Russia - WikiLeaks
Russia 100708
Basic Political Developments
• Itar-Tass: Medvedev to hold offsite meeting on information society in Russia - The Council is a conciliatory body under the Russian president. It was set up in November 2008. It ensures interaction among the federal bodies of state power, regional bodies of state power, local self-government bodies, public associations, scientific and other organizations in questions of developing an information society in Russia.
• Itar-Tass: Vietnamese Communist leader to arrive in Russia - The General Secretary of the Central Committee of the Vietnamese Communist Party Nong Duc Manh will arrive in Russia for an official visit on Thursday at the invitation of Russian President Dmitry Medvedev.
• VOR: Vietnam to get nuclear plant - The Vietnamese Communist Party boss Nong Dyk Man is arriving in Moscow for talks which are expected to produce agreements to exchange business centres, facilitate Russian holiday-making on Vietnamese territory and also develop Vietnam’s oil and gas and build its first nuclear power plant, with Russian help.
• RIA: Moldova's Constitutional Court postpones hearings on anti-Soviet decree - The court session was to take place on Thursday, but was delayed following a request by acting President Mikhai Ghimpu. The president said he wanted to attend the hearing, but was unable to be present at the court because he had much work.
• Bloomberg: Russia Seeks Control of Kyrgyz Military Plant, Kommersant Says
• RIA: Russian paratroopers recalled from Kyrgyzstan - Russian paratroopers have returned to their home base in Russia from Kyrgyzstan, a Russian Defense Ministry spokesman said on Thursday.
• Trend.az: Paratroopers guarding an air base in Kyrgyzstan Ulyanovsk returned to Russia
• RIA: Kyrgyzstan to restore damaged South with Russian money - "The interim government plans to allocate $100 million from the $300 million Russian loan... to restore the devastated southern part of the country," Temir Sariyev said at a press conference. Some $450-500 million will be steered into restoring housing in the violence-hit Osh and Jalalabad regions within the next 18 months, he said.
• RIA: U.S., Russian diplomats discussed Medvedev's visit in Washington - U.S. Under Secretary for Political Affairs William Burns and Russian Ambassador to the United States Sergei Kislyak discussed a recent official visit of the Russian president, the U.S. Department of State said.
• WSJ: On Pentagon Wish List: Russian Copters - A Department of Defense spokeswoman said the Pentagon had received "several inquiries" from lawmakers about the purchase of Russian-made Mi-17 helicopters, adding that the department issued a report to Congress in March addressing the issue.
• MID.ru: Minister of Foreign Affairs Sergey Lavrov Meets with Italian Minister of Foreign Affairs Franco Frattini - Minister of Foreign Affairs of the Russian Federation Sergey Lavrov held talks on July 6, in Moscow, with Italy’s Minister of Foreign Affairs Franco Frattini, who is in Russia to attend the eleventh session of the Russian-Italian Council on Economic, Industrial, and Monetary and Financial Cooperation.
• RIA: Italian energy giant may take part in Skolkovo project - Italy's largest power company Enel may take part in Russia's Skolkovo innovation hub, the company's CEO Fulvio Conti said on Thursday.
• Standart: US Ambassador James Warlick: Bulgaria's agreements with Gazprom should be public
• Sofia Echo: President Purvanov hits back at US ambassador over transparency in energy projects
• Novinite: Bulgarian Prosecution May Shy Away from Checking Gazprom Deals
• Novinite: Bulgaria Energy Experts Negotiate Gas Price in Moscow - A delegation of Bulgarian experts will hold energy talks with giant Gazprom in Moscow in a bid to eliminate the notorious intermediaries in the purchase of natural gas from Russia and cut its price.
• Oil and Gas Eurasia: Georgia Approves Sale of Pipeline Delivering Russian Gas To Armenia - The Georgian parliament has approved the sale of a trunk gas pipeline which pumps Russian gas across Georgia to Armenia. eighty-eight members of parliament favoured the law, while five voted against the measure.
• RenCap: Kazatomprom expects to get 50% interest in Russian enrichment plant
• Saba: Russian companies will to invest in Yemen - Several Russian investment delegations are to pay visits to Yemen to get acquainted with the environment investment in the country and to study the available opportunities in different sectors.
• VOR: New memorial date on Russia's calendar - September 2 may be declared an official memorial date in Russia to mark the end of World War. On that day in 1945, Japan, Hitler’s war ally, signed an act on unconditional surrender four months after Nazi Germany capitulated. The bill is undergoing parliamentary debates.
• Reuters: Russia to mark Japan surrender anniversary
• RIA: China may sign deal with Russia on fight against illegal migration in 2010-11 - China hopes to sign with Russia an agreement on the fight against illegal immigration this or next year, a high-ranking official from the Chinese Foreign Ministry said.
• RUSSIAN SPY ARRESTS IN US
o Itar-Tass: 10 suspect spies to be arraigned at US court - At 14:45, local time (22:45, Moscow time), the arrested will appear before US District Judge Kimba Wood. The charges will be read out to them, after which the suspects will say if they plead guilty or not.
o VOR: 'Russian spies' to formally face charges in NY
o Herald Sun: More names emerge on US-Russia spy list - MORE names have emerged on a list of Russians condemned for spying who could form part of an exchange for the members of an alleged Russian spy ring in the United States, a report said.
o AP: NY lawyer: Russian spy case could be resolved soon - Attorney Robert Baum, who represents defendant Anna Chapman, said late Wednesday the case might be settled when she and the other nine people arrested in the United States appear for arraignment on the indictment, raising the possibility of guilty pleas to the lowest charges and deportation from the country.
o Earthtimes: Spy suspects to make joint court appearance; swap talk grows
o NY Times: Russian Inmate Torn by Possible Deal, Backers Say
o Reuters: U.S.- Russia may seek spy swap to free agents
o Bloomberg: Russian Officials Seek Prisoner Swap in Spy Case, Lawyers Say
o Russia Today: Swapping spies: More than Cold War exchanges and Hollywood drama
o VOR: No chances for Russia-US spy scandal to grow into political one - The fact that Russia’s ambassador to the U.S., Sergey Kislyak met the US Undersecretary of State for Political Affairs William Burns can serve as a proof. The main thing is that all trial procedures are taking place only in New York. Actually, espionage charges have been dropped against the detained Russian citizens only in the media and not formally. Moscow Times: All Power to Russia’s Bungling Intelligence - By Valentin Prussakov
o Russia Today: Russia may have sent its spies to get CIA intelligence jobs – US congressman: “The ultimate goal may well have been that these [ten alleged Russian spies] were being implanted into the American society in order so that they later on put themselves in a position to get jobs in our own intelligence service, in the CIA,” Mr. Rohrabacher told RT.
o Guardian: A rocky road for US-Russian relations
• Asia Times: Europe keeps mum on Russian cobalt - Kosh-Agach is a steppe word meaning "so long, tree". It's the world's end, the driest and direst place in far-eastern Russia at a remote corner where the frontiers of Mongolia, Kazakhstan and China meet. It is also the location of a large reserve of rare metals, including cobalt. So rare is cobalt that since 2008, Russian law doesn't allow foreigners to dig it out of the ground, sell it or export it without special permission. So why has the European Bank for Reconstruction and Development (EBRD) spent US$30 million so far on investing in a project, details of which it insists on keeping secret?
National Economic Trends
• Prime-Tass: IMF says raised 2010 Russia’s economic growth forecast to 4.3%
• VTB Capital: CPI increases 0.1% WoW in the week to 5 July
• UralSib: Finance Ministry still very cautious on budget
• Bne: Kudrin's lonely fight for prudence continues
• Metropol: The State Duma approved lowering the rates on state-subordinated loans to Russian banks.
• Bne: Russia's wheat exports up 15.2% in 4M10
• Black Sea Grain: Russia Harvests 5.4 Million Tons Grain To July 7 - Ministry
• Reuters: Russia May Sugar Imports Leap on Lower Tariff
Business, Energy or Environmental regulations or discussions
• Bloomberg: Rosneft, Norilsk Nickel, Polyus Gold: Russian Equities Preview
• Bloomberg: RTS Index Climbs for Third Day This Week on Oil, U.S. Data
• Aton: Putin proposes canceling property tax on airports
• Aton: Auto producers to benefit from customs union
• RBC: SUEK's subsidiary nearing debut bond issue
• RenCap: Mechel strengthens steel division's sales arm with Turkish acquisition
• RenCap: Severstal ups Crew Gold stake to 36.22%
• Reuters: UPDATE 1-Norilsk shareholder Interros opposes new board vote
• Alfa Bank: Rusal says it will call Norilsk Nickel EGM
• Reuters: Russia's Sistema to sell rest of real estate unit to VTB-paper
• Alfa Bank: AFK Sistema may sell its 27.6% stake in Sistema-HALS to VTB
• RenCap: OGK3's missing cash: A crucial test for government
• MarketWatch: Russia! Magazine: Helsinki Commission May Investigate Possible Link Between Philip Morris and Corrupt Russian Officials
• Bne: Yeltsin-era oligarch business collapses amid first Eurobond default since 1998
• RenCap: Mid-cap Russian banks: Transitioning through 2010
Activity in the Oil and Gas sector (including regulatory)
• Bloomberg: Chevron, Rosneft Black Sea Oil Deal Dependent on Tax Relief
• Reuters: Chevron to get 1/3 stake in oil JV with Rosneft –sources
• Moscow Times: Chevron to Get 33% Stake in Black Sea Project With Rosneft
• UralSib: Bashneft buyout offer results announced
• Bloomberg: Russia Challenges Middle East on Oil to Asia: Energy Markets
Gazprom
• Itar-Tass: Gazprom opens representative office in Riga
• Reuters: UPDATE 1-FMC Tech signs $190 mln deal with Russia's Gazprom
• PR Newswire: Gazprom Awards FMC Technologies $190 Million Subsea Equipment Contract
• MIA: South Stream project to be signed in September - Head of Gazprom Aleksey Miller is coming to Macedonia to sign a contract on South Stream. The overall project for installing gas in Macedonia is estimated at EUR 300 million. Russian and Macedonian companies are expected to participate only in closing down of the clearing debt.
• Barentsnova: Mikhalchuk and Mandel discussion: LNG construction at Novaya Zemlya
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Full Text Articles
Basic Political Developments
Itar-Tass: Medvedev to hold offsite meeting on information society in Russia
08.07.2010, 01.22
MOSCOW, July 8 (Itar-Tass) - Russian President Dmitry Medvedev will travel to the town of Tver on Thursday to hold an offsite meeting of the Council for developing an information society in Russia. It will assess the interim results and prospects of work in priority areas of using IT in the social sphere.
President Medvedev will make an opening speech. After him, the heads of the Council’s respective working groups will deliver their reports. They include Minister of Education and Science Andrei Fursenko, Minister of Public Health and Social Development Tatyana Golikova, Culture Minister Alexander Avdeyev as well as Leonid Reiman, presidential adviser and the secretary of the Council for developing an information society.
The Council is a conciliatory body under the Russian president. It was set up in November 2008. It ensures interaction among the federal bodies of state power, regional bodies of state power, local self-government bodies, public associations, scientific and other organizations in questions of developing an information society in Russia.
Itar-Tass: Vietnamese Communist leader to arrive in Russia
08.07.2010, 05.38
MOSCOW, July 8 (Itar-Tass) - The General Secretary of the Central Committee of the Vietnamese Communist Party Nong Duc Manh will arrive in Russia for an official visit on Thursday at the invitation of Russian President Dmitry Medvedev.
“The Russian-Vietnamese high-level talks will be held on July 9,” the Kremlin press service reported.
Nong Duc Manh will meet the speakers of both chambers of Russian parliament: the Federation Council and the State Duma, as well as Communist Party leader Gennady Zyuganov. The Vietnamese leader will visit St. Petersburg.
The Russian-Vietnamese talks will focus on expansion of Russian-Vietnamese economic and political interaction.
Four cooperation agreements in the oil and gas sector are to be signed with the Zarubezhneft Company. A joint Vietnamese-Russian venture ’ Vietsovpetro’ has been operating since 1981. Zarubezhneft and Petrovietnam, Vietnam’s Oil and Gas Group, one of the world’s biggest oil companies, founded it.
Russia has a “mirror structure” of this joint venture. The Rusvietpetro Company has launched its first project in the Yamal-Nenets Autonomous District.
The sides will also discuss the construction of the first nuclear power station in Vietnam’s Ninh Thuan Province. The construction works are to begin in 2014. The station will begin operation by 2020. The State Corporation Rosatom will be Vietnam’s partner in this project.
Tourism will be another vital topic for discussion. Seventy thousand Russians reportedly visited Vietnamese resorts in 2008.
Bilateral trade relations are also on the rise. Reciprocal trade volumes exceeded 1.4 billion dollars in 2008. There are plans to increase the figure to three billion dollars in 2010. Russia and Vietnam develop inter-regional ties.
The construction of a new Vietnamese cultural and business centre in the northeast of Moscow will contribute to bilateral cooperation. It will house exhibition space, sport and business complexes and a hotel.
In turn, the construction of the House of Moscow is to be launched in Hanoi soon.
VOR: Vietnam to get nuclear plant
|Jul 8, 2010 06:44 Moscow Time |
The Vietnamese Communist Party boss Nong Dyk Man is arriving in Moscow for talks which are expected to produce agreements to exchange business centres, facilitate Russian holiday-making on Vietnamese territory and also develop Vietnam’s oil and gas and build its first nuclear power plant, with Russian help.
His interlocutors will include President Dmitri Medvedev, the Speakers of both Houses of Parliament and the Russian Communist leader Gennadi Ziuganov.
RIA: Moldova's Constitutional Court postpones hearings on anti-Soviet decree
12:34 08/07/2010
Moldova's Constitutional Court postponed until July 12 a hearing on the legitimacy of a decree establishing Soviet Occupation Day proposed by the country's acting president, a chief justice said.
The court session was to take place on Thursday, but was delayed following a request by acting President Mikhai Ghimpu. The president said he wanted to attend the hearing, but was unable to be present at the court because he had much work.
Ghimpu, who is also the parliament speaker, signed a decree on June 24 establishing June 28 as Soviet Occupation Day in the country and ordered a Monument to the Victims of Soviet Occupation to be erected in front of the government building.
The decree, which has been widely criticized by Moldovan citizens, ordered mourning ceremonies to be held across the country and national flags to fly at half mast. The president also demanded that Russian troops be immediately withdrawn from the republic.
On June 28, 1940, at a U.S.S.R. request, royal Romania withdrew its troops from Bessarabia and Northern Bukovina, which it had been occupying since 1918, and the region joined the Soviet Union. The Moldavian Soviet Socialist Republic, including six Bessarabia districts as well as six areas from the left bank of the Dnester, was established in August 1940.
Ghimpu was made acting Moldovan leader in September 2009 when the country's liberal-democratic coalition was forced to find a compromise after failing to appoint another candidate. The acting president is known for his sweeping pro-Romanian policies. Recent polls show that Ghimpu's popularity rating is less than 2%.
The appeal to the Constitutional Court was initiated by the Moldovan Communist Party, which fiercely opposed Ghimpu's decree calling it unconstitutional.
The communists said in their statement to the court that Ghimpu violated 13 articles of the country's Constitution by signing the decree, in particular an article on Moldova's sovereignty and integrity.
CHISINAU, July 8 (RIA Novosti)
Bloomberg: Russia Seeks Control of Kyrgyz Military Plant, Kommersant Says
By Ilya Khrennikov
July 8 (Bloomberg) -- Russia seeks a controlling stake in OAO Dastan, Kyrgyzstan’s only military plant, which makes marine torpedos, in exchange for part of the country’s debt, Kommersant reported, citing Russia’s Foreign Affairs Ministry.
To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@
Last Updated: July 8, 2010 00:18 EDT
RIA: Russian paratroopers recalled from Kyrgyzstan
11:37 08/07/2010
Russian paratroopers have returned to their home base in Russia from Kyrgyzstan, a Russian Defense Ministry spokesman said on Thursday.
Russia sent additional paratroopers to the Central Asian state amid bloody interethnic riots in the republic's south. Clashes between ethnic Kyrgyz and Uzbeks claimed the lives of up to 300 people, according to official figures, with an unofficial death toll exceeding 2,000.
The paratroopers were sent in mid-June to enhance security at Russia's Kant military base in the country's north, some 20 kilometers (12 miles) outside the capital, Bishkek.
A total of 270 troops have been recalled from Kyrgyzstan as tensions in the republic have eased, Alexander Cherednik said. Two more paratrooper companies remained at the base, he said.
More than 1,500 people were displaced by the June unrest in the Central Asian republic. A state of emergency was declared in the Jalalabad region and several districts of the Osh region, where the clashes took place.
The situation in the republic remains strained since large-scale opposition protests overturned President Kurmanbek Bakiyev in April, bringing the interim government to power. Bakiyev fled the country and has taken refuge in Belarus.
The country held a referendum on June 27, which turned the country from a presidential to a parliamentary republic and made the interim prime minister, Roza Otunbayeva, the country's president for a transitional period until 2012. The reform is designed to bring stability to Kyrgyzstan.
MOSCOW, July 8 (RIA Novosti)
Trend.az: Paratroopers guarding an air base in Kyrgyzstan Ulyanovsk returned to Russia
GOOGLE TRANSLATION
08/07/2010 11:08
Airborne Divisions, to improve the protection of the Russian airbase at Kant in Kyrgyzstan, where in mid-June in the southern areas of inter-ethnic clashes occurred on Wednesday returned to their places of permanent deployment, told RIA Novosti on Thursday, the official representative of management's press service and information, the Defense Ministry on the Air Amphibious Force, Colonel Alexander Cherednik.
He said the unit gain of Kant air base, from the 31-th Guards separate landing-assault brigade, returned to Russia in connection with the reduction of tensions in Kirghizia.
"Three Il-76 military transport aircraft transported 270 troops brigade under the command of Colonel Dmitry Gluschenkova" - said Cherednik.
Marines were directed at Kant airbase on June 13 in connection with the deteriorating situation in Kyrgyzstan. Currently, the remaining two companies of paratroopers continue to protect military installations.
In southern Kyrgyzstan, in June there were armed clashes between the residents there Kirghiz and Uzbeks. According to official data, in Jalal-Abad and Osh killed about 300 people. The authorities recognize that victims may be many times more.
