuril Islands during World War II and is entitled to keep them regardless of the prior history of the disputed territories. Many believe that taking these islands away from Japan was a just reward for Russia’s sacrifices during World War II and for Russia’s agreement to enter the war against Japan at the request of its allies.
In Japan, there are various private groups cooperating with local and national government to encourage the Japanese people to push for the return of the islands. One man whose family was evicted from the islands, Kenjiro Suzuki, heads the Tokachi branch of the League of Chishima Habomai Islands Residents (Chishima is the Japanese name for the Kuril Islands). In 2008, the main organisation had a budget of approximately 187 million yen (1.7 million US dollars).
The modern Kuril Islands dispute arose in the aftermath of World War II and results from the ambiguities in and disagreements about the meaning of the Yalta agreement (February 1945), the Potsdam Declaration (July 1945) and the Treaty of San Francisco (September 1951). The Yalta Agreement, signed by the United States, Great Britain and the Soviet Union, stated:
The leaders of the three great powers – the Soviet Union, the United States of America and Great Britain – have agreed that in two or three months after Germany has surrendered and the war in Europe is terminated, the Soviet Union shall enter into war against Japan on the side of the Allies on condition that: [....] 2. The former rights of Russia violated by the treacherous attack of Japan in 1904 shall be restored, viz.: (a) The southern part of Sakhalin as well as the islands adjacent to it shall be returned to the Soviet Union; [....] 3. The Kuril Islands shall be handed over to the Soviet Union.
Security talks to be held in Georgia-Ossetia conflict zone
23.04.09 11:45
Georgia, Tbilisi, April 23 /Trend News, N. Kirtskhalia/
The first meeting since the Russia-Georgia conflict will be held in the zone of Georgia-Ossetia conflict in Ergneti on April 23.
The meeting will be held upon the decision of Geneva conference aimed to create mechanisms to prevent incidents in the conflict zone, Georgian Foreign Ministry Analysis and Information Department head Shota Utiashvili said.
Georgian Foreign Ministry, OSCE and EU representatives and representatives of Russian and Ossetian sides will attend the meeting, he said.
"We do not expect anything special from this meeting," Utiashvili said.
Russia, South Ossetia, Georgia & the EU to hold four-sided meeting
TSKHINVAL, South Ossetia, April 23 (Itar-Tass) - Russia, South Ossetia, Georgia and the European Union will hold a four-sided meeting on Thursday. It will take place in Ergneti, a populated area in the Georgian territory on the border with South Ossetia.
Lieutenant-General Sergei Antonov, the first deputy chief of the general headquarters of the Russian land troops, will take part in the meeting. Representatives of the Organization for Security and Cooperation in Europe (OSCE) will be present as observers of regional stability.
“The meeting will be held within the framework of the Geneva agreements the aim of which is to normalize the situation in an area adjacent to South Ossetia’s border with Georgia and establish closer contacts between representatives of Russia and the European Union, " Antonov emphasized.
He explained that the sides would discuss how to organize regular exchanges of information adn monitoring of the situation in an area adjacent to South Ossetia’s border with Georgia and how to hold briefings on the results of monitoring and find prompt solutions of disputable issues. The representatives of Russia and the European Union will exchange with contact telephone numbers and addresses with an aim to establish close working contacts between EU representatives and the command of the Russian military contingent in South Ossetia.
Lavrov says Russia does not see NATO as a threat
LONDON, April 22 (RIA Novosti) - Russia views NATO as a key factor in Euro-Atlantic security, and not as a threat, Foreign Minister Sergei Lavrov said.
"To us, NATO is one of the objective key factors of Euro-Atlantic security, not least security near our borders," Lavrov told the BBC Russian service.
"Russia does not view the North Atlantic Treaty Organization as an inherent source of danger," he said.
However, the diplomat criticized NATO over its policy of enlargement.
"Obviously, Russia cannot ignore the movement of NATO's military infrastructure closer to our borders. The bloc's expansion is being accompanied by the introduction of air patrols, modernization of airports, and the establishment of bases on the territory of newly admitted member states," he said.
He stressed Russia will continue to take all of these factors into account in its foreign policy and military planning, in the interests of ensuring national security.
NATO, Russia to Resume Formal Political Contacts at End of April
| 2009-04-23 01:57:09 Xinhua Web Editor: Bao Congying |
NATO and Russia will resume formal political contacts at the end of April with a meeting of the NATO-Russia Council at ambassadorial level, said the alliance on Wednesday.
The Russians have indicated that they wish to restart formal relations at the NATO-Russia Council at the end of April and that there will be a meeting of foreign ministers during the last two weeks of May, NATO spokesman James Appathurai told reporters.
"If that's the way they wish to do it, then that is the way it will be done," he said.
NATO will also hold open invitation to Moscow for a chief of defense meeting scheduled for the beginning of May, he said.
NATO decided to suspend high-level contacts with Russia in August 2008 following the Russia-Georgia military conflict. NATO foreign ministers in December 2008 agreed to gradually resume political contacts with Moscow.
The alliance on Wednesday also sought to address Moscow's concerns over two military exercises in Georgia in May and June.
The exercises will be attended by 20 countries -- both NATO members and partner countries. Russia was invited to the exercises but refused to participate, said Appathurai. Moscow has been kept informed of the exercises and is welcome to send observers, he said.
"If Russia chooses to send observers, that's something that the alliance will look on quite positively as a way of diminishing any possible misunderstanding or concerns."
He said the exercises, planned in spring 2008, well before the start of the Georgia-Russia military conflict, pose no threat to any country.
Russia's protest against NATO military training in Georgia is element of "exchange" in Moscow-Washington dialogue: experts
23.04.09 08:38
Azerbaijan, Baku, April 22 / Trend News, E. Tariverdiyeva/
Experts say Russia's protests against NATO military training in Georgia is another element of "exchange" in a dialogue between West and Moscow.
"Moscow increases number of negotiating positions with the U.S. as agenda of mutual relations are being formed actively. Sides seek subjects for exchange," Russian expert on security Mikhail Remizov said.
It is planned to hold NATO military training in Georgia, which is striving for the alliance, in early May. NATO planned to involve 1,300 military men from 19 countries to the training and hold them at 20 kilometers east of Tbilisi to improve coordination amongst the alliance members and its partners.
Russia proposed NATO to cancel or postpone military training in Georgia. Russia considers the military training to be provocation in a period of anti-president demonstrations.
"I asked the NATO Secretary General […] to postpone or fully cancel the training," Russian Special Envoy to NATO Dmitriy Rogozin told Reuter and added that Russia is against of NATO training near its borders.
However alliance representatives are not going to cancel military training.
NATO will not refuse to hold military exercises in Georgia in early May, despite Russia's address to cancel or postpone it, NATO Press Secretary Simone De Manso said.
"The exercises have been planned for a long time and it will go ahead as planned," De Manso told Trend News in a telephone conversation from Brussels.
Analysts say Russia's protest against alliance's military training in Georgia is a ground for exchanges with the U.S.
Military training can play a role of trump card in West-Moscow talks, British expert on South Caucasus Ziba Norman said. "There is a genuine need for cooperation with Russia regarding supply routes for military operations in Afghanistan, and Russia may have calculated that this can be used as a bargaining tool in an attempt to prevent the NATO exercises in Georgia," Director of the London-based Transatlantic and Caucasus Studies Institute Norman told Trend News via email.
Remizov said Moscow is increasing number of negotiating positions with the U.S. as agenda of mutual relations are being formed actively. "As a subject for "exchange" the problem of military cooperation with Georgia was more important than even missile defense system in Europe as prospects of military bases in Georgia are more significant for Russia," Russian National Strategy Institute Director Mikhail Remizov told Trend News over telephone from Moscow.
Western observers say Russia's step is also demonstration of regional influence in the Caucasus.
Georgia falls within an area that Russia considers to be its private preserve, an area in which it believes it has the right to assert its influence, Norman said. "Georgia is of greater strategic importance to Russia. The hasty recognition of Abkhazia's independence and the subsequent development of a Russian military presence on the Black Sea coast are clear examples of just how critical Russia believes this region is," Norman said.
"Moscow's protest is part of a strategy to weaken NATO, so if these exercises were to be abandoned then NATO would lose credibility," Norman said.
Russian expert said not military decision of NATO member states, but diplomatic situation is principal in this situation. "Moscow wants the regime in Georgia to be diplomatically out of the zone of military cooperation with the West because this regime does not hide that it is concerned with the possible military revenge," Remizov said. Moscow's protests are simply policy to prevent military cooperation, he said.
E. Ostapenko contributed to the article.
Russian deputy FM: Obama administration shows signs of easing position on strategic arms
Moscow says that Washington’s approach to offensive strategic arms instills hope and counts on the fact that the U.S. administration will take into consideration Russia’s position when a new treaty which is to replace START I which expires this December is worked on.
“There are many signs that allow me to state with a sufficient level of certainty that the current administration will take into consideration our priorities and preferences to a larger extent than the George Bush administration,” Deputy Russian Foreign Minister Sergei Ryabkov told Interfax in an interview on Tuesday.
Asked whether he thinks that Washington is ready to reduce not only warheads but also delivery means and preserve verification mechanisms of the START I, the diplomat said: “I hope for this.”
The Russian side is at the level of first contacts with new U.S. disarmament negotiators, and “these contacts are rather intense,” he said. “Now it is too early to speak about what is happening in detail and what shifts can be seen in reality, because just the first exchange of approaches and positions is underway,” Ryabkov said.
“We have yet to reach the track of full-scale talks when the dialog gains tempo, intensity and when expert groups will work,” he said. “We are at the very beginning, but what we have at present instills hope,” the diplomat said.
The first Russian-U.S. consultations on strategic arms will take place in Rome on April 24, the deputy minister said. “This will be the first introductory visit on strategic arms. Russia will be represented by the Foreign Ministry’s Department for Security Affairs and Disarmament Director Anatoly Antonov. The U.S. side will be represented by Assistant Secretary of State Rose Gottemoeller,” he said.
“The discussion of this topic will continue after the Rome meeting during Minister Sergei Lavrov’s visit to Washington in May,” he added.
Describing Russian-U.S. relations, Ryabkov said that “everything is going smoothly, and the tone which has changed after the new U.S. administration came to power has been maintained.”
“The tone is positive, which is a plus as it is. But the main thing is that one manages to realize some declarations on mutual aspiration to promote relations,” the diplomat said.
“Results of the London meeting of the Russian and U.S. presidents, two statements by the presidents, the atmosphere of the discussion, mutual aspiration to fully prepare and hold Barack Obama’s visit to Moscow in July are the first achievements on the way to making something real of the ‘reset slogan,” Ryabkov said.
“The notion ‘rest has become slightly soiled. But this does not change its essence,” Ryabkov said. “Today the issue is about trying to give a new look to the whole range of bilateral relations and defining the base on which current problems can be resolved,” he said. “This succeeds. But it is common knowledge that the first swallow does not make spring. We should bolster the dialog, and we are ready to interact with the U.S. in this manner,” Ryabkov said.
He also said that there was no reason for a drastic reduction of offensive strategic arms.
“I do not think that anything supernatural will happen from the viewpoint of reducing these parameters. Preconditions for this have yet to mature, and in my opinion there is no reason to speak about such drastic reductions,” Ryabkov said, commenting on the opinion of some experts that Russia and the United States could reduce their nuclear potential down to 1,000 units or even less.
Asked about Russia’s readiness to reduce arms ‘ceilings’ down to these figures, the diplomat said: “A thousand or five hundred units are not the figures we can hear from the U.S. side when it states its official position.”
Any figure can be hypothetically discussed, but one should bear in mind that the lower we go as to the number of warheads and delivery means, the more serious issues linked to missile defense and the strategic potential of other nuclear powers appear,” Ryabkov said.
“The logic of strategic stability impedes the further movement in the direction of reducing the potentials,” he said, adding that “one should be realistic and should not set tasks that knowingly cannot be fulfilled.”
Ryabkov abstained from answering the question to which level Russia is ready to reduce its nuclear potential, stressing that this issue will be a subject for discussions with the U.S. side. “It is easy to understand that there is no possibility in announcing any figures, moreover in public,” the diplomat said.
It is "impossible" and would be "counterproductive" to draw other nuclear powers into Russian-U.S. talks on proposed reductions of strategic offensive armaments, Russian Deputy Foreign Minister said.
"That is impossible at the current time. We are holding negotiations with the United States on a new framework for our joint action in reducing offensive armaments. Before any agreement has been reached and has begun to be put into practice, it would be counterproductive, in my view, to make any other proposal, including proposing that the format of such negotiations be extended and other nuclear powers be drawn into it," Ryabkov said
"After all, it does remain a fact that today the strategic nuclear potentials of the United States and Russia seriously exceed those of other countries," he said.
"We do nOt believe there is any reason for anyone else beside Russia and the United States to join in discussing these subjects, which are traditionally dealt with in a bilateral format," the deputy foreign minister said.
Ryabkov said he foresaw "serious debates on this subject, including at the Review Conference of the [Parties to the] Treaty on the Non-Proliferation of Nuclear Weapons."
"I would like to take this opportunity to draw attention to the Russian proposal for imparting a universal character to the treaty on intermediate- and shorter-range missiles [Intermediate-Range Nuclear Forces Treaty or INF]," he said.
"So far we have not heard any coherent reaction from other countries that have [such weapons], nor have we seen readiness on their part to join in the process of universalization of the INF treaty," Ryabkov said.
"With time, those states would also have to agree to get down in earnest to self-limitations or contractual limitations in the strategic armaments sphere. At this stage, progress is possible without their participation. But afterward it will be unavoidable," he said.
At the same time Ryabkov noted that Moscow doubted that the United States would revise its plans of deploying elements of its missile defense and has stated that the U.S. side bolstered work in this sphere in particular in the NATO format.
“The U.S. side has not revised its plans. I do not think that this may happen. On the contrary, we can see that work in the missile defense area has intensified, including in the NATO format,” Minister Ryabkov said.
The diplomat said he does not think that the issue of deploying U.S. missile defense elements in Eastern Europe has stopped in midair. “Firstly, talks that schedules of deploying missile defense elements in Poland and the Czech Republic could shift appeared at the dusk of the previous administration. Secondly, we do not have any more details from the new administration in addition to what has already been announced,” Ryabkov said.
The diplomat pointed out that Washington earlier intended to examine the balance between the technical efficiency of the project and its costs, as well as to take into consideration results of the tests.
“And I cannot say that this position of the U.S. side is understood as a large shift. There nothing particular to be happy with,” Ryabkov said.
Russia has not changed its position regarding the U.S. plans to deploy missile defense facilities in Europe and will deploy Iskander missiles in the Kaliningrad territory if this happens, said Ryabkov.
"Nobody has changed this position. I would only add that, if there is no third phase [of the U.S. global missile defense system], then there will be no Iskanders," Ryabkov said.
"We are far from seeking to put them there. We really do not want to do that," he said.
In commenting on Washington's declared willingness to reconsider its approaches toward missile defense in case the Iranian nuclear problem is resolved, Ryabkov said, "We have never agreed that the building of the third phase of the U.S. strategic missile defense system has been prompted by a missile or nuclear threat emanating from Iran."
Russia has "a somewhat different approach toward the qualification of this threat than the U.S. administration does," he said.
"What is more important to us is that the potential of the third phase of the missile defense system undeniably threatens the Russian strategic potential. These are the fundamentals. It seems to me that everybody understands this now," Ryabkov said.
"We do not see any signs indicating that Iran is approaching the possession of nuclear weapons," Ryabkov said.
"I am saying this absolutely responsibly. Moreover, I presume that Iran, as a non-nuclear state and a signatory to the NPT [the Treaty on the Non-Proliferation of Nuclear Weapons] should have the right to civilian development of its nuclear power industry as well as all other rights under the NPT," he said.
Therefore, "any attempts to build a policy based on the U.S.' mistrust in Iran, which could, say, raise questions and cause doubts among other members of the international community, do not promote the resolution of the problem itself," Ryabkov said.
"The problem can be boiled down to the restoration of confidence in the purely civilian nature of Iran's nuclear activities. Therefore, there is no subject for bargaining or trading here," Ryabkov said.
Moscow is still concerned over the fact that the U.S. is not destroying its nuclear warheads but stockpiling them in implementing the Treaty on Strategic Offensive Reductions (SORT Ryabkov said also.
"This is a very important subject. We still disagree with the idea that restrictions apply only to operationally deployed warheads. We cannot be indifferent to what happens to the warheads that are not deployed on means of their delivery but that are stockpiled," Ryabkov said.
"We could not find a common language on this issue with the previous U.S. administration," Ryabkov said.
"We hope that the new administration sees fit to take a constructive look at this issue. We will continue to bring it up," he said.
