Russia 110121

Basic Political Developments Federation Council to take up new START on Monday - The Federation

Council’s International Affairs Committee is due to hold a full-scale meeting next Monday to discuss the treaty, says the Committee Chairman Mikhail Margelov.

Dmitry Medvedev and Hamid Karzai to have talks in Moscow - The sides will pay special attention to the development of the trade and economic ties. The turnover between Russia and Afghanistan shows a growth trend and made about 460 million dollars over the first ten months of the past year. The presidents will sign an intergovernmental agreement on trade and economic cooperation, which, among other issues, includes organisation of an Intergovernmental commission.

o Afghan president seeks trade deals on Russia visit - "There is a need for Russia and Afghanistan to engage with one another, not only in a manner of Russia helping Afghanistan rebuild itself and redevelop its institutional capacity, but also by way of trade, by way of investment," he told Russia Today television.

o Afghan leader makes first official visit to Russiao Afghanistan’s security is our continued effort and struggle –

Afghan president: “There’s need for Russia and Afghanistan to engage with one another, not only in a matter of Russia helping Afghanistan to rebuild and redevelop its institutional capacity but also by means of trade, investment, by interaction between our businesses which is very strong.”

o Afghanistan: Moscow Wants to Supply More Arms to Kabul -- Russian Envoy - A EurasiaNet Q&A with Russian Ambassador Andrey Avetisyan

Japan regrets Russian commission's visit to Kuril Islands - "This move is not in line with Japan's position and causes us deep regret," Edan said at a press conference after a cabinet meeting.

Russia ready to recognize South Sudan’s independence - “If a new independent state appears on Africa’s map as a result of the referendum and this is not accompanied with conflicts, this outcome can be described as a most favourable one,” said Mikhail Margelov special Russian envoy to Sudan.

U.S. Nears Deal for Russian Copters - In a Jan. 13 notice, the U.S. Army Aviation and Missile Command Contracting Center said it would award a "sole-source" contract to Rosoboronexport for the purchase of Mi-17 helicopters, rugged Soviet-era aircraft that are a workhorse of Afghan military forces. "This item is restricted to Rosoboronexport," the notice said.

Black Sea Fleet submarine prepares for Mediterranean Sea deployment - "During the mission, the Alrosa will be accompanied by a group of

various ships in charge of anti-submarine defense and air defense," he said.

Hungary, Russia seek to resolve all outstanding issues in one package, says FM - He said outstanding issues included the future of troubled Hungarian national airline Malev, Russian oil and gas company Surgutneftegas's stake in Hungarian peer MOL, expansion of Hungary's Paks Nuclear Plant, as well as possible Russian participation in the construction of Budapest's fourth metro line. Other issues are the expansion of the broad-gauge railway line in Hungary and the extension of a bilateral gas-purchase contract set to expire in 2014, he added.

U.S. hopes Russian-Polish ties remain unaffected by Kaczynski plane crash

o Russia not to blame for Kaczynski's plane crash - Polish expert In talks with Russia, Turkey urges Iran for nuke assurances

o Erdogan to visit Russia RF hopes Belarus to follow gas contracts 2011, may offer support Moscow is starting rehabilitation of the railway in Abkhazia Vladimir Putin will hold the first meeting of the governmental commission

on economic and social development of the North Caucasus Medvedev to Tell Davos Forum That Russia Is ‘Open’ for Business

o Medvedev Aide: Russian Companies Will Sign Deals At Davos o Davos forum to address Rosneft-BP deal - Kremlin officialo Bank Rossii’s Micex Exit Will Hasten Exchange Tie-Up:

Dvorkovich ‘Merchant of Death’ to make court appearance

o Bout pushes for private lawyer o BBC: 'Kremlin links' of alleged arms dealer Viktor Bout

British Government approves BP-Rosneft deal - The UK Cabinet has come out in support of the British Petroleum oil company’s new strategic policy of promoting cooperation with Russia.

o BP-Rosneft deal is separate from Khodorkovsky's fate, minister says - It is up to BP, not the government, to judge its trading relationship with Rosneft, says energy minister Charles Hendry

o U.S. Lawmaker Seeks Prompt Review of BP-Rosneft Deal Foreign law enforcers not doubt YUKOS suspects lawfully wanted -

Foreign law enforcement agencies do not doubt that several people accused in the YUKOS criminal case were put on the international wanted list lawfully, a deputy chief of the Russian National Interpol Central Bureau at the Interior Ministry Alexei Abramov told Itar-Tass on Friday.

Russia Bans Temporarily Animal Import from Bulgaria - Russia has temporarily restricted the import of animal products from Bulgaria because of the cases of foot-and-mouth disease (FMD) found in the country.

Finland wants EU to put pressure on Russia - Finland intends to call for the EU's help in influencing Russia. Last week a scandal erupted when the Finnish Foreign Ministry sent an official note to his Russian colleagues

regarding the ban on the sale of land to foreigners in border areas signed by Russian President Dmitry Medvedev on January 9, 2011.

Russia puts meteorological satellite into orbit (Update 1) The Church urges to form Russian domestic and foreign policy on the

country's originality - "We have wonderful models of the countries that despite criticism go on following their own way in history: it's Great Britain, countries of Arabic world, Switzerland and Israel. They've displayed political will that make others respect them and I am convinced the same will be with Russia," head of the Synodal Department for Church and Society Relations Archpriest Vsevolod Chaplin said at a meeting of the Russian Public Chamber with Russian President Dmitry Medvedev.Maintaining interethnic and inter-religious accord in Russia essential for preserving the state in the form in which it exists today - Medvedev

Lisin Replaces Bogdanchikov for Olympics - Lisin, owner of Novolipetsk Steel and president of the Russian Archery Union, was unanimously elected president of the National Association of Summer Olympic Sports at a meeting of that organization in the Olympic Committee building, the association's web site reported.

Police reform bill railroaded by Interior Ministry - President Medvedev's pet project to reform Russia's notorious police force is being railroaded by vested interest in the Interior Ministry, claim deputies from minority parties, after the Duma Security Committee suggested dropping several amendments on Thursday, reports The Moscow Times. The same deputies also complained that they have been cheated by the ruling United Russia party.

Russian Press at a Glance, Friday, January 21, 2011 Former mayor of Moscow Yuri Luzhkov unwanted in Europe Russia seizes three tonnes of ancient mammoth tusks

National Economic Trends Russia's Economy May Barely Manage Forecasted Inflation 2011 - It will

be complicated for Russia's economy to meet the 6-7 percent inflation forecast of during 2011, Deputy Chairman of Russia's Central Bank Alexei Ulyukayev said on Thursday at Deutsche Bank's 9th annual Investment Forum - Russia One-on-One.

Ulyukaev not worried about capital outflows Spike in budget spending destabilizes economy Ministry of Finance: In need of liquidity? - Yesterday (20 January), the

Ministry of Finance (MinFin) confirmed that the preliminary federal budget deficit was 3.9% of GDP in 2010. The result is clearly positive compared with the official forecast of 4.3% of GDP announced in late 2010.

COMMENT: Russia talks modernisation, but still prioritises energy – by Chris Weafer of Uralsib

Yields Diverge on Downgrade for Bank of Moscow: Russia Credit Fitch Says Russia Rating Upgrade ‘Highly Probable’ (Update1) - “I think

we will see all these trends and if they are in line with our positive

expectations, then it is highly probable that there will be an upgrade this year,” Vladimir Redkin, who oversees Russia’s rating at Fitch, said in an interview in Moscow.

Russia IPOs Set for Three-Year High on State Sales, RenCap Says Russia. Siberia will increase grain storage capacity by 2013 - The volume

of grain storage capacity to meet modern requirements, in the Siberian Federal District in 2013 to increase by 32.8% compared to 2010 - to more than 6.4 million tons of simultaneous storage.

Business, Energy or Environmental regulations or discussions Magnitogorsk, Mechel, Norilsk, Rosneft: Russian Equity Preview Russia sees 6pct increase in coal output in 2010 UPDATE 1-Russia's NLMK sees Q1 production in line with Q4 Mordashov sets out new conditions to the banks for Lucchini Polyus changes management of Irkutsk business unit VimpelCom Announces Intent to Raise Financing in the International

Bond Markets Telenor Says It’s Committed to VimpelCom Investment, FT Reports Investor pool may buy News Outdoor Russia for $300-400 mln in Feb Alexander Lebedev might not sell his remaining stake in Aeroflot on the

market Pharmstandard mulls purchases of foreign assets in 2011 Tartarstan to build agricultural centre Swedish Tele2 announced that Tele2 Russia added 283,000 new

customers in December 2010, with 147,000 customers in new regions, to bring its total number of subscribers to 18.4 million. (Reuters)

President Dmitry Medvedev ordered the Central Bank by June 1 to determine the timing and method for unloading its 29.8 percent stake in the MICEX stock exchange, Kommersant reported Thursday, citing an unidentified official. (Bloomberg)

Sberbank and Western Union signed an agreement Thursday to carry out international money transfers in more than 8,000 Sberbank outlets beginning this year and later to be expanded to all branches of the bank. (MT)

Activity in the Oil and Gas sector (including regulatory) Fitch Ratings: CIS oil and gas companies will maintain production levels

and financial results in 2011 Russian Export Duties for Oil Products May Be Adjusted to 66 Percent of

Crude Duties Beginning in April India's OVL Shows Interest in Rosneft Rosneft Seeks 25 Licenses TNK-BP may join BP-Rosneft Arctic project TNK-BP says it will start search this year for shale gas in Donetsk Oblast Statoil Says Shtokman Will ‘Undoubtedly’ Go Ahead, TU Reports Chornomornaftogaz, Lukoil to develop Black Sea shelf together LUKOIL Invests Over $6 Billion in Kazakhstan Oil Production Sector

Technip Gets EUR70 Million Contract For Bulgaria Refinery Novatek makes mandatory buyout offer to Itera for remaining 49% of

Sibneftegaz C.A.T. Oil discloses strong 2011 order book of €222m, up 8% y-o-y

Gazprom Gazprom owns Armenian gas infrastructure Gazprom sells 28% of Cherepovetsk Azot

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Full Text Articles

Basic Political Developments

Federation Council to take up new START on Monday http://english.ruvr.ru/2011/01/21/40601117.html

Jan 21, 2011 11:41 Moscow Time

The Russian Parliament’s upper house, the Council of Federation, is due to start debating the new Russian-American START treaty on Monday, January 24th.