Over half a million people fled their homes. In Jalal-Abad and Osh some areas of the republic regime was introduced emergency, which continues to operate today.
RIA: Kyrgyzstan to restore damaged South with Russian money
10:23 08/07/2010
BISHKEK, July 8 (RIA Novosti) - Kyrgyz authorities plan to allocate $100 million from a Russian loan received in 2009 to restore the violent-hit southern regions back to normal, a deputy prime minister from the country's interim government said on Thursday.
"The interim government plans to allocate $100 million from the $300 million Russian loan... to restore the devastated southern part of the country," Temir Sariyev said at a press conference.
Some $450-500 million will be steered into restoring housing in the violence-hit Osh and Jalalabad regions within the next 18 months, he said.
Interethnic clashes in the south of the Central Asian state broke out on June 11 and claimed the lives of more than 280 people, according to government figures, and made thousand homeless. However, Kyrgyz officials acknowledge that the real death toll may be 10 times higher.
According to latest figures, 2,500 buildings, including 1,900 residential buildings, were destroyed during the clashes, Zhantoro Satybaldiyev, who heads the state board for restoring the Osh and Jalalabad regions.
RIA: U.S., Russian diplomats discussed Medvedev's visit in Washington
03:44 08/07/2010
U.S. Under Secretary for Political Affairs William Burns and Russian Ambassador to the United States Sergei Kislyak discussed a recent official visit of the Russian president, the U.S. Department of State said.
Russian President Dmitry Medvedev paid an official visit to the United States two weeks ago first stopping in California and then in Washington D.C. for talks with President Barack Obama.
"Under Secretary Burns meets regularly with Ambassador Kislyak, and at this morning's meeting, they reviewed the recent visit by President Medvedev, discussed how to implement the various agreements and as well as other bilateral issues," Mark Toner, an acting deputy department spokesman, told a daily press briefing.
He added that the high-ranking diplomats also discussed a recent spy scandal between the United States and Russia, but refused to give any details.
The reset of Russian-U.S. relations was threatened following the espionage scandal on the arrest on June 29 of 11 people allegedly spying for Russia. However, the both countries pledged the espionage row would not affect bilateral ties.
MOSCOW, July 8 (RIA Novosti)
JULY 7, 2010
WSJ: On Pentagon Wish List: Russian Copters
By NATHAN HODGE
WASHINGTON—The Obama administration's recent lifting of sanctions against Russia's state arms exporter could boost orders for Russian aircraft from a somewhat-unexpected customer: the U.S. military.
As part of its effort to equip the militaries of Afghanistan, Iraq and Pakistan, the Pentagon has in recent years been snapping up helicopters and fixed-wing aircraft from the arsenals of its former Cold War rivals, including Russia. The goal is to help the three countries build air forces that are rugged, affordable and easy to operate.
Washington sanctioned Rosoboronexport, Russia's state arms dealer, in 2006 for its dealings with Iran, and lifted those restrictions in May as part of an effort to win Moscow's support for new Iran sanctions.
But even as the move could open the door to more purchases of Russian-made helicopters, U.S. lawmakers are complaining about a lack of oversight of the procurement process and asking the military to consider buying more American-made aircraft.
A Department of Defense spokeswoman said the Pentagon had received "several inquiries" from lawmakers about the purchase of Russian-made Mi-17 helicopters, adding that the department issued a report to Congress in March addressing the issue.
"Analysis conducted by [U.S. Central Command] in 2005 identified the Mi-17 as the most cost-effective means—at the time—for addressing the operational requirements of Iraq, Afghanistan, and Pakistan," the spokeswoman said.
The Mi-17 helicopter is a workhorse transport aircraft seen as versatile and easy to maintain. The U.S. has spent more than $800 million over the past several years to buy Mi-17s; a single Mi-17 costs around $12 million, according to the State Department, although figures vary depending on the contract, and congressional critics say the price tag can be higher.
The helicopters are mostly used for airlifting troops and equipment to fight insurgents in remote regions.
Richard Aboulafia, an aviation analyst with the Teal Group, an aerospace and defense consultancy, said Soviet-bloc aircraft are "cheap to operate because of simplicity of design," and the militaries of these countries have "worked with them before."
Acquiring such aircraft wasn't easy after the 2006 ban on trade with Rosoboronexport. To meet the Pentagon's orders, private companies acquired civilian-model Russian-made helicopters and converted them for military use, said people familiar with the transactions.
With the lifting of the sanctions, more Russian helicopter purchases could be in the works. Following a June meeting between President Barack Obama and his Russian counterpart Dmitry Medvedev, the two sides announced in a joint statement they were "working on the possibility of assisting Afghan security forces by supplying Russian-made helicopters and spare parts." The Pentagon declined to provide further details.
The U.S. military's efforts to help its foreign allies build low-budget air forces are facing increased scrutiny in Congress, with some lawmakers questioning the approach. The Mi-17 procurement "either had uncoordinated oversight or simply none at all" by the government, Sen. Richard Shelby (R., Ala.) said in an interview. "The results have led to massive waste, cost overruns, schedule delays, safety concerns, and major delivery problems," he said. He urged the government to "analyze alternative airframes, and select the best helicopter for the mission."
In response, the military has argued that Mi-17s could be procured relatively quickly, while the production lead time required to get U.S.-made alternatives to field was lengthy, in some cases two or three years.
Some U.S. lawmakers want the government to consider buying American-made equipment to support the U.S. economy. The House version of the fiscal 2011 defense-authorization bill says U.S.-made helicopters should be among the options when the U.S. considers buying aircraft for the Afghan air force.
Pakistan has received 10 Russian-made helicopters at U.S. taxpayer expense, and U.S. counterinsurgency funds have paid for the overhaul of a dozen Pakistani Mi-17s.
Iraq's military operates a fleet of 18 Mi-17s, with another 22 on order, eight of which were paid for by the U.S. government. The Department of Defense has bought 31 Mi-17s for Afghanistan's security forces, and the pending defense budget for fiscal 2011, beginning in October, includes a $180 million request for the procurement of 10 additional Mi-17s for Afghanistan.
"I would love to transition this to all-Western [aircraft], as a U.S. pilot and aviator," said Air Force Brig. Gen. Michael Boera, who oversees the effort to strengthen Afghanistan's air forces. "But the fact remains I need to make decisions based on what's best for the Afghans."
Write to Nathan Hodge at nathan.hodge@
MID.ru: Minister of Foreign Affairs Sergey Lavrov Meets with Italian Minister of Foreign Affairs Franco Frattini
953-07-07-2010
Minister of Foreign Affairs of the Russian Federation Sergey Lavrov held talks on July 6, in Moscow, with Italy’s Minister of Foreign Affairs Franco Frattini, who is in Russia to attend the eleventh session of the Russian-Italian Council on Economic, Industrial, and Monetary and Financial Cooperation.
The talks, held in the traditional frank and confidential atmosphere for Russian-Italian dialogue, confirmed the strategic character of Russian-Italian interaction.
The ministers discussed key issues in bilateral relations, including the schedule of Russian-Italian contacts at Summit and Ministerial levels in the second half of this year.
Considerable attention was paid to the current international issues. Particular emphasis was placed on the set of issues related to Euro-Atlantic security. The Russian side stressed the need for the creation of a new European security architecture in light of the initiative of the President of the Russian Federation to conclude an appropriate legally binding international treaty. The Italian side confirmed its interest in work toward this end. The foreign ministers of both countries also noted the importance of reinvigorating equal cooperation between Russia and the North Atlantic Treaty Organization, including at the venue of the Russia-NATO Council, as one of the elements of the Euro-Atlantic architecture.
The parties also considered in depth the theme of Russian relations with the European Union in light of the outcomes of the Russia-EU summit held in Rostov-on-Don, 31 May-1 June, 2010, including prospects for crisis management cooperation and the modernization partnership. Franco Frattini reaffirmed Italy's open position in favor of removing visa barriers to travel by citizens of Russia and the EU.
The heads of the foreign affairs agencies of both countries exchanged views on the results of the OSCE Corfu Process, reviewed progress in the preparations for a ministerial meeting of the member countries of the Organization in Almaty on July 16-17, and discussed the prospect of convening an OSCE summit.
Lavrov and Frattini spoke out in favor of increasing efforts to find a settlement in different regions of the world. In particular, the situation in the Middle East was considered from this vantage point.
July 7, 2010
RIA: Italian energy giant may take part in Skolkovo project
11:59 08/07/2010
Italy's largest power company Enel may take part in Russia's Skolkovo innovation hub, the company's CEO Fulvio Conti said on Thursday.
Skolkovo, dubbed Russia's Silicon Valley, is being built from scratch 20 km (12.4 miles) outside of Moscow. The center will focus on research in five priority spheres: energy, information technologies, communication, biomedical research and nuclear technologies.
Conti said Enel was highly interested in developing innovations, but the Russian government "should make a firm proposal" concerning the participation of the Italian company in the research hub.
"A decision on participating in the Skolkovo project would be taken after we examine all the conditions: figures, plan, profit rate," Conti said, adding that first of all the energy giant would like to see the conditions of participating and evaluate them.
Enel produces, distributes and sells electricity and gas across Europe, North and Latin America. The company has a presence in 22 countries with approximately 95 GW of generating capacity and serves nearly 60 million power and gas customers.
Russia considers the development of the high-tech and innovation sector a top priority, pledging billions of dollars to finance the sphere.
MOSCOW, July 8 (RIA Novosti)
Standart: US Ambassador James Warlick: Bulgaria's agreements with Gazprom should be public
Sofia is strengthening ties with Greece and Turkey, the construction of NPP Belene's first reactor has been frozen due to lack of cash
US ambassador in Sofia James Warlick said that the gas supply agreements between the Bulgarian government and Russia?s Gazprom should be made public. A day after the visit of Russia's deputy PM Viktor Zubkov and Gazprom Deputy Chief Alexander Medvedev to Sofia, who came to discuss the amended agreement for supply of Russian natural gas to Bulgaria, US Ambassador in Sofia James Warlick held talks with Bulgaria?s Economy and Energy Minister Traycho Traykov.
"I understand that the Bulgarian people want to know who inflates the consumer price of the Russian natural gas with more than 30%, but this cannot happen as long as the gas supply agreements are confidential,' Mr. Warlick said.
On his part, Minister Traykov assured the American ambassador that he will insist on the new agreements being made public.
Mr. Warlick emphasized once again that the diversification of the energy supplies to Bulgaria is of fundamental importance to the security of the whole region.
?Our position on the realization of the NPP Belene project has not changed,? Mr. Traykov said answering a question of the US ambassador.
After the Warlick-Traykov meeting, PM Boyko Borissov came up with a statement, in which he emphasized the importance of Bulgaria?s energy independence.
The Prime Minister also reiterated that the state currently does not have enough free capital to finance the construction of the Belene power plant?s first reactor.
?We are seeking a European investor for the realization of this project,? he added.
Meanwhile, it became clear that Sofia and Moscow will sign an agreement on the realization of the South Stream project on July 16.
Team of Srandart
Sofia Echo: President Purvanov hits back at US ambassador over transparency in energy projects
Thu, Jul 08 2010 10:14 CET byClive Leviev-Sawyer 196 Views
Bulgarian President Georgi Purvanov has reacted to United States ambassador James Warlick’s call for transparency about Bulgaria’s natural gas supply dealings with Russia by saying that there is complete transparency – and "advising" ambassadors in Sofia not to give so much advice about Bulgaria’s domestic and regional policy issues.
At the same time, Purvanov was reported by mass-circulation daily 24 Chassa to have said that he supported Prime Minister Boiko Borissov’s call for checks into natural gas deals.
The profits being made by intermediaries should be disclosed publicly to expose the profits they were making at the expense of Bulgarian consumers, 24 Chassa reported Purvanov as saying.
Purvanov said that for years he had called for intermediaries to be removed from the process, to reduce the consumer price of gas.
On July 7 2010, Bulgarian National Radio reported Warlick as requesting an urgent meeting with Economy, Energy and Tourism Minister Traicho Traikov for details about the Bulgaria – Russia natural gas dealings, and called on Borissov to stick to his undertaking for Bulgaria to develop energy diversity.
In an interview with mass-circulation daily Trud, Warlick said he wanted to know what steps had been taken to prevent Bulgaria from being dependent on a single supplier.
Bulgarian National Television, in a July 7 reported, quoted Warlick as saying that he had two basic questions. First, what the Government could demonstrate in the direction of energy diversity, after talking about the issue during the year that it had been in power.
His other question for Traikov was what had happened about the transparency of contracts with Gazprom.
Warlick asked whether Bulgarian citizens were prepared to pay 30 per cent higher prices for gas "and maybe after a year or five years, an increase of 50 per cent or more?"
"But there is no way to know because all agreements are secret for now," Warlick said.
In a statement the same day, Traikov’s ministry said that Bulgaria and Russia were in active discussions about the South Stream natural gas pipeline project, with meetings at expert level this week on the roadmap. On July 16, Traikov will meet Alexander Medvedev, deputy head of the executive board of Gazprom, for talks.
According to Bulgarian National Television, so far only the US ambassador had requested a meeting with Traikov about the energy issue, but after meeting Warlick, Traikov "did not deny" that meetings with other diplomats were likely.
Existing contracts with Gazprom are unlikely to become transparent, Traikov said, because they contained secrecy provisions that the Russians jealously guarded.
Warlick said after meeting Traikov had the minister had been "very open", had helped to clarify what had happened in the Bulgarian-Russian talks earlier this week, and had given an assurance that Bulgaria’s Government was 100 per cent committed to diversifying its energy sources and achieving transparency in the energy sector.
"Now is in your hands to keep track of whether it will fulfill these commitments," Warlick said, Bulgarian National Television reported.
Novinite: Bulgarian Prosecution May Shy Away from Checking Gazprom Deals
Energy | July 7, 2010, Wednesday
Bulgaria’s Prosecutors Office is not certain whether it will launch an investigation of the country’s 2006 natural gas deals with Russia’s Gazprom despite the request of Prime Minister Boyko Borisov.
Last week Borisov and his cabinet blamed the Stanishev government for succumbing to Gazprom pressure in 2006 and agreeing to gradually increasing the money Bulgaria pays for Russian gas between 2007 and 2012.
The Cabinet has especially blamed former Socialist Economy and Energy Minister Rumen Ovcharov, and said it was Ovcharov’s deals with the Russians back in 2006 that led to a staggering 25% hike of natural gas prices in Bulgaria as of July 1, 2010.
Earlier on Wednesday, Bulgaria’s Economy Minister Traicho Traikov said the country will insist on a reduction of 25%-33% of the price it pays for Russian gas.
Prime Minister Boyko Borisov said all relevant documents will be handed to the prosecutors, and that he expected “sever” sentences for those who allegedly betrayed Bulgaria’s interests in dealing with Gazprom.
On Wednesday, Bulgaria’s Chief Prosecutor Boris Velchev has confirmed that his institution has received from the government “a very detailed analysis of the contracts for the supply of gas from the Russian company Gazprom.”
However, he also made it clear that the prosecutors might refuse to start a new investigation because several months ago the Gazprom contracts were inspected at the request of Maria Kapon, a former rightist MP, and no violations have been found.
Velchev said his office will compare the new data submitted by the Borisov government with its previous investigation to determine whether there are grounds to start tackling the issue again.
Bulgaria’s gas deals with Gazprom are confidential because of a clause that requires the consent of both parties to make them public – a request made by Economy Minister Traikov recently but rejected by Gazprom, in Traikov’s own words.
Novinite: Bulgaria Energy Experts Negotiate Gas Price in Moscow
Energy | July 8, 2010, Thursday
A delegation of Bulgarian experts will hold energy talks with giant Gazprom in Moscow in a bid to eliminate the notorious intermediaries in the purchase of natural gas from Russia and cut its price.
The meeting comes days after the visit of Russian Deputy Prime Minister Viktor Zubkov to Sofia, during which he expressed astonishment at high gas prices in Bulgaria and vowed to ensure lower sale prices of Russian gas in the nearest future.
The meeting also made clear that Bulgaria does not view Russian energy projects as unfavorably as was previously apparent, with Prime Minister Boyko Borisov expressing commitment to the South Stream gas pipeline, among other joint projects.
Bulgaria's contracts for gas delivery with Russia expire 2011-2012. Shedding intermediaries has been a long-time ambition of Bulgaria, but in April it was announced that negotiations with Gazprom have marked little progress.
Bulgarian officials say the gas price can by cut by one third, should Bulgaria succeed in changing the way it is calculated.
07.07.2010
Oil and Gas Eurasia: Georgia Approves Sale of Pipeline Delivering Russian Gas To Armenia
The Georgian parliament has approved the sale of a trunk gas pipeline which pumps Russian gas across Georgia to Armenia. eighty-eight members of parliament favoured the law, while five voted against the measure.
Despite the law being passed by parliament, the Georgian opposition does not share the majority's enthusiasm for the sale which they say will be "an energy and economic threat to Georgia", RBK reports.
Parliament members of the opposition suggest that instead Georgia should retain a 51 per cent stake in the pipeline and remain the pipeline operator. The majority however, deemed the "Russian threat" exaggerated and passed the law. Another argument used in favor of the sale was the fact Tblisi believes "private companies are more effective in managing such sites than the government".
The trunk pipeline was built in the 1970s. it has not been upgraded since 1980.
Copyright 2010, Oil and Gas Information Agency. All rights reserved.
RenCap: Kazatomprom expects to get 50% interest in Russian enrichment plant
Renaissance Capital
July 8, 2010
Event: Kazakhstan and Russia may give Kazatomprom 50% ownership in the Urals Electrochemical Plant, which could start enriching uranium as early as next year; a decision on the ownership of the plant is expected this year. Kazakhstan and Russia control about 25% of the world's uranium reserves and are developing the uranium enrichment plant to sell nuclear fuel on the global market. Kazakhstan became the largest uranium-mining country in 2009, producing 13.9kt of uranium, and it plans to produce 18kt of uranium in 2010, and to increase annual production to 25kt by 2015.
Action: We think the news is positive for Kazakhstan's uranium producers, which might get easy access to Russian enrichment facilities.