Asked whether the Strategic Offensive Reductions Treaty will make sense if the U.S. and Russia sign an agreement replacing the expiring Strategic Arms Reductions Treaty (START), Ryabkov said, "As regards SORT, this treaty has worked and existed only in connection with START-1."
"SORT has made sense as a way to lower the ceilings of warheads in the context of the agreements stipulated by START," he said.
"However, SORT would turn into a pointless text without START," he said.
Ryabkov also commented on U.S. cruise missiles not armed with nuclear warheads, that are not subject to START.
"The U.S. has a program that envisions the rearmament of the submarine fleet with conventional, that is, non-nuclear, cruise missiles. This is a serious issue, and we deem it important in the process of negotiations with the U.S. to find out how much the new administration is willing in principle to deal with the very problem of strategic non-nuclear weapons as a subject of a future treaty," he said.
Russian Deputy Foreign Minister said also that the NATO exercises planned to take place in Georgia in May were aimed at upgrading the Georgian armed forces' combat potential, and Moscow viewed them as support for an aggressor, said Russian Deputy Foreign Minister Sergei Ryabkov.
"Georgia is an aggressor, and we cannot characterize what is happening as something different than the provision of military and political support to an aggressor," Ryabkov said.
The essence of these exercises is "to train operational compatibility with the Georgian troops and the practicing of a number of tasks that would upgrade the Georgian armed forces' combat potential," he said.
"No matter how someone is trying to explain to us that these exercises were planned long ago, that these are not purely NATO exercises but exercises under the Partnership for Peace program, and that these are command post exercises, all these arguments sound cheap and unconvincing," Ryabkov said.
The diplomat also expressed Russian concern over U.S. military support for Georgia. "In our view, this obviously violates a number of agreements that were reached together with the U.S. and other countries. In particular, the matter involves the Wassenaar Arrangement on control over weapons exports and at least two OSCE documents that stipulate that countries should refrain from shipping weapons to conflict areas," he said.
The exercises under NATO auspices will be conducted in Georgia on May 6-June 1.
NATO Press Officer Robert Pszczel told Interfax earlier that the exercises had been planned long ago and have nothing to do with the current political situation in that country.
Russia, Hong Kong to scrap visas
HONG KONG, April 23 (RIA Novosti) - Russia and Hong Kong will sign an agreement on Thursday in Beijing cancelling visa requirements for visitors on short trips, a spokesman for the Russian consulate in South China's territory said.
As soon as the agreement comes into effect, Russians will be able to visit Hong Kong for up to 14 days visa free.
Russian Ambassador to China Sergei Razov and Hong Kong immigration chief Simon Peh are to sign the documents, agreed during a visit by a Russian Foreign Ministry delegation to Hong Kong in September 2008.
The number of tourists travelling to the former British colony is growing every year. In 2008, over 37,000 Russians visited Hong Kong, up 13% against 2007.
However, Hong Kong saw the biggest rise from Finnish visitors with a 20% increase year-on-year.
Ukraine leader to review gas accords with Moscow
7 hours ago
KIEV (AFP) — Agreements reached in January to end the gas dispute between Kiev and Moscow should be reviewed as they disadvantage Ukraine, the country's president, Viktor Yushchenko, said Wednesday.
"We must return to the issue of gas relations in a most open manner, on the basis of clear principles," he told reporters in Kiev.
"Neither Ukraine nor Russia can be proud of what was reached in January 2009," he added.
The accords the two countries signed had only generated problems and "do not reinforce stability either in Russia, or Ukraine, or Europe," said Yushchenko.
The accords were "asymmetrical" and disadvantageous for Ukraine because they fixed a minumum amount of gas Kiev, but did not specify a minimum volume of gas that Russia had to transit to Europe through Ukraine, he explained.
Ukraine is responsible for more than 80 percent of Russia's gas transit to Europe.
It paid 280 dollars (215 euros) per 1,000 cubic meters for Russian gas in 2009's second quarter -- more than the price paid by Germany, he noted.
At the same time, the transit tariffs Russia paid to Kiev (1.7 dollars per 1,000 cubic meters per 100 kilometers) remained substantially lower than the standard European price, he added.
"No European company pumps gas through at this price," said Yushchenko.
Everyone understands that this is unprofitable -- the tariffs do not cover the expenses" of transport."
In January, a bitter payment dispute between Moscow and Kiev led to a cut-off of Russian gas exports through Ukraine to downstream clients, leaving millions of Europeans without gas in the middle of winter.
Russian gas dependence worries Lithuanian leader
bne
April 23, 2009
In an interview with The Associated Press, Lithuanian President Valdas Adamkus said the former Soviet republic is likely to become fully reliant on Russian natural gas supplies once it shuts down a Chernobyl-style nuclear plant later this year. "As I always said, energy independence is political independence," the 82-year-old leader said. "There will be some years that we will depend on only one single source ... but I appeal here to the goodwill of our neighbor that ... this situation would not be used for political pressures of any kind."
Under its accession agreement with the European Union, Lithuania must close the last operational nuclear reactor at the aging Ignalina power station on Dec. 31. Many Lithuanians fear that Russia will use its gas supplies to assert influence until the country of 3.4 million people develops other energy sources, including an underwater link to Sweden's electricity grid and a new nuclear plant to be built by the all 3 Baltic nations and Poland.
Adamkus said Lithuania should have devoted more resources to developing those alternatives during the years of strong economic growth before the financial meltdown cut deep into the Baltic economies last year. "We have not foreseen or haven't planned enough to take that surplus and save for one of those dark days to come," Adamkus said. "That was shortsighted planning and we are paying for that right now a bigger price."
Russia: Presidential Aide Arkady Dvorkovich’s Responses to Questions from Reporters
RUSSIAN PRESIDENTIAL AIDE ARKADY DVORKOVICH: As the President of the Russian Federation has noted, today we will be giving a document to our colleagues in the G8, G20, CIS countries, international organisations, and our neighbouring countries, on the conceptual approaches to a new legal base in international energy cooperation. This document consists of three sections. The first one contains the international energy cooperation principles, which we feel must be included in the new international legal act. The second section contains elements of an agreement governing [energy] transit, an integral part of which will be an agreement on resolving transit conflicts. And the third section contains a list of energy materials and products that we suggest applying these legal acts to. So, we are not only talking about gas or oil, but about all other energy products, including nuclear fuel, electricity, coal, and all the other goods traded by ourselves and other countries in the energy sector.
Last year at the G8 summit the President said that we will prepare such suggestions and present them to our partners. We have expressed our readiness to do this at a variety of forums, and have stated on many occasions that we are not satisfied with the Energy Charter and the related documents as they currently exist, and that we feel a new legal base is needed. Now, we have a topic for discussion: some very concrete suggestions that include a ready set of regulatory acts, but we are still working to finalise their inner legal structure. After that, we will be ready to present them to our partners for discussion.
As the President said earlier, we are ready to intensively discuss these documents with our partners – first and foremost, with the European Union (which includes our closest energy partners), – in the upcoming weeks, in a variety of formats.
QUESTION: What does all this mean? After all, Russia did not join in on the Energy Charter, so it cannot talk about leaving it.
ARKADY DVORKOVICH: Russia signed the Energy Charter, but did not ratify it. This means that we do not consider ourselves bound by obligations under the Energy Charter. As for the Energy Charter Treaty, we also do not feel that we are bound by obligations under it.
But it is not a matter of binding obligations. The actual issue is that we are suggesting a full-fledged new regulatory base for future energy cooperation. We want for relations to be built on the principles of transparency, clarity, reliability and stability that are satisfactory to all sides: fuel consumers, suppliers, and transit countries. The documents that are currently available do not answer the actual, current state of affairs.
For example: unlike the times when the Energy Charter was signed, today we have the European Union with its regulatory base and its member states. But many of the principles that work within the European Union are no longer in synch with the Energy Charter’s provisions and the respective Charter treaties. These contradictions are not dealt with; they can only be dealt with by signing new agreements. Furthermore, despite many discussions and even some promises, these documents were never extended to cover, for example, nuclear energy, although this is an issue of great importance to us. We have always expressed our interest in this topic and we have felt that in this area we should apply the same principles. That did not happen, and the only possible way to resolve this problem is a new agreement, so we will suggest working on it as intensively as possible with our partners.
QUESTION: So it cannot be said that Russia has left the Charter?
ARKADY DVORKOVICH: No, we are not leaving it: in fact, these documents never applied to us.
QUESTION: Do you think that Russia’s partners will respond positively to these suggestions? Are these suggestions being offered as a substitute for the Energy Charter?
ARKADY DVORKOVICH: These documents are basically being suggested as a substitute for the Energy Charter, although there may be different approaches to their legal implementation. They may serve either as amendments to the Energy Charter or as preparations for a new document, since the suggestions call for changing many existing and adding many new principles, and because today’s Energy Charter does not include many major global market players. I think we should discuss a new document with a wider group of countries, a group that includes countries which have not signed the Energy Charter. I am referring to some of our most important partners: the United States, Canada, China, and India. Even Norway, one of the major global oil market suppliers, is not a member to the Energy Charter. So we probably need a new document, but we are open to dialogue in any legal format.
QUESTION: Do you think that the EU will respond to these suggestions?
ARKADY DVORKOVICH: We have already discussed this issue on many occasions in a variety of formats with our EU partners. We have talked about it, so it comes as no surprise to them; they know that we are not satisfied with the Energy Charter in its current form and that we will suggest amending it. Our partners’ attitudes toward this issue gradually changed over the past several months, although from a legal standpoint, their position remained the same. Still, we could see that they were increasingly open to dialogue on this issue, so we feel that initial consultations and subsequent talks can be very constructive, although, naturally, we understand that the EU will need to do a great deal of internal work on this issue.
QUESTION: Which of the CIS countries support Russia’s suggestions?
ARKADY DVORKOVICH: Today is the first time we hand out the documents containing our suggestions, so it is simply too early to talk about which countries support them. Our Finnish partners received these documents first. Since we were finally ready to present these documents only today, while we are in Finland, we felt it necessary to make them available first to our Finnish partners. In the next few hours, all of our other partners will also receive these documents.
QUESTION: How many of them are there?
ARKADY DVORKOVICH: Several dozen countries. I have already said that at the very least, they will include all member countries of the G20 and the CIS, international organisations operating in this sector, and the European Commission, but also other active energy market players, including members of the Energy Forum, which includes key oil producers and consumers.
Finland was the first country to receive these documents because today is the day that we are finally ready to present them, and we happen to be here, in Finland.
QUESTION: Back to the topic of today’s talks, was any kind of concrete agreement reached with Finland regarding the Nord Stream project?
ARKADY DVORKOVICH: This is a matter of scheduling internal procedures here in Finland. That is what was discussed; we believe that this year we may achieve some progress.
QUESTION: So are you saying that the Finnish government will accept the legal procedure and agree to the obligations? Or, if not, then what do you mean?
ARKADY DVORKOVICH: We do not want to get involved in internal Finnish procedures. It really is a sovereign matter for each country to undertake this process in accordance with national legislation. We respect these principles, we feel that the project allows for maximum environmental safety, and based on this, we count on positive attitudes from our Finnish and Swedish partners toward this project.
QUESTION: What about the Estonians?
ARKADY DVORKOVICH: And our Estonian partners as well. If we set aside political issues, then from an environmental and, even more so, economical stand point, this project is secure and beneficial for everyone.
QUESTION: Could you please tell us, what exactly are the main principles you referred to in the first section of the document?
ARKADY DVORKOVICH: The first section of the document on the new legal base for international energy cooperation covers the principles of stability and transparency of relations in this sector. It is about the sovereignty of each country over the resources located on its territory. It is also about a non-discriminatory access to development of such resources in accordance with relevant agreements and arrangements. It is about countries encouraging investment and creating favourable tax environment for this kind of investment. It is about the fact that future agreements governing certain aspects of energy cooperation, such as transit, should not contain contradictions, but should instead be applied equally to everyone, based on a fair approach principle. It is about the fact that agreements must address all aspects of energy cooperation, rather than only transit, consumption, or production, and they must address all forms of energy, all products and materials that can be used to generate energy. It also includes a few other principles, which you will see when the document is published and openly accessible.
QUESTION: Could you please speak in more detail about nuclear materials? How will that work?
ARKADY DVORKOVICH: The subject of nuclear materials has always been of particular interest to us. Unfortunately, any issue in this area brought up today in Europe is resolved on the basis of individual agreements and is not subject to the Energy Charter principles. Accordingly, if we had chosen to participate in the Energy Charter (which we did not do), we would be limited by some obligations. However, our partners do not have any such obligations in regard to nuclear materials. If our suggestions are accepted, then they will apply to trade in nuclear materials as well.
Why the bear and the beaver should make nice together
PIOTR DUTKIEWICZ
From Thursday's Globe and Mail
April 23, 2009 at 12:00 AM EDT
The United States has declared "it's time to press the reset button and to revisit the many areas where we can and should be working together with Russia." The European Union is talking to Moscow about energy, security, environmental issues and economic ties. The Harper government, meanwhile, resurrects Cold War phantoms and scares children with tales of Russian bombers and reincarnated KGB troops storming Ottawa from the Arctic.
Stephen Harper and Russian President Dmitry Medvedev spent hours over the past year at G8 and G20 summits but never found time to discuss Canada-Russia relations. Mr. Harper can't only find the reset button - he seems intent on crashing the computer.
Russia's ambassador to Canada, Georgiy Mamedov, recently injected an optimistic note on our relationship, saying that, despite heated rhetoric from Canadian politicians, ties at the working group level are actually quite good. Mr. Mamedov probably was being generous to his host. Despite enormous shared interests and common goals, there's no meaningful co-ordination in Ottawa of the existing programs and policies on Russia, let alone movement forward on new opportunities.
In fact, we're moving backward. Under the Harper government, the Canadian International Development Agency has dropped its Russian programs, essentially writing off 15 years invested in establishing a strong and welcome presence in Russia. Likewise, last year, Ottawa halted the only viable student and academic mobility program that permitted Russians and Canadians to collaborate in areas ranging from Arctic research to NGO co-operation, and democratic and economic reform.
We were finally working as partners to secure key Canadian political and economic interest and influence when Ottawa pulled the plug - ironically, just as Russia was beginning to make financial contributions to the program. We were sharing our approaches on the environment, youth, social programs and health, and pursuing Canadian values on better governance and pluralism.
Unfortunately, the Harper government seems to have no sense of the impact of this withdrawal. Fortunately, however, Canada's business community is ahead of its political leadership in understanding the Canada-Russia opportunity. Trade between the two countries, for instance, continues to grow. "Most of our members are committed to long-term investments in Russia, whether industrial, in natural resources, or in consumer products and service businesses," said Piers Cumberlege, chairman of the Canada Eurasia Russia Business Association (CERBA).
From Russia's point of view, it's appreciated that Canadians are involved in social and education projects, as well as diversifying into the Russian economy, as opposed to simply extracting resources. That has given Canadian businesses good access to Russia's decision-makers. We have been building trust in Russia - in fact, Canadian researchers and scholars are often asked to advise some of Russia's most important institutions, including the Duma (parliament) and the presidential administration. Canadians work with Russians on legal and administrative reforms that might create a stronger rule of law. Canadian NGOs and the private sector are working in the North, helping devise new youth-at-risk programs and bringing Canadian expertise to the core of Russia's political system.
Despite Ottawa's political freeze on Russia, there are still some productive relationships at the working level. The Department of National Defence will tell you that Canadian lives have been saved because of the information Russia has shared on Afghanistan. Our Department of Agriculture, Indian and Northern Affairs Canada, Treasury Board and Department of Justice are also involved in projects in Russia.
And at the provincial level, some political leaders are taking it on themselves to build relationships. Quebec Premier Jean Charest decided to increase his province's economic presence there unilaterally, and he is expected to lead a delegation to Russia soon. This week, Ontario Premier Dalton McGuinty greeted a delegation of Russian nanotechnology experts; his government has also expressed support for better Russian relations.
But at the federal level, when we urgently need Russian co-operation to fight terrorism, nuclear proliferation, money laundering, drug trafficking, climate change and more, our political leadership is not in the picture.
There are big economic opportunities for Canada in Russia, given that our trade surplus is shrinking. Seizing these opportunities requires political leadership and involvement, especially in our core areas of common interest: natural resources; the Arctic; energy conservation; forestry; and agriculture.
Russia, of course, isn't entirely blameless in our frosty relationship. Mr. Medvedev might have taken the initiative at the London G20 to spend some time with Mr. Harper, though, given the Prime Minister's anti-Russia rhetoric, it's understandable why he didn't. But the Russians also need to be aware of Canada's reaction to ego-stroking stunts such as planting the Russian flag on the seabed at the North Pole. That may serve national pride on the home front, but, internationally, it was pointless and even counterproductive as an element of foreign policy.