The Federation Council’s International Affairs Committee is due to hold a full-scale meeting next Monday to discuss the treaty, says the Committee Chairman Mikhail Margelov.

According to the MP, when debating about the document a while ago, the lower house of the Russian Parliament, the State Duma, pointed out the need for adopting a number of special statements. It was specifically suggested that the United States should bring back home the tactical nuclear weapons that Washington had deployed in Europe.

The new START is due to be ratified on the 25th of this month.  

Dmitry Medvedev and Hamid Karzai to have talks in Moscow

http://www.itar-tass.com/eng/level2.html?NewsID=15875039&PageNum=0

21.01.2011, 01.11

MOSCOW, January 21 (Itar-Tass) -- Russia’s President Dmitry Medvedev and Afghanistan’s President Hamid Karzai will have talks on Friday, the Kremlin’s press service said.

The summit talks will continue and develop the political dialogues of the two countries. Over the previous year, Medvedev and Karzai met three times: on June 10, in Tashkent at the SCO summi;, on August 18, in Sochi over the quartet summit /Russia, Afghanistan, Pakistan and Tajikistan/, and on November 20, during the Russia-NATO Council’s summit in Lisbon. Karzai visited Moscow as the leader of the country /in March 2002/, while from late 1970s this will be his first official visit to Russia.

The agenda will include issues of strengthening the bilateral relations and cooperation in the region.

The sides will pay special attention to the development of the trade and economic ties. The turnover between Russia and Afghanistan shows a growth trend and made about 460 million dollars over the first ten months of the past year. The presidents will sign an intergovernmental agreement on trade and economic cooperation, which, among other issues, includes organisation of an Intergovernmental commission.

Over the talks, the delegations will discuss joint projects on reconstruction of Afghanistan’s social and economic infrastructures, including those which had been built by Soviet specialists.

Russia and Afghanistan will discuss improvement of effective cooperation in counteracting drug trafficking. The relevant authorities of the two countries will discuss improvement of cooperation in this sphere. Russia assists Afghanistan in training national specialists, including the police, military, and drug police.

The Russia-Afghanistan cooperation in humanitarian and educational spheres is improving. Presently, over 400 students from Afghanistan study in Russia’s universities. The annual quota for them has reached 100.

The basis for the military and technical cooperation between the two countirs was founded in 2002, as the sides agreed that Russia’s military and technical assistance will cover logistics, supplies of communications equipment, fuel, vehicles and spare parts for them, reconstruction of aircrafts, including military transport aviation and helicopters. Over 2002-2005 Russia’s military and technical assistance made up 220 million dollars. Over 2007, Afghanistan’s president asked Russia to resume this kind of cooperation. In July 2009, Russia and the USA signed an agreement in Moscow on the military transit to Afghanistan via Russia’s territory. Presently, as requested by the USA, Russia supplies to Afghanistan helicopters /has supplied over 80 transport helicopters Mi-17/ and guns and ammunition.

International part of the agenda will cover support for Afghanistan in organising a peaceful, independent, neutral and stable state, development of the regional cooperation, including in the framework of the Shanghai Cooperation Organisation, where Karzai participates in summits as an official guest.

Karzai came to Moscow on an official visit on Thursday at the invitation of Medvedev.

As a conclusion of the negotiations, the two presidents are expected to make an official joint statement.

Afghan president seeks trade deals on Russia visithttp://www.google.com/hostednews/afp/article/ALeqM5hej5FPD9wboxW2nChzTnTQrClwqA?docId=CNG.fa7db8f3462efc0aa7b25879a26f4c9b.7b1

(AFP) – 46 minutes ago

MOSCOW — Afghan President Hamid Karzai Friday was to meet Russian leaders in a quest for closer economic ties, on the first official visit by an Afghan head of state since the war with against Soviet forces.

Karzai was due to meet both his Russian counterpart Dmitry Medvedev and Prime Minister Vladimir Putin. While Karzai has visited Moscow for summit meetings this is his first state visit to Moscow since taking office in 2004.

The embattled Afghan leader told Russian television on the eve of his talks that he was looking to develop lagging trade relations between the two countries and not just seeking more international aid.

"There is a need for Russia and Afghanistan to engage with one another, not only in a manner of Russia helping Afghanistan rebuild itself and redevelop its institutional capacity, but also by way of trade, by way of investment," he told Russia Today television.

He also defended himself against accusations that his government has done little to halt the supply of opium and other drugs to Russia and further on to Europe.

Karzai has voiced displeasure with a joint US-Russia drugs raid on a laboratory in eastern Afghanistan in October. But he conceded in the interview that his government was too weak to interrupt the flow of drugs.

"Had we had the capability to prevent (drug) supplies from Afghanistan to other countries, of course we would have done it and we would have not been in such a sorry state as we are today," he told the channel.

The Soviet Union invaded Afghanistan in 1979 to stamp out the US-backed Mujahedin resistance that managed to beat back the Soviet force following a bloody decade-long war.

But relations between Kabul and Moscow have developed since the US-led invasion of Afghanistan in 2001 and the subsequent installation of the Western-backed Karzai as president.

Moscow and NATO struck a deal in November to boost the flow of Western military supply shipments through Russia to Afghanistan.

There are about 140,000 NATO-led troops in Afghanistan -- around two-thirds of which are from the United States -- fighting a Taliban insurgency.

Afghan leader makes first official visit to Russiahttp://rt.com/news/afghan-leader-first-visit-russia/print/

Published: 21 January, 2011, 07:19Edited: 21 January, 2011, 09:32

Afghan President Hamid Karzai is in Moscow on his first official visit to the Russian capital.

Karzai will meet his Russian counterpart Dmitry Medvedev to talk about strengthening relations between the two countries, brainstorm about effective solutions to mutual threats, and expand common interests. Economic relations and the war against drugs are expected to top the agenda in their talks.

The leaders of both countries have met three times in the past to discuss economic cooperation. Russia is trying to help Afghanistan more and more every year, including reconstructing infrastructure built by the Soviet Union.  

Military cooperation will also be in the spotlight. Russia and the US have agreed for US Army cargo to be transited through Russian territory which significantly eases the process of delivering military equipment to Afghanistan.

Another important issue which will be addressed is drug trafficking. Moscow is trying to be more involved in tackling this problem.  Annually, 350,000 people

die in Russia from Afghan heroin. Russia has recently been participating in many international conferences on the Afghan drug problem.

Afghanistan’s security is our continued effort and struggle – Afghan presidenthttp://rt.com/news/afghanistan-hamid-karzai-interview/print/

Published: 21 January, 2011, 11:37Edited: 21 January, 2011, 12:08

Ahead of his meeting with Dmitry Medvedev, Afghan President Hamid Karzai spoke with RT about his plans for solving the problems that are plaguing Afghanistan and spilling beyond its borders.

When Hamid Karzai was elected President of Afghanistan in 2004, he had many hopes and aspirations – “that we’d have a peaceful Afghanistan, a stable Afghanistan, an Afghanistan in close contact and neighborly relations with its neighbors and near-neighbors.” He said it should be “a country that would progress into a better economy with better living standards, and the Afghan children who were deprived of education for so many decades would go to school.”

Some of those aspirations “have been met, some have not,” he said.

“We managed to achieve a better economy. We have more than 20 universities right now, a booming construction industry and independent sovereign Afghanistan,” he said. “Of course, one of our greatest aspirations – security for the Afghan people – peaceful Afghan people – for the whole country, has not come – and that is our continued effort and struggle.”

Hamid Karzai said he had been strongly attacked by the Western media for many years – “partly because of their lack of understanding of Afghanistan and its situation, partly because of politics. And when you are in a country like Afghanistan, where there is so much world attention, where there is so much conflict, where there is so much rivalry, so many interests involved, it’s only natural that criticism like that would take place.”

“The Western media are unfortunately extremely simplistic in their study of Afghanistan, in their analysis of Afghanistan,” he said. “Imagine if the Afghan media were writing about politics or life or society in America or in France, what would they write? They lack information about us. It’s simplistic and rudimentary at best.”

As for the war on terror, it is “a struggle for all of us,” Hamid Karzai said.

“The war on terror – to the extent that war on terror is concerned – is a struggle for Afghanistan, for the US, for Russia, for Muslim countries, for all of us.”

Karzai said that the Afghan government has managed to cut back poppy cultivation on the territory it controls.

“Where we are in charge – the Afghan government – we have reduced poppies in 22 provinces of Afghanistan. In some of those provinces we have completely eliminated poppies. Where we are not in charge – in one or two provinces where there’s Taliban or where there are more foreign forces, poppies have increased and that’s a problem,” he said.

“Those who grow poppies in Afghanistan, grow them out of desperation. I know people in Afghanistan who destroyed their vineyards, their pomegranate orchards to replace them with poppies. And that must have been done out of absolute desperation. The trafficking is an entirely different matter.”

Hamid Karzai said that the international drug trade is something that is beyond Afghanistan’s means to fight.

“That’s an international matter for us to fight together,” he said.

“We cannot fight the flow – if you cannot stop it in Russia – you are a much more organized society, you are a much more effective government – if the US cannot stop it at the border with Mexico, with all that policing and ability,” Karzai said. “The international community is in Afghanistan because we have been destroyed by years of foreign destruction. The infrastructure is gone, the ability is gone, the civil services weakened. That’s why Russia is helping our police force, that’s why America is helping our military. Had we the capability to prevent supply from Afghanistan to other countries, of course we would have done it.”