Rationale: Cooperation between Kazakhstan and Russia in uranium production and enrichment would facilitate Uranium One's management of its uranium stocks, we think. The uranium miner recently announced a deal with Russian state corporation Atomredmetzoloto, which will obtain control of Uranium One in exchange for several Kazakh mining assets and $610mn in cash. The deal should result in increasing purchases of uranium by Russian customers and greater turnover for Uranium One, in our view.
Marina Alexeenkova
Saba: Russian companies will to invest in Yemen
| |
[08/July/2010]
SANA'A, July 08 (Saba) - Well-informed sources said on Thursday that a number of major companies in Russia have voiced their will to invest in Yemen in various areas.
The weekly 26 September cited the sources as saying that Russian energy, electricity and gas companies expressed, during the last visit of President Ali Abdullah Saleh to Moscow, their desire to establish strategic economic projects availing from the great facilities the government gives to the foreign capitals in Yemen.
Several Russian investment delegations are to pay visits to Yemen to get acquainted with the environment investment in the country and to study the available opportunities in different sectors.
It is worth to mention that a Russian oil company announced last week its desire to buy U.S.-based Hunt Oil's stake in Yemen's Liquefied Natural Gas (LNG) project.
AF/AF
Saba
VOR: New memorial date on Russia's calendar
|Jul 8, 2010 09:50 Moscow Time |
September 2 may be declared an official memorial date in Russia to mark the end of World War. On that day in 1945, Japan, Hitler’s war ally, signed an act on unconditional surrender four months after Nazi Germany capitulated. The bill is undergoing parliamentary debates.
Reuters: Russia to mark Japan surrender anniversary
1:09am IST
MOSCOW (Reuters) - Russian lawmakers gave preliminary approval on Wednesday to a bill that would make the anniversary of Japan's surrender an official "Day of Remembrance" marking the end of World War Two.
The vote in the Kremlin-controlled State Duma, the lower parliament house, comes with no resolution in sight to a territorial dispute that has prevented Moscow and Tokyo from signing a peace treaty formally ending hostilities.
Russia celebrates Nazi Germany's defeat with a military parade on Red Square on the annual Victory Day holiday on May 9.
But the Kremlin has paid far less attention to the fighting against Japan -- a minor coda, in the minds of many Russians, after the defeat of an invader that overran a large swath of the country and killed millions of its soldiers and citizens.
Sponsors of the proposal to mark Sept. 2 as the Day of the End of the Second World War, which passed in the first of three required Duma readings, said it was meant to remedy that.
The remembrance day would pay tribute to "our countrymen who displayed self-denial, heroism and fidelity ... while implementing the decision of the Yalta Conference of 1945", Itar-Tass quoted lawmaker Viktor Zavarzin as saying.
At Yalta, Soviet leader Josef Stalin agreed to enter the conflict in the Pacific region after the war in Europe ended, and Soviet forces invaded Japanese-held territory on Aug. 9 -- the day the United States dropped an atomic bomb on Nagasaki.
Japan formally surrendered in a Sept. 2 ceremony aboard a U.S. battleship.
The Soviet Union and Japan never signed a peace treaty, and a dispute over a chain of islands north of Japan that the Soviet Union held at the end of the war still persists.
The islands, which Russia calls the Southern Kurils and Japan calls the Northern Territories, are a frequent topic of high-level talks, but there is no sign a resolution is near.
Like other remembrance days such as Cosmonauts Day and the recently instituted day marking the adoption of Christianity by Russia's precursor, Sept. 2 would not be an official day off from work, which means it might attract little notice among the general populace.
(Writing by Steve Gutterman)
RIA: China may sign deal with Russia on fight against illegal migration in 2010-11
07:11 08/07/2010
China hopes to sign with Russia an agreement on the fight against illegal immigration this or next year, a high-ranking official from the Chinese Foreign Ministry said.
"If the agreement will not be signed this year, it will be definitely signed next year," said Zhang Hanhui, a deputy director of the ministry's Department of European-Central Asian Affairs.
The diplomat said that illegal immigration as a term must still be defined.
"Many Chinese people do not want to take roots in Russia, but are keeping private business on a short-term basis. In order to do this it is necessary to have a registration, while some Russian departments are creating artificial barriers [to obtain registration]," he said.
Many Chinese are stating education as a purpose for their visit to Russia, when applying for a visa, but in reality they come to do private business.
Although this is a violation of laws, Hanhui said, China does not consider them as illegal immigrants.
He added that China is ready to provide Russia with legal workforce, but "the central Russian government has not allocated quota for this."
BEIJING, July 8 (RIA Novosti)
RUSSIAN SPY ARRESTS IN US
Itar-Tass: 10 suspect spies to be arraigned at US court
08.07.2010, 09.46
NEW YORK, July 8 (Itar-Tass) - Ten suspects arrested by the US authorities on charges of espionage for Russia on Thursday will appear at the US federal court of the southern district in New York where they will be arraigned. On Wednesday, the US federal prosecutors brought indictment in which the suspects are charged with a conspiracy to act as secret agents of the Russian Federation government without notifying in advance the secretary of justice, as well as with money laundering.
The indictment lists the names of 11 people – Christopher Metsos, Richard Murphy, Synthia Murphy, Donald Howard Heathfield, Tracey Lee Ann Foley, Mikhail Kutzik, Natalia Pereverzeva, Juan Lazaro, Vicky Pelaez, Anna Chapman and Mikhail Semenko. Metsos is at large as after he was arrested in Cyprus on June 29 and released on bail, he disappeared.
Ten of 11 suspects were arrested in the United States on June 27. All of them were bought the same preliminary charges of law violation contained in documents sent to the US southern district court in New York. Therefore, the suspects arrested in other US cities will be convoyed to New York from Alexandria (Virginia) and Boston.
At 14:45, local time (22:45, Moscow time), the arrested will appear before US District Judge Kimba Wood. The charges will be read out to them, after which the suspects will say if they plead guilty or not.
All 10 defendants since the moment of their arrest are in custody. Although on July 1 the court made a decision to release Vicky Pelaez on bail of 250,000 US dollars and put her under house arrest, she is still in custody, because the reelase has been suspended until Friday when the prosecutors intend to appeal the decision at the federal district court.
According to Reuters, quick guilty pleas would avoid lengthy trials that officials fear may undercut improving US-Russia relations. The two countries are cooperating on Russia’s bid to join the World Trade Organisation, the global standoff over Iran’s nuclear programme and other issues.
The Russian lawyer said the proposed plan includes exchanging Russian nuclear expert Igor Sutyagin, who was sentenced to 15 years in jail in 2004 for passing classified military information to a British firm which prosecutors said was a front for the US Central Intelligence Agency. “They want to exchange Sutyagin for one of those arrested in the United States for spying,” Anna Stavitskaya, a lawyer acting for Sutyagin, told Reuters. “It is a one-for-one exchange. So each of those detained in the United States will be swapped for one person from Russia.”
The alleged Russian spy ring has been major news in the United States since counter-intelligence agents arrested the 10 people last month on suspicion of acting as deep-cover members of a network sent to infiltrate US policymaking circles. An 11th suspect was arrested in Cyprus but then disappeared after being granted bail.
Federal prosecutors in New York unsealed a grand jury indictment charging all of the suspects with acting as unregistered foreign agents and nine of them with conspiracy to commit money laundering, the agency reported. Three suspects held in Virginia and two in Boston were ordered to be sent to Manhattan, court papers said. Two of the Virginia detainees have admitted they were in the United States under fake names, according to prosecutors. Only one of the 10 suspects in US custody – Vicky Pelaez, a columnist for the New York Spanish-language daily El Diario - has been granted release pending trial. The government has appealed that decision and a bail hearing has been set for Friday.
A lawyer representing another of the suspects, Anna Chapman, said he was in contact with Russian officials and that they had met with Chapman in jail. “We are in very sensitive discussions ... about a possible resolution of her case,” federal defender Robert Baum said in an email to Reuters.
US and Russian officials have vowed the spy case will not set back the broader relationship and US officials appeared eager to play down the affair.
William Burns, under secretary of state for political affairs, touched on the spy case in talks with the Russian ambassador on Wednesday, State Department spokesman Mark Toner said without giving any details. “I’d have to refer you to the Justice Department on any speculation about a spy swap,” Toner said.
Justice Department officials declined to comment. A spokeswoman for Russia's Foreign Intelligence Service (SVR) also declined to comment and no Russian official has yet confirmed that a swap could take place.
While there had been speculations that the arrests of the alleged spies, which occurred barely 72 hours after President Medvedev’s White House visit, might cast a shadow over President Obama’s effort to transform the relationship between the US and Russia, on June 30th the US administration said that it would not expel Russian diplomats and it expressed no indignation that Russia had apparently been caught spying on it.
In its July 1, 2010, issue, The Economist wrote: “The revelations have caused embarrassment in Moscow, not so much because Russia was caught spying on America, but because it did it so clumsily. Old KGB spies this week lamented the decline in professional standards.”
VOR: 'Russian spies' to formally face charges in NY
|Jul 8, 2010 09:27 Moscow Time |
Ten people accused of spying for Russia are expected to face official charges in New York on Thursday. However, The New York Times says it may happen that ‘Russian spies’ will not go on trial as the detainees` lawyers have been negotiating with the U.S. government a prompt resolution of the case. If the accused admit their guilt in minor crimes, they will be deported to Russia. Yet none of the detainees has been charged with espionage and leaking classified information.
Some Russian and foreign media say ten ‘Russian spies’ could be exchanged for the release of Igor Sutyagin, a former arms control researcher for a Russian institute in Moscow, who was convicted in 2004 of treason and espionage for selling information on nuclear submarines to a British company that was a C.I.A. front in the late 1990s.
Herald Sun: More names emerge on US-Russia spy list
From: AFP
July 08, 2010 4:41PM
MORE names have emerged on a list of Russians condemned for spying who could form part of an exchange for the members of an alleged Russian spy ring in the United States, a report said.
The lawyer of Igor Sutyagin, jailed in 2004 for 15 years on charges of spying for the United States, said Wednesday he had been told he would be released as part of the swap for the suspects detained in the United States.
The Kommersant daily said the list of the Russian convicts who would form part of the swap included former members of the Russian secret services condemned for spying for the West.
They included Sergei Skripal, a former colonel with Russian military intelligence who it said was sentenced in 2006 to 13 years jail on charges of spying for Britain.
It quoted Ernst Cherny, the head of the committee for protection of researchers, who claims to have seen the list, as saying that Skripal's name was among those listed.
Sources in the Russian security services also told Kommersant that the list included a former employee of Russian Foreign Intelligence Service Alexander Zaporozhsky who was jailed for 18 years for espionage in 2003.
Another man named was Alexander Sypachev, sentenced in 2002 to eight years in jail for spying for the CIA.
There was no confirmation of the exchange from the Russian authorities, although it has yet to be denied.
Cherny told the paper the list had been passed to Russia from the American side via diplomatic channels. He said he had been able to to look fleetingly at the document.
The United States arrested 10 alleged Russian "deep cover" sleeper agents on June 27 in an FBI swoop.
An 11th suspect, accused Kremlin paymaster Christopher Metsos, was arrested in Cyprus the following day but freed on bail and subsequently vanished.
AP: NY lawyer: Russian spy case could be resolved soon
By LARRY NEUMEISTER (AP) – 33 minutes ago
NEW YORK — A lawyer for one of 11 people accused of spying for Russia said their case could be resolved as early as Thursday.
Ten people whose U.S. arrests were announced by federal authorities a week ago and an 11th person, who was released on bail by a court in Cyprus and is a fugitive, were formally charged in a federal indictment unsealed Wednesday.
The indictment charged all of them with conspiring to act as secret agents and charged nine of them with conspiracy to commit money laundering. It demanded that those accused of money laundering return any assets used in the offense.
Attorney Robert Baum, who represents defendant Anna Chapman, said late Wednesday the case might be settled when she and the other nine people arrested in the United States appear for arraignment on the indictment, raising the possibility of guilty pleas to the lowest charges and deportation from the country.
"There's a good possibility that the case will be resolved at the initial court appearance tomorrow," he said Wednesday.
Chapman, a Manhattan resident branded a femme fatale in tabloid newspaper stories, and the other arrested defendants were scheduled to be arraigned Thursday afternoon.
The indictment, a charging document that can be used at trial, contains far fewer details of the alleged crimes than were in two criminal complaints filed last week.
Robert J. Krakow, an attorney for defendant Juan Lazaro, said Wednesday, "Of certain events tomorrow that might occur, the fact the indictment is minimal makes perfect sense. This is a crazy situation."
Prosecutors released a copy of the indictment as federal judges in Boston and Alexandria, Va., signed orders directing that five defendants arrested in Massachusetts and Virginia be transferred to New York. All were charged in Manhattan and had to be taken there eventually.
The legal developments came amid reports that American officials were meeting with the Russian ambassador in Washington, D.C., and a claim by the brother of a convicted spy in Russia that his brother has been told he will be swapped for Russians arrested in the United States.
Janice Oh, a spokeswoman for U.S. Attorney Preet Bharara, declined to comment on speculation about a spy swap.
U.S. District Judge Kimba Wood, who has been assigned the case, signed an order Wednesday requiring that defendant Vicky Pelaez, Lazaro's wife, remain detained until the judge can hear an appeal by the government of a $250,000 bail package that was approved last week by a magistrate judge.
The bail hearing was set for Friday for Pelaez, a U.S. citizen.
John Rodriguez, a lawyer for Pelaez, said his client has met the conditions required for her release. Her bail conditions require her to remain at home, where an electronic bracelet will monitor her whereabouts.
The defendants were accused of living seemingly ordinary lives in America while they acted as unregistered agents for the Russian government, sending secret messages and carrying out orders they received from their Russian contacts.
All have remained in custody except for a man identified as Christopher R. Metsos, the fugitive.
Associated Press writer Tom Hays contributed to this report.
Earthtimes: Spy suspects to make joint court appearance; swap talk grows
Posted : Thu, 08 Jul 2010 05:59:17 GMT
By : dpa
Washington -Ten Russian spy suspects are expected to be arraigned Thursday afternoon in a joint appearance in a New York federal court, fueling discussion about a possible swap with espionage suspects held in Russia.
Five of theRussian suspects were transferred Wednesday from Boston and Virginia to New York, the Los Angeles Times reported, where they are to join the five New York-based suspects.
Those five who were moved had their court appearances cancelled in Boston and Arlington, Virginia, earlier Wednesday, according to court records.
Indications of a spy swap reminiscent of the Cold War era emerged early Wednesday in Moscow, with news that nuclear expert and convicted spy Igor Sutyagin had already been transferred to Moscow from a penal camp in northern Russia, the Itar-Tass news agency reported.
The 45-year-old will presumably be exchanged along with other spies whose cover has been blown, his lawyer, Anna Stavitskaya, said. Sutyagin's mother, who met with her son, told The Los Angeles Times that he had been rushed to Moscow and told to confess to spying so he could be part of the exchange.
Double agent Sergei Skripal, who was sentenced to 13 years in a Russian prison in 2006, is also to be swapped, Moscow-based media outlets reported.
US and Russian officials would not comment on the reports. Speculation of a possible swap was further fuelled by a meeting at the Russian embassy in Washington between the ambassador and a top US diplomat.
The US Federal Bureau of Investigation arrested 10 espionage suspects in late June, in a spectacular blow to what is believed to have been a Russian spy ring. An 11th suspect disappeared last week after posting bail in Cyprus.
Sutyagin had agreed to the exchange, his lawyer said. He had been sentenced to 15 years in prison during a widely publicized trial on high treason charges in 2004. A Moscow court found him guilty of having delivered information on Russian anti- missile defence systems and nuclear submarines to a British agency with links to the US secret service.
Officials in Moscow and Washington have tried to limit the effect of the affair on the recently improved bilateral relations.
July 7, 2010
NY Times: Russian Inmate Torn by Possible Deal, Backers Say
By CLIFFORD J. LEVY and PETER BAKER
MOSCOW — Until this week, Igor V. Sutyagin was being held in a prison camp not far from the Arctic Circle, near the site of what were some of Stalin’s most infamous gulags. His supporters say the location was apt, describing him as a political prisoner in Vladimir V. Putin’s Russia.
The Russian government, though, considers Mr. Sutyagin, 45, nothing more than a turncoat, a scientist who passed secrets about Russian weapons systems to the C.I.A.
After more than a decade behind bars, Mr. Sutyagin may be nearing release because he may be included in a possible prisoner exchange involving the 10 people arrested in the United States last month on charges of being part of a Russian espionage ring.
Now moved to a prison in Moscow, Mr. Sutyagin was said by his family and friends to be bewildered about the change. They said he did not want to leave in a spy swap, given that he had steadfastly denied engaging in espionage. But he feels that he has no choice.
“He basically has no other way out,” Ernst Chyorny, executive secretary of the Public Committee in Defense of Scientists in Moscow, said in an interview on Wednesday. “It is clear that otherwise, they will not free him under any other circumstances.”
Mr. Chyorny said Mr. Sutyagin had four years left on his sentence, but the authorities could punish him further by extending his term. He said Mr. Sutyagin had recently lost two appeals for early release.
Mr. Chyorny said that he went to the prison camp in Arkhangelsk, and that Mr. Sutyagin had not been physically or psychologically broken, despite often harsh treatment. He said Mr. Sutyagin had at times been put in solitary confinement.
Mr. Sutyagin, a former arms control researcher for the Institute for the U.S. and Canadian Studies in Moscow, was convicted in 2004 of treason and espionage for selling information on nuclear submarines and missile warning systems to a British company that prosecutors said was a C.I.A. front. He said at his trial that he could not be convicted of espionage because he did not have access to state secrets.
The authorities have pressed Mr. Sutyagin to sign a confession, but he has refused. As part of the deal for his release, he signed one this week, but his lawyer said Wednesday that he did so only because he was under duress.
“This is what worries him most, that people will start to think, ‘They traded him for spies, so he must be a spy,’ ” the lawyer, Anna Stavitskaya, said in a radio interview. “He never admitted his guilt, and he doesn’t consider his conviction legal.”
She said a Russian passport was given to him at the prison in Moscow, and he was told he would soon be flown to Vienna and then London. She said he had not been allowed to shave, out of concern that he might commit suicide.