We need to be pursuing meaningful relationships with each other, not engaging in publicity stunts.
The good news is, it's not too late. Ottawa can reset the tone of its relationship with Russia. The Harper government can develop a comprehensive strategy toward Russia, giving government departments, the private sector, NGOs and the academic community a clear sense of where we're going with this relationship. It should establish a joint Canada-Russia Trust Fund (in any form, either under CIDA or the Department of Foreign Affairs, or as a public-private sector venture) to support joint programs in key areas such as business, rule of law, mobility and good governance.
Ottawa should also create a consultative mechanism to involve Canada's non-governmental sector, business community and the public to share views, ideas and contacts for a more effective use of available resources.
There may be some short-term domestic political gain from taking a confrontational approach to Russia. But if Canada is going to play on the global stage - something we need to do for the benefit of all Canadians - then our political leaders must take a more thoughtful and sophisticated approach than they have so far.
Piotr Dutkiewicz is director of the Centre for Governance and Public Management at Carleton University and a member of the national board of CERBA.
Arms Dealer May Not Fill All Orders
23 April 2009 The Moscow Times
State-owned arms exporter Rosoboronexport may not be able to fill all of its international orders this year, Alexander Brindikov, chairman of the company's board of advisers, said Wednesday.
"On the market today, by our estimates, defense firms will suffer from a low level of cooperation, and this may lead to noncompliance for a number of completed contracts," he said, Interfax reported.
Brindikov pointed to weak credit markets as a serious obstacle for the sector, saying lending to defense firms had nearly frozen up. Providing the defense industry with cheap and long-term credit is the most serious issue that the sector faces, he said.
Nevertheless, the company expects to export about $7 billion worth of weapons in 2009, roughly the same level as last year. "We have a serious portfolio of orders. We expect the level of exports of Russian arms to coincide with 2008," Brindikov said.
Last year, Russia exported $8.4 billion worth of arms, of which Rosoboronexport accounted for $6.7 billion.
Major clients, such as India, have complained about late deliveries, and Libya returned 15 MiG fighters last year because of what it called the equipment's low quality.
Sevmash Shipyard said Tuesday that it was increasing the price that it would charge India for the Admiral Gorshkov, a modernized aircraft carrier. In 2004, India signed a $1.6 billion contract for the delivery, but the shipyard now says it wants between $2.5 billion and $4 billion to deliver the upgraded vessel.
Russian arms exports holding steady
Published: April 22, 2009 at 1:30 PM
MOSCOW, April 22 (UPI) -- Russia's state arms exporter said its business would remain steady this year, but warned the recession could affect supply lines.
"Our situation is stable," said Alexander Brindikov, head of a group that advises arms exporter Rosoboronexport.
The exporter expects sales to reach $7 billion this year, equal to sales for 2008, RIA Novosti reported Wednesday.
Currently, the company's backlog of orders is valued at $27 billion
However, "today in the marketplace … defense enterprises with the lowest levels of cooperation suffer the most, and this could lead to defaults on contracts," Brindikov said.
Russia's chief arms purchasers remain China and India, although arms, including MiG fighters, helicopters, battle tanks and armored personnel carriers are sold to about 80 different countries.
To keep business rolling, Rosoboronexport recently said it would offer loans and debt write-offs to some customers. The company has also increased its emphasis on servicing, upgrading, repairing and even decommissioning military equipment, RIA Novosti said.
Two dead in south Russia car blast
ROSTOV-ON-DON, April 23 (RIA Novosti) - Two people have died after a car blew up near the southern Russian city of Nalchik, emergency services said on Thursday.
According to the statement, a VAZ-2106 car exploded at approximately 10:00 pm on Wednesday [18:00 GMT] in a village a short distance from the capital of the North Caucasus republic of Kabardino-Balkaria.
Two dead bodies were discovered in the vehicle after the subsequent blaze had been extinguished.
The cause of the blast and the identities of the two victims have yet to be determined.
22 April 2009, 14:42
Over a dozen Wahabi groups "neutralized" in North Caucasus - Russian ministry
Moscow, April 22, Interfax - The Russian authorities dismantled the activities of more than a dozen radical Wahabi groups at the end of 2008 and at the beginning of 2009, said Yury Kokov, head of the Interior Ministry's department for the fight against extremism.
"A large amount of work was carried out in the North Caucasus region, where we dismantled the operations of more than a dozen militant units involving supporters of radical Wahhabism, which has nothing in common with the fundamentals of traditional Islam, at the end of last year and this year," Kokov told the Public Chamber's forum for civil accord and against intolerance and extremism.
Several militant group leaders and emissaries of international extremist and terrorist organizations have been "neutralized", he said.
Prosecution to present evidence in new case against Khodorkovsky
MOSCOW, April 23 (Itar-Tass) - Moscow’s Khamovniki (Khamovnichesky) court will hold a meeting on Thursday at which the prosecution side will begin to present evidence within a new case against former CEO of the YUKOS oil company Mikhail Khodorkovsky and former MENATEP head Platon Lebedev.
The prosecutors said in court that they would start with studying written documents and then would proceed to the questioning of witnesses. Some witnesses will be questioned as the need arises in the course of the documents’ studying.
Lebedev’s lawyer Yelena Liptser said earlier that on Thursday the defence side plans to challenge the public prosecutors.
On Tuesday, Khodorkovsky and Lebedev did not plead guilty in the Khamovniki court of Moscow on. “I do not plead guilty,” Khodorkovsky said in reply to questions put by the judge on each charge brought against him.
According to Khodorkovsky, the alleged embezzlement of Tomskneft stock was a temporary exchange for the protection against hostile takeovers, and no damage was done. “Criminal motives that I had, according to the opinion of the prosecutor, are disproved by my professional activities,” he said. On charges of YUKOS oil stealing “the fact of crime has not been proved,” Khodorkovsky said.
Lebedev also did not plead guilty on this charge. “I have never stolen anything, have not misappropriated anything by myself or in an organized group,” he said. Khodorkovsky and Lebedev are accused of gross property stealing with office abuse. The cumulative sentence envisages 22 years in prison.
On Monday, the defendants filed a number of petitions at Moscow’s Khamovniki court, asking the prosecutors to clarify terms and facts in the indictment against them, as well as the method, time an place of the crimes they are accused of. “If a claim in the indictment contradicts another, or qualification of crime, I want explanations,” Khodorkovsky said. “I’ll have to defend not from suppositions, but from a written indictment, which I believe is vague and controversial,” he added.
Khodorkovsky asked for the clarification of 70 terms, whose meaning, in his opinion, is unclear in the indictment: for example, “hydrocarbon raw-materials,” “artificial transfer to balance,” “subordination of legal agents or natural persons,” and “daughter companies.” “It’s unclear in what sense the key term – “oil” - is used. I’m a specialist and understand that there’re different kinds of oil,” he said.
Former MENATEP director Platon Lebedev, a second defendant in the case, also said he did not understand any of the charges against him. He claimed practically each page of the indictment is vague this way or another.
The court turned down all the appeals.
Khodorkovsky’s lawyer Natalia Terekhova earlier said, “The indictment is vague on who and when detected the shortfall in oil, and who carried out the check. We wish to hear how the oil was misappropriated.”
Former YUKOS CEO Khodorkovsky and former MENATEP director Lebedev are accused of grand theft using their office powers. Investigators ascertained that the defendants, acting in an organized group involving the main shareholders of the YUKOS OJSC and other persons committed a theft by embezzling shares of subsidiaries of the Eastern Oil Company OJSC from November 6 to June 12, 1998 in the amount of 3.6 billion roubles, legalized the stolen shares of the subsidiaries of the Eastern Oil Company OJSC in 1998-2000 in the same amount, committed a theft by misappropriating oil belonging to YUKOS OJSC’s subsidiaries in 1998-2003 and oil belonging to Samaraneftegaz, Yuganskneftegaz and Tomskneft of the Eastern Oil Company OJSC in the amount of more than 892.4 billion roubles.
They are also suspected of legalized some of this money in 1998-2004 in the amount of 487.4 billion roubles and 7.5 billion US dollars. The criminal case totals 168 volumes.
In May 2005, Moscow’s Meshchansky district court found Khodorkovsky and Lebedev guilty under several articles of the Russian Criminal Code, including fraud and tax evasion and sentenced them to nine years in prison. Later, the Moscow City Court commuted the term to eight years.
Russian Army is short of men, President Medvedev says
Today, 11:04 PM
While the Russian government is trying hard to modernize the Armed Forces despite the country’s financial problems, there are not enough men to staff the army, President Medvedev says.
"It is known that there are problems with the presence of young men prepared for military service," Interfax news agency quoted Medvedev as saying at a government meeting at Ryazan in central Russia Thursday.
"In the past 20 years their number has decreased by a third, and the health and the level of physical development of more than 40 percent of people of draft age do not meet the army service requirements," he said.
Medvedev suggested that Russia's oil-and gas-fuelled boom - which came to an abrupt halt last autumn with the global economic crisis - did little to improve the country's army, notorious for corruption and abuse of soldiers, AFP reports.
He also noted the widespread practice of bribing doctors to forge medical documents to avoid being conscripted.
"There is one more topic to which one cannot turn a blind eye," he said. "Doctors' notes get bought. We know this."
Medvedev said the Armed Forces would benefit from the presence of more women soldiers, and more should be done to ensure the women soldiers’ comfort in the army.
“If the women are interested in this, I think that the army will only benefit from that,” he said, adding that nothing prevented women from rising to the highest military posts.
The government is hoping to turn its ailing army into a modern force by slashing a bloated officer corps and modernizing its Soviet-style command structure, but the reforms have sparked resistance from the top brass, AFP adds.
Under the plan, three out of four servicemen would still be conscripts, Medvedev said.
Russian president laments unfit conscripts
by Staff Writers
Moscow (AFP) April 22, 2009
Russian President Dmitry Medvedev said on Wednesday that over 40 percent of those eligible for military service were not fit enough, amid a government drive to modernise the armed forces.
"It is known that there are problems with the presence of young men prepared for military service," Interfax news agency quoted Medvedev as saying at a government meeting at Ryazan in central Russia.
"In the past 20 years their number has decreased by a third, and the health and the level of physical development of more than 40 percent of people of draft age do not meet the army service requirements," he said.
Medvedev suggested that Russia's oil-and gas-fuelled boom -- which came to an abrupt halt last autumn with the global economic crisis -- did little to improve the country's army, notorious for corruption and abuse of soldiers.
He also noted the widespread practice of bribing doctors to forge medical documents to avoid being conscripted.
"There is one more topic to which one cannot turn a blind eye," he said. "Doctors' notes get bought. We know this."
The government is hoping to turn its ailing army into a modern force by slashing a bloated officer corps and modernising its Soviet-style command structure, but the reforms have sparked resistance from the top brass.
Under the plan, three out of four servicemen would still be conscripts, Medvedev said.
Medvedev reaches out to Russia's unruly bloggers
13 hours ago
MOSCOW (AFP) — Russian President Dmitry Medvedev praised the openness of the Internet on Wednesday as he made his debut on LiveJournal, a popular blogging community seen as an outpost of free speech in Russia.
"Lately the Internet has grown into a fully fledged self-regulating system, and one that strongly influences all aspects of our life. At the forefront are social networks and blogs," Medvedev said.
"Trying to regulate the Internet, to do this primitively, is very difficult. On the Internet one must act by its rules," he added, speaking in a video posted on his new LiveJournal blog.
The Russian version of LiveJournal is a freewheeling blogging community with a broad range of users including government critics rarely featured on Russia's state-dominated mainstream media.
Medvedev, a 43-year-old who claims to be an avid Internet user, first began blogging on the Kremlin's own website last year. But the move to LiveJournal could attract more visitors and provoke more online discussion.
Hundreds of comments poured into the blog in the hours after it started, including some mildly critical of the president.
"You are the president of a mighty nation, but the blog is rather boring," said one user, posting under the pseudonym zloy_volzhebnik (Evil Magician).
Medvedev has recently called for greater government openness and granted an interview to an opposition newspaper, Novaya Gazeta, known for its fierce criticism of his predecessor, president-turned-premier Vladimir Putin.
Analysts meanwhile continue to question the extent to which Medvedev is prepared to push democratic reforms, especially given the continued influence of his mentor Putin.
Russians Bet on a Market for Dampening Dissent
By ANDREW E. KRAMER
Published: April 22, 2009
VARGASHI, Russia — Alongside bargain retailers, cheap restaurants, debt collectors and bankruptcy lawyers, a midsize factory in Siberia is promoting a product that it hopes is just the thing for hard times. Employees here call it the “anti-democracy truck,” a modified fire truck fitted with a water cannon and designed to quell riots.
“We look at this as a product with a market,” Vladimir N. Kazakov, the factory director, said in an interview in his office. “We don’t mind who buys them. We would be happy to sell them to Israel, America or France.”
The business, though, sheds some light on Russia in the financial crisis.
The country that was on the cusp of prosperity after so many years of post-Soviet turmoil is struggling through another uncertain period of economic change and social upheaval.
The water cannon business has become, in a sense, a barometer of social unrest in Russia, written up in Russian news magazines and joked about dryly on the Echo of Moscow radio station in the capital.
Mr. Kazakov said he expected two or three purchases of the roughly half-million dollar vehicles this year. The Russian Interior Ministry, which oversees the police, has asked the plant to be ready to re-outfit the assembly line to produce many quickly, if needed. But no solid orders have come in yet, he said.
“If the order comes, we will fulfill it on time, and well,” he said.
The truck is sold under the brand names Avalanche-Hurricane and, for a smaller model, the Storm. Shrouded in steel armor, it comes standard with brick- and cobblestone-resistant window grilles, sprinklers attached to a tank of chemical irritant like pepper spray, speakers that can emit ear-splitting noise and, of course, a powerful, joystick-operated water cannon. The cannon can topple protesters from dozens of yards away.
Economically related social unrest has already arisen throughout the lands of the former Soviet Union. Used-car dealers have taken to the streets in Vladivostok to protest tariffs. In Ukraine, where tens of thousands of steel workers are newly unemployed, protesters gathered on the central square in Kiev. Most recently, in Moldova, an angry crowd stormed the Parliament building and hurled furniture out the windows. Among the protesters were unemployed young people with little prospect of finding jobs in Moldova.
In that riot, incidentally, the pitfalls of using an off-the-rack fire truck for crowd control were on full display. News photographs showed protesters, pumping their fists in excitement, climbing on the dented hood of a standard-issue red-and-white fire truck, its windshield smashed and its crew long gone.
In Russia, the economy is doing an about-face from 6 percent growth in 2008 to an expected 2.2 percent contraction this year, according to government figures that are probably too optimistic, many economists say. With unemployment rolls swelling, protests are likely, said Yevgeny S. Gontmakher, a member of the board of the government-affiliated Institute of Contemporary Development, a research organization in Moscow. “The social consequences will grow all this year, we can say that with certainty.”
In one measure of discontent, 39 percent of Russians in a national poll answered yes when asked if they had noticed a “rise in the mood to protest” among their acquaintances.
The factory here in Vargashi, in the western part of Siberia, is the only plant in Russia with a government certificate to make water cannons, Mr. Kazakov said. It is also, paradoxically, situated in the type of struggling one-factory town where Mr. Gontmakher and others have said industrial unrest is most likely.
A glum ensemble of gray apartment blocks and muddy streets, bisected by the trans-Siberian railway, the town is wholly dependent on the plant. Of 12,000 residents, 600 work there. Workers grumble that salaries are already falling.
The plant’s fortunes followed the trajectory of the Russian economy as a whole; it flourished in the late Soviet period, producing 3,000 fire trucks a year and selling them to 27 countries, including Mongolia, Tanzania and Vietnam. In those days it had branched out into tank trucks for milk, and even produced a model called the spirtovoz, or spirit carrier, designed to transport vodka in bulk. A faded Communist-era mural that says “Glory to the Working Class!” still adorns a building here. In the current crisis, the plant is struggling. Production of fire trucks fell to 35 trucks in February from 70 in December.
Anton Y. Sinagnoyev, a laid-off construction worker, said he supported the factory’s new product, even if it was used against other laid-off workers like himself. He said he was happy that the plant had prospects. “If we didn’t make them, somebody else would,” he said.
Factory managers said they hoped that police departments in Russia and elsewhere would trade up to customized crowd-control vehicles for the financial crisis. The trucks are far more effective in safely dispersing large, hostile groups than standard fire trucks, mounted police officers or lines of police officers with shields are, Mr. Kazakov said.