President Karzai also said Russia and Afghanistan should cooperate in many areas.

“There’s need for Russia and Afghanistan to engage with one another, not only in a matter of Russia helping Afghanistan to rebuild and redevelop its institutional capacity but also by means of trade, investment, by interaction between our businesses which is very strong.”

He added that Russians have a better understanding of Afghan mentality than Americans.

“Russia is both European and Asian and Russia understands Afghanistan culturally better and we understand it culturally better,” he said.

Afghanistan: Moscow Wants to Supply More Arms to Kabul -- Russian Envoyhttp://www.eurasianet.org/node/62741

January 20, 2011 - 1:50pm, by Aunohita Mojumdar

A EurasiaNet Q&A with Russian Ambassador Andrey Avetisyan

Afghan President Hamid Karzai is in Moscow for a two-day official visit that underscores the Kremlin’s growing political role in Afghanistan. The visit, which began January 20, also coincides with a deepening constitutional crisis inside Afghanistan, stemming from a dispute concerning the legitimacy of parliamentary elections in 2010. While drugs and terrorism top Russia’s agenda for Karzai’s visit, Russian Ambassador Andrey Avetisyan tells EurasiaNet.org in Kabul that Moscow would also like to benefit from a share in the defense pie as a commercial supplier.

EurasiaNet: Can you frame for us your concerns about the current situation in Afghanistan?

Avetisyan: We see constant fighting in the north, which worries us a lot. It is almost on our borders because you know we do not have proper borders with the Central Asian republics; they are absolutely open. Two main threats to Russia emanating from Afghanistan are drugs and terrorism. They must be dealt with here, or at least at the northern border of Afghanistan. So we try to encourage a regional approach to the Afghan issue including the Central Asian republics, which, like Russia, are members of the Shanghai Cooperation Organization, and members of the Collective Security Treaty Organization.

The regional approach is something that is badly needed for the Afghan settlement. We know better than anybody how needed and how important peace in the region is, … but national reconciliation is the only way out of this. The international community’s role must be to support them [the Afghan parties to the conflict], not to find solutions for them, not to impose our visions of western democracy.

EurasiaNet: In what way are you prepared to support them?

Avetisyan: In any possible way, except through direct military involvement in Afghanistan. No Russian soldiers will ever [again] be on Afghan soil. Apart from that, everything is possible and we are doing many things already, for example, cooperating against drugs. There are plans for multilateral cooperation in this sphere.

EurasiaNet: Are you happy with the counter-narcotics policy being followed by the United States and NATO?

Avetisyan: With NATO and the United States we only have differences on eradication. … We are in favor of physical eradication like Afghan police do now. We are discussing the possibility of supplying the Afghan side with tractors and other means. We are absolutely not in favor of aerial spraying. We understand that this is a way of living for Afghan peasants. Even if we encourage and support eradication, we must substitute it with something.

We are absolutely certain that terrorism and drugs are inseparable. You fight drugs, you fight terrorism. You cannot fight terrorism without fighting drugs because that’s how they get their money.

EurasiaNet: Is the current military strategy employed by NATO and the Afghan government comprehensive enough?

Avetisyan: This war can’t be won. Everyone understands that now. I think the focus must be on training the Afghan national security forces -- serious training. It is not happening yet. Short-term training is not enough. To train a decent officer takes several years -- three, four or five years. Military academies must be set up here and military officers must be sent abroad for training. We have started with the police. We took 225 police officers to Russia [in 2010] in addition to running special courses for several hundred counter-narcotics police.

Apart from training, the strengthening of the national security forces includes ammunition, weapons, and all things necessary for an army to fight, so we support the approach of President Karzai when he asks allies to provide the army with real fighting capability. We recently supplied the Ministry of Interior with 20,000 AK-47 rifles. We are also discussing the possibility of providing the Afghan army and police with transport helicopters. If the Afghan army or police have other needs, we will consider it.

EurasiaNet: Are you also keen to sell your defense equipment to Afghanistan?

Avetisyan: Yes, of course we are, because we are a big producer, and at some point it will be on a commercial basis. In Lisbon [at a NATO meeting in November], there was an agreement with NATO to set up a trust fund to service and maintain Russian helicopters and to train technicians. We are in discussions on the purchase of Russian equipment [for the Afghan army] with members of the [NATO] coalition.

Editor's note: Aunohita Mojumdar is an Indian freelance journalist based in Kabul.

Japan regrets Russian commission's visit to Kuril Islandshttp://en.rian.ru/world/20110121/162232399.html

09:17 21/01/2011

TOKYO, January 21 (RIA Novosti) - Japanese Chief Cabinet Secretary Yukio Edano expressed deep regret on Friday over the visit of a Russian defense ministry commission to one of the disputed South Kuril Islands.

"This move is not in line with Japan's position and causes us deep regret," Edan said at a press conference after a cabinet meeting.

A commission from the Russian defense ministry, led by Deputy Defense Minister Dmitry Bulgakov, is visiting the islands of Iturup and Kunashir from January 19-23 to inspect Russia's only machine gun and artillery division.

Both Japan and Russia have laid claims to four of the islands since they were annexed by the Soviet Union at the end of World War II. The dispute over the islands has prevented the two countries from signing a peace treaty to formally end World War II hostilities.

Russian President Dmitry Medvedev infuriated Japan in November, 2010, when he became the first Russian or Soviet head of state to visit one of the islands.

Edan reiterated the importance of dialogue between Russia and Japan on the long-standing territorial dispute.

"It is important that both countries negotiate to resolve the territorial issue in a peaceful atmosphere," said Edan, who represents his country's interests in the Kuril Islands, called the Northern Territories by Japan.

Russia ready to recognize South Sudan’s independence http://www.sudantribune.com/Russia-ready-to-recognize-South,37707

January 20, 2011 (MOSCOW) — Russia is willing to recognize an independent state in Southern Sudan if the results of 9 January referendum are accepted by the two governments north and south, said the special envoy of the President Dmitry Medvedev to Sudan.

On Wednesday, the ruling National Congress Party (NCP) declared recognizing the results of the Southern Sudan referendum on independence. Southerners

according to the preliminary results overwhelmingly voted in favor of the independence of the region.

International observers from different countries and organizations also said the vote was fair and credible. They also hailed the security conditions and the good organization despite logistical and material difficulties.

“If a new independent state appears on Africa’s map as a result of the referendum and this is not accompanied with conflicts, this outcome can be described as a most favourable one,” said Mikhail Margelov special Russian envoy to Sudan.

“We act as an honest partner: we have no burden of the colonial past either in Sudan or in neighbouring African countries, nor have we investments running into billions or the mentality of an international policeman. Russia in this case can only show its goodwill,” he stressed.

Margelov said the northern and southern Sudan governments expressed readiness to reach agreement on the pending issues to prevent another civil war.

"The political forces of Sudan were able now to reach agreement: they have common interests, and, one would like to hope, not only economic."

Last December during a visit to Khartoum, the Russian envoy met with the Sudanese First Vice President and head of southern Sudan government to discuss the future relations between Russia and South Sudan.

"Russia is interested in its economic presence in Sudan, whether in a unified one, or with the South separated from it," he said.

“From the business point of view, (Sudan) offers a multitude of perspective trends - oil, pipelines, energy, water resources and railway transport,” he stressed.

(ST)

JANUARY 21, 2011

U.S. Nears Deal for Russian Copters http://online.wsj.com/article/SB10001424052748703921504576094370884318218.html

By NATHAN HODGE

WASHINGTON—The U.S. military plans to award an exclusive contract to Russia's state arms exporter Rosoboronexport to supply helicopters for

Afghanistan's military, speeding a deal that was outlined as part of a "reset" of U.S.-Russia relations.

In a Jan. 13 notice, the U.S. Army Aviation and Missile Command Contracting Center said it would award a "sole-source" contract to Rosoboronexport for the purchase of Mi-17 helicopters, rugged Soviet-era aircraft that are a workhorse of Afghan military forces. "This item is restricted to Rosoboronexport," the notice said.

The Army didn't provide specifics on the cost or the size of the contract, but individuals familiar with the details confirmed it was for 21 new Mi-17 helicopters, along with tool kits, spare parts and testing.

The proposed purchase represents the latest attempt to equip the militaries of Afghanistan, Iraq and Pakistan with reliable, affordable aircraft from the factories of its former Cold War rival.

Russian-made helicopters like the Mi-17 are known for their versatility and ease of maintenance, but efforts to buy the aircraft were once complicated by U.S. sanctions against Rosoboronexport over its dealings with Iran.

Those sanctions were lifted last year as part of a push by the White House to patch up relations with the Kremlin.

Following a June meeting between President Barack Obama and his Russian counterpart, Dmitry Medvedev, both sides announced they would work together to provide Russian-made helicopters and spare parts to the Afghan military.

Rosoboronexport didn't respond immediately to an emailed request to comment, and its officials couldn't be reached by telephone.

U.S.-funded Russian helicopter deals have raised some eyebrows. Lawmakers have complained that the Pentagon should consider buying more American-made aircraft. And firms that hoped to bid on this latest helicopter contract were frustrated by the government's decision to pursue an exclusive deal with Rosoboronexport.

Last year, Arinc Engineering Services LLC, a Maryland-based firm, challenged a Navy-run solicitation to buy 21 Mi-17 helicopters from Rosoboronexport. The Government Accountability Office dismissed Arinc's protest. Management of the procurement was subsequently handed over to the Army, which runs an office for buying "nonstandard" aircraft.

The U.S. has spent hundreds of millions over the past several years on Mi-17 procurement for its allies. Before sanctions against Rosoboronexport were lifted,

private firms bought civilian variants of the helicopters and converted them for military use, according to people familiar with the process.