Mr. Sutyagin, who was arrested in 1999, was one of the most prominent in a series of academics who were put on trial in Russia for spying. The academics’ defenders called the charges fraudulent, saying that the F.S.B., the main successor to the K.G.B., was trying to reassert itself under Mr. Putin by creating a spy mania.
The arrests were seen as a warning signal from the security services that working with foreigners was dangerous.
Mr. Sutyagin was convicted in 2004 after many procedural twists. The first court that heard the case dismissed the charges as too vague. When it went back to court, his closed-door trial was disrupted midway when the judge and jury were replaced without explanation.
A new judge with a record of handling other accusations brought by the F.S.B. was assigned and refused to allow Mr. Sutyagin’s lawyers to present expert testimony showing that the information he handled was not secret.
Scholars and human rights groups in both Russia and abroad have taken up Mr. Sutyagin’s case.
Before his arrest, Mr. Sutyagin was a workaholic who often slept in a bed in his office and lived off instant noodles. He spent countless hours poring through books, journals and newspapers piecing together information about the Russian military arsenal.
“He had a tremendous passion for details,” said Pavel Podvig, a friend and fellow arms control researcher. “He wasn’t in this business for money or glory. He was glad to be able to do it because he found it very interesting.”
Mr. Podvig said that even if the British company that Mr. Sutyagin worked for did have intelligence connections, Mr. Sutyagin did not know it. “It was a strange kind of consultancy, and certainly he should have thought twice about working for them,” he said. “But he was really glad someone could use his knowledge and his expertise.”
Clifford J. Levy reported from Moscow, and Peter Baker from Washington.
Reuters: U.S.- Russia may seek spy swap to free agents
3:58am IST
By Guy Faulconbridge and Andrew Quinn
MOSCOW/WASHINGTON (Reuters) - Russia and the United States appeared to be considering a spy swap on Wednesday to send home a ring of suspected Russian agents whose arrest cast an unwelcome Cold War chill over warming diplomatic ties.
Officials for both governments declined to confirm a deal was in the works as U.S. federal prosecutors unsealed formal charges against the group.
But a Russian lawyer involved in the affair said a swap was discussed and a U.S. official said Washington might allow the suspected spies to plead guilty and then return to Russia in exchange for the release of certain Russian prisoners.
"It's a common practice. It's been done numerous times," the official, speaking on condition of anonymity, told Reuters.
All 10 suspects in U.S. custody are to be arraigned on Thursday before U.S. District Judge Kimba Wood.
Quick guilty pleas would avoid lengthy trials that officials fear may undercut improving U.S.-Russia relations. The two countries are cooperating on Russia's bid to join the World Trade Organization, the global standoff over Iran's nuclear program and other issues.
The Russian lawyer said the proposed plan includes exchanging Russian nuclear expert Igor Sutyagin, who was sentenced to 15 years in jail in 2004 for passing classified military information to a British firm which prosecutors said was a front for the U.S. Central Intelligence Agency.
"They want to exchange Sutyagin for one of those arrested in the United States for spying," Anna Stavitskaya, a lawyer acting for Sutyagin, told Reuters.
"It is a one-for-one exchange. So each of those detained in the United States will be swapped for one person from Russia."
The alleged Russian spy ring has been major news in the United States since counter-intelligence agents arrested the 10 people last month on suspicion of acting as deep-cover members of a network sent to infiltrate U.S. policymaking circles.
An 11th suspect was arrested in Cyprus but then disappeared after being granted bail.
"VERY SENSITIVE DISCUSSIONS"
Federal prosecutors in New York unsealed a grand jury indictment charging all of the suspects with acting as unregistered foreign agents and nine of them with conspiracy to commit money laundering.
Three suspects held in Virginia and two in Boston were ordered to be sent to Manhattan, court papers said. Two of the Virginia detainees have admitted they were in the United States under fake names, according to prosecutors.
Only one of the 10 suspects in U.S. custody -- Vicky Pelaez, a columnist for the New York Spanish-language daily El Diario -- has been granted release pending trial. The government has appealed that decision and a bail hearing has been set for Friday.
A lawyer representing another of the suspects, Anna Chapman, said he was in contact with Russian officials and that they had met with Chapman in jail.
"We are in very sensitive discussions ... about a possible resolution of her case," federal defender Robert Baum said in an email to Reuters.
U.S. and Russian officials have vowed the spy case will not set back the broader relationship and U.S. officials appeared eager to play down the affair.
William Burns, under secretary of state for political affairs, touched on the spy case in talks with the Russian ambassador on Wednesday, State Department spokesman Mark Toner said without giving any details.
"I'd have to refer you to the Justice Department on any speculation about a spy swap," Toner said.
Justice Department officials declined to comment.
A spokeswoman for Russia's Foreign Intelligence Service (SVR) also declined to comment and no Russian official has yet confirmed that a swap could take place.
News of the possible swap emerged after Sutyagin was suddenly moved this week from a prison in Kholmogory, in Russia's northern region of Arkhangelsk, to Moscow's high-security Lefortovo prison and allowed to see his family.
Sutyagin told his family, including brother Dmitry, of the plans to exchange him for the accused in the United States in a swap that would involve travel to Vienna and London.
Dmitry said Sutyagin had seen a list of names of other people who would be swapped. One name on the list was Skripal -- a likely reference to Sergei Skripal, a Russian officer who was convicted of spying for Britain in 2006.
"Sutyagin agreed to the swap offer as he had no other choice left. He knew that otherwise his whole life would be broken," said Stavitskaya. "But he still insists he is innocent."
(Additional reporting by James Vicini and Jeremy Pelofsky in Washington, Basil Katz in New York, Editing by John O'Callaghan)
Bloomberg: Russian Officials Seek Prisoner Swap in Spy Case, Lawyers Say
By Bob Van Voris and Patricia Hurtado
July 8 (Bloomberg) -- Russian officials and U.S. defense lawyers discussed a possible prisoner swap for accused Russian spy ring members while prosecutors in New York unsealed an indictment of the alleged deep-cover agents.
Lawyers for two of the defendants said yesterday that they were contacted by Russian Federation officials seeking to negotiate a way to resolve the case.
“I’m in discussions with the government about a possible resolution with this case,” Robert Baum, the attorney for Anna Chapman, said in an interview, referring to U.S. prosecutors. “I have also spoken with officials from the Russian Federation. I can only say we’ve had very sensitive discussions.”
Russian officials met Chapman, who Baum said was 28, on July 4. Two days later, they discussed a possible swap with him, Baum said.
John Rodriguez, a lawyer for defendant Vicky Pelaez, 55, a columnist for the Spanish-language newspaper El Diario La Prensa in New York, said in an interview that he also was contacted yesterday by Russian officials. Pelaez is a naturalized U.S. citizen born in Peru, Rodriguez said.
“There was a phone call from a member of the Russian Federation in New York concerning my client, asking if she was interested in going to Russia,” he said. “I said I didn’t think she would.”
Conspiracy, Laundering
In the indictment unsealed yesterday, 11 of the defendants are charged with one count of conspiracy to act as an unregistered foreign agent of a foreign country. Nine also are charged with one count of conspiracy to launder money. The accusations are similar to those contained in two criminal complaints unsealed June 28 by prosecutors in the office of Manhattan U.S. Attorney Preet Bharara.
Baum said his client, who is being held in solitary confinement at a federal jail in Brooklyn, New York, had initially wanted to stay in the U.S. to fight the charges. He said that U.S. officials informed him that she would no longer be allowed to have contact visits.
“It’s one more aspect of the abusive detention concerning my client,” Baum said, adding that he hoped negotiations between U.S. and Russian officials could be resolved “one way or another” by today.
Fake Identity
Federal prosecutor Michael Farbiarz said in court last week that under questioning, Pelaez’s husband, Juan Lazaro, admitted he wasn’t born in Uruguay and that Lazaro isn’t his real name.
Lazaro said that while he “loved his son, he would not violate his loyalty to the ‘Service’ even for his son,” Farbiarz said, referring to the Russian spy agency known as SVR.
Genesis Peduto, a lawyer for Lazaro, said her client denied the allegations in the indictment.
“My client has said he’s innocent of the charges and that he’s not a Russian, he’s from Uruguay” Peduto said in an interview outside the courthouse. “He did not make the statements the U.S. said he did.”
Peduto said Lazaro wasn’t interested in going to Russia in a swap.
“His wife is here, his life is here, his work is here,” she said.
She would not say whether Russian officials had gotten in touch with her.
New York Transfers
Five defendants in custody in Massachusetts and northern Virginia were ordered transferred to New York for prosecution in the case yesterday. Five others are in custody in New York. An 11th member of the alleged ring, Christopher Metsos, was arrested in Cyprus and then fled after he was released June 29 on bail of 20,000 euros ($24,500).
The government claims the 11 were connected to a ring of agents who worked to blend in with their U.S. surroundings while attempting to infiltrate American policy-making circles.
With the indictment, the case was assigned to U.S. District Judge Kimba Wood. She scheduled an arraignment of the 10 in U.S. custody for today.
In a letter to Wood, prosecutors also appealed a magistrate’s decision to release Pelaez on bail. Wood agreed to put a hold on Pelaez’s release pending a July 9 bond hearing. U.S. Magistrate Ronald Ellis agreed on July 1 to release Pelaez on $240,000 bond secured by $10,000 cash.
Nuclear Researcher
The Associated Press and the Russian news agency Ria Novosti reported that the U.S. and Russia are working on a possible exchange for Igor Sutyagin, a nuclear researcher sentenced by a Russian court to 15 years in prison in 2004 for disclosing secrets to the U.S. The AP cited Sutyagin’s brother as its source of the information.
Mark Toner, a U.S. State Department spokesman, said yesterday that the case was discussed at a meeting between William Burns, undersecretary of state for political affairs, and Russian Ambassador Sergey Kislyak.
“That wasn’t the main purpose of the meeting, but I believe the case was discussed,” Toner said.
The case is U.S. v. Metsos, 10-cr-00598, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporters on this story: Bob Van Voris in New York federal court at rvanvoris@; Patricia Hurtado in New York federal court at pathurtado@.
Last Updated: July 8, 2010 00:01 EDT
Russia Today: Swapping spies: More than Cold War exchanges and Hollywood drama
08 July, 2010, 04:24
It’s the stuff of movies…a secret exchange on a neutral bridge, where captured spies are swapped secretly back to their countries, in the dark of night.
Except during the Cold War, this really happened.
“Back in those days they had to do it secret because there was so much tension,” said Chris Lapetina, a political strategist.
And a famous spot for it was in Germany, on the Glienicke Bridge.
“If any side needed to swap spies that was the place they did it,” said James C. Lewis, a journalist and travel writer.
Today, the bridge is just a normal bridge.
“People drive on it, it’s open to the public, just one of the many bridges operated in Berlin,” said Lewis, who visited it last year.
But decades ago, it was closed to regular traffic, and known as the “bridge of spies.” It was where some of the secret spy swaps took place during the Cold War, both know and probably unknown, but immortalized in movies.
“This is the bridge where Gary Powers was exchanged that wrapped up the whole U-2 affair,” recalled Lewis.
That “affair” happened when a US U-2 spy plane was shot down over the Soviet Union in 1960.
American pilot Francis Gary Powers was captured after parachuting down onto Russian soil. He was exchanged in 1962 for KGB Colonel Rudolph Abel, arrested in the United States years earlier. It went down, of course, on the Glienicke Bridge.
Now with talk of a modern day exchange of agents between the countries, of course the question comes up, how would that happen today?
“I think now if there is a swap like this it could be done almost in public because I think both countries understand that why we may not be friends we don’t have to be enemies,” said Lapetina.
Where both countries understand spying happens and it doesn’t mean they have to re-enact the Cold War.
“Better or worse, I think most Americans understand we spy on Russia and Russia spies on us and if we get caught it’s better if we have our own people back and they get their’s back,” believes Lapetina.
This makes secret spy swaps these days, only the stuff of movies, for real.
Former CIA analyst Ray McGovern and investigative journalist Wayne Madsen both agree that a potential swap is technically possible to address the current Russian spy case.
“The State Department would take this case from the Justice Department, claim responsibility for foreign affairs. They probably, the ten under arrest in this country would see the charges dropped or put aside and I’m sure the restrictions would be that they could never return to the United States, they could never get a US visa,” said Madsen
McGovern added that this would be a real test for the “reset button” between US-Russian relations, given that the ten alleged spies held in the US are armatures as opposed to pros. He also added that the positive movement on the US-Russia relationship, at the high state level, is likely to be unaffected.
Intelligence services like to pull their agents out of foreign nations, argued McGovern.
“There’s a mutual incentive, there is no honor among thieves, but there is sort of an unwritten agreement that once your illegals get wrapped up, then if you can trade them it serves both services to be shown to look after the people they put in such jeopardy,” said McGovern.
He argued that that is what is driving talks of a spy swap, since it serves the interest of both nations. He also said that in order to keep spies, is it best that nations show a certain level of care to the spies they catch.
VOR: No chances for Russia-US spy scandal to grow into political one
Jul 8, 2010 11:26 Moscow Time
The recent spy scandal which broke out between Russia and the U.S. may be resolved very soon. The New York Times says the lawyers of the ten detained Russians have been negotiating a prompt resolution of the case with the U.S. government. Some reports say the two countries might exchange citizens once accused of spying for Russia and the U.S.
The fact that Russia’s ambassador to the U.S., Sergey Kislyak met the US Undersecretary of State for Political Affairs William Burns can serve as a proof. The main thing is that all trial procedures are taking place only in New York. Actually, espionage charges have been dropped against the detained Russian citizens only in the media and not formally. And the leaders of Russia and the U.S. do not seem to be concerned somehow over the scandal. Congratulating Mr. Obama on the U.S. Independence Day, Dmitry Medvedev said that Moscow would not ‘fall into the trap of the provocation plotted by the U.S. secret service and respond symmetrically’. Barack Obama stressed that the spy scandal should in no way affect the Russian-US relations. Commenting on the issue, the Russian Foreign Minister Sergei Lavrov noted that ‘the time it was done was selected with a special grace’: shortly after Mr. Medvedev`s visit to the U.S. However, every politician who was asked to comment on the scandal said that the whole situation should not be politicized. Deputy Chairman at the State Duma Committee for International Affairs, Andrey Klimov, comments:
"This time our countries have managed to avoid escalations of tensions. The media is just serving public interest for this case really offers much to talk about. Politicians, however, have done their best to turn over a new leaf."
What will happen next depends on the kind of accusations the detained Russian citizens are going to face and how the things will go on in the court. As of today, the suspects have been accused of using fake documents and money laundering while residing in the U.S., but this is not enough to exchange any of them for Igor Sutyagin, a former arms control researcher for a Russian institute in Moscow, who was convicted in 2004 of espionage for the U.S. This deal appears to be very unlikely, though spies swap is usual practice in many countries, Andrei Klimov says.
However, things may unfold differently if the suspects plead guilty not to all counts of the indictment. It is possible under the U.S. legislation. A lawyer Sergei Maximov continues:
"Title 18 of the US Criminal Code says that if a person admits guilt in minor crimes, he or she is relieved of responsibility for graver crimes. In this case, a detainee can be deported to another country to serve a prison term there."
Since both sides involved in the scandal do want to resolve the issue peacefully, it is very likely that the court will choose this scenario to follow. So, it is up to the suspects to decide for they are welcome to agree on the ‘deal’ before a sentence is passed by the court.
Moscow Times: All Power to Russia’s Bungling Intelligence
08 July 2010
By Valentin Prussakov
Russia’s intelligence services have always enjoyed a privileged position in the country’s ruling hierarchy. This was definitely true during the Soviet period and has been revived since Vladimir Putin’s emergence. Shortly after becoming president in 2000, Putin spoke before a KGB veterans club and said presciently: “Your task has been fulfilled. You have infiltrated the corridors of power.”
But the increased number of spies has not been accompanied by an increase in their competence. A vivid example was the assassination of Zelimkhan Yandarbiyev, acting president of the breakaway Chechen Republic of Ichkeria in 1996-97, in Qatar in 2004. Instead of following orders to pay Palestinian migrant workers to assassinate Yandarbiyev, Lubyanka’s finest might have decided to pocket the money and do the dirty work themselves. It wasn’t difficult for Qatari authorities to single out the Russian agents, who stood out prominently with their Slavic appearance. They were saved from severe Qatari punishment only because Moscow struck a murky deal with Doha that allowed for the agents’ return to Russia.
The only thing topping the Qatari fiasco is the spy scandal that broke out in the United States a week ago. According to media reports, Sergei Tretyakov, a former Russian intelligence officer, may have been the source who tipped off Washington to the purported spy ring when he defected in 2000. When there is evidence that Russia’s undercover agents have been compromised by a deserter, the spies are almost always evacuated. But in this case, they were hung out to dry.
Russia can claim only one small success in the spy farce. Christopher Metsos, the suspected paymaster in the operation, was able to escape after being arrested in Cyprus. Why was Metsos’ bail set at only $20,000 by Cypriot authorities when he was an obvious flight risk? Cyprus is clearly grateful to the more than 20,000 wealthy Russians and 14,000 Russian-owned offshore companies that have invested so much money in the island’s economy. This may explain why the Cypriot court, presumably under strong pressure from political and business interests, was so lenient in setting Metsos’ bail.
During the early Bolshevik period, the popular slogan was: “All power to the soviets.” Under Putin, it should be edited to read: “All power to the spies.” The only problem is that the harm these spies do to Russia’s reputation and interests is far greater than the value of the intelligence they discover.
Valentin Prussakov is a columnist for Zavtra newspaper in Moscow.
Russia Today: Russia may have sent its spies to get CIA intelligence jobs – US congressman
08 July, 2010, 11:37
As the spy intrigue between Moscow and Washington gets more twisted, RT spoke to US Congressman Dana Rohrabacher about current American policy towards Russia and other burning political issues.
“The ultimate goal may well have been that these [ten alleged Russian spies] were being implanted into the American society in order so that they later on put themselves in a position to get jobs in our own intelligence service, in the CIA,” Mr. Rohrabacher told RT.