But for now, though, the new business strategy remains just that. Even if the company manages to sell the two or three water cannon trucks it hopes to sell this year, that will not begin to make up for the lost revenues from fire trucks, Mr. Kazakov conceded. “The situation in the country is not at that point,” he said.
Russian police readied for unrest
By Richard Galpin
BBC News, Moscow
Russia's paramilitary police units are being reorganised to guard against "extremism" amid fears of growing social unrest, an official says.
A senior interior ministry official told the BBC the definition includes protests provoked by the credit crunch.
The official said a new federal department was being set up to expand the remit of existing squads tackling serious crime nationwide.
They will still answer to the interior ministry, like gendarmeries elsewhere.
Confirmation came as the International Monetary Fund forecast that the Russian economy would shrink by 6% this year.
The projected decline follows 10 straight years of rapid growth.
The BBC's Richard Galpin in Moscow says the creation of the special police units is another sign of the government's growing nervousness about the impact of the crisis on Russia. The interior ministry official spoke of a deteriorating socio-economic environment, and said the crisis could get even worse.
According to the IMF, the countries of the former Soviet Union will be the hardest hit of all the regions in the world. It predicts that the Russian economy will shrink by far more than the government has been prepared to admit.
Already, millions of Russians have been thrown out of work, while prices, including for food, have continued to rise rapidly. In some areas people have taken to the streets to vent their anger.
So far the demonstrations have been small, but there have been specific calls for the Prime Minister Vladimir Putin and his government to resign.
Putin Wants Access to State Secrets
23 April 2009 The Moscow Times
Prime Minister Vladimir Putin will preside over a meeting Thursday that will consider a rule giving the prime minister and other top government officials access to state secrets.
The current law does not say who should authorize the prime minister, presidential chief of staff and ministers to see classified information, the Cabinet said on its web site Wednesday.
The Presidium will discuss legislation to formally empower the president to approve a list of government jobs that automatically have access, the Cabinet said.
The Cabinet would reserve the right to compose the list. Cabinet spokesman Dmitry Peskov chuckled when asked whether Putin had been hindered by the legal gap. "He, naturally, has the necessary access in full," Peskov said.
Survey: People Doubt Medvedev Is the Boss
23 April 2009
By Nikolaus von Twickel / The Moscow Times
As Dmitry Medvedev ends his first year in the Kremlin, many Russians are doubtful about how much political clout he wields as president, according to a survey released Wednesday.
Just 15 percent of the population believes that Medvedev holds the real power, while 27 percent say Prime Minister Vladimir Putin is pulling the strings, according to the survey conducted by Canadian polling firm GlobeScan for the BBC's Russian service.
The most common opinion, however, is that power is shared equally between the two, a view held by 41 percent of respondents.
The poll also found that most Russians expect that Putin will return to the Kremlin: 57 percent said they expect him to be the next president, while just 24 percent disagreed, GlobeScan said in a statement.
Speculation has been rife that Putin, who gave up the presidency in 2008 after serving two consecutive four-year terms, might come back after a constitutional amendment extending the presidential term from four years to six was whisked through the parliament last year by Medvedev, who is widely seen as Putin's handpicked and loyal successor.
The survey also indicated that 30 percent think that the country is headed in the right direction, while 24 percent think that it is not. "The results show that those who believe Putin will return are more likely to feel that things are headed in the right direction, suggesting that a comeback is seen by many as representing continuity," the pollsters said.
The survey found that less than a third (32 percent) of the population thinks that human rights and civil liberties have improved under Medvedev. About 40 percent disagreed, and the rest took a neutral position or said they were unable to answer.
Yet the pollsters noted that Russians in general did not categorize human rights as a very pressing issue -- only 2 percent mentioned it as top priority.
On foreign policy issues, the survey found that Russians are happy with their country's international influence: Two-thirds (66 percent) said Russia was perceived by other countries as a force for good in the world, while only 12 percent said the country posed a threat to its neighbors. A total of 28 percent said that last year's war with Georgia damaged Russia's image.
The findings contrast with an international GlobeScan poll released in February that showed attitudes about Russia took a dramatic dive last year.
Foreign Minister Sergei Lavrov said the latest findings showed that the country's foreign policy was supported by most of the population despite the fact that the West was waging an "information war" on Russia.
"Western media that allowed themselves being utilized in that war are now discredited in the eyes of Russians," he was quoted as saying by the BBC.
GlobeScan said it interviewed 1,012 Russian citizens for the latest survey. The margin of error was 3.07 percentage points.
Russian Unemployment Figures Rapidly Rising
[tt_news]=34887&tx_ttnews[backPid]=7&cHash=8978d406bd
Publication: Volume: 6 Issue: 77
April 22, 2009 05:57 PM Age: 10 hrs
Category: Eurasia Daily Monitor, Home Page, Economics, Russia
By: Yuri Zarakhovich
On Tuesday April 14, traffic on the Garden Ring Road in downtown Moscow was seriously hampered, as President Dmitry Medvedev made a high profile visit to the Institute of Contemporary Development (INSOR) -his pocket think tank, staffed with many known liberal academics. Medvedev's formal position as Head of INSOR's Board of Trustees is a part of his carefully nurtured "closet liberal" image. The Presidential visit to his scholars, stage-managed with all the typical Kremlin royal pomp and massive media coverage, centered on discussing the increasingly alarming problem of unemployment, badly worsened by the current Russian economic crisis (gazeta.ru, April 14).
Indeed, according to the Russian State Statistics Committee, among the country's entire population of 142 million, only 75.6 million (53 percent) are economically active. By late February 2009, 6.4 million (8.5 percent) of the economically active population qualified as unemployed under the International Labor Organization (ILO) standards. Meanwhile, only 2.2 million are officially registered in Russia as unemployed, with 1.7 million of them receiving state support (gks.ru).
During the past year unemployment in Russia has doubled (Moskovsky Komsomolets, April 14, 2009), and it continues to grow unchecked, threatening to quickly reach what some experts consider as the critical level of 10 to 12 percent -beyond which social upheavals will become a serious possibility (market-pages.ru, April 14).
Hence, Medvedev visited INSOR in order to publicize his concern over the issue. The current 8.5 percent unemployment level, as well as its rapid growth, "Are not the indicators we need," Medvedev stated (gazeta.ru, April 14).
Two key INSOR experts responsible for briefing Medvedev on the issue were Yevgeni Gontmakher, Director of the Social Policies Center at the Institute of Economy (Russian Academy of Sciences), and Tatyana Maleva, Director of the Independent Institute of Social Policies. In their interviews with the Moscow-based Echo Moskvy radio station following the meeting, both experts praised Medvedev's grasp of the issue and his understanding of the general need for Russia's modernization as a remedy for unemployment among other economic and social ills. "It is not like when they talk to you in the cabinet," Maleva said pointedly in what sounded like a jibe against Prime-Minister Vladimir Putin. "There, on the contrary, the conversation goes like ‘Tell us what should be done about modernization,' but five minutes later you realize that they are talking about crisis-management suggestions which you are supposed to submit next week." Gontmakher explained: "We did not expect that much media coverage: the entire Kremlin pool and all possible TV stations. I guess he did it to show publicly that he is personally interested in this issue, not just the cabinet who presented their crisis program to him" (echo.msk.ru, April 14).
According to these INSOR experts, it is not the rate of unemployment which is most dangerous (in other countries it reached 20 percent), but that it is becoming chronic. This is now the case in Russia, they maintain: "Now, when we do not have a clue, when this crisis will end and the tensions ease, of course, everyone is scared that unemployment might set in for a long period," said Maleva. "As long as new jobs are not being created, this unemployment may indeed become chronic. Then, even the current 8.5 percent level spells major trouble" (echo.msk.ru, April 14).
They also believe that the cabinet (indirectly referring to Putin) stubbornly supports an inefficient and obsolete economy to maintain employment. This policy might postpone a social explosion, they say, but only for a while. Neither will this policy ever allow Russia to emerge as a modern and well developed economy. Gontmakher emphasized -in another thinly veiled taunt aimed at the Putin regime- that only free private business can save the situation, but this freedom has long been badly restricted within Russia.
The INSOR experts made some striking suggestions on how to restructure the entire economy and employment system. They talked about a freeze on hiring young people by obsolete industrial giants, left over from the Soviet era. They mentioned the idea of creating social workers systems, unheard-of within Russia, and getting a lot of people, particularly unemployed women in crisis-stricken cities that have grown up around dying industries, employed as social workers. Medvedev listened favorably and nodded approvingly to such ideas as the need to retrain office personnel, most of whom have fake university diplomas, he said.
The INSOR meeting of minds is a striking example of the promotion of Medvedev's image, which his staff recently launched: on April 16, the liberal opposition Novaya Gazeta biweekly ran his interview -the first he has given to a Russian newspaper. On the same day as his INSOR visit, April 14, Medvedev met with a group of top Russian human rights activists and NGO leaders. He conceded at the meeting that the current law on NGO's, (passed by the Russian Duma on Putin's orders) was unduly harsh and needed some corrections (24new.ru, April 14).
However, the approving nods to Novaya Gazeta and NGO's, listening to INSOR's ideas and showing a firm grasp of strategic issues make a great public relations campaign. However, it does not promote any meaningful changes in the political and economic scenes, which are still firmly controlled by Putin. More people are applying for the misery of state benefits, which Putin on January 12 ordered to be raised to 4,900 Rubles ($146). Yet, Maleva insists, 4,900 is the highest level. Many people in the regions are bitterly disappointed, when they come to collect the expected 4,900, only to go away with some 800 Rubles ($24) instead (echo.msk.ru, April 14).
National Economic Trends
Russian international reserves up $0.9 bln in week
MOSCOW, April 23 (RIA Novosti) - Russia's gold and foreign currency reserves increased by $0.9 billion, to $384.8 billion, in the week of April 10 - April 17, the Central Bank of Russia said Thursday.
Kudrin Says Reserve Fund to Be Spent by '10
23 April 2009 Bloomberg
Finance Minister Alexei Kudrin said Wednesday that the Reserve Fund would be "practically exhausted" in 2010, and the government will have to cut spending to trim a budget deficit that is estimated at 7.4 percent this year.
"The period of spending increases is ending," Kudrin told lawmakers. "In the coming years, we will have at least to keep spending at the current level for many sectors, but for some we won't even be able to do this, and programs will have to be reduced."
Russia's two sovereign wealth funds fell in March to a combined 7 trillion rubles ($206.1 billion) as the government began transferring money to cover its first budget deficit in a decade. The government expects revenue to drop by 30 percent this year as the economy enters its first recession in 10 years and tax revenue tumbles on slowing demand at home and abroad.
The Reserve Fund fell to 4.1 trillion rubles at the start of the month, and the National Welfare Fund stood at 2.9 trillion rubles, according to the Finance Ministry. The government is forecasting a 2.2 percent economic contraction this year after a decade of expansion.
The revised budget could be changed to seek new funds to recapitalize banks should the level of bad loans in the banking sector exceed 10 percent, Kudrin said.
Overdue loans in the sector currently stand at 7.5 percent, Kudrin said in an interview with Vedomosti published Wednesday.
Central Bank expects Russia’s bank lending to go up 10-12% this year – Kudrin
MOSCOW, April 22 (Itar-Tass) -- The Central Bank of Russia forecasts an increase of the bank lending in the country by 10-12 percent, the Prime Tass economic news agency cited Russian Deputy Prime Minister and Finance Minister Alexei Kudrin as he told reporters on Wednesday.
According to Kudrin, “he had some difference forecasts, but he did not elaborate,” Prime Tass said.
The combined portfolio of Russia’s banks accumulated 18 trillion roubles (USD 1 = RUB 34.05) up to date, Prime Tass cited the minister as saying. The combined portfolio consists of personal loans and loans to non-financial companies.
In Kudrin’s words, of the total corporate loans stood at twelve trillion roubles, while personal credits amounted to six trillion roubles, Prime Tass said.
According to the finance minister, the combined portfolio of loans grew by 35 percent in 2008 and went up by more than 50 in 2007, Prime Tass said.
Cash in circulation down 16.3% to $107.5 bln in Russia in 1Q09
MOSCOW, April 22 (RIA Novosti) - The volume of ruble cash in circulation in Russia declined 16.3% to 3.7 trillion rubles ($107.54 billion) as of April 1, compared to 4.4 trillion rubles ($128.4 billion) as of January 1, the Bank of Russia said on Wednesday.
The decrease was caused by the population converting rubles to foreign currencies amid the ruble's devaluation.
The figure had increased 6% year-on-year in Russia in 2008.
Russia’s inflation reaches 6% by April 20 – statistics
MOSCOW, April 22 (Itar-Tass) -- Russia’s inflation had reached 6.0 percent by April 20 since the beginning of the year, the Prime Tass economic news agency said on Wednesday, quoting an official report of the Federal State Statistics Service.
Retail prices increased by 0.2 percent in the week from April 14 to April 20, Prime Tass said, adding that the indicator had made up 0.6 percent since the beginning of the current month (from April 1 to April 20).
An average daily increase in prices was 0.028 percent in the reporting period, Prime Tass quoted the statistics document.
In the week from April 14 to April 20, retail prices for frozen fish, eggs, tea, and infant milk powder went up by 0.7-0.9 percent, Prime Tass cited the report of the Statistics Service as saying.
In the reporting period, prices of pork, canned meat, and some kinds of confectionery grew by 0.4 percent, Prime Tass said.
At the same time, average prices of sunflower oil decreased by 0.9 percent in the reporting period, Prime Tass said, adding that prices of granulated sugar, poultry, cheese, buckwheat, millet, flour, milk and some kinds of dairy products went down by 0.1-0.4 percent.
In the week from April 14 to April 20, fruit and vegetable prices edged up by 0.8 percent on average, Prime Tass said, adding that prices of cabbages increased by 4.2 percent, prices of onions grew by 1.8 percent and prices of carrots went up by 1.4 percent.
In the designated period, the Statistics Service registered a slowdown of gasoline prices by 0.2 percent and a decrease of diesel fuel prices by 0.5 percent, Prime Tass quoting the statistics report as saying.
The report was drafted on the basis of weekly monitoring of retail prices for 61 socially important goods and services, which the Federal State Statistics Service carries out in 264 Russian cities and towns on Mondays.
On Wednesday, Russian Prime Minister Vladimir Putin said that the country’s inflation rates had declined recently.
Russia’s inflation was 2.4 percent in January, 1.7 percent in February, and 1.3 percent in March, Putin said, quoting forecasts of the Economic Development Ministry. The country’s inflation rate will make up from 1.1 to 1.2 percent in April, the prime minister said at Wednesday’s conference on economic issues.
The Central Bank’s forecasted inflation at 13 percent in 2009, Prime Tass recalled, adding that last year’s inflation was at 13.3 percent.
Russia's Putin unveils plan to aid small businesses
MOSCOW, Apr 22 (Prime-Tass) -- Russian Prime Minister Vladimir Putin unveiled a plan to aid small businesses while speaking at the All-Russian Small- and Mid-Sized Business Forum on Wednesday.
In particular, Putin proposed that companies whose revenues are less than 60 million rubles per year should be allowed to switch to a simplified taxation regime that reduces the tax burden on small businesses. At present, the threshold is set at 30 million rubles.
Putin also said that small businesses should be allowed to deduct aid provided by regional and municipal governments from their taxable income.
He went on to say that the government would allocate an additional 15 billion rubles to subsidize regional programs aimed at supporting small businesses.
In addition, Putin proposed setting the requirement for collateral for bids at tenders and auctions for government purchases from small businesses at 2% of the starting price. At present, the figure is set at 5%.
Putin also said that the government intended to require banks that receive government aid to lend to small- and mid-sized businesses.
Putin Offers Measures To Recapitalize Banks
23 April 2009 The Moscow Times
President Vladimir Putin on Wednesday outlined aggressive new measures for recapitalizing the banking sector and spurring lending to cash-strapped enterprises.
Speaking at a Cabinet meeting discussing economic issues, Putin said any banks receiving government assistance would be required to lend out as much as they were receiving and to keep interest rates relatively low.
"It's very important that interest rates aren't more than three percentage points higher that the Central Bank's refinancing. Today, that means 13 percent plus 3 percent -- or 16 percent. And this must be the final price for borrowers, including all commissions," Putin said, according to a transcript posted on the government's web site.
Putin also ordered the Finance Ministry and the nominally independent Central Bank to change the mechanism by which the government guarantees certain loans, allowing the bank to receive government funds immediately after a borrower becomes insolvent rather than having to sell off the collateral first.
"We have to make it more comfortable and attractive for commercial banks, so that a guarantee really does lower credit risks and, hopefully, interest rates for borrowers," he said.