11:14January 21, 2011 11:58

Black Sea Fleet submarine prepares for Mediterranean Sea deployment (Part 2)http://www.interfax.com/newsinf.asp?id=216464

MOSCOW. Jan 21 (Interfax-AVN) - The Alrosa, the one and only submarine owned by the Russian Black Sea Fleet, will undertake its first deployment in the Mediterranean Sea, which will continue for three months, a military-diplomatic source told Interfax-AVN on Friday.

"The Alrosa will rise to the surface to pass through the Bosphorus in summer. The Turkish authorities will be notified of it. However, this issue has not yet been completely settled," he said.

"During the mission, the Alrosa will be accompanied by a group of various ships in charge of anti-submarine defense and air defense," he said.

"The submarine, which suffered an accident in November 2009, was fixed and modernized in Novorossiisk for seven months, during which the Alrosa received state-of-the-art hydroacoustic stations enabling it to maintain a higher level of covertness," he said.

The submarine B-380 Svyatoi Knyaz Georgy, built in 1982, is slated for decommissioning.

The Ukrainian Navy's submarine Zaporizhzhya is currently undergoing post-maintenance trials.

The Turkish Navy owns 14 German-built non-nuclear submarines of various modifications.

The diesel-electric submarine Varshavyanka Project 877 was named Alrosa in 2003 after Russia's diamond miner Alrosa, which helps cover the submarine's operating costs.

tm dp

January 21, 2011, 9:41 CET

Hungary, Russia seek to resolve all outstanding issues in one package, says FMhttp://www.realdeal.hu/20110121/hungary-russia-seek-to-resolve-all-outstanding-issues-in-one-package-says-fm

By MTI

Hungary aims to settle all unresolved economic issues with Russia in a single package, Hungary's foreign minister said.

The Russian side has earlier shown willingness towards this goal, too, while it is acknowledged that "several questions need further clarification at an expert level", Janos Martonyi said in a response addressed to opposition Socialist Party lawmaker Vilmos Szabo and posted on Parliament's website on Thursday.

Martonyi replied to Szabo's questions regarding the progress of Hungarian-Russian economic relations.

He said outstanding issues included the future of troubled Hungarian national airline Malev, Russian oil and gas company Surgutneftegas's stake in Hungarian peer MOL, expansion of Hungary's Paks Nuclear Plant, as well as possible Russian participation in the construction of Budapest's fourth metro line. Other issues are the expansion of the broad-gauge railway line in Hungary and the extension of a bilateral gas-purchase contract set to expire in 2014, he added.

Referring to recent bilateral talks Martonyi said that "our ideas do not always coincide with those of the Russian government ... Talks have not yet brought a breakthrough, but they were exceptionally useful in making standpoints clear in an open and honest way."

The foreign minister added that Hungary was seeking further export opportunities in regional-development projects related to preparations for the 2014 Winter Olympics in Russia's Sochi.

U.S. hopes Russian-Polish ties remain unaffected by Kaczynski plane crashhttp://en.rian.ru/world/20110121/162230007.html

U.S. hopes that controversies surrounding the probe into last year's Polish presidential crash in western Russia will not affect ties between Russia and Poland, a U.S. State Department spokesman said on Friday.

"We understand the sensitivities, the emotions that sorting through these issues can create," Philip Crowley said. "At this point, it is – we certainly would hope that this – the investigation of this tragedy does not in any way impede improved relations between Russia and Poland."

Crowley said the crash "has been fully investigated" and remained "a matter between Russia and Poland."

"I'm not aware that the United States has been asked to provide any particular assistance in the investigation of this accident. But, obviously, we are prepared to help in any way that might be - that either Poland or Russia would contemplate."

Russia's aviation authorities released a report last week citing the pilot error as the main cause of the tragedy, which killed then President Lech Kaczynski and 95 others near the city of Smolensk last April. The report aroused criticism from Polish experts and officials as lacking in evidence.

Polish Prime Minister Donald Tusk said the following day that Poland might have to turn to international agencies if the two sides fail to agree on the causes of the crash.

WASHINGTON, January 21 (RIA Novosti)

Russia not to blame for Kaczynski's plane crash - Polish experthttp://en.rian.ru/world/20110121/162229425.html

Russian traffic controllers are not to blame for the April crash of a Polish presidential plane in western Russia, a leading expert working on a probe of the tragedy said.

A Polish commission investigating the Smolensk air crash said on Tuesday Russian air traffic controllers were under pressure, made a number of errors and failed to warn the Polish pilots that they were off course.

"I'm convinced that our [Polish] side is to blame for most causes of the Smolensk disaster. Any faults on the part of Russia should be ruled out," Poland's special envoy to the Interstate Aviation Committee (IAC), Edmund Klich, said in an interview with Poland's TVN24 channel.

The Polish expert said the air disaster, which claimed the lives of 96 people, was caused by "faults in the pilots' training."

"A good crew of a serviceable plane - and we have no information that the Tu-154 experienced technical problems - just won't perform the landing in that manner. Even if that was what the air traffic control instructed them to do. They must know their aircraft's course," he said.

The Polish expert also said the pilots were aware of bad weather conditions in Smolensk.

Then Polish president Lech Kaczynski and many Polish officials were killed when a Tu-154 plane crashed upon landing near the western Russian city of Smolensk on April 10, 2010.

The CIS International Aviation Committee (MAK) released a report on January 12 citing pilot error as the main cause of the tragedy, which occurred when the plane hit trees while attempting to land in thick fog.

Polish experts and officials have criticized the report for lacking sufficient evidence and stressed, in particular, the absence of the conversations between the pilots and air traffic control.

WARSAW, January 21 (RIA Novosti)

In talks with Russia, Turkey urges Iran for nuke assuranceshttp://www.todayszaman.com/news-233082-in-talks-with-russia-turkey-urges-iran-for-nuke-assurances.html

21 January 2011, Friday / TODAY’S ZAMAN WITH WIRES, İSTANBULTurkish Foreign Minister Ahmet Davutoğlu has called on Iran to offer assurances that it won’t seek nuclear weapons, while, however, underlining that all countries have the right to the peaceful use of nuclear energy.  

Davutoğlu’s remarks came on Thursday at a joint press conference with visiting Russian Foreign Minister Sergei Lavrov as İstanbul will today host a new round of nuclear negotiations between six world powers and Tehran.

For his part, Lavrov said world powers should hold out the possibility of rolling back sanctions in talks with Iran over its nuclear program, while also urging Iran to allow inspection of its nuclear sites.

“If we can agree on the perspectives for future talks, this will be a good result,” Lavrov said, speaking through a translator. “The approach of Russia and the other

participants is that the focus of the debate ought to be Iran’s nuclear program and resolving the unresolved problems in this program. But this meeting doesn’t have just one topic. Cancelling the sanctions against Iran should also be discussed,” Lavrov said.

Iranian negotiators, meanwhile, said they had no fresh offer to make for a nuclear fuel swap when they meet six world powers on Friday.

The Saudi-owned Al Arabiya TV news channel reported on Tuesday Iran would propose a revised version of a deal that was agreed in principle at a 2009 round of talks but then unraveled. But Iranian officials said there were no such plans.

“I haven’t heard about it,” Ali Bagheri, a deputy to Iran’s nuclear negotiator Saeed Jalili, told Reuters as the Iranian delegation arrived in İstanbul on Thursday. Another Iranian official said: “There is no new proposal. This is something created by the Western media. Why should we propose such a thing?”

‘Visa deal with Russia soon to be finalized’

Davutoğlu also announced on Thursday that a long-awaited bilateral agreement for lifting visa requirements between Turkey and Russia will be finalized in the coming months on the occasion of an intergovernmental meeting between the Black Sea neighbors. Last year, the presidents and prime ministers of the two countries agreed to mutually lift visa requirements, Davutoğlu said while speaking at a joint press conference with visiting Russian Foreign Minister Lavrov after the two co-chaired the first meeting of the Joint Strategic Planning Group as part of preparations for an upcoming meeting of the High-Level Cooperation Council between Russia and Turkey -- an intergovernmental cooperation mechanism.

“Within this framework, the Readmission Agreement has already been signed and, God willing, with all legal procedures being completed, the visa agreement will finally be signed in the coming months during the High-Level Cooperation Council meeting that will be held in Moscow,” Davutoğlu said, calling the planned deal “a historic step.”

The issue of lifting visa requirements had first come to the agenda during talks between Prime Minister Recep Tayyip Erdoğan and his Russian counterpart, Vladimir Putin, during an official visit by the former to Moscow in January 2010. Since then, intensified work on both sides, based on a mutually agreed upon text during Erdoğan’s visit, has continued to push this issue forward, with the Turkish sources admitting that the bureaucratic procedure on the Russian side was more complicated than on the Turkish side.

Erdogan to visit Russiahttp://www.news.az/articles/turkey/30081

Fri 21 January 2011 06:05 GMT | 7:5 Local Time

Turkey and Russia have taken very important steps about energy.

Turkish Foreign Minister Ahmet Davutoglu said that Erdogan would pay a visit to Russia in spring to attend the second meeting of the High-Level Cooperation Council in Moscow.

Davutoglu said at a joint news conference with his Russian counterpart Sergey Lavrov after attending the meeting of Turkey-Russia Joint Strategic Planning Group at Istanbul's Ciragan Palace, "today, we held the first meeting of the planning group which was established as part of the High-Level Cooperation Council. The relations between Turkey and Russia do not consist of only the neighborly and friendly relations. They are also two partner countries having a joint perspective about regional and global developments." 

"We had the chance of reviewing our bilateral relations as well as regional and global developments at the meeting today. The second meeting of the High-Level Cooperation Council will take place in Moscow in the spring. Prime Minister Recep Tayyip Erdogan and I will travel to Russia to attend the meeting. These gatherings will add a new dimension to Turkey-Russia relations," he said. 

"Turkey and Russia have taken very important steps about energy. We are determined to bring our energy cooperation to the highest level," he said. 

"Recent developments in Caucasus, Balkans, Central Asia and the Middle East were also high on agenda of today's meeting. I informed Mr. Lavrov on my meetings with Lebanese authorities. Russia, as a permanent member of the UN Security Council, made important contributions to the Middle East. We also reviewed cooperation areas in the Black Sea," he said. 