Guardian: A rocky road for US-Russian relations
The timing of Medvedev's visit, the spy ring arrests and Clinton's tour couldn't have been more telling about US-Russian relations
Ruth Collins
guardian.co.uk, Thursday 8 July 2010 07.00 BST
It's been a rocky road for US-Russian relations over the past few weeks. The light-hearted images of Presidents Obama and Medvedev chomping on cheeseburgers in Washington brought some hope of a new era of reconciliation. Yet the arrest of 10 alleged Russian spies in the US only days later and the US secretary of state's tour of eastern Europe and the South Caucasus have done more than enough to question whether relations have truly been "re-set".
Arms control was one of the most controversial issues raised throughout Hillary Clinton's recent five-day tour of the Ukraine, Poland, Azerbaijan, Armenia and Georgia.
Last April, as a sign towards improved US-Russia relations, Obama and Medvedev signed an arms control treaty that would see both countries cut their nuclear arsenals by a third by 2017. However, Russia said then that it was prepared to withdraw from the treaty if the US increased its missile defence system in any way – even to counteract a potential threat from Iran – that would pose a direct threat to Russia's strategic nuclear forces.
It is certain that the Missile-Shield Pact that Clinton signed with Poland during her visit will not sit well with the Kremlin. Despite her protestations that the move is not a direct attack on Russia, it will certainly make Russia less willing to collaborate with the US on this issue.
During her visit to Poland, Clinton also broached the idea of exploiting the country's shale gas supplies, thus re-opening the gaping wound that is Europe's ongoing energy power struggle. According to the Baker Institute, the American moves to expand and develop shale production in Europe would "strengthen the hand of European consumers in dealing with Russia" and thus pose a threat to Gazprom's monopoly, forcing it to make concessions and co-operate with other countries.
Few will see these developments as a bad thing given Russia's recent track record, which has seen numerous power struggles over gas supply and overdue payments with the Ukraine, Belarus and other Baltic states paralysing supplies as far west as Poland and Germany. Yet it also ruins any previous Russian notion of brokering a gas deal with Poland.
Clinton's pitstop in Azerbaijan also highlighted the geopolitical tensions over energy disputes in the region and American interest in curtailing Russia's overriding control in the sector. The Nabucco pipeline project, which aims to diversify gas suppliers across Europe and thus mitigate Russia's supply monopoly, will provide energy to the EU from the Caspian region and the Middle East. Azerbaijan lies crucially along this line and Nabucco has been seen as a key threat to the Russian-sponsored South Stream gas pipeline.
Although a deal signed between Russia and Austria earlier this year will see Gazprom work in tandem with Nabucco's developers – Austrian energy supplier OMV and Italian energy company ENI – the ongoing tensions between the two pipeline projects will surely be exacerbated if the US is seen to be having talks with Azerbaijan. Russia is resolute in stopping the Nabucco project going ahead in an effort to maintain its dominance, particularly after its gas flow "stranglehold" in the region was broken earlier this year following separate gas deals between the EU and Turkey, and China and Kazakhstan and Turkmenistan, respectively.
The US secretary of state's visit to the Ukraine and Georgia will also worry the Kremlin. Russia enjoys a certain element of control over Ukraine, particularly in the energy sector. However, following the election of pro-Russia president Viktor Yanukovych in February, and his subsequent decision to drop the Ukraine's bid to join Nato, the US has actively sought to consolidate ties between the two countries under the US-Ukraine Strategic Partnership.
Clinton also made the position of the Obama administration on the Russo-Georgian conflict very clear: she criticised Russia's military presence in the country, but hastened to add as an afterthought that Georgia should not "provoke" Russia. Her comments on occupation also upset the renegade regions of South Ossetia and Abkhazia, who deny Russian occupation.
The timing of Medvedev's visit, the "spy ring" arrests and Clinton's tour couldn't have been more telling about the veracity of US-Russian relations. Russia's bid to join the WTO still seems a long way away but the US should be warned, as history has shown that the bear, when threatened, will only fight back harder.
Asia Times: Europe keeps mum on Russian cobalt
By John Helmer
MOSCOW - Kosh-Agach is a steppe word meaning "so long, tree". It's the world's end, the driest and direst place in far-eastern Russia at a remote corner where the frontiers of Mongolia, Kazakhstan and China meet. It is also the location of a large reserve of rare metals, including cobalt. So rare is cobalt that since 2008, Russian law doesn't allow foreigners to dig it out of the ground, sell it or export it without special permission.
So why has the European Bank for Reconstruction and Development (EBRD) spent US$30 million so far on investing in a project, details of which it insists on keeping secret?
The EBRD is financed by 61 shareholding countries of Europe, North America and Australasia, plus the European Union and the
[pic]
European Investment Bank. The EBRD's website claims the bank "seeks to develop a sound investment climate based on an effective legal and regulatory framework and promotes corporate governance, including sound management practices, a firm stance against corrupt practices, disclosure of information, and clear and consistent accounting and auditing practices". On January 8, 2008, this is what the minutes of the EBRD board of directors reported as happening at Kosh-Agach:
The Board approved an equity investment of up to USD 30 million (EUR 21.4 million) to Imperial Mining Holding Company. The equity investment will be used to finance preparation of a full feasibility study (including a full international-standard EIA [environmental impact assessment]), implement preparatory work for the development of Karakul cobalt-copper deposit in Altai region of Russia, and expected acquisition of nearby satellite deposits.
The minutes record that the decision was taken by the then-president Jean Lemierre, three of his deputies, including the EBRD's chief lawyer. Voting in favor were 22 directors and 21 alternates. The director for Russia voted in favor; her name is Elena Kotova, and she is still the Russia director.
Almost all equity investments, mine project loans and cash disbursements the EBRD has made in Russia are heavily documented in the bank's public record before they are approved at board level. EBRD says that from its inception in 1991, it counts 613 projects altogether in Russia, and has paid out 12.4 billion euros (US$15.6 billion). To count only mining and natural resource projects, there have been 25. Five of these focus on timber, gold, zinc, iron-ore and mineral water; all the others involve energy resources, such as oil and gas. There is no reference to Imperial Mining or the Karakul cobalt mining project.
Counting the EBRD's equity investments in Russia since 1991, there are more than 40 projects in total. The money has gone for shares in banks, brokerages, venture funds, regional development funds, a truckmaker, carmaker, railway operator, airline and a shipping company. The list is interesting because at least two of the banks in which EBRD invested - Tokobank and Inkombank - disappeared in scandalous circumstances. Again, there is no reference to an equity interest in Imperial Mining or the Karakul cobalt mining project.
EBRD's complete list of 395 project, disbursement and investment identifications since 1991 range from sausage factories to bakeries, telephones to bottles, sewers to supermarkets - but not a reference to Karakul cobalt. [1]
In short, unlike any other EBRD payout to Russia for mining resources, there is just a two-sentence record that the board approved it - and nothing else. EBRD spokesman Anthony Williams was asked to say whether the equity investment EBRD has made in the venture is in a Russian company; whether EBRD believes the license it has spent $30 million to exercise carries mining rights, or is limited to exploration and proving; and finally, whether EBRD knows that, according to Russian law on mining strategic metals, cobalt is prohibited for mining by a foreign company without Kremlin permission.
Williams answered: "I have no comment to make on this issue." Rarely can so little mean so much that EBRD wants to keep secret.
But first, consider the Kosh-Agachinsky region, in the southeast corner of Russia's Altai territory. [2]
A travelogue reports that the steppe hereabouts is "extremely interesting and exotic for the traveler from the viewpoint of its landscape, flora and fauna, with a slightly undulating plain at the altitude of 1,700-1,900 meters above the sea level, surrounded by mountain ridges covered with snow. Severe climate, dry and windless, means that the permafrost runs to 90 meters in depth. Wormwood and thorn bush are the only obvious vegetation."
Cobalt is more interesting. The metal is used in diverse industrial and military applications. The most serious of these is in superalloys, which are used to make jet engine parts. It is almost always mined as a by-product of other more abundant metals. More than half of the world's supply is produced as a by-product of copper mining and refining in the Democratic Republic of Congo (DRC) and Zambia. Cobalt production in Russia and most other countries is a by-product of nickel mining. Although some producers can increase or decrease the amount of cobalt mined or refined, most cobalt production is ultimately dependent on the production of copper and nickel.
The global bust for commodities and metals that began in the autumn of 2008 resulted in reduced demand for and supply of cobalt. According to a report from the US Geological Service (USGS), the world availability of refined cobalt during the first half of 2009 was 13% lower than in the first half of 2008. This decline was primarily because of a decline in 2009 production from China, and the closure of a Zambian refinery in late 2008.
During the second half of 2009, a strike at a company in Canada resulted in reduced production of refined cobalt from that country. Beginning in late 2008, production of cobalt-bearing concentrates and intermediate metals was hurt by cutbacks at many nickel mines around the world, and at some copper-cobalt operations in DRC. Financing, construction and startup of proposed brownfield and greenfield projects were delayed because the demand for the metal was falling, along with prices; and banks weren't ready to lend to new mines.
The chart shows cobalt falling like a stone - down 73% from the May 2008 peak to the December 2008 bottom. Since then the price recovery has been modest.
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Vale (Brazil), BHP Billiton (Australia), Xstrata (Switzerland), Teck Resources (Canada), Antofagasta Plc (UK) and Katanga Mining (Switzerland) are the biggest of the mining companies which produce cobalt.
Norilsk Nickel, Russia's sole miner of cobalt (the two other Russian producers of copper do not have cobalt by-production) says as little as possible about its cobalt reserves or output. The last financial report for 2009 gave no information at all. The 2008 report indicated that the main company had signed contracts to provide up to 6,500 tonnes of cobalt per year for refining at the OM Group's Harjavalta plant in Finland, which Norilsk Nickel had taken over the year before.
Output numbers appear from time to time when Norilsk Nickel executives let them slip. In 2004, when a new Russian cobalt refinery was being planned, its annual capacity was said to be 2,500 tonnes. In the first half of 2008, when the OM refining deal was disclosed, cobalt production for that period was said to be 1,160 tonnes.
Norilsk Nickel's annual report for 2009 skips cobalt production for the year, but notes that revenues were down on account of falling price. "The main reason for the decline in revenue from the sale of by-products was a sharp fall in sales prices of rhodium - from USD 6,600 per ounce in 2008 to USD 1,600 per ounce in 2009, and cobalt - from USD 73,000 per tonne in 2008 to USD 32,500 per tonne in 2009." The report fails to disclose revenues from cobalt sales.
Norilsk Nickel's main cobalt reserves are hidden. In a pseudo-disclosure, deposits under exploration, which are described in the company's literature, are reported to contain a grand total of 850 tonnes, according to the Russian C1 and C2 classifications.
The table below shows how the USGS reports Norilsk Nickel's cobalt output and reserves, compared to other countries. The reality may be more or less, but because of the military uses of the metal, how much Russian holds underground in reserves, in stocks above ground in strategic stockpiles, and in annual trade
remains a classified secret:
| |Mine Production* |Reserves* |
| |2008 |2009 | |
|United States |- |- |33 |
|Australia |6.1 |6.3 |1,050 |
|Brazil |1.2 |1.0 |29 |
|Canada |8.6 |5.0 |120 |
|China |6.0 |6.2 |72 |
|Congo (Kinshasa) |31.0 |25.0 |3,400 |
|Cuba |3.2 |3.5 |500 |
|Morocco |1.7 |1.6 |20 |
|New Caledonia |1.6 |1.3 |230 |
|Russia |6.2 |6.2 |250 |
|Zambia |6.9 |2.5 |270 |
|Other Countries |3.4 |3.2 |180 |
|World Total (rounded) |75.9 |62.0 |6,600 |
Source: USGS, June 2010. *All figures in thousands of tonnes.
Altai regional sources report they have been hoping against hope that they are sitting on a cobalt mine of great value. Exploration began in the Soviet period, between 1978 and 1985. A deposit license was issued in January 2006 to a Russian company called Altai Ruda Metall (ARM, "Altai Ore and Metal"). ARM is owned by Imperial Mining, a company registered outside Russia.
In May 2007, ARM told a local newspaper that it had "carried out technological expertise, and that currently an environmental assessment was being completed. Negotiations [were underway] with the European Bank for Reconstruction and Development to allocate a large loan to a mine production. The timing is not yet known, [the project is] waiting for the completion of appraisals."
Six months later, the EBRD came through with $30 million - far from enough to build a mine but more than was needed to complete a bankable feasibility study. No reserves have been published, and the Ministry of Natural Resources in Moscow isn't saying what their estimates are. The only clue to the deposit is a report that from drill samples the ores are believed to contain 0.23% cobalt, 0.15% bismuth, 0.32% copper, 0.55% tungsten trioxide and traces of vanadium and gold.
A regional environmental protection publication reported this year that if the mine goes ahead, it may destroy the habitat and migratory pattern of the argali, the horned mountain sheep, and several other rare species, including the steppe hawk.
EBRD claims that it subjects all its project loans and investments to tough environmental compliance standards and impact assessments. Nothing appears to have been done before it handed out the cash this time.
Ilya Smelyansky, an expert for the Siberian Environmental Center in Novosibirsk, has reported to the Bird Protection Union of Russia that he and his colleagues have held talks with ARM and Imperial Mining group on the impact of mining on bird life in the area. He confirms that "one deposit [Karakul] is already taken on license by the company AltaiRudaMetall (Imperial Mining) and is being prepared for development; the rest [of the deposits] are included in the list of sites for auctions to be held in the near future."
Smelyansky is in the field at present; his mobile telephone is turned off, and he is unavailable to answer questions. According to his report, the Siberian Environmental Center and the Bird Protection Union want to form "a coalition of environmental organizations, which should seek recognition of the special status of the [Kosh-Agach] territory and full compliance with environmental legislation by the Government of the Altai Republic, to initiate a dialogue with companies, in particular to develop a joint plan of action to minimize the adverse effects on birds, maintain a dialogue with municipal authorities and local communities. A special task was to achieve reduction in the total number of licensed deposits."
Vladimir Gulevich is the chief executive officer of ARM. A spokesman confirmed that his company held the Karakul license, but declined to say more.
There is inconclusive evidence of an Indian shareholder interest in Imperial Mining alongside the European Bank for Reconstruction and Development and large mining institutional investors.
A source at the Office of Foreign Investment Control, a branch of the Federal Antimonopoly Service (FAS) in Moscow, acknowledges that two statutes which Prime Minister Vladimir Putin signed into law in April of 2008 subject foreign-owned or controlled companies to special restrictions in strategic sectors of Russian business and define cobalt as a mineral of strategic value to Russia, whatever the size of the deposit where it has been found.
These laws, FZ-57 and FZ-58, require an application by any foreign company seeking to own, or control, a cobalt mining venture to apply for government permission. This petition goes to the FAS in the first instance, where the papers are prepared for review by the Committee on Foreign Investment Control, which is chaired by Putin. The committee review is slow; eventual approval may be hedged with conditions, or not granted at all.
But according to the FAS, no petition has been filed by Imperial Mining or ARM for committee review and approval. That means that for the time being it is legal for Imperial Mining, the EBRD and any possible Indian interest to own a company with a Russian cobalt mining license, but no mining of cobalt is allowed until government authorization is granted.
Reviews of the legislation by well-known international law firms have been in wide circulation since the two laws came into force, and the effect of their provisions on foreign mining and other investment continues to be widely debated. [3]
It cannot be likely, therefore, that EBRD's lawyers and bankers do not know what their investment in the Karakul cobalt deposit would require, even if they were careless when the board of directors voted approval back in January of 2008. Even then it is improbable that the board and its Russian director, Kotova, didn't know that cobalt was on the strategic list. Less than three months were to elapse before Putin signed the law into force, but the State Duma (parliament) and Federation Council had been voting on drafts of the legislation well before the EBRD board acted.
Kotova happens to be working in Russia this week, and a spokesman relayed to her the question of what she knew, or knows, about Imperial Mining and the restrictions in Russian law on the cobalt project. At the time of publication, she has yet to reply.
After Williams had written to say EBRD would not answer any question on the $30 million investment in Karakul cobalt, he was asked whether the lack of project, loan or due diligence data for Karakul or Imperial Mining, published on the EBRD website, had any precedent for Russian project disclosure. Williams was also asked to explain why his refusal to respond to the questions asked should not be interpreted as a coverup of wrongdoing at the EBRD. There has been no reply. Williams did answer a separate question on Kotova's status, confirming that she "is the Director representing the Russian Federation on the EBRD's Board of Directors .. [and] sits on the Financial and Operations Policies Committee, currently as Vice Chair."
A source at the Russian Ministry of Natural Resources in Moscow reveals there may be a catch in the cobalt mining rules. Cobalt mining is strategic, and subject to special permission by the Russian government, the source acknowledges. But if a license holder like ARM and Imperial Mining, "started developing the field prior to the entry into force of the law [April 29, 2008], the permit is not required". Since Soviet prospectors first discovered the Karakul deposit more than 30 years ago, what counts now is when exactly Imperial Mining and its local affiliate started work at the site, and what counts as development under the Russian law.
According to the ministry, the cobalt mining venture may not be restricted, or subject to Kremlin permission, if the deposit was "let for use for the aim of geological studies, exploration and extraction carried out on a combined license, and for which the user has completed the subsurface geological studies, and begun in the prescribed manner exploration and extraction, before the coming into force of the present Federal Law."
The EBRD board record appears to show that Imperial Mining had not completed its geological studies, nor started mining, in January 2008. When the strategic legal restrictions came into force 111 days later, the situation was almost certainly the same. But the facts on the ground, the corporate records, and the ambiguities in the law remain unclear and unexplained. If the loophole disclosed by the mine authorities in Moscow provides one motive, then at least $30 million of EBRD cash makes an even bigger reason to keep this mine a secret.
Note
1. The EBRD can be accessed here.
2. For a map of the Kosh-Agachinsky region, see here.
3. See here
John Helmer has been a Moscow-based correspondent since 1989, specializing in the coverage of Russian business.
(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
National Economic Trends
Prime-Tass: IMF says raised 2010 Russia’s economic growth forecast to 4.3%
MOSCOW, Jul 8 (PRIME-TASS) -- The International Monetary Fund (IMF) has raised its forecast for Russia’s economic growth in 2010 to 4.3% from 4.0% forecast in April, the IMF said in its revised world economic growth outlook released late Wednesday.
The IMF also raised its forecast for Russia’s economic growth in 2011 to 4.1% from 3.3% forecast in April, according to the report.