The government has set aside 300 billion rubles ($8.84 billion) to provide guarantees on loans to strategic enterprises, but banks currently have to go through a long process that involves selling the deposit before they can cash in on the guarantee.
Putin also expanded on the government's plans for providing additional capital to the financial sector.
A total of 550 billion rubles are set aside in 2009 to recapitalize the banks. That is in addition to the 757 billion rubles put to that purpose last year.
Government aid to the banking system currently matches shareholder equity at a one-to-one ratio. That aid should be increased so that "for every ruble of shareholder equity, the government adds three rubles in the form of subsidized loans," he said.
Putin also asked the Cabinet to send him a plan within two weeks for using government bonds to build up banks' capital base.
Putin gives banks, borrowers a boost
By CATRINA STEWART , 04.22.09, 11:20 AM EDT
Russian Prime Minister Vladimir Putin announced aggressive measures Wednesday to encourage more lending to companies and shore up the troubled banking sector as lenders grapple with a growing deluge of bad debts.
Putin urged the Central Bank to lower interest rates now that the threat of soaring inflation has receded. He also called on officials to make it easier for banks to recover money from the state in cases where state guarantees back the loans of struggling enterprises.
"There must be a higher comfort level for commercial banks, so that providing guarantees actually lowers the credit risks and, I would hope, loan interest rates," the prime minister said during a meeting with business leaders on Wednesday.
Plunging oil prices and a rapid slowdown in demand for its exports has driven Russia to the brink of a recession for the first time in a decade. Unemployment has soared, factories have scaled back production and many companies are locked in sensitive restructuring talks with their lenders.
Officials have said they expect the economy to contract by 2.2 percent this year as lending to the real economy dries up. But that estimate is considered optimistic by many, and the IMF predicted Wednesday that Russia's economy would shrink by 6 percent in 2009.
Responding to calls for lower interest rates, Putin said no lender that has received state aid should charge interest of more than 16 percent - based on a refinancing rate of 13 percent plus 3 percent. Russian borrowers, who have little access to overseas credit, have complained that banks are offering loans at exorbitant rates.
The government's efforts to restart lending come as warning signs emerge of growing problems in the banking system.
German Gref, the influential head of Russia's largest bank, Sberbank, warned earlier this month that Russia's banking crisis is only just beginning. He said that bad loans were probably much higher than official figures suggested, and said the state should not encourage banks to increase lending when they still have bad assets on their books.
Non-performing loans currently account for 3.7 percent of domestic bank portfolios, according to official statistics. But Nataliya Orlova, an economist at Alfa Bank, said the real figure could be as high as 15 percent.
Meanwhile, Russian Finance Minister Alexei Kudrin said Wednesday that Russia will use up almost its entire 4.1 trillion ruble ($120.5 billion) "rainy day" reserve fund by the end of next year - faster than expected - to support its economy through the global financial crisis.
Russia salted away windfall oil profits during the boom years of Putin's presidency to cushion the country against a drastic fall in oil prices.
Russia has tapped into the reserve fund to cover its first budget deficit in a decade. Parliament's upper house on Wednesday passed the revised crisis budget, which envisages a budget deficit of 7.4 percent of gross domestic product, or 3 trillion rubles ($88 billion).
The government had previously suggested the reserve fund would cover Russia's budgetary deficits through mid-2011.
Putin to End Rule On Cash Registers
23 April 2009
By Nadia Popova / The Moscow Times
The government will ease life for small businesses by simplifying their taxes and ditching a requirement that they must all use cash registers, Prime Minister Vladimir Putin said Wednesday.
The cutoff level for small businesses to get access to the simplified tax system will be raised to 60 million rubles ($1.77 million) in annual revenues from the current 30 million rubles, Putin told the All-Russia Forum on Small and Middle-Sized Businesses.
The government will lose more than 100 billion rubles in taxes as a result, the Finance Ministry estimated.
The simplified tax regime envisages an entrepreneur paying only one tax -- either 6 percent of revenues or 5 to 15 percent of the net profit. Most small and middle-sized businesses currently pay taxes on imputed income, which means that the tax inspector calculates their taxes with a complicated formula. Under the common tax system, companies pay revenue tax, property tax, unified social tax and value-added tax.
Putin said smaller businesses would get relief with a decision to scrap cash registers, which became mandatory in all shops in 2003 amid a state effort to boost tax collection.
"The cash registers are often more expensive than the goods that are sold in the shop," Putin said.
Entrepreneurs use 2 million tax registers, which cost an average of 15,000 rubles ($442) each, Putin said. Overall sales rung up on them amount to 30 billion rubles per year, plus an additional 10 billion rubles to service them over the same period, he said.
"With that, the amount of [sales] revenue doesn't matter when one pays taxes on imputed income," Putin said.
Legislation on the cash registers will be drafted by July 1, Putin said.
The measure was welcomed by businessmen at the conference, who said cash registers have become a nightmare for them.
"You first have to buy the machine for 15,000 rubles, then regularly change the flash memory device, which costs 9,000 rubles -- and pay for servicing it all the time," Volgograd businessman Andrei Udakhin said on the sidelines of the conference.
"The data registered by the machine has never been used, because the amount of taxes we pay does not depend on that," said Udakhin, who owns two minimarts employing 35 people.
Udakhin called the new tax measures "very useful and logical," but he said small businesses still needed a lot of changes to the Tax Code. "It is very hard for small and middle-sized businesses to switch to the simplified tax system that, for one thing, requires you to have more than 150 square meters of commercial space," Udakhin said. "Most small businesses don't have that much."
Business confidence is at a four-year low now, Economic Development Minster Elvira Nabiullina told the conference. Forty-four percent of small businesses call high taxes their biggest problem, she said.
Putin said an extra 15 billion rubles would be earmarked for regional funds that offer state guarantees as collateral for small businesses. The funds have received 2.5 billion rubles so far.
In another measure of support, at least 20,000 microloans of up to 1 million rubles each will be given out this year, Putin said.
Sberbank chairman German Gref said Tuesday that the state-controlled bank would introduce a microloan program, under which borrowers could obtain the funds in two to five days.
The state's bailout of banks will be tightly connected with the number of loans they issue to small and middle-size businesses, Putin said. The government has earmarked 10.5 billion rubles to support small businesses this year.
Small businesses will receive 100 billion rubles through state banks in 2009, Vneshekonombank chairman Vladimir Dmitriyev said on the sidelines of the conference. Vneshekonombank, or VEB, has said it will hand out loans for 30 billion rubles to small businesses this year, up from 9 billion rubles in 2008.
The European Bank of Reconstruction and Development and Deutsche Bank are ready to give out loans worth 1 billion euros to Russian small businesses with VEB guarantees, Dmitriyev said.
Although regional banks are growing plump with state cash, the situation has not improved for entrepreneurs, Udakhin of Volgograd said. "The interest rates at the banks are still high, from 28 to 40 percent, which we could never afford," he said. He said the average before the crisis was 16 percent.
Pension funds investment restrictions eased
bne
April 22, 2009
Russia's Federal Service for Financial Markets says it will ease the rules on what pension funds can invest into and so broaden the number and kinds of assets available to fund managers.
The draft laws will be submitted to the government by the end of May, Sergei Kharlamov, deputy head of the watchdog, said report newswires.
The funds will be allowed to invest in more bonds, investment fund shares, certificates of deposit and bank deposits, he said.
The government has said that it is pushing ahead with its plans to reform, deepen and broaden Russia's capital market that was top of the political agenda until the crisis hit last year.
1Q09 macro statistics reveal a mixed picture
UralSib, Russia
April 22, 2009
Statistics show weakening domestic demand ... On Monday Rosstat published macro data for March and 1Q09 which indicates a mixed performance by the major sectors of the Russian economy. Not surprisingly, the sectors that gained from growing government protectionism and funding (or from stabilization in global commodity prices) did fairly well. These include agriculture, housing construction and mining. At the same time the figures show a significant contraction in domestic demand with real incomes, fixed investment and retail sales all ending the quarter in the red.
... in line with our expectations. This news is in line with our expectation that the Russian economy is set to post major weakness in the first two quarters of the year. However, we stand by our view that in 2H09 the economy may demonstrate clear signs of stabilization and a modest recovery. We reconfirm our 2009 GDP growth forecast at 0% YoY.
Fixed investment and retail sales down. According to Rosstat, in March fixed investment in Russia dropped 15.4% YoY (-15% YoY in 1Q09). However, the rate at which real incomes fell slowed to -0.1% YoY vs. -4.7% YoY in February and -6.7% YoY in January 2009. Last month retail sales volumes declined by 4% YoY with larger numbers of shoppers opting for small format stores and street markets. Also, in March the share of food in retail sales increased to 49.1% vs 47.3% a year ago.
Unemployment jumped 100 bpt in one month. Another unwelcome surprise in March statistics was the major increase in unemployment which based on ILO methodology Rosstat estimates at 9.5% in March, which is a big increase on the February figure of 8.5% and 8.1% in January Growth in housing, agriculture continues. As a result of increased government funding, the volumes of housing construction in March were up 4.2% YoY (2.1% YoY growth in 1Q09). Growing state protectionism and shifts in domestic demand have also helped the agricultural sector which posted 1.7% YoY growth in March (up 2.1% YoY in 1Q09).
Vladimir Tikhomirov
Business, Energy or Environmental regulations or discussions
'Climate Doctrine' Outlined
23 April 2009
By Anatoly Medetsky / The Moscow Times
The Natural Resources and Environment Ministry wants to see steeper penalties for environmental violations as part of a "climate doctrine" that it composed, a policy paper predicting that parts of Russia may go underwater after 2025, Minister Yury Trutnev said Wednesday.
The Presidium, a scaled-down version of the Cabinet, is scheduled to consider the doctrine Thursday.
Fines for air pollution may increase up to twentyfold, Trutnev said at a news conference. Fines for some other types of pollution could increase fivefold to fifteenfold, he said.
The document also addresses why the climate is changing and contains forecasts about the effects of global warming and ways to adapt to the changes, Trutnev said. The document is intended to be a reference for other ministries and agencies, he said.
Even if carbon emissions were to stop immediately, air temperature would continue rising through 2050, Trutnev said.
"The economy will develop in different climatic conditions in the future," he said. "That's why climate changes need to be taken into account."
Global warming, caused by higher levels of carbon dioxide in the atmosphere, may lead to rising sea levels and flooding, including in Russia from 2025 to 2050, Trutnev said, citing the doctrine. The negative effects would also include more droughts and forest fires.
On the upside, Russia would gain farmland, be able to generate more electricity at its hydropower stations and enjoy easier access to the Arctic shelf.
Trutnev also said the government should not reject the idea of auctions for licenses to develop natural resources in favor of the less transparent competitions, even if companies are currently too cash-strapped for vigorous bidding.
The Federal Subsoil Resources Use Agency was able to hold only 10 percent of the planned auctions in the first quarter of this year because potential bidders showed little interest.
Russian Stocks Decline, Paced by Severstal, Rosneft; VTB Gains
By Bradley Cook
April 23 (Bloomberg) -- Russia’s Micex Index fell for the third time this week, led by steelmaker OAO Severstal and oil producer OAO Rosneft. VTB Group advanced.
The 30-stock Micex slid 0.2 percent to 903.12 at 10:54 a.m. in Moscow. The ruble-denominated benchmark is up 0.6 percent this week, heading for its eighth weekly gain in a row. The dollar-denominated RTS Index increased 1.6 percent to 797.86.
Severstal declined 1 ruble, or 0.7 percent, to 146.95 rubles after Bank of America Corp. rated the billionaire Alexei Mordashov’s steel company “underperform” in renewed coverage.
Rosneft, Russia’s biggest oil company, fell 1.95 rubles, or 1.1 percent, to 171.96 rubles, tracking crude prices lower. Crude oil for June delivery slid as much as 48 cents, or 1 percent, to $48.37 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
VTB, the country’s second-biggest bank, advanced 2.1 percent to 3.38 kopeks after posting a net loss in the fourth quarter that was less than analysts estimated. The state-run lender lost $104 million, versus the $225 million median estimate in a Bloomberg survey of eight analysts.
OAO Sberbank, VTB’s bigger rival, gained 9 kopeks, or 0.3 percent, to 27.39 rubles. A kopek is a hundredth of a ruble.
To contact the reporter on this story: Bradley Cook in Moscow at bcook7@.
Last Updated: April 23, 2009 03:04 EDT
Russian eurobond segment weaker
Rencap, Russia
Wednesday, April 22, 2009
On the back of a global correction, the Russian eurobond market has been feeling selling pressure as well. By the end of yesterday (21 Apr), prices for most instruments were down by one bid-to-offer spread. For sovereign bonds, this corresponds with half a figure down, with the benchmark Russia-30 closing at 97.375. Russian five-year CDSs widened 18 bpts yesterday, to 385 bpts. Prices for Gazprom, TNK-BP, VimpelCom all dropped 2 ppts. In the metals and mining segment, prices were almost 3 ppts weaker. Gazprom 19, which was recently placed at par, closed at 98.375.
Buy or sell?
Volatility on the Russian eurobond market remains high. After quite a long rally, we regard yesterday's wave of profittaking as a rather natural market trend. However, we still consider the Russian eurobond market relatively cheap compared with its emerging markets peers. Yields for VimpelCom bonds at 16.0%, or the 18-20% yields in the metals and mining segment, still look highly attractive to us. Besides, even after the recent Gazprom placement, we do not think the risk of new supply in the Russian eurobond market is a concern. For most Russian domestic borrowers, rates are still too high to economically justify any new public borrowings. We think that in order for them to return to the primary market, yields should fall another 300-500 bpts. At the same time we see little risk of another massive sell-off in the Russian eurobond market in the coming months. The biggest drop of eurobond prices in Oct-Nov 2008 was mainly triggered by western hedge-fund liquidations, and this process is now almost complete. We think the chance of such a situation repeating itself is fairly low in the coming months. Hence, currently the downside risk in the Russian eurobond market is significantly lower compared with its upside opportunities, in our view. We suggest investors use the current market weakness as an opportunity to add relatively cheap bonds to their portfolios.
Nikolay Podguzov
UPDATE 1-Russian bank VTB's year profit beats forecasts
Thu Apr 23, 2009 2:57am EDT
* 2008 net profit $212 million vs $1.5 billion in 2007
* Provisioning charge 3.2 pct, up from 1.3 percent in 2007
* Provisions soar by $1.1 billion in Q4
(Adds further details)
By Melissa Akin
MOSCOW, April 23 (Reuters) - VTB (VTBR.MM: Quote, Profile, Research, Stock Buzz), Russia's second-largest bank, made a net profit last year of $212 million, it said on Thursday, defying expectations of a loss although provisions soared in the last quarter as the economy began to contract.
Analysts' forecasts for full-year net income varied widely, from a $150 million loss to a $33 million profit, because of uncertainty over provisions and trading losses. Most analysts expected a small full-year loss.
The state-controlled bank made a net profit in 2007 of $1.5 billion.
In 2008 provisioning for bad loans soared by $1.1 billion in the final quarter of the year from $1.4 billion in the first nine months of the year.
Total provisions rose to 3.2 percent of the average gross loan portfolio from 1.3 percent in 2007 and 2.5 percent for the first nine months of 2008.
VTB has already restructured 15 percent of its loan portfolio and sees "problem debt" at around the 7 percent mark, the bank's head, Andrei Kostin, was quoted as saying this week.
The bank reiterated on Thursday that provisions for bad loans would not exceed 8 percent of the portfolio this year and said revenue growth would be in the mid-teens in dollar terms this year. (Editing by Greg Mahlich)
VTB Posts $104 Million Fourth-Quarter Loss, Less Than Expected
By Denis Maternovsky
April 23 (Bloomberg) -- VTB Group, Russia’s second-biggest bank, had a fourth-quarter loss of $104 million, based on Bloomberg calculations of the 2008 results published by the company today.
That’s better than the $225 million net loss median estimate of eight analysts in a Bloomberg News survey.
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@
Last Updated: April 23, 2009 02:22 EDT
VTB forecasts revenue to rise 10%-20% in 2009
MOSCOW. April 23 (Interfax) - VTB (RTS: VTBR) expects revenue from
core operations (net interest income before provisioning and net
commission income excluding one-time items) to rise in the middle of the
range 10%-20% in dollar terms in 2009.
The figure is a "working forecast," the bank said in its financial
report, noting that the "critical variable" remains the overall
condition of the economy.
Alfa to Get VEB Loan
Alfa Bank expects to receive a state-subordinated loan for 20 billion rubles ($587 million), president Pyotr Aven said Wednesday.