Asked about Iran, Davutoglu said that Turkey would host a meeting between Iran and the P5+1 countries (5 permanent members of the UN Security Council China, France, Russia, the United Kingdom and the United States + Germany). 

"We are against nuclear weapons, but we believe that all countries have the right to peaceful use of nuclear energy. It is also the responsibility of all countries to prevent proliferation of nuclear weapons. A solution can be reached if peaceful nuclear energy is allowed and if Iran offers assurances that it won't seek nuclear weapons," he added. 

RF hopes Belarus to follow gas contracts 2011, may offer support

http://www.itar-tass.com/eng/level2.html?NewsID=15875144&PageNum=0

21.01.2011, 03.27

MOSCOW, January 21 (Itar-Tass) -- Russia hopes the gas contracts with Belarus for 2011 will be observed, but it is prepared to offer state support, Russia’s Prime Minister Vladimir Putin said on Wednesday.

“The Russian side has worded its position once again: the gas will be supplied under the current agreement,” Putin said. “We are ready to start negotiations on the terms of supplies in 2012 and later.”

“Should it be necessary, we may think about state support to make these supplies acceptable for Belarus,” he said.

Putin believes that relations with Belarus in fuel and energy cooperation will be solved constructively.

“We have on-going dialogue and consultations,” he said. “We believe that all questions arising in this sphere will be solved constructively and from the point of view of our counties’ companies.”

Moscow is starting rehabilitation of the railway in Abkhazia http://eng.expertclub.ge/portal/cnid__7412/alias__Expertclub/lang__en/tabid__2546/default.aspx

20/01/2011 13:38

In the near future maintenance crews of the Russian railway will start rebuilding of the Psou – Ochamchire section of the railway. With this regard, head of the puppet government Sergei Shamba conducted an inspection of several sites regarding their readiness to cooperate.

We should remind that Sukhumi transferred the railway under the control of Russia. At the same time, Sukhumi received a loan from Russia to restore the railway that has already been transferred to the management of Moscow.

It is unlikely that we, mere mortals, will understand mathematical equations of the Abkhazian regime. But, still, we can assert that Moscow is laying its hands on the entire infrastructure in the occupied region to ensure provision for its military bases. And embezzlement of several hundred million rubles that was identified in Abkhazia by the Accounting Chamber of Russia is nothing compared to real value of those objects that pass into the hands of Moscow.

Vladimir Putin will hold the first meeting of the governmental commission on economic and social development of the North Caucasus

http://www.prime-tass.ru/news/0/%7BB8B69B0B-7E29-451F-B0B0-56F2F5490A85%7D.uif

GOOGLE TRANSLATIONMOSCOW, January 21. Itar-Tass. Russian Prime Minister Vladimir Putin will hold the first meeting of the governmental commission on economic and social development of the North Caucasus Federal District / SKFO. It is reported by the government press service. The meeting will discuss the implementation of federal programs "South of Russia 2008-2013" / applied to regions in the North Caucasus Federal District /, "Socio-economic development of the Republic of Ingushetia in 2010-2016 years", "Socio-economic development of the Chechen Republic in 2008-2012 ", the socio-economic development of the Stavropol region, to approve the Commission's work plan for 2011 The Commission was established on 8 December 2010 in accordance with the request of Vladimir Putin to ensure coordination between federal and regional authorities in the North Caucasus Federal District. North Caucasus Federal District was formed just over a year ago - January 19, 2010 Presidential Plenipotentiary in the North Caucasus Federal District was appointed Khloponin while earning a nomination for the post of Deputy Prime Minister.

Medvedev to Tell Davos Forum That Russia Is ‘Open’ for Business http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=arCYrUZOvWwk

By Lyubov Pronina

Jan. 21 (Bloomberg) -- President Dmitry Medvedev will tell the World Economic Forum next week that Russia is open for business, Arkady Dvorkovich, the president’s top economic adviser, told reporters in Moscow today.

To contact the reporter on this story: Lyubov Pronina in Moscow at lpronina@bloomberg.net

To contact the editor responsible for this story: Patrick Henry at phenry8@bloomberg.net

Last Updated: January 21, 2011 02:21 EST

JANUARY 21, 2011, 2:58 A.M. ET

Medvedev Aide: Russian Companies Will Sign Deals At Davos http://online.wsj.com/article/BT-CO-20110121-702191.html

MOSCOW (Dow Jones)--Russian President Dmitry Medvedev's chief economic aide said Friday he believes the country's delegation to the World Economic Forum next week will sign corporate deals.

The aide, Arkady Dvorkovich, declined to say what the deals might be. Medvedev's principal message at the gathering in Davos, Switzerland, will be that Russia is open for business and seeking foreign investment.

"Russia has a very bad investment climate," Dvorkovich told journalists in Moscow.

-By Jacob Gronholt-Pedersen, Dow Jones Newswires, +7 495 232 9197;

jacob.pedersen@dowjones.com

11:21Davos forum to address Rosneft-BP deal - Kremlin official

http://www.interfax.com/news.asp

Bank Rossii’s Micex Exit Will Hasten Exchange Tie-Up: Dvorkovich http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=atu9rkWFVBEk

By Lyubov Pronina

Jan. 21 (Bloomberg) -- The Russian central bank’s sale of its stake in the Micex Stock Exchange will hasten a tie-up between Micex and the RTS exchange, Arkady Dvorkovich, the president’s top economic adviser, told reporters in Moscow today.

Bank Rossii’s share sale sends an important signal to foreign investors that Russia wants to make the platform more transparent, he said.

To contact the reporter on this story: Lyubov Pronina in Moscow at lpronina@bloomberg.net

To contact the editor responsible for this story: Patrick Henry at phenry8@bloomberg.net

Last Updated: January 21, 2011 02:39 EST

‘Merchant of Death’ to make court appearance

http://gulftoday.ae/portal/52817da6-5121-454e-ba29-3c2e870171d1.aspx

January 21, 2011

NEW YORK: A suspected Russian arms dealer, called the “Merchant of Death,” was due on Friday to make only his second court appearance since being extradited from Thailand in a case that has strained relations between Washington and Moscow.

Viktor Bout, 44, is due for a pretrial hearing in New York federal court, a spokeswoman for the prosecutor's office said. The hearing had been scheduled earlier this month but was postponed.

A Russian former intelligence officer, Bout allegedly became the world's most prolific arms dealer, shipping plane loads of weapons to guerrilla organisations in Africa, South America and the Middle East. He claims he was an innocent air-cargo businessman.

The United Nations suspects Bout of selling arms to everyone from the Taliban to Liberia's former president Charles Taylor.

Bout — whose story inspired the 2005 Nicolas Cage film “Lord of War” — has pleaded not guilty to conspiracy to kill US nationals, to acquire an anti-aircraft missile and to support a terrorist group. If convicted, he faces between 25 years and life in prison.

The charges stem from a US sting operation in Thailand in March 2008 in which Bout allegedly agreed to sell millions of dollars worth of weapons to the leftist guerilla group Revolutionary Armed Forces of Colombia. The weapons included surface-to-air missile systems that allegedly would be used to destroy US military helicopters on joint missions in Colombia.

His capture after that covertly recorded business meeting provoked protests from Moscow.

Bout, who is being held without bail in a high-security detention center, said in a rare interview with Russian state news agency RIA Novosti this month that he

had rejected a US plea bargain offer of leniency in exchange for his alleged contact list.

He also predicted his upcoming trial will be "biased and non-objective." Military analysts in Moscow have said his arrest was a particularly sensitive blow for Russia because it threatened to expose potential links between government officials and the illicit arms trade.

Russia initially fought the extradition to the United States. But the Kremlin's top foreign policy adviser said in November that Bout "should answer the questions that US justice has for him."

He was extradited to the United States in November 2010 after more than two years of legal wrangling. International aid group Oxfam, meanwhile, said Bout's alleged arms empire reflected an international "legal vacuum."

"Arms traffickers can too easily navigate the patchwork of national arms regulations, fueling conflict while avoiding arrest and extradition, because of the lack of global regulation of the arms trade," Oxfam said in a statement.Agence France-Presse

Bout pushes for private lawyerhttp://en.rian.ru/world/20110121/162232856.html

Alleged Russian arms dealer Viktor Bout, who is due to make a second appearance in a New York court on Friday, is in talks with the U.S. authorities on the possibility of bringing in a private lawyer to represent his case, Russia's consul general in New York said.

"As far as we know, Viktor Bout and his relatives are currently holding talks with the intent that a private lawyer defends his interests," Consul Andrei Yushmanov said.

Former Soviet military translator Bout was arrested in Thailand in March 2008 during a sting operation led by U.S. agents. He was extradited to the United States in November, 2010, after spending more than two and half years in Thai prisons.

The charges, which Bout denies, include conspiring to supply arms to terrorist groups and kill U.S. nationals. Currently, the suspected arms dealer is being represented by a U.S. lawyer appointed by the federal court where his trial is being heard.

Bout could face from 25 years to life behind bars if convicted of all four charges against him. He says he expects a "biased and nonobjective" trial.

Yushmanov said the Russian embassy is trying to establish why Bout, whose guilt has not been established in court, is awaiting trial in solitary confinement in a maximum-security prison. He said the U.S. authorities have not responded to Russian requests for information on the matter.

Bout's 16- year-old daughter Lisa, his 74-year-old mother Raisa and his wife Alla arrived in New York on January 7 and will be allowed to visit him on January 24.

NEW YORK, January 21 (RIA Novosti) 

21 January 2011 Last updated at 02:25 GMT

'Kremlin links' of alleged arms dealer Viktor Bouthttp://www.bbc.co.uk/news/world-europe-12208961

By Richard Galpin BBC News, Moscow

The former Russian air force officer Viktor Bout, who is due to make a second appearance in a New York court today, had close relations with officials in the Kremlin, according to a well-placed source in Moscow.