Meanwhile, Paul Thomson, the IMF mission head in Russia, said in June the forecast had been raised to 4.4%.
In 2009, Russia’s gross domestic product (GDP) fell 7.9% on the year. Under the government’s official forecast, GDP is expected to grow 4% in 2010.
End
08.07.2010 12:22
VTB Capital: CPI increases 0.1% WoW in the week to 5 July
VTB Capital
July 8, 2010
News: Consumer prices rose 0.1% WoW in the week ending 5 July, with YTD inflation rising to 4.5% (7.6% over the same period in 2009). The main price drops were recorded in eggs, cabbage and fish: they were down 1.1%, 0.6% and 0.2% WoW respectively. Vegetable prices rose 0.6% WoW (1.2% WoW last week) while gasoline added 0.3% WoW.
In separate news, Deputy Minister for the Economy Andrei Klepach said that the ministry expected 0.3-0.4% MoM inflation for the whole of July. And First Deputy Chairman of the CBR Alexey Ulyukaev said yesterday that he expected lower YoY inflation in July with, possibly, deflation in August-September.
Our View: Weekly inflation has remained stable at 0.1% WoW for seven weeks in a row. The monthly MinEconomy estimate suggests that July inflation might decline to around 5.5% YoY.
We agree that inflation might continue declining in YoY terms in July and August as seasonal factors increase their influence (already evident in slowing vegetable inflation). However, money supply growth remains above 30% YoY, credit growth is on the rise and economic activity continues to revive. Our year- end inflation forecast remains unchanged at 7.6% YoY.
UralSib: Finance Ministry still very cautious on budget
UralSib
July 8, 2010
1H10 budget deficit 2.3% of GDP. Finance Minister Alexei Kudrin yesterday announced that the budget deficit reached 2.3% of GDP at the end of 1H10. The ministry expects the budget deficit to reach 5.4% of GDP by the end of the year, which is far above our expectations and the consensus. We do not exclude the possibility of the Russian budget running a small surplus by the end of the year.
Government expects RUB2.46 tln ($82 bln) deficit by year-end. Kudrin said that budget revenues rose 36.1% YoY in 1H10, but are still 4% below the pre-crisis (1H08) level. The latest official figures show budget revenues of RUB3.2 tln ($106 bln), with expenditures reaching RUB3.7 tln ($123 bln) for 5M10, leading to a deficit of RUB491.3 bln ($16 bln) for the period. The minis- try expects the deficit to come to about RUB2.46 tln ($82 bln) by the end of the year: RUB1.4 tln ($47 bln) is to be financed from the reserve fund, and the remainder by borrowing.
RUB30 bln ($1 bln) surplus possible in June. Based on 5M10 budget data and the official GDP forecast, we estimate that the June budget surplus was RUB30 bln ($1 bln) despite flat oil prices. This presents a much better picture than expected, and con- firms our positive view on budgetary trends. The Finance Ministry is always very conservative about budget expenditure and reve- nue estimates in order to preserve the reserve fund from inappropriate expenses. We reiterate our view that the budget surplus may reach 0.8% of GDP by the end of the year.
Vladimir Tikhomirov
Bne: Kudrin's lonely fight for prudence continues
bne
July 8, 2010
Finance minister Alexei Kudrin has been fighting a battle - a somewhat lonely one at times - for economic liberalism and fiscal prudence for decade or so now. And despite the fact that it was only the $600bn in reserves that he had ringfenced that saved the Russian economy from sliding totally into the abyss last year, he still has to fight the same battles over and over again.
Last week it was his proposal to raise the retirement age to deal with Russia's gaping pension's financing gap that had opponents hurling insults. Yesterday, he had deputies in the State Duma suggesting he should have his head torn off after he urged the lower house to keep a lid on state spending to help squeeze the budget deficit to under 3% by 2013.
Instead, Kudrin insisted, Russia's great modernization mission must be powered by private investment to have long-term effects. "If we support demand with big [stimulus] packages it can support growth in the near term ... but in 2-3 years it will, to the contrary, reduce economic growth," Kudrin declared, according to Reuters. "It can create inflation, appreciation of the exchange rate, state borrowing and thus a reduction of corporate borrowing. So our task is to reduce the deficit in the next few years."
There were already signs last month that Kudrin's cautious approach faces opposition from the highest levels when Prime Minister Vladimir Putin announced that the budget would be based on a forecast oil price of $75, with a suggestion that pensions and salaries could expand in the near future.
Although economic recovery is steady, growth remains tentative, but with oil prices apparently steady above $70, the temptation is there to raise spending as elections (for the Duma in 2011, for the presidency in 2012) draw nearer.
The move to a base scenario of $75 for a barrel of oil flies in the face of the extremely conservative forecasts seen in recent years. Clearly losing the argument, Kudrin made one last bid to dampen expectation last month, retreating to draw a line in the sand at $70, but even that failed.
Neveretheless, Kudrin continues to bang the drum. He warned once more on Wednesday that government reserves will be eaten by the deficit by the end of this year, and that the country will need to sighificantly deepen its level of debt to cover shortfalls over the next few years.
With a forecast deficit of 5.4% of GDP this year, the government plans to draw RUB 1.4tn ($45bn) from the Reserve Fund and borrow RUB 1.1tn to cover it. With the fund standing at around $40bn at the end of June, that will mean Russia will need to borrow to finance deficits in the following three years, with a target of reducing the deficit to 2.9% of GDP by 2013.
Kudrin warned that this will more than double the state's debt servicing costs to $19bn by 2012. "From next year the main source for covering the deficit will be borrowing," the finance minister told the lower house. "Expenditures for debt servicing will rise from RUB 280bn this year to RUB 587bn in 2012, even if we cut the deficit to 2 percent in 2013."
In typical fashion, Communist leader Gennady Zyuganov led objections with a less-than-sophisticated response. Without going into detail, he accused Kudrin of sabotaging President Dmitry Medvedev's modernization agenda. Claiming that state spending should lead the way, Zyuganov said that "in the place of the president, I would have torn off your ears, together with the head."
Metropol: The State Duma approved lowering the rates on state-subordinated loans to Russian banks.
Metropol
July 8, 2010
Yesterday the State Duma approved lowering the interest rate on subordinated loans issued to 18 Russian banks by the Central Bank and VEB at the height of the financial crisis from 8% to 6.5%.
The move is aimed to stimulate lower lending rates and facilitate lending to both retail and corporate sectors, and comes after a string of benchmark rate decreases. The CBR benchmark rate currently stands at an historically low 7.75%.
The largest recipients of the subordinated loans were Sberbank, which received RUB 500bn from the CBR, and VTB, which received RUB 200bn. Both banks now stand to save significant amounts in interest expenses over the next nine years.
We estimate that Sberbank should save RUB 41bn over the remaining life of the loan, or RUB 4.5bn a year given the fact that it has already repaid RUB 200bn of the loan. VTB stands to save RUB 27bn overall, or RUB 3bn a year. Overall, all recipient banks combined should save close to RUB 10bn annually.
These savings could potentially add 3% to 5% to the bottom lines of both banks in 2010 alone.
Bne: Russia's wheat exports up 15.2% in 4M10
bne
July 7, 2010
Drought may have reduced expectations for this year's harvest (to 85m tones), but Russia exported 15.2% more grain between January and May year-on-year, reports the Federal Customs Service.
The value of wheat exports rose to $1.237bn in January-May, from $1.040bn in the same period of last year reports Prime Tass. In 2009, Russia's wheat exports rose 43.5% on the previous year to 16.821m tonnes, the customs service said.
Black Sea Grain: Russia Harvests 5.4 Million Tons Grain To July 7 - Ministry
Russia harvested 5.4 million metric tons of grain to July 7, which is 1 million tons more than on the same date last year, the agriculture ministry said Wednesday.
The reason for the higher harvest this year is that a drought has forced farmers to begin harvest seven to 10 days earlier than normal, the ministry said.
The grain was harvested on 1.6 million hectares, 300,000 hectares more than a year ago, with the average yield of 3.42 tons a hectare, about the same as last year.
The ministry reported that state of emergency had been imposed in 14 Russian regions because of the drought.
The ministry's harvest forecast this year is 85 million tons. The ministry also said grain stocks in the country totaled 24 million tons, including 9.5 million tons in the state intervention fund.
Russia's annual grain requirement is 77 million tons.
Reuters: Russia May Sugar Imports Leap on Lower Tariff
Source: Reuters
08/07/2010
Moscow, July 7 - Russian raw sugar imports leaped in May to 1.4 million tonnes from a mere 18,800 tonnes in April, as a reduced import tariff became effective, before rising again in June, customs data published on Wednesday showed.
The data confirmed a preliminary estimate by the Russian Sugar Producers' Union, the industry lobby.
Actual imports were lower, as traders had imported and stockpiled large volumes of raws in advance before clearing them with customs in May.
Russia, the world's third-largest sugar buyer, cut its import tariff on imported cane raws to $50 per tonne for May, before raising it to $200 in June, $239 in July and $203 in August.
Total imports in the first five months of this year were four times larger than the amount the country imported a year ago, the customs data showed.
The Federal Customs Service also said Russian imports of coffee, tea and cocoa rose in January-May 2010.
It provided the following figures:
RUSSIAN JANUARY-MAY SOFT COMMODITY IMPORTS*
2010 2009
Tonnes $ mln Tonnes $ mln
RAW SUGAR 1,781,900 969.4 464,300 167.6
Non-CIS** 1,781,900 969.4 464,300 167.6
CIS 0 0 0 0
WHITE SUGAR 24,600 15.9 43,000 20.6
Non-CIS 24,600 15.9 20,800 10.0
CIS 0 0 22,200 10.6
COFFEE*** 42,300 121.4 32,100 88.4
Non-CIS 42,100 120.4 31,900 88.0
CIS 200 0.9 100 0.4
TEA 76,000 235.2 65,000 173.5
Non-CIS 74,600 232.5 64,200 172.0
CIS 1,400 2.7 800 1.5
COCOA BEANS 18,800 69.8 15,800 42.9
Non-CIS 18,800 69.8 15,800 42.9
CIS 0 0 0 0
COCOA-CONTAINING
PRODUCTS 53,100 200.5 36,600 113.1
Non-CIS 14,400 80.6 8,900 41.4
CIS 38,700 119.9 27,700 71.7
* FCS data do not include all trade with Belarus.
** CIS - Commonwealth of Independent States includes 11
republics of the former Soviet Union.
*** Coffee figures do not include soluble coffee.
Business, Energy or Environmental regulations or discussions
Bloomberg: Rosneft, Norilsk Nickel, Polyus Gold: Russian Equities Preview
By Stephen Bierman
July 8 (Bloomberg) -- The following companies may be active in Russian trading. Stock symbols are in parentheses and share prices are from the previous close of trading in Moscow.
The Micex Index of 30 stocks was little changed at 1,327.77 at the close in Moscow. The dollar-denominated RTS Index fell 0.1 percent to 1,352.71.
OAO Rosneft (ROSN RX): Crude oil rose from a four-week low and for the first time in seven days following a forecast that U.S. retail sales are growing at the fastest pace in four years. Russia’s largest oil producer fell 1.1 percent to 190.83 rubles.
OAO GMK Norilsk Nickel (GMKN RX): Copper rose in New York, erasing a drop after the dollar pared gains and shrinking stockpiles of the metal helped bolster prices. Russia’s largest mining company rose 0.5 percent to 4,766.20 rubles in Moscow.
OAO Polyus Gold (PLZL RX): Gold futures rose in New York, erasing losses, after prices dipped to the lowest in six weeks. Gold futures for August delivery gained 0.3 percent after dropping as much as 0.9 percent. Shares in Russia’s biggest gold producer fell 2.9 percent to 1,463.04 rubles.
To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@.
Last Updated: July 7, 2010 22:00 EDT
Bloomberg: RTS Index Climbs for Third Day This Week on Oil, U.S. Data
By Alex Nicholson
July 8 (Bloomberg) -- The dollar-denominated RTS Index climbed for the third day this week, as crude oil advanced to a one-week high after gains in U.S. retail sales spurred speculation the global recovery is on track.
OAO Sberbank, the country’s biggest lender, and oil producers OAO Lukoil and OAO Surgutneftegaz advanced. Those movements pushed the RTS Index 1.5 percent higher to 1,372.33 as of 10:15 a.m. in Moscow.
Crude for August delivery rose as much as $1.03, or 1.4 percent, to $75.10 a barrel in electronic trading on the New York Mercantile Exchange.
Last Updated: July 8, 2010 02:18 EDT
Aton: Putin proposes canceling property tax on airports
Aton
July 8, 2010
Vedomosti and RBC Daily report today (8 July) that Prime Minister Vladimir Putin has proposed setting a 0% property tax rate on airports to encourage investments and further modernise airport equipment on the state's account. The Ministry of Transportation has also suggested that airports should be sold to private investors after modernisation. These suggestions may have a strong positive impact in the medium term on domestic passenger turnover, which has been lagging behind international turnover lately, particularly as a result of regional airport limitations. In our view, UTair and Sibir airlines will be the major beneficiaries.
Aton: Auto producers to benefit from customs union
Aton
July 8, 2010
Vedomosti reports today (8 July) that with the formation of a customs union between Russia, Kazakhstan and Belorussia, import duties for automobiles will remain high, and their status will be changed from temporary to permanent. This should create a stable outlook for local producers, which have already benefited from the duties. Positive for local auto producers, in our view.
RBC: SUEK's subsidiary nearing debut bond issue
RBC, 08.07.2010, Moscow 10:48:07.The first coupon rate on the debut issue of bonds of SUEK Finance worth RUB 10bn (approx. USD 322m) has been set at 9.35 percent per annum, or RUB 46.62 (approx. USD 1.5) per bond, the Russian mining company indicated in official documents today. SUEK Finance is SUEK's (Siberian Coal Energy Company) subsidiary working in the sphere of investments in capital assets and property.
The interest rates on the second-sixth coupons will be equal to the first coupon rate. The overall amount of funds to be paid to bond owners is RUB 466.2m (approx. USD 14.99m).
SUEK Finance is poised to launch the flotation of the debut issue on Micex on Friday. The issue includes 10m bonds with a par value of RUB 1,000 (approx. USD 32.16). The bonds are placed for 10 years by public subscription.
RenCap: Mechel strengthens steel division's sales arm with Turkish acquisition
Renaissance Capital
July 8, 2010
Event: Yesterday (7 July), Mechel announced the acquisition of a 100% stake in Turkish steel-trader Ramateks Group, located in Istanbul. The purchase price is $3mn (equity value) plus $13.8mn in debt. The main activity of the Ramateks Group is the distribution of steel products, including construction and stainless steel long products. The company owns10k m2 of warehouse capacity and leases a further 4.5k m2, which is enough for the storage of 21kt of steel products.
Action: The news is positive for Mechel, in our view, as the company is continuing to strengthen its sales arm, Mechel Service.
Rationale: Mechel Service owns and operates more than 75 service and distribution centres in the CIS and EU. Mechel is the second-largest producer of long steel and the top stainless steel producer in Russia, with an approximate 80% market share in stainless steel. The company is currently focused on upgrading and developing its portfolio of high-value-added products.
Boris Krasnojenov
RenCap: Severstal ups Crew Gold stake to 36.22%
Renaissance Capital
July 8, 2010
Event: Yesterday (7 July), Severstal acquired a 9.63% stake in Crew Gold, bringing Severstal's total stake in the company to 36.22%. Severstal bought 206mn common shares of Crew Gold at a price of NOK1.7475/share, paying NOK360mn (approximately $56mn). Crew Gold is located in Guinea. FY09 output was 179k oz of gold. According to a press release, "Severstal is at present a control person of Crew Gold Corporation and exercises influence over Crew Gold through representation on the board of directors."
Action: The news is neutral for Severstal, in our view.
Rationale: The current deal values Crew Gold at $539mn, or at more than $3,000/oz of FY09 production, we estimate. In Feb 2010, when Severstal acquired a 15.7% stake in Crew Gold, the asset was valued at $325mn ($1,800/oz of FY09 production). In terms of ownership structure, Endeavour Financial Luxembourg currently owns about 43% of Crew Gold (click here to read our article "Severstal faces competition for gold asset in Guinea" in the CIS Morning Monitor dated 9 Mar 2010). We believe that Severstal may face serious competition if it decides to seek a controlling stake in Crew Gold. The price paid for this additional 9.63% stake already looks quite high to us. Since mid-2007, Severstal has built up a portfolio of gold production and development assets. The asset base comprises the gold assets of Celtic Resources, based in Kazakhstan; two producing assets of private Russian group Arlan, in Yakutia and Chita; and a 68.9% stake in High River Gold, which has two operations in Russia (Buryatia) and one in West Africa (Burkino Faso), plus advanced- stage exploration assets in Russia and Africa.
Boris Krasnojenov
Reuters: UPDATE 1-Norilsk shareholder Interros opposes new board vote
Thu Jul 8, 2010 7:59am GMT
* Says RUSAL trying to solve debt issues at Norilsk expense
* Analysts believe conflict may push share price up
* Norilsk shares rise 0.5 pct
(Releads, adds details, analyst comment, share price)
By Aleksandras Budrys
MOSCOW, July 8 (Reuters) - Interros, owner of a quarter of shares Norilsk Nickel (GMKN.MM), said on Thursday it will not support another election for the Russian metals giant's board as called for by the owner of an equal stake, UC RUSAL(0486.HK).
In its latest spat with RUSAL, Interros also said on Thursday that the aluminium producer's Norilsk board members had voted in their own firm's interest at the expense of the nickel company.
RUSAL (RUAL.PA), the world's top aluminium producer, unhappy with the loss of a seat on the board of Norilsk, said on Wednesday it would ask for a new vote. [ID:nLDE6660YZ]
Interros -- the investment vehicle of Russian tycoon, Vladimir Potanin -- said it believed the voting took place in strict conformity with existing legislation and Norilsk's corporate rules.
The new board of Norilsk -- the world's biggest producer of nickel and palladium -- includes four representatives of Interros, three of RUSAL, three members of the management and three independent directors.
RUSAL, majority owned by Oleg Deripaska, formally requested that Norilsk provide the voting papers from the annual general meeting, saying it might file a lawsuit if violations are found.