Earlier this year, Alfa received a 10.2 billion ruble subordinated loan from state bank VEB as part of the government's support package for the banking sector. "We can receive twice as much as we received, and we will get it," Aven told a news briefing. (Reuters)
Sberbank Q1 Profit Sinks
Sberbank on Wednesday posted a 99 percent year-on-year drop in first-quarter net profit, hit by increased provisions for bad loans.
The bank reported a 300 million ruble ($8.8 million) net profit for the period, according to Russian accounting standards, down sharply from 36.1 billion rubles in the first quarter of 2008. The results implied that the bank made a loss in March, as it had earlier reported 5.1 billion rubles in earnings for January and February. (Reuters)
Sberbank to hold talks with Kazakh officials on BTA acquisition in May
Rencap, Russia
Wednesday, April 22, 2009
Reuters reported that Sberbank will hold talks with Kazakh officials next month on taking over BTA Bank, which was nationalised in February, BTA Chairman Arman Dunayev said at a conference in Almaty yesterday. Sberbank representatives will discuss the results of their due diligence with officials from BTA and Samruk-Kazyna, the sovereign wealth fund operator that controls BTA, Dunayev added. Sberbank's Moscow-based spokeswoman Irina Kibina confirmed these by phone today.
While it is official that Sberbank is in talks with BTA and teams from both banks have been going back and forth between the two entities, we do not believe that this process will end with Sberbank buying the troubled Kazakh bank. The only reason we could see for such an acquisition is political. Sberbank could comfortably grab corporate market share with a strong push in the Kazakh market at the current time, but with the retail platform of BTA being average at best - in a country of just 15mn - it does not seem worth stretching for during the time of a banking crisis at home. Any move on the BTA front by Sberbank would be taken negatively by the market, very difficult to justify, and could significantly tarnish the relatively new management's market reputation, in our view - unless there were overly generous pricing and guarantees involved.
David Nangle
Peter Hambro Mining PLC completion of Aricom acquisition and move to main market
Press release
April 22, 2009
On 6 February 2009 the Independent Board Committees of Aricom plc ("Aricom") and Peter Hambro Mining Plc ("PHM" or the "Company") announced that they had reached agreement on the terms of a recommended all share offer to be made by PHM for the entire issued share capital of Aricom (the "Merger").
Earlier today, the Independent Board Committee of Aricom announced that the Court has sanctioned the scheme of arrangement relating to the recommended all share offer ("Share Scheme"), which was required in order to implement the Merger, and the scheme of arrangement relating to the exchange of Aricom Warrants for new Peter Hambro Mining Warrants ("Warrant Scheme"). PHM confirms that the Share Scheme and the Warrant Scheme have today become effective in accordance with their terms. Trading in Aricom shares and warrants on the London Stock Exchange was cancelled at 8.00am (London time) today.
The Company is also pleased to announce that it has successfully transferred the listing of its entire issued ordinary share capital from AIM to the Official List of the UK Listing Authority ("Official List"). Admission of PHM shares to trading on London Stock Exchange plc's main market for listed securities ("Main Market") and commencement of dealings became effective from 8.00 a.m. today. Trading in all the Company's ordinary shares on AIM has been cancelled simultaneously. The New PHM Shares and New PHM Warrants issued in connection with the Merger have also been admitted to the Official List and commenced trading on the Main Market today. The ticker for the Company's ordinary shares will continue to be LSE: POG and the ticker for the new PHM warrants will be LSE: POGW. At admission there were 171,083,485 ordinary shares and 8,312,463 warrants in issue.
The Company is also pleased to announce that the 2008 Annual Report and Accounts for Peter Hambro Mining Plc will be available today to download from the Company's website and copies are currently being prepared for mailing to shareholders.
Peter Hambro, Chairman, commented: "The successful completion of the merger with Aricom and the move to the Main Board of the London Stock Exchange both mark significant milestones in the development of PHM as a leading natural resources company, with a focus on the Far East of Russia.
We have grown tremendously since we first listed on AIM in April 2002 and we look forward to the next stage in our development where we continue to grow our production of profitable ounces of gold whilst exploring the alternatives to take forward the Iron Ore projects."
KAMAZ to stop its main production line until May
KAZAN, the Republic of Tatarstan, April 23 (Itar-Tass) -The main production line of the Kamaz automobile plant will stop until the end of the May holidays.
“During this forced stoppage caused by the falling demand for heavy trucks the workers and engineers will be paid two thirds of the tariff,” Nail Nagumanov, the deputy director of the company’s department for informational policy, told Itar-Tass.
It’s the fourth downtime at Kamaz this year. The first was during the New Year holidays, the second - from February 2 to 12, the third – from March 6 to 16. The plant has switched over to a four-day working week in October 2008.
The Kamaz automobile works is Russia’s leading producer of heavy trucks. It occupies the 11th place among the world’s major heavy trucks producers and is 8th in the production of diesel engines.
The Kamaz group of companies includes 96 sister enterprises. They employ about 50,000 people.
Russia's Magnit downgraded to hold by Citigroup
{896FB429-EB2A-4FA2-B32B-49F9B20CF3CC}
By Polya Lesova
Last update: 3:38 p.m. EDT April 22, 2009
NEW YORK (MarketWatch) -- Citigroup downgraded the shares of Russian food retailer Magnit to hold from buy on Wednesday, citing "limited potential upside." Magnit was one of the best performing stocks in the Russian market since the beginning of the year -- it soared 40% since April 1 and about 100% year-to-date, said Marat Ibragimov, analyst at Citigroup, in a research note. "In the absence of any near-term catalysts, we believe the upside potential for the stock is largely exhausted," Ibragimov said. Magnit, which is based in the Russian city of Krasnodar, operates convenience stores and hypermarkets throughout Russia. Its shares are listed on the RTS and Micex stock exchanges in Moscow as well as on the London Stock Exchange.
Kommersant
Foreigners will not be able to buy Russian land in border areas
Finnish President Tarja Halonen has asked her Russian counterpart Dmitry Medvedev to allow Finnish citizens to buy Russian land in border areas. Although President Medvedev promised to look for a solution, members of the State Duma, the lower house of parliament, said there was no need to do this.
The 2000 Land Code stipulated a provision banning land purchases by foreigners in Russian border areas. This was done in order to convince the then influential Russian Communist Party to vote for the document.
"This ban could be lifted on the Russian-European border," Viktor Pleskachevsky, chairman of the State Duma's property committee, told the paper.
He said many land plots, including those in border areas, remained vacant, and that new owners would cultivate land and pay taxes to the benefit of the state.
"We are ready to quickly pass the relevant amendments. At any rate, we must act prudently," Pleskachevsky said.
State Duma deputy Konstantin Zatulin said it was unclear whether the Land Code could be amended in order to stipulate exclusive regional land sales to foreigners.
He said "it would be no better to allow Finnish citizens to buy land in Karelia than to allow Japanese citizens to buy land in the Kuril Islands."
"We could sell the Kuril archipelago to Japan, the Kaliningrad Region to Germany and those on the Russian-Chinese border to China, which is already buying our land through front companies," Zatulin said.
Konstantin Kosachyov, chairman of the State Duma's foreign affairs committee, said the sale of border territories could result in their loss because "border territories can be annexed by other states in certain conditions."
Railway transport plummets
2009-04-23
The railway transports of timber and wood products along the Russian Northern Railway line is down 24 percent this year compared with the same period in 2008.
According to Regnum, a total of 1340 tons of forestry goods were transported along the railway the first quarter in 2009, which is 23,8 percent less the same period in 2008.
The lower amounts of shipped timber goods is a direct result of the economic crisis, Severinform.ru reports. The crisis has significantly lowered demands for Russian timber goods in Finland, Severinform.ru reports.
Saturn Bid Delayed
The Federal Anti-Monopoly Service said Wednesday that it would wait until June to consider state-owned Oboronprom's application to acquire 75 percent of engine maker Saturn.
The service postponed a decision so it could gather and consider all the necessary information, a spokeswoman said. An Oboronprom spokesman confirmed that it had applied earlier this month but declined to comment on the postponement.
Oboronprom controls 37 percent of Saturn, and its CEO was appointed deputy chairman at Saturn last month. Saturn, which designed the engine for Sukhoi's Superjet, has been under fire since Finance Minister Alexei Kudrin criticized the firm's management last fall. (MT)
Russian Arctic helicopter company for sale
2009-04-23
The Russian state is selling shares in the Naryan-Mar United Air Fleet, the biggest helicopter company in the Nenets Autonomous Okrug.
An auction on the company sales will be held on 4 May, Regnum reports. The sales come after a Russian federal decision on company privatization made late December last year, Severinform.ru reports.
The Naryan-Mar United Air Fleet controls major parts of air traffic in the Northwest Russian Nenets Autonomous Okrug. The oil-rich region in the Russian North has no roads leading to neighboring federal subjects and is therefore dependent of aircraft and helicopter transport.
A total of 840 people work in the company.
Ingosstrakh Notes Skyrocketing Fraud
23 April 2009
By Jessica Bachman / The Moscow Times
Insurance fraud hit a high in the first quarter as a growing number of individuals felt compelled to take criminal measures to avoid paying off loans, Alexander Grigoryev, chairman of insurer Ingosstrakh, told journalists on Wednesday.
Grigoryev said arson property-loss claims are up fivefold this year and estimated that 80 percent of them are fraudulent.
"If we used to receive claims for one burned-down warehouse, now we are receiving five," he said.
In almost all instances of fraud, the insured property was bought on credit, and the borrower likely couldn't handle the payments, Grigoryev said.
A devalued ruble, climbing unemployment and salary cuts have caused loan-default rates to mushroom in the first quarter. The country's top banks are forecasting a second wave of banking defaults, as overdue loans are expected to constitute 10 percent of banks' portfolios by the end of the year.
"If a guy has a car that's three years old and he has a car loan in dollars, well, if the car 'burns up' it's an insured accident. The insurer pays the bank for the remainder of the loan and the owner is off scot-free," Grigoryev said. "Later, he can apply for another loan because his credit history is unscratched."
And it's not only cars going up in flames this year.
"Most interesting," he said, was the spike in arson claims for insured freight and other retail goods.
"There was a refrigerating unit that stored frozen meat products. It burned up, burned to the ground," Grigoryev said, adding that the refrigerating unit was set to minus 18 degrees Celsius.
"Tell me, how can a freezer set at this temperature just burn up on its own? It can't. It's impossible, there isn't enough oxygen for anything to burn, but somehow it did."
Grigoryev also said Ingosstrakh should be valued at $4 billion to $5 billion if its majority shareholder, Oleg Deripaska, were to consider selling his stake in the company.
He dismissed comments by the director of Generali, an Italian firm that owns 38 percent of Ingosstrakh, who said the company would pay 300 million euros ($388.4 million) if it decided that it wanted a controlling interest.
"This is a ridiculous figure ... and it does not reflect reality," Grigoryev said.
"[Generali] needs to understand how to go about negotiations with a serious majority shareholder and understand the real value of the company."
In a recent interview, Pyotr Aven, the head of Russia's largest private lender Alfa Bank, said the bank is ready to restructure Deripaska's $800 million of debt if the businessman puts up his stake in Ingosstrakh as collateral.
Evroset Appoints VimpelCom’s Alexander Malis as President
By Maria Ermakova
April 23 (Bloomberg) -- OOO Evroset appointed Alexander Malis, head of broadband development at OAO VimpelCom, as president, Ulyana Smolskaya, a spokeswoman for the mobile-phone retailer, said by phone from Moscow today.
To contact the reporter on this story: Maria Ermakova in Moscow at mermakova@
Last Updated: April 23, 2009 02:07 EDT
MTS vs. Vimpelcom: Vimpelcom winning the retail war
Unicredit, Russia
April 22, 2009
Russian SIM card statistics for March 2009 showed Vimpelcom outpacing MTS in net card additions for the third month in a row. Vimpelcom gained 1.7mn new subscribers in 1Q09 vs. 0.5mn for MTS and 0.7mn for Megafon, despite being the only cellular provider to raise base service tariffs from March.
We believe Vimpelcom's 49% stake in Euroset is an important driver of its superior growth in Russia vs. MTS, which is likely to continue. Given the mobile services industry is continuing to grow despite the overall weakening economy, with 8.3mn net adds in 4Q08 and 3.0mn 1Q09, Vimplecom's exposure to Euroset, Russia's largest retailer, with a market share of approximately 40%, gives it an excellent opportunity to continue eating into MTS' share of subscriber additions.
Despite a more extensive TV advertising campaign for its new tariff initiatives in 1Q09, MTS' share of SIM card additions halved from 33% in 4Q08 to 16%, while Vimpelcom's share rose from 31% to 57% over the same period. According to an Admonitor study of TNS data, the total volume of MTS ad spots increased 36% q-o-q to 3,700 minutes in 1Q09, while Vimpelcom reduced its advertising activity by 44% from 4Q08 to 1,600 minutes.
We expect the Euroset factor to strengthen in 2Q09-3Q09, as MTS fully severed its relationship with the retailer in mid-April and several of Euroset's retail competitors went bankrupt amid tight market conditions, including Dixis, Betalink, Cifrograd and Svyaznoy, increasing Euroset's market share.
Vimpelcom's top-line potential for 1Q09-2Q09 vs. MTS is even higher given its recent tariff increases. While all "Big Three" operators raised their roaming tariffs in mid-1Q08 in an effort to compensate for the weakening ruble, Vimpelcom was the only one to increase its local and VAS tariffs across the country (Vimpelcom announced a selective price rise from 25%-50%, which we estimate translates to an effective APPM rise of around 15%). MTS and Megafon limited their tariff initiatives by selective tariff rebalancing. Although Vimpelcom's tariff increases risked possible client migration to MTS and Megafon, 1Q09 SIM card statistics showed the company's net subscriber adds actually rose during the quarter.
We expect MTS to underperform Vimpelcom in the short term. We believe the market might expect a weakening of MTS' subscriber numbers and market position, which suggests weaker 1Q09 and 2Q09 results for MTS (due in June and August 2009 respectively) compared to Vimpelcom, and should drive underperformance in the stock.
Although Vimpelcom is a strong Buy on operations, the shareholder conflict means it is only for the brave. Last week the Moscow arbitration court heard Telenor's appeal to overturn the Tyumen court's refusal to suspend the order that Telenor sell its stake in Vimpelcom.
The court decided to revisit the case on April 30, asking Vimpelcom to attend the hearing and state its position on the matter. Thus, the sale of Telecnor's 29.9% stake via auction is unlikely to be completed in less than a month, and we see a risk of high volatility in the stock over this period. However, we reiterate our view that Telenor's potential exit from Vimpelcom would likely be positive for the company's fundamental value in the long run.
We recommend investors who believe the negatives of the shareholder conflict are already in the price play Vimpelcom on its stronger operational positioning vs. MTS. We have a Buy recommendation for Vimpelcom, with a 12-month TP of $11.6.
Billionaires Disappear From Russian Art Auction at Sotheby’s
By Katya Kazakina
April 23 (Bloomberg) -- An ornate silver and enamel punch bowl and ladle produced in Moscow by jeweler Feodor Ruckert around 1910 sold for $482,500 yesterday, more than double its estimate at Sotheby’s in New York.
Mostly, though, prices were distinctly cooler in the morning and afternoon sessions devoted to Russian art.
Total sales of $13.8 million fell short of the high estimate for $17.5 million. Of the 308 lots, 35.1 percent failed to sell.
The global economic crunch has taken a toll on the number of ultra-rich wishing to acquire symbols of taste and luxury. Moscow has 32 billionaires, down from 110 a year ago, and the 100 richest Russians have lost 73 percent of their wealth last year, according to Forbes Russia magazine.
The punch bowl, which had a presale high estimate of $200,000, stood out in the second part of yesterday’s sale, shining brightly amidst an assortment of Faberge pieces and icons.
The priciest Faberge piece -- a silver toiletry set that once belonged to Russian Prince Gorchakov -- failed to sell. It was estimated to fetch between $300,000 and $500,000.
“For the current economic climate, the results are good,” said Natalia Kolodzei, executive director of the U.S.-based Kolodzei Art Foundation, which promotes Russian art.
“If we saw such results a year and a half ago, it would have been a catastrophe,” she said.
Father and Son
Only two lots topped $1 million. Among them was “Columbus Sailing From Palos,” an 1892 seascape by Ivan Aivazovsky, which fetched $1.6 million.
Works by Nicholas Roerich and his son Sviatoslav attracted active bidding in the morning. Their decorative landscapes and portraits featured striking color combinations and exotic settings.
The senior Roerich’s “Secrets of the Walls” (1920), a small-town scene, fetched $530,500, more than double its high presale estimate of $200,000. Yet his “St. Mercurius of Smolensk,” a vibrant 1919 painting that was featured on the catalog cover failed to sell.