Mr Bout is appearing on charges of conspiring to kill Americans and sell weapons to a foreign terrorist organisation.

"He had very close relations with some people in the president's office in both Yeltsin's and Putin's time," said the source, who previously held a senior government position himself.

Mr Bout, who is accused of being one of the world's most prolific illegal arms dealers, was arrested three years ago in the Thai capital, Bangkok, in a sting operation by agents from the United States Drug Enforcement Administration.

'Merchant of death'

The agents posed as Marxist rebels from Columbia and Mr Bout is alleged to have offered to supply them with surface-to-air missiles and automatic weapons, and was reported to have been told American nationals could be targeted.

In a recording of the conversation, he is alleged to have said: "We're together, we have the same enemy."

After finally being extradited to the US last November, he now faces the prospect of a life prison sentence on these charges alone, if found guilty by the New York court.

But experts who have done extensive research on the man known as the "Merchant of Death" also claim he had been trying to sell weapons to other organisations designated as "terrorists" by Western countries.

"The direct accusation is that his planes brought in weapons for al-Shabab, which at the moment is pretty much top of the wanted list in terms of terrorist activity and Islamic militant activity in Somalia," says Alex Yearsley, an arms control expert, who is currently working as a consultant for the United Nations.

"There are also potentially allegations he was negotiating with Hezbollah to bring in missiles for them, and there is much talk within intelligence circles that Israel was so concerned it tried to take Viktor out several years ago."

After running his operation from the United Arab Emirates, Belgium and South Africa in the 1990s, Mr Bout returned home to the Russian capital, Moscow, about ten years ago.

The UN had imposed sanctions and a travel ban on him accusing him of breaking embargoes on supplying weapons to rebels in Angola and to Charles Taylor's government in Liberia.

In 2002 the Belgian government issued an international warrant for his arrest.

Despite this, Mr Bout was able to live freely in Russia, according to the former government official in Moscow, who wished to remain anonymous.

"Everyone from our police and special services knew where he was in the capital," the former official says.

But the allegations run much deeper than the state simply giving Mr Bout the freedom to continue his business.

"In the latter part it's clear he had official protection," says Douglas Farah, author of a book about Viktor Bout called Merchant of Death.

"When he was working in Iran in 2005 and when he appears in Beirut in 2006 with the Hezbollah-Israel war - when Russia was supplying a great deal of weapons through Iran, which ended up in Hezbollah hands - at that point he was very useful to them and he was working on behalf of the Russian state," Mr Farah says.

Vehement denial

As a graduate of Russia's elite military institute of foreign languages, it is widely suspected that Viktor Bout had begun his working life as a military intelligence officer.

He moved into the air cargo business after the Soviet Union collapsed in 1991, but some claim he never lost his links with the intelligence world.

"Viktor was not an intelligence agent of the state. He was a money-making machine, but also a foreign policy tool principally of Russian military intelligence," claims the arms control expert, Alex Yearsley.

The Russian government along with Mr Bout vehemently deny all these allegations insisting the only business he was involved in was the transportation of legal cargo.

"For the past ten years, the US authorities have been directly and through the media waging war against me and my family," Mr Bout said in a recent interview with the Russian news agency RIA Novosti.

"We have been buried under a torrent of lies," he said.

Mr Bout's brother Sergei, who's accused of being an integral part of the business, is currently living in Moscow and agreed to be interviewed at a restaurant in an upmarket shopping centre.

Sipping green tea during the interview, he also dismissed the allegations against them.

But he quickly shifted from charm to aggression when pressed about evidence gathered by a United Nations investigator called Johan Peleman.

"I know Mr Peleman… yes very nice investigator," he said.

"They came to Dubai to a five-star hotel, very nice, beautiful hotel and sat there and investigated… is that an investigation?

"He is a diamond expert, he does not know about ammunitions," he added.

The big question now hanging over the trial in New York is whether much more will be revealed than what Viktor Bout is alleged to have said during the sting operation in Bangkok.

For Russia it could be extremely embarrassing.

But it could be equally embarrassing for the United States and other Western countries, which are also alleged to have taken advantage of Mr Bout's services to fight their wars in different parts of the world.

British Government approves BP-Rosneft dealhttp://english.ruvr.ru/2011/01/21/40579197.html

Jan 21, 2011 10:06 Moscow Time

The UK Cabinet has come out in support of the British Petroleum oil company’s new strategic policy of promoting cooperation with Russia.

According to The Guardian daily, London has brushed aside the US criticism of the agreement that BP has reached with the Russian oil company Rosneft.

British Minister of State in the Foreign Office David Howell says that he approves the agreement on the joint development of the Russian Arctic shelf.

The agreement was signed last week. According to a US Congressman, the deal undermines the national security of the United States.       

BP-Rosneft deal is separate from Khodorkovsky's fate, minister sayshttp://www.guardian.co.uk/business/2011/jan/20/minister-speaks-on-bp-and-khodorkovsky?INTCMP=SRCH

It is up to BP, not the government, to judge its trading relationship with Rosneft, says energy minister Charles Hendry

Tim Webb

guardian.co.uk, Thursday 20 January 2011 18.28 GMT

Concerns raised by the government last month over the 14-year jail term handed to Mikhail Khordorkovsky in Russia should "rightly be kept separate" from BP's controversial deal with Rosneft, the company which now owns many of the oligarch's former oil assets, according to energy minister Charles Hendry.

In an interview with the Guardian, Hendry also said that it was the government's role to help British companies identify such "legitimate international opportunities". Asked if Rosneft, in which the Russian government owns a 75%

stake, was "legitimate", he said it was up to BP to judge. "It's not the job of the government to look at every trading relationship which every company has working outside the UK."

The British government's public backing for the alliance between Rosneft and BP has come under fire given Rosneft's past and Russia's murky business environment. Chris Huhne, the energy secretary, was present at last Friday's signing ceremony for the deal, where the British and Russian flags were displayed prominently together.

Hendry added that other British oil and gas firms could be involved in exploring Russia's Artic as well as BP. Another announcement about further co-operation between British and Russian companies is expected in the next few weeks.

"Putin [the prime minister] has said he is keen to have international involvement in developing the Yamal peninsula and there are certainly British companies which could take advantage of that. [It's] not just BP at all."

Last month, William Hague, the foreign secretary, said he was "deeply concerned by the implications of this case concerning Mikhail Khodorkovsky for confidence in how the law is applied in Russia".

Hendry responded: "Britain is saying 'it's a good deal for BP and for BP shareholders'. In terms of the politics behind it, we are the energy department, our job is to look at the energy issues. William Hague has expressed his concerns on behalf of government on political issues. We recognise where there are government issues and we recognise where there are commercial issues. The two should rightly be kept separate."

Rosneft acquired assets from Khodorkovsky's Yukos oil company for a knockdown price in 2004 after a Kremlin-inspired campaign against the oligarch.

U.S. Lawmaker Seeks Prompt Review of BP-Rosneft Deal http://www.themoscowtimes.com/news/article/us-lawmaker-seeks-prompt-review-of-bp-rosneft-deal/429365.html

21 January 2011Reuters

WASHINGTON — U.S. Representative Edward Markey on Thursday asked Treasury Secretary Timothy Geithner to open an immediate investigation into a multibillion-dollar share-swap plan between BP and state-owned Rosneft.

In a letter to Geithner, Markey, a leading House Democrat on energy and environmental issues, cited "several" national security concerns over the deal.

"I believe that there is clearly sufficient evidence that this deal may pose an unacceptable threat to U.S. national security," he said in asking Treasury's Committee on Foreign Investment in the United States to conduct the probe.

Markey's letter to Geithner follows a request he made last week introducing the idea of a U.S. government look into the BP-Rosneft deal if national security concerns were established.

In his letter, Markey noted that BP is the largest producer of oil and natural gas, and the fourth largest oil refiner, in the United States. He also noted that BP is the largest supplier of fuel to the U.S. military.

Russian state-owned energy companies, Markey said, "have demonstrated a willingness to cut off energy supplies during confrontations," noting a 2009 disagreement between Gazprom and a Ukraine firm which he said prompted Gazprom to shut down supplies.

Foreign law enforcers not doubt YUKOS suspects lawfully wanted

http://www.itar-tass.com/eng/level2.html?NewsID=15876046&PageNum=0

21.01.2011, 12.05

MOSCOW, January 21 (Itar-Tass) - Foreign law enforcement agencies do not doubt that several people accused in the YUKOS criminal case were put on the international wanted list lawfully, a deputy chief of the Russian National Interpol Central Bureau at the Interior Ministry Alexei Abramov told Itar-Tass on Friday.

He noted that Russia had put on the Interpol wanted list 19 YUKOS offenders, who were involved directly in criminal schemes. “We will not name all of them. Foreign law enforcement agencies already detained six wanted offenders, particularly in Great Britain, Spain, Monaco and Cyprus,” Abramov noted.

“Their extradition is under consideration now. Unless they are extradited, they will be on the international wanted list,” Abramov elaborated.

“No one from our foreign colleagues questioned these people put on the wanted list, no one refused in the search for any political motives,” the deputy chief of the Russian National Interpol Central Bureau said, noting, “these requests are passing

an expertise in the legal department of the Interpol General Secretariat on the matter of meeting the requirements of the Interpol Charter.”

“The international police community does not put into question the search for these people, but no matter how strange it sounds Russian human rights activists and several politicians, including those in other countries, permanently doubt it,” Abramov remarked. “Therefore, I believe that the deputies of the European Parliament should first specify the position of the international police community before making resounding statements on this issue,” he told Itar-Tass.

A criminal case instituted recently by the British law enforcement agencies confirms the foresaid fact, Abramov indicated. The information provided by the Russian Investigation Committee through the Interpol channels was also used in the investigation into this criminal case. “The criminal case was instituted over money laundering by a certain person, who according to British partners, had the direct links with YUKOS and its top managers. Over 210,000 pounds in cash were confiscated from him,” the deputy chief of the Russian Interpol Bureau said.