Interros said RUSAL's representatives on the board had voted against approving Norilsk's budget for 2010 and had demanded a dividend which exceeded the company's net profit.
"It is evident that RUSAL is trying to solve its own debt problems at the expense of Norilsk Nickel," Interros said.
In May the Norilsk board rejected a request from RUSAL, whose debt stands at $12.9 billion, to pay 110 percent of its profit or some $3 billion in a dividend for 2009 and instead approved a dividend of $1.325 billion.
Interros also said that RUSAL had demanded another election after the independent directors voted against the merger between RUSAL and Norilsk. One of the independent directors, Brad Mills, told Reuters he saw no reason for the merger plans long nurtured by RUSAL shareholders. [ID:nLDE65N0X4]
The conflict could support Norilsk shares, analysts said.
"We expect all parties to start building up their stakes ahead of the EGM, which could result in the purchase of shares on the open market, supporting the near-term share price," UralSib bank said in a note.
Norilsk shares were up 0.51 percent at 4,810 roubles at 0752 GMT on Thursday, underperforming both the broader Russian market index and the Russian mining index .MCXMM. (Reporting by Aleksandras Budrys; Editing by Hans Peters)
Alfa Bank: Rusal says it will call Norilsk Nickel EGM
Alfa Bank
July 8, 2010
Rusal has put out a press release saying it intends to call an EGM of Norilsk Nickel to seek the reelection of the board of directors. The recently elected board consists of only three Rusal representatives out of 13 members. In the press release, Rusal indicated that it suspects fraudulent or irregular activity during the latest board election and "intends to undertake a rigorous inspection of the ballots...and if this reveals violations, Rusal intends to file a lawsuit to uphold its interests." Based on this information, it appears likely that Rusal will call for an EGM, which could be held in October, according to the press release. In order to reelect the board, the existing board must first be dissolved, requiring a majority vote. Rusal will most likely undertake a major roadshow in advance of the board meeting in order to persuade minority investors to support this vote. Rusal may promise an increased dividend or point to suspected fraudulent activity in order to support its case. In addition, it may promise payments in exchange for votes. However, these payments are likely to persuade only local investors. International investors generally do not accept payment for such votes.
In the past, international investors have eventually grown tired of the recurring shareholder conflicts over Norilsk. Once the battle for control over the company was resolved after the Prokhorov/Rusal transaction, investors viewed these conflicts as negative for the stock for two reasons: 1) they distracted management from operational issues; 2) they increased the likelihood of shareholder-unfriendly asset-stripping or other developments.
Since the current conflict is not over company control, as it is unlikely that any of the parties will give up their blocking minority interest, we characterize this news as NEUTRAL.
Reuters: Russia's Sistema to sell rest of real estate unit to VTB-paper
10:31am IST
MOSCOW, July 8 (Reuters) - Russia's Sistema (SSAq.L: Quote, Profile, Research) is set to sell its remaining stake in real estate unit Sistema-Hals HASq.L to VTB (VTBR.MM: Quote, Profile, Research), enabling the state bank to unite its developer assets into a new firm, Kommersant reported.
VTB secured control in Sistema-Hals (HALS.MM: Quote, Profile, Research) in December after agreeing to restructure the developer's debt, and currently holds 51.2 percent. [ID:nWLA9717]
VTB could not be immediately reached for comment by Reuters.
On June 26, Sisitema's board of directors approved the sale of the 27.6 percent it still owns in Sistema-Hals to VTB, a source close to the real estate company told the business daily.
VTB's press office said the bank is currently in talks about the conditions of the acquisition, while a source close to the deal said the price would be close to current market rates, which value the stake at around $59 million, Kommersant wrote.
After increasing its stake in Sistema-Hals, VTB could combine the company with its other real estate assets -- which include a controlling share in Don Stroy Invest -- to create a new development holding, thus boosting the capitalisation of the assets, analysts told the business daily.
Russia's second-largest bank has voiced confidence in the real estate sector -- still smarting from the country's worst recession in a 15 years -- and earlier this year pledged to lend up to 35 billion roubles ($1.13 billion) to developers. (Writing by Toni Vorobyova; Editing by Anshuman Daga)
Alfa Bank: AFK Sistema may sell its 27.6% stake in Sistema-HALS to VTB
Alfa Bank
July 8, 2010
According to Kommersant, AFK Sistema's BoD has approved the sale of the holding's 27.6% stake in developer Sistema-HALS to VTB. VTB gained control (51.24%) of the developer last year, when it purchased its stake for RUB60. A spokesperson of the bank confirmed that the parties are engaged in negotiations regarding a possible acquisition by VTB of a further stake in the developer. Should VTB gain control of Sistema's remaining stake, it would hold 78.8% of the developer and could proceed with a delisting. This may be NEGATIVE for minorities, as the terms of a minority buyout may not be attractive and may not provide an opportunity for investors to participate in the upside to Sistema-HALS' value from a recovery in the Russian property market. The potential for conflicts of interest between VTB and HALS minorities has been the key reason for our cautious stance on HALS' shares.
The article further states that VTB may seek to create a new holding that would combine the operations of Sistema-HALS with those of Don-Stroy, another developer in which the bank obtained a controlling stake for debt.
RenCap: OGK3's missing cash: A crucial test for government
Renaissance Capital
July 8, 2010
OGK3 to fund Interros? In our view, the long-running saga concerning $820mn of cash passed from OGK3 to Interros at the height of the credit crunch has reached a critical stage, with the suggestion by Vladislav Nazin, OGK3's deputy CEO, that the missing cash could be raised by OGK3 taking on debt or issuing new primary shares. If these proposals were to be acted upon, we believe investors would conclude that the Russian authorities were prepared to overlook the cynical removal of cash from a major public company, operating at the forefront of a national strategy of infrastructure renewal, in order to prop up the presumably ailing finances of a private individual.
No justification for acquisitions. We have analysed the circumstances of the Oct 2008 purchase by OGK3 of a 25%-minus-one share stake in Rusiya Petroleum from Interros for $576mn and conclude that there was no justification for OGK3's board to approve this transaction. Furthermore, we conclude that in the circumstances that prevailed at the time, an independent valuation of the Rusiya Petroleum stake, used to justify the purchase price, was meaningless. We also see no justification (other than to prop up Interros' finances) for OGK3's purchase of other assets from Interros, or for OGK3's purchase of a large tranche of Norilsk Nickel shares.
Substantial corporate governance threat. Senior government ministers, including Prime Minister Vladimir Putin, have criticised the OGK3/Interros transactions and characterised them as misuse of investment funds. The energy ministry has give OGK3 until the end of the year to recover the funds to the capex account. We believe the investment community has welcomed this political intervention and continued to buy the shares of Russian power sector companies in the expectation that the government's demand will be met.
However, if OGK3 shareholders had, themselves, to replace the missing cash, we foresee a new corporate governance crisis that would push up the already- high cost of capital in the Russian power sector. For a sector where capital costs typically constitute around 60% of end-user tariffs, the consequences for Russian consumers would be very negative, in our view.
July 8, 2010, 2:59 a.m. EDT
MarketWatch: Russia! Magazine: Helsinki Commission May Investigate Possible Link Between Philip Morris and Corrupt Russian Officials
NEW YORK, NY and MOSCOW, Jul 08, 2010 (MARKETWIRE via COMTEX) -- According to Russia!, the Commission on Security and Cooperation in Europe (CSCE) may soon be reviewing a possible connection between U.S. cigarette manufacturer Philip Morris and a circle of corrupt Russian government officials. The matter was brought to the Commission's attention by Alexander Dobrovinsky, a Russian lawyer, in a written appeal to its chairman, U.S. Senator Benjamin Cardin of Maryland.
Dobrovinsky's letter, a copy of which was obtained by Russia! Magazine, recounted how his client, Moscow entrepreneur Armen Yeganyan, was allegedly blackmailed by corrupt Russian officials attempting to seize his $120 million wine and cognac business. Many of the officials involved in the attempted takeover, Dobrovinsky wrote, were also implicated in the tragic 2009 case of Sergei Magnitsky.
According to the U.S. Helsinki Commission, Magnitsky, a lawyer for the U.S. investment advisory Hermitage Capital, was incarcerated on false charges after he testified about a massive tax fraud ring, and died in prison last November when his captors denied him basic medical care. The case elicited widespread outrage and the attention of the CSCE, alternately known as the U.S. Helsinki Commission.
Dobrovinsky's appeal was a warning to the Commission that the perpetrators in the Magnitsky case are still using the same tactics to subjugate private businesses. "[P]arties responsible for Magnitsky's death," he wrote, "have continued to conduct activity that makes them seem complicit in the seizure of companies and in threatening the lives and wellbeing of other Russian citizens."
Dobrovinsky also called on the Commission to inform cigarette manufacturer Philip Morris that it may be indirectly implicated in corruption schemes perpetrated by these same corrupt authorities from the "Magnitsky List": "The information available to us indicates a possible link between the... criminal case against Armen Yeganyan [in] an attempt to establish control over KiN Moscow Wine and Cognac Plant's activity on the part of the structures controlled by [Russian tobacco mogul] Igor Kesayev, and the actions of law enforcement agencies subsequent to this conflict with respect to Mr. Yeganyan," Dobrovinsky wrote, concluding: "Thus,... Philip Morris, may be an implicit participant in actions aimed at illegally imprisoning Russian businessman Armen Yeganyan and seizing his property."
The Helsinki Commission is aware of the situation and acknowledged Dobrovinsky's appeal and expressed concern about the worsening climate of corruption in Russia: "The Commission remains interested in seeking improvements in the rule of law within Russia and throughout the OSCE region and will continue its work toward that end."
Russia! Magazine () is an award-winning US-based publication covering Russian business, art, and culture.
SOURCE: Russia! Magazine
Bne: Yeltsin-era oligarch business collapses amid first Eurobond default since 1998
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bne
July 8, 2010
And then there were two...
Convention wisdom has it that seven oligarchs carved up Russia under former president Boris Yeltsin - the so-called seven boyers - but actually there were eight, with Sergei Pugachev a late addition to the club. Pugachev's empire collapsed this week, leaving only two of the original oligarchs who came to prominence in the 1990s still in the game.
Pugachev wasn't invited to Yeltsin's first oligarch meeting that ended with the now notorious loans-for-shares deal, which handed over to the seven Russia's industrial crown jewels. But he was present at the very last oligarch meeting Yeltsin held shortly before the 1998 financial crisis that should have propelled him to riches and notoriety had not the economy collapsed a few months later.
However, he sort of made up for it since. An old friend of current Prime Minister Vladimir Putin's from St Petersburg, Pugachev escaped the anti-oligarch pogrom at the start of the last decade and thrived in the first part of Putin's first term as president.
In classic style he made his first money with his International Industrial Bank (IIB, or Mezhprombank in Russian) and also was a big player in shipping, owning two important shipyards in the northern capital. Unlike the other oligarchs who backed off from making business out of close ties to the government, for many years Pugachev seemed to be the only oligarch doing business in the old school fashion; using his close contacts within government to boost his commercial activities. Richard Hainsworth, CEO of RusRatings, told bne previously: "Mezhprom remains a bank of many mirrors. It is still doing what it always did: takes the state's money and then lends it back to them."
However, it has just emerged that on July 6, IIB defaulted on its two Eurobonds - the first default on an external debt by any Russian entity since 1998. The fact the bank was allowed to default signals an end to state bailouts for troubled Russian banks and shows that Pugachev, who represents Siberia's Tuva Republic in parliament's upper house, has clearly fallen out of favour with the Kremlin and Putin in particular. The bank's future hangs in the balance and the state has already seized the shipyards as collateral, which will almost certainly be taken to form the core of yet another new national champion, this time in the shipbuilding business.
The fall of Pugachev means that out of the original Yeltsin-era oligarchs, the only survivors are Mikhail Fridman of Alfa group and Vladimir Potanin of Norilsk Nickel.
One of the largest banks in Russia, IIB's star began to wane from Putin's second term as president began and Pugachev looked increasingly out of step with the way Russia was developing. In 2005 when the entire banking sector was re-licensed as part of the introduction of the deposit insurance scheme (following the mini-banking crisis of 2004), the then-deputy head of the Central Bank of Russia, Andrei Kozlov (who was later murdered by another disgruntled banker), tried to block the inclusion of Mezhprombank in the scheme. Pugachev finally managed to dodge the ban by setting up a retail operation called M+ Bank that ensured him a full banking license.
On July 7, Prime-Tass reported analysts at VTB Capital as saying that IIB is ready "to repay the coupon on the Eurobond issue, but only after bondholders agree to restructure the issue." The analysts were reported as saying that the bank's management may offer bondholders to restructure the issue by increasing its maturity by one year while keeping the coupon rate at 9%. The Prime-Tass report only seemed to talk about one Eurobond.
Whatever the outcome for IIB, Pugachev is hardly going to be driven into penury and rags. At worst he will retire to Monaco where he owns the luxury chain of stores of the Hediard Group, which he bought from Monaco-based business man Michel Pastor in October 2007 for a reported $1bn. Pastor is a close friend and together with Pugachev under his LuxAdvor holding the two have gone into the luxury interior design business with Viscount David Linley, the Queen's nephew and 12th in line to the British throne. Linley produces top-end luxury interiors for the rich and famous with his over-the-top use of expensive materials and heavy handed exotic finishes - just the sort of stuff crass Russian oligarchs love. Pugachev owns a chateau near Nice and two villas in the jet-set playground of St Jean Cap Ferrat. Linley owns a nearby property with 600 acres and has taken Pugachev on pheasant shoots at Windsor Castle, the Queen's residence, while Pugachev has reciprocated with invitations to functions at the Elysée Palace in Paris.
Below is a note from Renaissance Capital on the details of the default on the bonds and the impact on Pugachev's business:
International Industrial Bank defaults, press reveals preliminary restructuring terms
Maxim Raskosnov, Renaissance Capital
Yesterday (6 July), International Industrial Bank (IIB) publicly announced defaults on its two Eurobond issues. The press (including Reuters and Vedomosti) has reported some preliminary terms of a restructuring offer the bank will propose. In our view, the terms do not seem very favourable to shareholders, and we believe investors should demand better treatment, although this might prove difficult, given the bank's current financial position. Our key takeaways from the reports are:
Reasons for the default. IIB cited its litigation with Bashneft and the court rulings allowing the oil company to block IIB's access to its correspondent account as the primary reasons for its liquidity issues, which were followed by the Central Bank of Russia's (CBR) decision not to restructure its loans to IIB. In our view, the core reasons of IIB's liquidity problems are 1) its inability to boost its deposits base (which contradicts the general market situation in Russia) and 2) IIB's decision to grow its loan book by using rather short-term CBR resources.
Current status. The bank reported it has settled the litigation with Bashneft (claims amounted to $67m) and has reached an agreement with the CBR on extending the maturities on the bank's liabilities until Jan 2011 (six months from now).
According to numerous press reports (including Reuters and Vedomosti), the CBR has taken shipbuilding assets from the bank and its shareholder (OPK) as collateral.
Still, the bank continues to be in breach of regulatory liquidity ratios. Press reports also indicate that VTB is considering providing financing ($400-600m) to OPK, against its coal assets (accepting its coal assets as collateral).
Default on both issues. According to a recent IIB press release, the bank has notified the trustee of a default event on both of its Eurobond issues, based on a number of factors (breach of CBR regulations, restructuring of CBR loans and the bank's inability to service its obligations).
IIB's forecasts. The bank has stated it plans to improve its liquidity position by significantly boosting its retail deposit base. In our view, this is unrealistic for an institution that has publicly defaulted on a number of its obligations.
No official restructuring terms. So far, we have not seen any restructuring terms to noteholders from the bank. However, according to press reports (including Reuters and Vedomosti), the terms will not include any down payments and will ask creditors to approve a one-year extension of the bonds' maturities. This effectively will put bondholders in a subordinated position to the CBR (given that the regulator becomes a secured lender and has extended maturities of its claims for only 6 months). Moreover, if a sale of coal assets goes forward, we think the absence of any prepayment will also restrict the position of bondholders regarding claims on IIB's and OPK's assets.
If, in fact, the final restructuring terms are similar to those highlighted by the press, we believe bondholders will be put in a very weak position, giving way to very significant risk of non-payment under restructured notes. Despite what seems to an absence of a haircut on the notional, we believe that a pure extension without any prepayment reflects very poor treatment of bondholders' rights. In our view, the most beneficial development would be if the bank was put under the umbrella of a state-related entity (eg VEB), but so far this option has not been discussed. We reiterate that the IIB situation is materially different from that of all of Russia's major privately-owned banks, which are currently experiencing a liquidity surplus on the back of continuing deposit inflows and thus we do not expect it to have any material impact on the broader market of banking sector bonds.
RenCap: Mid-cap Russian banks: Transitioning through 2010
Renaissance Capital
July 8, 2010
2010: A transition year for Russian mid-cap banks. Contrary to our outlook at the start of 2010, and how well Sberbank (for which we forecast a 2010 RoE of 20%) and VTB (with strong recovery momentum) are performing, Russian mid-cap private banks are still transitioning back to pre-crisis levels of performance and profitability, with 2011 more realistically when we see a return to 15-20% RoEs.
BSPB: 1H10 trends mixed. Bank St Petersburg (BSPB) has held up best, maintaining its net interest margin (NIM); although credit growth struggled through 1H10 and still high/conservative provisioning charges are weighing on the bottom line. We have cut our 2010 earnings forecast by 40% (principally due to higher provision costs) as we shift a full bottom-line recovery out to 2011E from 2010E. Fundamentally our view has not changed towards the bank: this is a timing and forecasting issue which we believe we are now on top of.
VozrozhdenieBank:A bad patch, not a bad bank.Aspreviously communicated, VBank bore the brunt of negative trends in 1H10 (margin pressure, cost uplift, still high provisioning, weak credit growth, an effectively high tax charge), with some optimism for 2H10 as 2Q credit growth turned moderately positive and its NIM looks set to recover from 1H10 lows. We are confident that, into a macro recovery, these trends will pass at what we regard as a fundamentally a sound bank.