Roerich Junior’s “Three Boddisatvas” (1920s) sold for $266,500, more than three times its high estimate of $80,000, setting an auction record for the artist.
A year ago, Sotheby’s took in $46.5 million on 386 lots of fine, contemporary and decorative Russian art over two days.
“To me, the economic crisis is a gift,” said Georgy Khatsenkov, a Monaco-based collector. “I bought a couple of paintings at lower prices than I had expected.”
Melancholy Nude
Khatsenkov placed a winning $110,000 bid for Pavel Tchelitchev’s melancholy male nude from 1926 and another one, at $37,500, for Dmitri Krasnopevtsev’s canvas depicting an old stove.
Quality was also an issue with bidders.
“There are no masterpieces,” said Alexandre Gertsman, a private New York art dealer, who said that unlike previous seasons he had decided against consigning works.
“It’s not the right time to sell strong works,” he said. “I don’t want to give them away at low prices and I don’t want to risk not selling them.”
Aivazovsky’s “Columbus Sailing from Palos” sold after vigorous bidding between two men in the room. The victor, a dark-haired man in a blue-and-white yarmulke, declined to identify himself. He said he was a New York-based collector.
Father of Futurism
The work depicts the explorer’s departure from Spain in 1492 and appeared at the World’s Fair in Chicago in 1893. It was subsequently acquired by heiress Marjorie Merriweather Post.
David Burliuk, who is known as the father of Russian Futurism, was represented by three canvases. “Blue Rider” was put on the block by the Hirshhorn Museum and Sculpture Garden to benefit its acquisition program, according to the catalog. It sold for $302,500 against the presale estimate of $100,000 to $150,000.
Contemporary art works by Grisha Bruskin and conceptual duo Komar and Melamid also didn’t attract buyers.
Prices include a buyer’s premium, or commission, of 25 percent of the hammer price up to $50,000; 20 percent, from $50,000 to $1 million; and 12 percent, above $1 million. Estimates don’t include the commission.
To contact the reporter of this story: Katya Kazakina in New York at kkazakina@.
Last Updated: April 23, 2009 00:01 EDT
Activity in the Oil and Gas sector (including regulatory)
Russia sees no need for oil cuts as shortage looming
Reuters, Wednesday April 22 2009
* Effect of oil output cuts to be short-lived
* Oil shortage looms in medium term
* Sees progress on South Stream gas pipeline project
* Surgut's purchase of MOL stake not hostile bid
By Vladimir Soldatkin
MOSCOW, April 22 (Reuters) - Russia believes global oil output cuts will have a short-lived effect and made no sense given a looming global supply shortage in the medium term, Energy Minister Sergei Shmatko said on Wednesday.
"According to various estimates, there will be a serious shortage of oil supply, maybe in one, maybe in two-three years," Shmatko told reporters.
"It will coincide with the end of the global economic crisis and will lead to serious instability, including in the pricing of oil," he said. "A simple cut in production can, in our view, have only a short-lived impact."
Russia repeatedly hinted it could join OPEC's oil output cuts when oil fell close to $30 per barrel last year, thus exposing the state budget and the Kremlin's social obligations to major risks.
Russian officials have even said the country has started to reduce exports, but OPEC ministers have said the pledges were unconvincing and regretted Russia did not provide real support.
Talk among Russian officials about output cuts have faded after oil prices stabilised at around $50 per barrel, slightly above the revised budget needs of $41 per barrel.
Russian oil output has shown extreme resilience to the crisis as it has even slightly risen over the past year, contrasting with a deep collapse in other sectors.
The gas industry has suffered from a slump in demand in Europe and at home. Russian gas export monopoly Gazprom was forced to cut output by a quarter while fully halting gas imports from Turkmenistan after a pipeline blast
Gazprom has said it sees gas demand depressed for at least five years but Shmatko said Russia was committed to finishing its new gas pipeline to Europe, South Stream, on time by 2015.
He said Russia would sign deals with Austria and Slovenia at government level, and with Greece, Bulgaria and Serbia at company level in the next few months.
"And that will be it. After that, a fully fledged format of political and economic agreements will be created to allow an immediate start of the project implementation," he said.
RIVAL PROJECT
South Stream is a competitor to the Nabucco pipeline from Central Asia and the Caspian to southern Europe.
The European Union supports Nabucco as a means to ease dependence on Russia, but the project has stalled as it lacks enough gas to justify costly construction.
Shmatko denied media speculation Russian oil firm Surgut had bought a large stake in Hungarian energy group MOL at a large premium on Kremlin orders to fight Hungary's plans to participate in Nabucco.
"No-one is planning hostile takeovers ... By buying 21 percent of the company, Surgut won't be able to fight the plans of MOL to co-operate with Nabucco," said Shmatko.
He adding Surgut paid a premium because it badly needs refining assets.
He also said Nabucco was poised to sell gas to Europe at a higher price than Russia due to its poor resource base and longer pipeline routes.
He said Russia and Azerbaijan would hold new talks about gas supplies in May, a move which could further undermine Nabucco's resource base if Baku agreed to sell most of its gas to Gazprom.
Shmatko also said he hoped Turkmenistan would soon repair the pipeline and restart gas exports to Russia, although he said Gazprom would need to change the terms of its deal to import gas from Turkmenistan. He did not elaborate. (Writing by Dmitry Zhdannikov, editing by Robin Paxton)
Russian gas demand rebounding
Alfa, Russia
Wednesday, April 22, 2009
According to today's Vedomosti, March was an unexpectedly good month for the Russian gas industry in terms of gas consumption. In the face of the massive decline we've seen starting from November last year, March 2009 saw gas consumption restored a bit, but primarily thanks to non-industrial consumers and abnormally cold weather.
Overall gas consumption in March, according to the article, amounted to some 35.5 bcm, 0.8% less than in the same period last year. Industrial and utilities consumption in March continued to decline, by 2.6% and 5.2%, respectively.
Households consumed 14% more y-o-y, but, as already mentioned, this was primarily due to weather conditions. The bad news for Gazprom was that export sales declined by 1.5 times y-o-y in 1Q, while production declined by 24%.
Data from the Central Dispatch Unit show that overall Russian gas consumption dropped by about 10% y-o-y in each of the four months leading up to March. After adjusting for weather, March data do not show much, if any, improvement.
Our concern over whether or not underlying demand can rebound in the coming months is a key factor in our Underweight recommendation on Gazprom and Novatek. We recommend gaining exposure to the Russian oil & gas sector via LUKoil.
Russia and China sign agreement allowing Rosneft to access $15bn loan; POSITIVE Bloomberg is reporting that Russia and China have signed an intergovernmental agreement, which will allow Rosneft to access the previously announced $15bn loan from a Chinese state bank. The first $5bn will be available this year, and should remove any concerns about the ability of Rosneft to service and refinance its debt obligations. Among Russian peers, this company has the most efficient capital structure.
Ronald P. Smith
Novatek's management board gets shares
Alfa, Russia
Wednesday, April 22, 2009
Novatek put out two press releases yesterday. The first announced a restructuring of how its 100% stake in PurNovaGas is held - it has been transferred from the holding company to a wholly-owned subsidiary for management efficiency issues. The second announced a list of names of members of the management committee who now have direct equity stakes in the company, with the total shares mentioned totaling 39.6m shares, or 1.3% of shares outstanding.
The list covers all but a couple of the members of the management board, and all of those receiving shares previously held no stake in the company, according to the press release, indicating that this is almost certainly a part of the company's retention/incentive plan. In mid-February, the company announced it would buy back up to 3% of the company for use in an incentive program, so this is likely a part of that. The 1.3% stake is worth some $115m at current prices. We treat this news as POSITIVE as it better aligns management incentives with that of minorities.
Ronald P. Smith
Sibneftegaz Starts Gas Production at Northern Pyreynoye Field
By Stephen Bierman
April 23 (Bloomberg) -- OAO Sibneftegaz, the OAO Gazprombank-led venture with OAO Acron and OOO Itera, started commercial production from the Pyreynoye deposit in the northern Russian region of Yamal Nenets.
The venture expects output to reach 2 billion cubic meters of natural gas a year, Sibneftegaz, based in Novy Urengoi, said in an e-mailed statement today.
To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@.
Last Updated: April 23, 2009 01:59 EDT
TNK-BP Bids for Minority Sibir Stake
23 April 2009
By Anatoly Medetsky / The Moscow Times
TNK-BP began a blitz bid Wednesday to buy a minority stake in smaller rival Sibir Energy, offering an impressive £4.30 per share, 2 1/2 times more than its last closing price.
Credit Suisse International said it was ready to buy a "significant minority stake" in the company on behalf of TNK-BP until Thursday.
TNK-BP, the country's third-largest oil producer, may gain up to 35 percent of Sibir Energy -- all that is not owned by two private Russian shareholders and the Moscow city government. It is unusual for a major oil company like TNK-BP, half owned by BP, to settle for the role of a minority shareholder unless it hopes to build up the stake to gain control of the company later.
"TNK-BP ... has not reached any agreement to acquire shares from the controlling shareholders," Credit Suisse said in a statement that announced the bid Wednesday afternoon.
The bank set the purchase price at £4.30 ($6.26) a share, valuing the entire London-listed company with assets in Russia at $2.4 billion.
TNK-BP may end up paying as much as $842 million for 35 percent of Sibir Energy, said Svetlana Grizan, an analyst at VTB.
Sibir Energy said TNK-BP had not approached the company to discuss a stake purchase. Another company, however, was interested in possibly making an offer for Sibir, Sibir said in a statement, without identifying the company.
"Discussions with that party are at a very preliminary stage, and there can be no guarantee that an offer for Sibir will be forthcoming," it said.
State-owned Rosneft has contacted Sibir to discuss a potential bid for the company, The Times of London reported Monday.
A TNK-BP spokeswoman declined to comment, but a BP spokesman said his company supported the bid. "We are quite behind TNK-BP on this sort of activity," spokesman Toby Odone said. "We have a good track record in Russia, and we are very keen to deepen our investment."
Sibir suspended trading in its shares in February after it learned that one of its major shareholders, Shalva Chigirinsky, owed the company $325 million. Sibir sued Chigirinsky and former chief executive Henry Cameron to recover "funds that were taken from the company," it said earlier this month.
The company has a 50-50 oil-producing venture with Royal Dutch Shell in Siberia, owns a refinery in Moscow jointly with Gazprom Neft, an oil arm of Gazprom, and runs filling stations.
Chigirinsky and another Russian businessman, Igor Kesayev, each own slightly more than 23 percent of Sibir, but Sberbank now holds their stakes as collateral for loans. The Moscow city government holds 18 percent of the oil company.
TNK-BP is likely betting that it will be able to acquire a controlling stake at some point, Grizan said. "The most unusual thing is that TNK-BP agreed to a minority stake," she said. "They are probably hoping to buy out either Chigirinsky's or Kesayev's stake afterward."
TNK BP may make an offer for Zhaikmunai
Troika, Russia
Wednesday, April 22, 2009
TNK BP is considering making an offer for Zhaikmunai, an oil producer in Western Kazakhstan, Reuters reported yesterday, citing sources close to the Russian company.
Zhaikmunai produced about 7,150 bpd of oil at its Chinarevskoye field in February, according to InfoTEK, and has proven oil reserves of 47.2m bbl (in addition to proven gas reserves of 48.4m boe), and probable oil reserves of 138.2m bbl (plus probable gas reserves of 145.5m boe). Its net debt was $236.5m as of end 1H08, giving it an EV of $522.5m and an EV/1P reserves ratio of 5.5.
As always, we refrain from commenting on the merits of the transaction before we know the price. However, we believe that the possibility of the deal has positive implications for TNK BP and for KazMunaiGas EP.
We estimate that TNK BP Holding (the main constituent part of TNK BP Ltd) generated net income of about $1.5bn in 2H08, for a rough operating cash flow estimate (net income plus depreciation) of $2.2bn and free cash flow (subtracting capex) of about $400m. (TNK BP Ltd would also likely reap some cash flow from its stake in Slavneft, but that amount would be minimal). TNK BP Holding had $848m in cash on its books at end 1H08, but assuming 2008 net income of $6.4bn and the company's commitment to keep its payout ratio at around 40%, it would face a dividend payment of about $2.5bn for the period between end 1H08 and this year (some $1.4bn of that has already been declared in interim dividends). A source at TNK BP has told Kommersant that the company has enough money to buy Zhaikmunai, so assuming it does not leverage up to do so, TNK BP must have posted higher free cash flow in 2H08 than our projections would indicate if it is confident of being able to afford Zhaikmunai.
According to previous reports, TNK BP is also eyeing the purchase of Sibir Energy.
However, Reuters also reported yesterday that TNK BP Ltd was seeking a $315m syndicated loan to refinance existing debt.
The deal would also be good for investor sentiment toward KazMunaiGas EP. This is a second instance of interest in Kazakh oil companies reported over the past week (the first was the Chinese state oil company's acquisition of a stake in MangistauMunaiGas), suggesting that strategic investors are attracted to the sector. Further, even without any acquisition premium, Zhaikmunai is valued at an EV/1P of 5.5, compared with 4.2 for KazMunaiGas EP. The Kazakh government, via national oil holding NC KazMunaiGas (the parent company of the traded KazMunaiGas EP), by law has the right of first refusal on the asset, which means that if the price is attractive, Zhaikmunai might eventually find itself a part of KazMunaiGas EP.
Oleg Maximov
Belokamenka crude terminal to handle 9mil tonnes
22 April 2009
The Russian oil terminal of Belokamenka is expected to handle 8 million tonnes of oil from Varandey oil export terminal and 1 million tonnes of Rosneft oil, in 2009.
LUKOIL and Rosneft are poised to sign an agreement on transshipment of Russian export oil from Varandey via Belokamenka terminal.
There are certain issues to be finally regulated after integration of the fishing and commercial ports’ administrations due to imperfect legal basis. The issue will be closed upon of the approval of Rosrybolovstvo and the Ministry of Transport.
Russia tries to control gas supplies to Europe through new deals: experts
23.04.09 10:45
Azerbaijan, Baku, April 22 /Trend Capital, A.Badalova/
Russia is trying to control gas supplies to Europe and prevent the implementation of competitive projects, like Nabucco project, through signing gas deals with Azerbaijan.
"Russia is making every effort to get volume of gas, including, offering deals at market prices. This is a big geopolitical game," the Russian Alfa-Bank Oil and Gas Senior Analyst Shirvani Abdullayev told Trend Capital over phone.
In March, the Russian Gazprom and Azerbaijan have agreed to start negotiations to determine conditions of gas supply from Azerbaijan in January 2010. In the near future, Gazprom and the State Oil Company of Azerbaijan (SOCAR) will conduct a technical inspection in the sections of the Baku - Novo-Filya gas pipeline system. Azerbaijan will supply gas to Russia via this route.
Russia needs more constructive relations with such countries as Azerbaijan and Turkmenistan.
Azerbaijan analyst of the Russian Unicredit Securities Pavel Sorokin said that Russia is trying to contract gas, including with Middle Asian countries, so that European countries fail to fill the proposed Nabucco pipeline.
Azerbaijan in its turn will benefit from the cooperation with Russia, as there are fixed prices and enough transparent relations.
Azerbaijan possesses 2 billion cubic metres of natural gas reserves. Azerbaijan consumes 12-14 billion cubic metres of gas per year.
Azerbaijan will probably not commit to more than small volumes, the American Energy Security Analysis Company expert Andrew Reed said.
"Azerbaijan will do what is in its best interests. Azerbaijan supports Nabucco, so it is in not in Azerbaijan's interest to commit to deliver large enough volumes of natural gas to Russia that Nabucco will be scuttled," Reed said. This will enable Azerbaijan to reduce transit risk and maintain flexibility in relations with Russia.
The possible partnership between Russia and Azerbaijan might further reduce the appeal of Nabucco, the Italian Bruno Leoni Institute Director Carlo Stagnaro said.
"The problem is that, economically speaking, it would be hard to sustain both the Nabucco and the South Stream gas pipelines, especially if Russia's and Azerbaijan's interests get closer. We are still seeing the problems that arise from the ambiguous position of the European Union, that so far hasn't been able to make a clear choice regarding what is its strategic interest," Stagnaro wrote to Trend Capital via e-mail. .
The Nabucco project worth $7.9 billion euro ($10.1 billion) will deliver Azerbaijani and Central Asian gas to the EU. Construction of the pipeline is expected to commence in 2011. Its maximum capacity will be 31 billion cubic meters per year.
EU-Ukraine Gas Deal Is No Pipe Dream
APRIL 22, 2009, 6:47 P.M. ET
A real plan to improve the network should please Europe and Russia.