“According to British law enforcers, he was involved in a money laundering scheme by Mikhail Khodorkovsky and Platon Lebedev in particular. This criminal case does not also cause any doubts among our foreign colleagues. Their position on this criminal case is that it is a major crime. They do not find any political underpinning in this issue,” he underlined.

Russia Bans Temporarily Animal Import from Bulgariahttp://www.novinite.com/view_news.php?id=124387

Business | January 21, 2011, Friday

Russia has temporarily restricted the import of animal products from Bulgaria because of the cases of foot-and-mouth disease (FMD) found in the country.

On Friday, the Federal Agency of the Russian Federation of Veterinary and Fytosanitory Supervision (Rosselhoznadzor) announced the temporary restriction of import and transit of animals which could get infected with FMD.

The restriction is also valid for beef, pork and sheep meat, milk, meat and milk products from Bulgaria, the Russian we journal meatinfo.ru reported.

In April 2010, Russia lifted the 10-year ban on import of meat and animal products from Bulgaria, which was introduced because of registered bluetongue disease in animals in 1999.

Turkey might also impose a ban on import of meat and animal products from Bulgaria because of the FMD disease. This was requested Thursday by the Turkish MP Mehdi Eker.

The Director of the Bulgarian National Veterinary Service, Yordan Voynov, said that Turkey has the right to decide on whether to impose the ban or not. However, he added that there was no doubt that the disease in Bulgarian animals is of Asian origin.

It was announced at the beginning of January about the first case of FMD in Bulgaria in the past 12 years. It was found in a wild boar that had been killed in the region of the southeastern city of Burgas.

Finland wants EU to put pressure on Russiahttp://english.pravda.ru/world/europe/21-01-2011/116604-finland_russia-0/

21.01.2011

Finland intends to call for the EU's help in influencing Russia. Last week a scandal erupted when the Finnish Foreign Ministry sent an official note to his Russian colleagues regarding the ban on the sale of land to foreigners in border areas signed by Russian President Dmitry Medvedev on January 9, 2011.

Finland intends to call the EU for help in influencing Russia. Last week a scandal erupted when the Finnish Foreign Ministry sent an official note to his Russian colleagues regarding the ban on the sale of land to foreigners in border areas signed by Russian President Dmitry Medvedev on January 9, 2011. The decree stipulates that foreign citizens and foreign legal entities cannot have ownership of the land in the border areas.

It is noteworthy that Finns and Estonians were the first ones to be unnerved by such news. Russia's decision angered the Estonian Foreign Ministry that called the Russian ambassador in Tallinn Yuri Merzlyakov for clarifications, as the ban on the purchase of land in the border area spreads to the entire length of the Russian border.

This issue was also raised in the Finnish Parliament by Foreign Minister Alexander Stubb. According to him, "Finland is asking Russia to explain what effect the decree of Dmitry Medvedev will have on the Finns who own land in border areas, and how it will affect future transactions."

Helsinki disagrees with the decision of Moscow and, according to the Stubb, insists that "the matter should be settled through bilateral negotiations between Finland and Russia."

Interestingly enough, the Finns have long expressed an unhealthy interest to the Russian border. In 2009 the Finnish President Halonen asked her Russian counterpart Dmitry Medvedev to allow the Finnish citizens to purchase Russian land adjacent to the Finnish regions.

The reaction of the Finns followed immediately. ProKarelia coalition, encouraging the return of "forcibly detached Finnish land" insists on countermeasures by the Finnish authorities, proposing to ban the Russians from purchasing property in Finland.

However, the head of the Duma committee on international affairs Konstantin Kosachev is confident that the sale of border land to foreigners is a direct path to their loss, because the border lands under certain conditions can be attached to another country.

In other words there is a possible option: today, foreigners are buying up land in the borderland, and tomorrow they provoke a conflict and begin to scream about infringement of their rights. Immediately after, historical claims emerge in their homeland, and politicians seek assistance from their "older European and American brothers".

At first glance, the scenario is somewhat of a fantasy one: would a small, weak Finland challenge the Russian Goliath? It can happen if Suomi joins NATO as under the rules of the alliance the participants help the country subjected to aggression.

As Finnish political scientist Johan Beckman stated in an interview with Pravda.ru, "nationalists have figured out all the details. They hope that by entering NATO they will receive its protection and will return previously lost territory from the Gulf of Finland to the Barents Sea. To a large extent they are interested in not only the Karelian isthmus but also Pechenga area where the country should have access to Arctic Ocean.

The most radical of them, the union ProKarelia, even published a book with a strategy of action to be implemented after they reacquire the territory of Finland. It outlines a plan of ethnic cleansing of the Russian population. Unfortunately, no one is in a hurry to make them responsible for these things, which is very significant for the Finnish authorities whose representatives were clearly tuned to revenge".

In other words, the Finns are trying hard to fan a diplomatic scandal, and their lobbyists are revenge organization who dream to regain the territory lost after the Winter War of 1939-1940.

This theme was picked up by some of the Finnish media, believing that the Russians buying land in Finland are a big threat to national security. However, such a position once again proves the correctness of the actions of the Russian head of state in relation to border areas.

If the purchase of land by Russians is considered a threat to the sovereignty of Finland by Helsinki, why should Russia welcome the acquisition of property by the Finns on their territory?

Revenge organizations wishing to return the "lost territories" are also found in Estonia (they have claims for Caves area of the Pskov region), Latvia (claims for Pytalovo district of Pskov region), as well as in Germany (the dream of return of Kaliningrad region). Do not forget about the problems of Russian Far Eastern borders.

It seems that the scandal will intensify. The chairman of the Foreign Affairs Commission of the Finnish Parliament Pertti Salolaynen said that deputies intend to initiate discussions in the EU.

However, revenge-seekers should be reminded that similar bans work in the EU. Mindful of the role played by the Sudeten Germans in the dismemberment of Czechoslovakia in the years 1938-1939, the modern Czech authorities have banned foreigners from buying land in their neighborhood.

The same restrictive measures are in place in Slovenia in relation to the Italians. That does not prevent either Czech Republic or Slovenia from the membership in the democratic European Union.

Sergei BalmasovPravda.Ru

Russia puts meteorological satellite into orbit (Update 1)http://en.rian.ru/science/20110121/162230923.html

The Zenit-3SB rocket launched on Thursday from the Baikonur space center in Kazakhstan delivered the Elektro-L 1 meteorological satellite into orbit early on Friday, Russia's space agency, Roscosmos, said.

Elektro-L 1, a Russian geostationary weather satellite, separated from the booster at 00:28 Moscow time [21:28 Thursday GMT]. Until recently, Russia had only one weather satellite, the Meteor-M type, in orbit.

Roscosmos deputy head, Anatoly Shilov, said later on Friday the spacecraft already completed first tests in the orbit and "works perfectly well."

"We can now say that the Russian orbital grouping already has two meteorological satellites - Meteor-M and Elektro-L. Elektro will make Russian weather forecasts more precise," he added.

The blastoff was originally scheduled for December 25, 2010, but was delayed and took place at 3:29 pm Moscow time (12:29 GMT) on Thursday.

The Elektro-L 1 was designed to provide meteorologists with a wide variety of data, including weather analysis and forecasting on a global and regional scale. It also monitors changes in the climate.

The satellite should be able to image the entire visible hemisphere of Earth at a resolution of 1 km per pixel (visible light band) and 4 km (IR band), every 30 minutes.

The weight of the spacecraft in operational mode is about 1,500 kg. Its service lifetime is about 10 years.

The Russian government previously said it would restore the Soviet network of weather satellites, which could help monitor weather and climate conditions across the country's 11 time zones. Currently, Russia has to use meteorological data from U.S. and European weather agencies.

MOSCOW, January 21 (RIA Novosti)

21 January 2011, 11:23

The Church urges to form Russian domestic and foreign policy on the country's originalityhttp://www.interfax-religion.com/?act=news&div=8120

*** "Core importance" of Russian people and Orthodox world outlook shouldn't be left out

Gorki, January 21, Interfax - Russia should not be afraid to follow its own original way in history, the Russian Church official believes.

"We have wonderful models of the countries that despite criticism go on

following their own way in history: it's Great Britain, countries of Arabic world, Switzerland and Israel. They've displayed political will that make others respect them and I am convinced the same will be with Russia," head of the Synodal Department for Church and Society Relations Archpriest Vsevolod Chaplin said at a meeting of the Russian Public Chamber with Russian President Dmitry Medvedev.

According to him, citizens of Russia "shouldn't repeat previous mistakes, we shouldn't be ashamed to be Russians, to be Orthodox. We shouldn't be ashamed to be Muslims, Tatars, Chechens, Dagestanians as well. We shouldn't be afraid to be ourselves."

"It seems to me that all attempts to create unified "uniman" have failed. Even if such "unipeople" are created, they will be deeply unhappy, the whole human history proves it. Only true people with their traditions, world outlook, lifestyle cooperating with each other can create truly healthy and harmonic society," Father Vsevolod stressed.

He urged to think over "how to make traditional, indeed eternal national values capable to mobilize people for a heroic deed, for great achievements," and pointed out that "a Russian man and representatives of all peoples living in Russia can give themselves only for the sake of great goals."

"The goal can be the boldest. Why don't we set such task to young people as to make Siberia and the Far East an independent center of electronic world!" Father Vsevolod gave an example.

According to him, Russia is rich with its national diversity "and each nation living in it needs attention of the state and the whole society," and each nation can have a possibility to develop their traditions, culture, language, world outlook.

"I wish people could dance lezghinka (the Caucasian dance which some Chechens keep dancing in Russian cities today irritating Russians - IF) and celebrate their national and religious feasts - of course observing laws and norms of decency, when and where it is appropriate for surrounding people. In this case, I am sure that people will always positively embrace our cultural riches and rejoice with joys of those who live beside them," the priest stressed.