We rate BSPB BUY(TPs$4.65/common;$5.35/convpref[previously$4.86and $5.70, respectively]), and VBank HOLD (TP $42.3 [previously $40.1]). While maintaining our preference for the larger, liquid and fundamentally better-performing Russian banks at this juncture (Sberbank and VTB), we see clear value in the mid- cap space which trades close to 1x forward book - a valuation we think remains enticing for the medium-term investor. We continue to call our banks on a relative basis and stick to our preference for BSPB over VBank, despite 22% outperformance (of the common shares) YtD. We still see BSPB as more geared to the recovery cycle, effectively as the bottom line is strongly geared to the asset-quality recovery cycle. Furthermore, we estimate it trades at a 14% P/B 2010 discount to VBank despite delivering a superior forecast 2011 RoE (23% BSPB vs 16% VBank). Within BSPB's asset classes, with BSPB convertible prefs trading at a 42% premium to the underlying common shares (the placement premium was 7%), we have a clear preference for the commons.
Activity in the Oil and Gas sector (including regulatory)
Bloomberg: Chevron, Rosneft Black Sea Oil Deal Dependent on Tax Relief
July 08, 2010, 4:37 AM EDT
By Stephen Bierman
The final agreement is conditional on the group gaining assurances of “fiscal relief” from the Russian government “to ensure the economic viability of the project,” according to the document. The two sides aim to finish negotiations by the end of March and start drilling at the end of next year. Chevron will have a 33.3 percent stake in the venture.
Russia needs foreign capital and technology to tap harder- to-drill deposits as production from existing fields in Siberia declines. The deal would mark Chevron’s second attempt at Russian offshore drilling after the state annulled a production sharing agreement to develop a block of the coast of Sakhalin Island in 2004.
“Russia is looking for foreign direct investment in frontier areas where Russians do not have the expertise to explore and develop themselves,” Ed Chow, a senior fellow at the Center for Strategic International Studies and a former Chevron executive, said by e-mail. “There are oil companies willing to test the investment climate in spite of Russia’s dubious track record.”
Tax Exemptions
The state last year approved exemptions from mineral extraction tax for the first 20 million metric tons of oil produced from Black Sea deposits. Even so, Chevron Chief Executive John Watson said the venture would seek tax breaks for the project in a meeting with Prime Minister Vladimir Putin during the signing of the agreement.
“Ideally, fiscal relief should come from a change in the tax laws applying to new exploration and production projects,” Alexei Kokin, an oil and gas analyst at AFK Metropol, said by e- mail today.
A deal would also mark Chevron’s initial foray into the little-explored Black Sea after rival Exxon Mobil Corp. has snapped up acreage in Turkey and Romania as have Petroleo Brasileiro SA, OAO Lukoil and Vanco Energy.
Chevron will provide all financing, up to $1 billion, in the venture’s exploration phase which would include drilling two exploration wells and two appraisal wells on one discovery, the document said, adding that Chevron will pay a Rosneft bonus in the event of a discovery.
Venture Structure
The group will seek to structure the venture to allow Chevron to book reserves, according to U.S. Securities Exchange Commission requirements even though Rosneft will retain complete ownership of the licenses to the venture’s West Chernomorsky block, the agreement said.
Rosneft has identified 5 potential structures in the deepwater block and potential resources of 860 million tons of oil, according to the company website.
Drilling on the block is expected to begin at the end of next year, Russian Deputy Prime Minister Igor Sechin said last month at the time of the signing. The two companies will first have to find a way to close negotiations which have been going on since at least 2008.
Both Rosneft and Chevron declined to comment on ongoing commercial negotiations.
--Editor: Will Kennedy, John Buckley.
To contact the reporter on this story: Stephen Bierman in Moscow +7-495-771-7745 sbierman1@.
To contact the editor responsible for this story: Will Kennedy at wkennedy3@.
Reuters: Chevron to get 1/3 stake in oil JV with Rosneft –sources
Wed Jul 7, 2010 1:56pm GMT
MOSCOW July 7 (Reuters) - Chevron (CVX.N) will take a roughly 30 percent stake in its Black Sea oil venture with Russia's largest oil producer Rosneft (ROSN.MM), industry sources told Reuters.
"The ownership structure will be around one-third Chevron, two-thirds Rosneft," said a source familiar with the details of project.
Last month Chevron and Rosneft signed an agreement to jointly explore and develop the Val Shatskogo field on Russia's Black Sea shelf, a deep-water region that analysts say presents large geological and substructural challenges.
The agreement is the biggest energy deal in Russia involving a foreign major in 2010. (Reporting by Jessica Bachman; Editing by Alfred Kueppers)
Moscow Times: Chevron to Get 33% Stake in Black Sea Project With Rosneft
08 July 2010
Reuters
Chevron will take a roughly 30 percent stake in its Black Sea oil venture with Russia's largest oil producer, Rosneft, industry sources said Wednesday.
"The ownership structure will be around one-third Chevron, two-thirds Rosneft," said a source familiar with the details of project.
Last month, Chevron and Rosneft signed an agreement to jointly explore and develop the Val Shatsky field on the Black Sea shelf, a deep-water region that analysts say presents major geological difficulties.
At the signing, Deputy Prime Minister Igor Sechin said initial exploration investment, to be financed by Chevron, would amount to $1 billion.
A source who has seen the agreement papers, however, said the figure was likely to be lower.
The U.S. company was not immediately available for comment.
Another source in the oil industry familiar with the terms of Rosneft's offer said that in his opinion a one-third equity stake in the holding company was not commensurate with the hefty investment outlays and the project's high risk level.
The license area of 8,600 square kilometers, in the eastern part of the Black Sea, has a maximum depth of 2,200 meters, which is considered difficult for deep-water drilling.
Other foreign oil companies looking to tap Russia's vast hydrocarbon resources have also had to make do with similar ownership structures for operations with Russian partners.
Rosneft gave China's Sinopec, for example, a 25.1 percent stake in its Sakhalin-3 project in the Far East.
Chevron's Chief Executive John Watson underscored the issue of speedy cost recovery with Prime Minister Vladimir Putin, who presided over the signing ceremony between the companies.
"It is a highly prospective area; it does have geological risks and high costs. We will need to work closely with the government to ensure that proper fiscal terms are in place to allow this project to develop rapidly," Watson said.
Oil industry profits are heavily taxed through the mineral extraction tax and the oil export duty, but firms operating difficult projects have in the past successfully lobbied for tax breaks.
In July 2009, the government scrapped the mineral extraction tax for Black Sea shelf deposits until production from the fields reaches 20 million tons, but the oil produced remains subject to the export duty.
Last December, the government lifted the export duty for oil extracted at 22 remote East Siberian fields whose operators have been burdened by high infrastructure development costs.
The export duty was reintroduced this month, albeit at a lower level than mature fields, but firms developing costly projects in other regions continue to lobby for similar breaks at offshore projects.
Sechin said that reducing the export duty for the Black Sea project had not yet been discussed.
UralSib: Bashneft buyout offer results announced
UralSib
July 8, 2010
Buyout offer results announced; ownership up 0.2%-7.8%. On Tuesday, Bashneft (BANE RU - Buy) announced the results of its buyout offer to minorities in its four refineries and Bashkirnefteproduct. It bought 9.55% of ordinary shares in Ufaneftekhim, 5.82% in Ufaorgsintez, 0.79% in Ufa refinery, 0.22% in NOVOIL, and 0.86% in Bashkirnefteproduct. Thus, its stakes in the share capitals of these enti- ties increased to 54.93% in Ufaneftekhim, to 56.53% in Ufaorgsintez, to 56.28% in Ufa refinery, to 61.77% in NOVOIL, and to 56.91% in Bashkirnefteproduct. We estimate that Bashneft spent RUB3.4 bln ($109 mln) on the acquisitions, which we believe came from proprietary cashflow. We view the results as marginally positive considering that the buyout prices were generally in line with market levels. We retain our positive view on Bashneft, and reiterate our Buy recommendation and target price of $66/ord and $50/pref. (Please see our desk note published yesterday.)
Consolidation adds value. Consolidation of the downstream business implies that Bashneft now owns all of the oil products that it produces. Bashneft markets these oil products to final customers, using the refineries only as processing centers (the refining fee nearly equals the cost of refining). We expect to see further value growth for Bashneft driven by aggressive production growth (the management expects 10% YoY growth in 2010 and 5% thereafter) and the effective utilization of existing refining capaci- ties
Victor Mishnyakov
Bloomberg: Russia Challenges Middle East on Oil to Asia: Energy Markets
By Christian Schmollinger
July 8 (Bloomberg) -- Russia is sending record amounts of oil to Asia, eroding the dominance of the Middle East, as refiners in South Korea and Japan increase purchases from a source that’s three weeks closer by ship.
South Korean imports of Russian crude climbed to an all- time high of 179,000 barrels a day in May, equal to 7.3 percent of the country’s supplies, according to government data. Japan took an unprecedented 241,000 barrels a day, up 61 percent from a year ago, Ministry of Economy, Trade and Industry data showed.
The first completed segment of the $26 billion East Siberian-Pacific Ocean pipeline is boosting competition between Russia and the Middle East, the world’s two biggest oil suppliers. North Asian processers can access the Russian oil, known as ESPO, for about $1 a barrel less than Dubai crude, according to shipping rates and data compiled by Bloomberg.
“More people are buying ESPO because it’s very handy and it’s very near, only two or three days,” said Osamu Fujisawa, an independent oil economist in Tokyo who formerly worked at Saudi Arabian Oil Co., or Saudi Aramco, the world’s biggest producer. “You have to consider ESPO a competitive crude to Arabian oil.”
Russia started loading tankers in December at Kozmino, the port located about 600 kilometers (373 miles) from South Korea and Japan. South Korean refiners took 39 percent of the ESPO sold through June, according to Vienna-based consultants JBC Energy GmbH. Japan bought 20 percent.
Transport Costs
Lower transport costs have boosted demand for Russian exports even as August-delivery ESPO sold at a premium of 40 cents a barrel to Persian Gulf benchmark Dubai oil on June 25, traders who participate in the market said. As recently as May 27, ESPO traded at 65 cent discount to Dubai.
Freight costs for ESPO were 70 U.S. cents a barrel as recently as July, compared with $2.16 for the Middle Eastern blend, according to data from Alliance Tankers Ltd., a Singapore-based shipbroker. Kozmino is three days by tanker from South Korea while Saudi Arabia is more than 20 days away.
Middle East producers have lowered prices to counter the competition. Abu Dhabi National Oil Co. on July 4 cut the premium on June Murban crude, the emirate’s largest export grade, over Dubai for a second month to 81 cents a barrel, the lowest level since January. Saudi Aramco reduced its August Arab Light grade to a discount of 15 cents to the average price for Oman and Dubai grades, from a premium of 50 cents for December.
Middle East Dominance
While ESPO exports have surged, peaking at 330,000 barrels a day in June, the Middle East remains dominant, according to David Wech, Vienna-based head of energy studies at JBC Energy.
Oman production was 853,300 barrels a day in April, according to government data. Output from the United Arab Emirates in June was 2.3 million, while Saudi Arabia pumped 8.3 million, according to a Bloomberg survey. Total Middle East output was 19.9 million barrels in June, while Russia’s output was 10.3 million barrels, according to Bloomberg data,
“ESPO is still, in terms of size, a small share” of the market, said Wech. “It was ramped up very quickly. It’s far too small to be a threat to sellers.”
ESPO contains less sulfur than Middle Eastern oils, making it less of a pollutant and more attractive to refiners. The Russian grade’s sulfur content is 0.535 percent, compared with Saudi oil’s 1.8 percent and Murban’s 0.7 percent, according to a chemical analysis of ESPO obtained by Bloomberg and data from Energy Intelligence Group.
Asian refiners are also buying the Russian oil because they have units capable of upgrading fuel oil, the residue from distilling crude, into higher-value products such as diesel and gasoline. ESPO’s fuel-oil yield is about 47 percent, according to a chemical analysis obtained by Bloomberg News, similar to that of Oman crude.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@
Last Updated: July 7, 2010 20:32 EDT
Gazprom
Itar-Tass: Gazprom opens representative office in Riga
08.07.2010, 01.51
RIGA, July 8 (Itar-Tass) - The Russian gas monopoly Gazprom opened a representative office in the Latvian capital on Wednesday.
Valery Goluberv, the vice-chairman of the Gazprom board of directors, Latvian Economics Minister Artis Kampars, Russia’s Ambassador to Latvia Alexander Veshnyakov and representatives of the leading European oil and gas companies attended the meeting.
“Strengthening long-term mutually beneficial cooperation with the Baltic States is one of the company’s vital strategic tasks,” Golubev went on to say.
“The work of Gazprom’s office will raise the efficiency of implementing large-scale projects and will give an additional impetus to closer cooperation with regional states,” he emphasized.
Gazprom opened its representation in Latvia in 2008.
“The subsidiary’s main tasks are to assist in carrying out long-term mutually beneficial economic cooperation between Gazprom and the Baltic States and represent and protect the company’s interests in the region. The representation will also search for new areas and forms of the company’ s work in the Baltic energy markets. Besides, the representation will provide informational and analytical support for project which Gazprom is going to implement in the region and will coordinate the work of companies to be set up by Gazprom in the Baltic States,” Gazprom’s press service reports.
Reuters: UPDATE 1-FMC Tech signs $190 mln deal with Russia's Gazprom
3:17am IST
* To provide equipment to Gazprom's Kirinskoye field
* Equipment delivery expected in Q2 2011
July 7 (Reuters) - Offshore oilfield equipment maker FMC Technologies Inc (FTI.N: Quote, Profile, Research) signed a $190 million contract with Gazprom (GAZP.MM: Quote, Profile, Research) to provide subsea equipment for the Russian state-owned gas major's Kirinskoye field.
Kirinskoye, a subsea-to-beach gas and condensate field located in water depths of about 300 feet off the Pacific coast, is FMC's first subsea development project in Russia, it said.
FMC will make various equipments to control the flow in and out of a well, including subsea production trees, wellheads, multiphase meters and choke modules.
Houston, Texas-based FMC said the equipments, which will be manufactured and assembled at its facilities in Scotland and Norway, are expected to be delivered in the second quarter of 2011.
Shares of FMC closed at $60.16 Wednesday on the New York Stock Exchange. (Reporting by Krishna N. Das in Bangalore; Editing by Don Sebastian)
PR Newswire: Gazprom Awards FMC Technologies $190 Million Subsea Equipment Contract
HOUSTON, July 7 /PRNewswire-FirstCall/ -- FMC Technologies, Inc. (NYSE: FTI) announced today that it has signed an agreement with Gazprom Dobycha Shelf LLC for the manufacture and supply of subsea production equipment to support the Kirinskoye field. The award has a value of approximately $190 million in revenue to FMC Technologies.
Kirinskoye is a subsea-to-beach gas and condensate field off Russia's Pacific coast. It is located in water depths of approximately 300 feet (90 meters) within the Kirinsky Block of the Sakhalin III project, 17 miles (28 km) offshore Sakhalin Island.
FMC's scope of supply includes the manufacture of subsea production trees, a manifold, wellheads, multiphase meters, choke modules and subsea control modules. The equipment will be manufactured and assembled at FMC's facilities in Dunfermline, Scotland and Kongsberg, Norway and at FMC's Multi Phase Meters AS (MPM) operation in Stavanger, Norway. Deliveries are scheduled to commence in the second quarter of 2011.
"We are proud to have been selected for this project, our first subsea development in Russia," said Tore Halvorsen, FMC's Senior Vice President of Global Subsea Production Systems. "FMC's experience and success in delivering subsea-to-beach solutions will help Gazprom meet its goal of serving Russia's Eastern Gas program and we view this as an opportunity to strengthen our position for future subsea projects in the region."
FMC Technologies, Inc. (NYSE: FTI) is a leading global provider of technology solutions for the energy industry. Named by FORTUNE® Magazine as the World's Most Admired Oil and Gas Equipment, Service Company in 2010, the Company has approximately 10,400 employees and operates 25 production facilities in 15 countries. FMC Technologies designs, manufactures and services technologically sophisticated systems and products such as subsea production and processing systems, surface wellhead systems, high pressure fluid control equipment, measurement solutions, and marine loading systems for the oil and gas industry. For more information visit .
This release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are information of a non-historical nature and are subject to risks and uncertainties that are beyond the Company's ability to control. These risks and uncertainties are described under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2009 and may be modified in subsequent quarterly reports filed by the Company with the Securities and Exchange Commission that may be accessed on the Company's website. The Company cautions shareholders and prospective investors that actual results may differ materially from those indicated by the forward-looking statements.
SOURCE FMC Technologies, Inc.
MIA: South Stream project to be signed in September
Thursday, 08 July 2010
Head of Gazprom Aleksey Miller is coming to Macedonia to sign a contract on South Stream. The overall project for installing gas in Macedonia is estimated at EUR 300 million. Russian and Macedonian companies are expected to participate only in closing down of the clearing debt.
The international contract on the construction of the pipeline section through Macedonia will be signed in September, when Miller will come to Macedonia. In this way, Macedonia will catch the last chance to participate in this important energy project, for which Romania is lobbying more and more.
South Stream will stimulate energy revival in Macedonia, competitive production and lower costs for all participating parties. Before Miller comes to Macedonia, Macedonian representatives will visit his working groups in order to conduct necessary analyses.
Barentsnova: Mikhalchuk and Mandel discussion: LNG construction at Novaya Zemlya
2010-07-08
Arkhangelsk governor and chief executive of Gazpromdobychashelf discussed the opportunities for LNG plant construction in Novaya Zemlya.
The meeting discussed a possibility to construct three platforms on the basis of Arkhangelsk dockyards.
Another topic to discuss was the construction of LNG plant in Novaya Zemlya archipelago that could get the Shtokman gas by condensate pipeline. The processed fuel could be used for local boiler-house and diesel electric power station, reports Dvinaland.
Before the final investment decision is taken, Gazprom is considering the investment climate of shotkman-related regions. According to the press release of the Arkhangelsk Gvt, the region enjoys a developed logistics scheme, tolerable traffic capacity for M-8 highway, railway, port capacities. Besides, big investors registered in Arkhangelsk may benefit from lower remissions due to a regional law adopted last year.
June 24, Mandel signed an agreement with Dmitrienko to construct a supply base and a plant for concrete weight coating in Severomorsk (Murmansk region).
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