By ALAN RILEY From today's Wall Street Journal Europe
One could have been forgiven for suspecting that this month's deal for the European Union to help reform Ukraine's gas market was just more political window dressing. It is true that the scale of the incompetence, double-dealing and corruption in the Ukrainian gas market is enormous. However, this time the EU and Ukraine may have achieved a breakthrough.
For the first time, a reform plan for the Ukrainian gas sector is backed up by a detailed, stage-by-stage program to fundamentally reform the market. If this program is implemented, it would not only drive out the corruption and opacity in the market. It would also provide a basis for increased revenues for Ukraine while enhancing EU energy security. What Europe needs to do now is work with Ukrainian politicians to implement the deal while taking parallel measures to ensure it really does work on the ground.
The core of the deal is a pledge by Ukraine to adopt EU energy legislation and to make this law binding by joining the European Energy Community. Under the agreement, the Ukrainian national gas company, Naftogaz, will turn its transmission subsidiary, Ukrtransgaz, into an independent operator. Full legal unbundling will follow, allowing Ukrtransgaz to offer access to the network to all potential gas suppliers on transparent and commercial terms. Tariffs will reflect actual costs and will be levied on a nondiscriminate basis. Equally, there will be third-party access to gas-storage facilities, again on transparent and commercial terms.
On its own, this first part of the deal would raise much skepticism with most commentators. It amounts to no more than another pledge to comply with EU rules. What distinguishes this deal from Kiev's previous pledges is the extremely detailed master plan for renovating the Ukrainian gas pipeline network. The plan shows the Ukrainians are serious this time.
The master plan provides a network-by-network, section-by-section analysis and costing for what needs to be done to restore the network, what is technically involved, and the potential for enhancing network capacity. Under the master plan foreign investors, together with the World Bank, the European Bank for Reconstruction and Development, and the European Investment Bank, would provide capital to renovate the network.
This renovation proposal is vital. The Ukraine network delivers 80% of Russia's European exports. Even if Nord Stream and South Stream -- two Russian projects to deliver gas straight to Western Europe, skirting Ukraine and other transit countries -- are actually completed, Ukraine will still deliver significantly more gas to Europe than these two pipelines.
The Ukrainian domestic gas incumbent cannot afford to pay for the gas it needs for the Ukrainian economy as well as maintain the pipeline network. The renovation proposal, if implemented, will ensure the continued flow of gas into the EU and provide the capacity for more gas to flow -- at least an additional 20 billion cubic meters (bcm) and perhaps as much as 60 bcm. The total cost is approximately between $2.5 billion and $3 billion.
Given the economic crisis, it is unlikely that Gazprom will be able to afford the $20 billion South Stream project, and Nord Stream is also under financial pressure. Hence both Europe and Gazprom should welcome the funding of additional capacity via the Ukrainian pipeline network at a relatively modest cost.
Taken together, the liberalization of the Ukrainian gas sector and the renovation of the network should enhance EU energy security. Liberalization will root out most of the Ukrainian sector's opacity and corruption. Renovation and additional capacity will also ensure that the gas will flow securely and that more gas can be made available.
Furthermore, as Ukrainian President Viktor Yushchenko has pointed out, "a single, competitive gas market would help depoliticize the EU-Russia gas relationship." The EU-Ukrainian deal, together with the extension of the European Energy Community to Ukraine, will help create a single European gas market in which commercial, not political, principles will prevail. This will reduce the scope for politics in gas supply.
The EU and the international institutions need to do more, however, to ensure that the deal is implemented in practice. We already know from our experience of energy liberalization in the EU that energy companies backslide when it comes to market-opening measures. For instance, subsidiary companies that own networks have a habit of swinging preferential deals to their holding companies which supply gas. The EU and international institutions such as the EBRD and EIB could insist that Ukraine significantly upgrade the powers and resources of its antitrust agency so that it can effectively police liberalization.
A further consideration for the EU, Ukraine and the international institutions is Russia. Prime Minister Vladimir Putin has indicated he very strongly opposes the EU deal. The facts, however, plainly stand against him. Two-thirds of Gazprom's revenues come from European sales. Given that its market capitalization has fallen by more than 70% since January 2008, that its gas revenues have collapsed, and that it has accumulated more than $35 billion of debt, Gazprom can barely afford to build Nord Stream, never mind South Stream. If there is additional Russian gas available for sale to Europe, it needs a cheap supply route. The Ukraine/EU deal can provide that route.
There is another consideration. Given Gazprom's lack of capital, the company will need significant foreign investment into its gas fields and its own gas network infrastructure. Foreign capital is easier to raise if there is a comprehensive, legally binding regime that applies to your principal route to market. In other words, the Ukraine/EU gas deal should make it easier for Gazprom to obtain foreign investment for its gas fields and pipeline network.
The plan provides for initial funding and due diligence to be carried out in the next couple of months, and for Ukraine to take practical steps toward the liberalization agenda. So we will soon see if the promise of the Ukraine/EU deal is delivered. But of all the deals that have been done between the EU and Ukraine over the last few years, this one appears to be the most promising.
Mr. Riley is a law professor at City University in London and an associate research fellow at the Center for European Policy Studies in Brussels.
Russia must offer maximum high price for Azerbaijani gas: Interview with head of Russian Gas Association
23.04.09 10:59
Russia, Moscow, April 22 /Trend Capital, I.Bragina/
Russian Gas Association President Valery Yazev spoke with Trend Capital in an exclusive interview.
Trend Capital: What are the prospects for the supply of Azerbaijani gas to Russia?
Valery Yazev: Russia has established a very constructive relationship with Azerbaijan. I'm confident that we will sign major documents. However, it is early to speak about the form and conditions. I think the situation becomes clearer in the near future.
Q: Will the technical capabilities permit to transport the expected volumes of gas via the existing pipeline systems between Azerbaijan and Russia?
A: Azerbaijan's export opportunities will increase as the work on the development of Shah Deniz field and will reach its limit approximately in five years. The transport facilities are significantly higher of production capacities. However, a pipeline to Russia must be repaired.
I'm sure that Azerbaijan will be able to find resources to sell natural gas to Russian company [Gazprom]. Russia must offer the highest possible price for Azerbaijani gas and transport gas after reconstruction of the pipeline infrastructure.
Q: Can we count on Gazprom's investments in repair and reconstruction of the pipeline on the Azerbaijan's territory?
A: I think that such actions are possible and would be appropriate.
Q: Does Azerbaijan's participation in transporting gas to Russia call EU's position on energy security into question?
A: Russia and Azerbaijan need to establish constructive cooperation as a gas producer. What is playing Europe? It tries to crush gas producers, to create a controversy between them, so that to deal with each country separately. This is a cartel of consumers, who plays on contradictions that arise in this context between Russia, Azerbaijan and Turkmenistan. Our countries will only suffer as a result of such contradictions.
Europe's willingness to build a Transcaspian pipeline is impossible until the status of the Caspian Sea is determined.
Our countries need to coordinate their positions clearly. Azerbaijan is geographically closest to Europe among gas producing countries in the region. Therefore, Moscow wants to develop energy dialogue with Baku.
Gazprom
Gazprom, E.ON could close Siberian asset deal in summer
MOSCOW, April 23 (RIA Novosti) - Gazprom and Germany's E.ON could close a deal for the German company to join the development of northwest Siberia's Yuzhno-Russkoye oil and gas field as early as the summer, the E.ON head said on Thursday.
"We hope that it [the deal] will be closed in the second half of the year, possibly in summer," Wulf Bernotat said in an interview with business daily Vedomosti.
Under the asset swap deal, signed in St. Petersburg late in 2008 in the presence of German Chancellor Angela Merkel and Russian President Dmitry Medvedev, E.ON, the world's largest utility company, will receive 25% minus one share in Gazprom subsidiary Severneftegazprom, while the Russian energy giant will get a 49% stake in E.ON's ZAO Gerosgaz, which holds a 2.93% interest in Gazprom.
Severneftegazprom holds a license for the Yuzhno-Russkoye oil and gas deposit, which has recoverable reserves of 800 billion cubic meters of gas and 5.7 million metric tons (41.7 million barrels) of oil.
Gerosgaz, founded in 1999, is a joint stock company in which Gazprom Export holds 51% interest, and E.ON Ruhrgas AG has 49%.
Gazprom Neft on Bourse
Gazprom Neft became the third of Russia's top five oil producers to start trading on the ruble-denominated St. Petersburg International Mercantile Exchange, the exchange said Wednesday. Gazprom Neft followed Rosneft and TNK-BP in selling refined oil products on the bourse, it said. (Bloomberg)
Gazprom primes South Korea study
News services
Russian gas giant Gazprom is poised to carry out an investment study covering shipments of natural gas to South Korea and is looking at possible transportation routes.
Today, Gazprom chief executive Alexei Miller led an internal meeting to discuss the planned supplies, possible routes and other commercial terms, a Platts report said.
Earlier this month, the president of South Korea's Kogas visited Moscow for talks with Gazprom.
Transportation of gas from Russia to South Korea has been one of the key discussion points. One of the possible options considered was the laying of a pipeline via North Korea, though this has been thrown into doubt following the country's latest rocket launch earlier this month.
Gazprom is said to be also looking at developing a subsea pipeline to South Korea.
However the head of Gazprom's foreign projects department, Stanislav Tsygankov, told Platts earlier this month that while the plan would face numerous technological difficulties, Gazprom was confident of meeting South Korea's gas demands.
Kogas plans to import 10 billion cubic metres per year of natural gas from Russia for a 30 year period beginning 2015, according to a $90 billion agreement signed with in September last year.
Wednesday, 22 April, 2009, 10:06 GMT | last updated: Wednesday, 22 April, 2009, 10:06 GMT
Gazprom Neft Buys Italy Assets
23 April 2009 Combined Reports
Gazprom Neft extended a Russian push into European refining and marketing on Wednesday by buying Italian oil operations from U.S. oil major Chevron.
Gazprom Neft will buy a plant in Bari, in southern Italy, which produces 30,000 tons of oil and 6,000 tons of lubricants a year for cars, trucks and other industrial uses, and fuel marketing and sales operations in Rome, the companies said.
The plant produces 150 types of oils used in cars and commercial transport as well as industry including drilling, according to the statement.
Gazprom Neft will also get the right to use the Texaco brand in the Italian market until 2010.
Chevron, the second-largest U.S. oil company, and Gazprom Neft, Russia's fifth-largest oil producer, did not reveal the price of the deal.
Gazprom Neft said in a statement that it expected production and marketing synergies between the Chevron assets and the Serbian oil refiner NIS, which it took control of earlier this year.
Chevron said last month that it would push ahead with streamlining its lubricants product line and would exit retail markets.
Russian oil companies' push into downstream activities in Europe reflects Gazprom's own effort to acquire gas distribution and power-generation assets across the continent and consolidate control of the country's domestic assets.
Rival LUKoil bought a 49 percent stake in ERG's Isab di Priolo refinery on Sicily last year and held talks to buy a large stake in Spanish oil company Repsol, which has a large refining portfolio.
Last month, Russian oil producer Surgutneftegaz agreed to buy 21 percent of Hungarian oil refiner MOL.
Earlier this month, Gazprom spent $4 billion to buy back a 20 percent stake in Gazprom Neft from Italy's Eni, which had picked up the stake at a 2007 auction of the assets of bankrupt oil firm Yukos.
(Reuters, Bloomberg, MT)
Gazprom lets Ukraine off gas fine
bne
April 22, 2009
After a lot of sabre rattling, Gazprom has backed down on its threat to fine Ukraine for buying less gas in the first quarter than it is contractually obliged to.
Almost as soon as Ukraine signed a gas supply deal with Russia at the start of this year, bring the annual gas row to an end, Kyiv was put in the embarrassing position of asking for less gas than it had just asked for as the crisis accelerated and tanking industrial production (GDP fell by a whopping 20% in January alone) meant demand for gas disappeared.
Initially Gapzorm was being nice and let the Ukraine off the hook, but once a fresh row broke out following Ukrainian Prime Minister Yulia Tymoshenko trip to Brussels where she signed off on a deal to upgrade the country's transport pipeline network, Gazprom took a hard line and said it would hold Ukraine to the contract after all. In the same week Gazprom let Belarus off the same hook.
The Kremlin is concerned that if any work is done on the pipelines it wants a piece of the action. Kyivian politicians have said that they don't have a problem and Brussels, which is even more afraid of sparking a fresh gas row, doubly so.
Tempers seems to be cooling now as Gazprom said on Friday April 17 that it would let Ukraine off the fine after all, Ukrainian Fuel and Energy Minister Yuriy Prodan said at a press conference at Interfax-Ukraine.
"Gazprom bills us on actual consumption. Of course, each month we,re in correspondence on actual gas consumption and payments. Information appeared in the mass media now is an echo of correspondence between the two economic entities," he said.
Talks on the issue are ongoing and the fines could be reimposed if the Kremlin is not happy with the deals being offered, but for the moment the mini-row has been averted. Last week Ukraine was due to pay for its march gas and met the payment without problems.
"I think that all is well in our relations - we always reach agreements," he said, adding that Ukraine pays for gas supplied by Gazprom in time. Making payments on its gas bill should get easier for Ukraine going forward as the economy is so depressed that comapneis are not using as much gas, shaving tens of millions of dollars of the bill each month.
Prodan also said that Ukrainian industrial companies in January to March 2009 cut gas consumption by 40% year-over-year reports Interfax.
Gazprom: GDF Suez may get 9% stake in Nord Stream pipeline
UralSib, Russia
April 22, 2009
Foreign partners are ready to reduce their shares. French gas company GDF Suez may gain a 9% stake in Nord Stream AG, a venture between Gazprom (GSPBEX - Not Rated), which holds a 51% stake, Gasunie (9% share), Wintershall (20%) and E.ON Ruhrgas (20%), Vedomosti reported yesterday, citing German news agency AFP. The venture was established to design, finance, construct and operate the Nord Stream pipeline. According to newswires, Gazprom's stake in the project remains unchanged; hence, foreign partners will have to reduce their stakes.
Nord Stream will supply gas to Germany. The 1,220-km Nord Stream pipeline will consist of two parallel strings (each with a capacity of 27.5 bcm), which will go under the Baltic Sea, from the Russian port Vyborg to the German town of Greifswald. The first string of the Nord Stream pipeline is planned to be constructed in 2010-11 and the second string by 2012. Currently, the EU is conducting an ecological assessment of the project and should announce the results of the study in 2H09.
Gazprom benefits from the Nord Stream. If GDF Suez becomes a partner in the Nord Stream project, this will greatly improve the chances of successfully completing the pipeline on time. This will enable Gazprom to secure gas sales to the French market in proportion to GDF Suez's share in the project.
Construction of both strings of the pipeline will solidify Gazprom's positions on the EU market and increase its share from 25% to approximately 34% by 2020, by our estimates. Gazprom also benefits from this project, since the Nord Stream pipeline will bypass transit countries and, therefore, minimize correspondent political risks. However, it is unclear yet whether GDF Suez will join the project, hence we regard the news as neutral for Gazprom's share price performance.
Victor Mishnyakov,
Kommersant
Liberalized European markets to prevent Gazprom from pressuring consumers
Tensions are growing around European gas pipeline projects as the European Commission intends in early summer to adopt the so-called Third Energy Package. It is a package of legislative proposals for Europe's electricity and gas markets aimed at further liberalization of the markets and prevention of abuse of market power.
These proposals are intended to prevent situations in which one company can produce, ship, distribute and market energy, writes Mikhail Krutikhin, a partner and analyst in Moscow's RusEnergy Consulting.
Gazprom, backed by the Russian government, does not support these initiatives, and neither do some of its European partners. The Russian monopoly's two major pipeline projects, Nord Stream and South Stream, make sense if Gazprom affiliates control upstream and downstream business in the countries to be crossed by the pipes, the analyst writes.
The EU-Ukrainian declaration on the modernization of Ukraine's gas pipeline network was an alarming sign for Gazprom. The document presumes competition-based access to the system. Consequently, to make good on its contracts with European consumers, Gazprom will have to buy transit capacities among other bidders.
New European regulations will jeopardize Gazprom's attempts to reach consumers directly with its two "streams," the analyst adds. European officials could simply ban Gazprom subsidiaries from participating in the distribution and marketing of Russian gas arriving through one of the streams.
That is why Russia is trying to replace the Energy Charter with a Moscow-drafted document, which would guarantee Gazprom a share in European transit and distribution business.
On the other hand, Gazprom would objectively benefit from the changes in Europe. Thrown into a free market environment to sink or swim, it will have to remember what competition is. It will have to improve management and use new technologies.
With improved efficiency, it will stand a good change of winning the respect of the international business community, as reflected in Barron's 100 Most Respected Companies list. This year, Gazprom was ranked 100th.
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