At the same time he urged not to leave out "core importance" of Russian people and Orthodox world outlook, Orthodox culture that "formed us as a nation and state." The speaker reminded that first spots of education, culture and thought in Russia were monasteries and churches: art, music, scripture "that have become symbols of Russia appeared there guiding Russian culture of 18th-19th century."

"It's not by chance that reproductions of the Rublyov's Trinity and Vladimir Icon of the Mother of God are frequent in Catholic churches of France, Belgium, Italy.

These icons are not given by the Russian Embassy or Moscow Patriarchate parishes. Western Christians, especially Catholics know and respect Russian culture and awe "the light from the East" and it seems to me they are waiting for it at the times of current Western crisis of world outlook," the Church official said.

21 January 2011, 10:06

Maintaining interethnic and inter-religious accord in Russia essential for preserving the state in the form in which it exists today - Medvedev http://www.interfax-religion.com/?act=news&div=8118

Gorki, January 21, Interfax - Serious measures must be taken to fight ethnic extremism and to preserve civil peace, Russian President Dmitry Medvedev said.

"We need to take very serious measures to prevent the spread of ethnic extremism based on lies, on the misrepresentation of cultural traditions, and on the distortion of history," he said at a meeting with Public Chamber members.

"For that, we ought to keep and promote true, and not imaginary values of all peoples populating our multi-ethnic country, all cultures, including, of course, the Russian one because this culture has always been at the core of our country's system," the president said.

Maintaining civil peace and ethnic accord is a pre-requisite for keeping the state in its existing form, he said.

"Maintaining civil peace in our country, interethnic and inter-religious accord is not just a prerequisite for our country's modernization, it is simply essential for preserving our state in the form in which it exists today," Medvedev said.

This topic "is extremely complicated and of exceptional importance to our country," he said.

Lisin Replaces Bogdanchikov for Olympics http://www.themoscowtimes.com/business/article/lisin-replaces-bogdanchikov-for-olympics/429348.html

21 January 2011By Natalya Kostenko, Lilia Biryukova and Filipp Sterkin / Vedomosti

Vladimir Lisin replaced Sergei Bogdanchikov as vice president of the country's Olympic Committee on Wednesday, in line with the committee's hopes that the wealthy Lisin will be able to raise the funds needed to restore the team to its former glory.

Lisin, owner of Novolipetsk Steel and president of the Russian Archery Union, was unanimously elected president of the National Association of Summer Olympic Sports at a meeting of that organization in the Olympic Committee building, the association's web site reported.

That automatically makes Lisin a vice president of the Olympic Committee, replacing Bogdanchikov.

Deputy Prime Minister and Olympic Committee president Alexander Zhukov was present at the event and thanked Bogdanchikov for his work. According to the Olympic Committee's web site, since 2005, when Bogdanchikov took the helm of the summer sports group, more than 300 million rubles (about $10 million) has been allocated to Olympic sports.

An Olympic Committee staff member said that sum was insufficient, and they had begun looking for a replacement for Bogdanchikov even before he left his position as Rosneft president last September.

Another Olympic Committee employee said Bogdanchikov left the Olympic Committee of his own accord, turning in a resignation in December. That source said the main donor to the committee during Bogdanchikov's time there had been Rosneft.

The oil company's web site says it is a general partner of the Sochi Olympics and has donated a total of $180 million.

Forbes claims that Lisin is the richest man in Russia, with an estimated net worth of $15 billion.

Police reform bill railroaded by Interior Ministryhttp://www.bne.eu/dispatch_text14024

bne21 January, 2010

President Medvedev's pet project to reform Russia's notorious police force is being railroaded by vested interest in the Interior Ministry, claim deputies from minority parties, after the Duma Security Committee suggested dropping several amendments on Thursday, reports The Moscow Times. The same deputies also complained that they have been cheated by the ruling United Russia party.

The Duma's Security Committee on Thursday recommended dropping dozens of the 560 amendments submitted to the bill on police reform ahead of a general vote on Monday. The Just Russia and Liberal Democratic parties, which supported the bill in a first reading last month in exchange for a promise that their proposals would be taken into account later, said Thursday that they had been cheated by United Russia, which controls both the Security Committee and the Duma. Lawmakers still can revise the bill before Monday, but the Duma usually follows committee recommendations.

"With all respect to President Medvedev's ratings, it will be a big blow to the general public if this law doesn't work," Nikolai Levichev, head of A Just Russia's Duma faction, said by telephone. Meanwhile, Andrei Lugovoi, a Liberal Democrat Party deputy on the Security Committee, accused the Interior Ministry of attempting to stall the legislation. "The president has been misled by Interior Ministry bureaucrats who are afraid to lose their jobs," Lugovoi told City-FM radio.

Among the amendments recommended to be discarded were measures to increase public and parliamentary control over the police and ban the force from the private security market, where it is currently a key player, said Gennady Gudkov, a Security Committee member with A Just Russia. "The Police Joint-Stock Company will be alive and well," Gudkov said bitterly by telephone. "In the end we will just change a couple of words and the people will not get any reform at all."

Another key issue is the public councils that oversee police work, whose membership Interior Ministry officials will be able to influence. "There is the possibility that a police boss will be able to bring in people who will support him in all his misdeeds," Alexei Volkov from United Russia admitted, before insisting that the guidelines for the creation and activities of public councils will be defined by a separate presidential decree, which is not yet drafted.

One apparent progressive recommendation was also issued on Thursday however, with the Security Council suggesting a controversial provision to declare all police actions legal unless proved otherwise be dropped.

Russian Press at a Glance, Friday, January 21, 2011http://en.rian.ru/papers/20110121/162232203.html

08:38 21/01/2011© RIA Novosti. Rybchinskiy

POLITICS

Ahead of Belarusian President Alexander Lukashenko's inauguration, the European Parliament adopted a resolution condemning the clampdown on post-election protests in Minsk and calling for immediate sanctions. In retaliation, Lukashenko instructed the government to prepare measures targeting EU countries

(Vedomosti, Kommersant, Nezavisimaya Gazeta, Rossiiskaya Gazeta)

The State Duma's security committee on Thursday considered amendments to a bill on police reform. During discussions, the committee decided to drop a controversial provision to declare any police actions legal unless proved otherwise

(Vedomosti, Kommersant, The Moscow Times, Nezavisimaya Gazeta, Rossiiskaya Gazeta)

Talks between the U.S. and Chinese leaders, Barack Obama and Hu Jintao, eased tensions between the two powers but failed to resolve a number of disputed issues (Kommersant, Nezavisimaya Gazeta, Rossiiskaya Gazeta)

ECONOMY

Russian Prime Minister Vladimir Putin told the government that Russia's development strategy until 2020 should be reviewed to take the post-crisis period into account

(Vedomosti, Kommersant)

Russia's Supreme Court upheld an acquittal verdict for former top managers of the Russian cell phone retailer Euroset, who were charged with the abduction of the company's shipping agent in 2003. Russian businessmen told Vedomosti this was "a good sign" but still not enough to change the business climate in Russia

(Vedomosti, Kommersant, Rossiiskaya Gazeta)

OIL & GAS

The Russian and Belarusian prime ministers failed to agree on the resumption of Russian oil supplies at their meeting on Thursday

(Vedomosti, The Moscow Times, Nezavisimaya Gazeta, Rossiiskaya Gazeta)

VEHICLES & ENGINEERING

The Russian industry ministry and western experts estimated growth in Russian car sales at around 39 percent in 2010. The quick recovery is mainly due to foreign brands and growth is unlikely to spread to domestic brands, experts warn

(Vedomosti, Nezavisimaya Gazeta, Rossiiskaya Gazeta)

POWER GENERATION

An apolitical power vertical is emerging as state-controlled electricity company Inter RAO on Thursday unveiled details of an aggressive expansion plan that will include consolidation of disparate assets under a single umbrella firm

(The Moscow Times, Vedomosti)

TELECOMS & IT

Major Russian-language internet portal, Rambler, will scrap its own search engine. It may be replaced by Russia's largest search engine Yandex, but Google is seen as the more likely candidate

(Vedomosti)

SOCIETY

On the eve of the 87th anniversary of Vladimir Lenin's death, Russia's ruling United Russia party has yet again raised the issue of burying the leader of the 1917 October Revolution. Experts see the move as Dmitry Medvedev's "image project," similar to the historic reunification of Russian Orthodox churches under his predecessor Vladimir Putin

(Vedomosti, Kommersant, Nezavisimaya Gazeta, Rossiiskaya Gazeta)

President Dmitry Medvedev criticized the Russian judicial system and pledged to continue reforms in the sector. As a first step, Russian judges may be partially stripped of their immunity against criminal charges

(Vedomosti, Kommersant)

Austria will not grant former Mayor Yury Luzhkov a residency permit because the country's government does not want to jeopardize relations with the Kremlin by favoring the embattled official

(The Moscow Times)

ENVIRONMENT

The summer 2010 wildfire disaster is likely to repeat itself this year in the Moscow Region and neighboring areas, Greenpeace warns. Experts say that 17 percent of the forested area around Moscow is at maximum risk of peat bog fires

as soon as the snow melts. Even now, peat bog fires continue southeast of Moscow, where dozens of hotspots were detected under the snow

(Vedomosti)

For more details on all the news in Russia today, visit our website at http://en.rian.ru.

Former mayor of Moscow Yuri Luzhkov unwanted in Europehttp://english.pravda.ru/russia/politics/21-01-2011/116603-Yuri_Luzhkov-0/

21.01.2011  

After Riga stated that it did not want to see Luzhkov as its resident, the Latvian society exploded with discussions of the correctness of this decision. In connection with Luzhkov‘s frank statement that he needs the notorious "freedom of movement," other European countries started discussing where the ex-mayor of Moscow may be headed. Miniature Austria was worried the most because Luzhkov's wife already has real estate in the country which she, according to local press reports, is going to grow even more in the future.

Last Tuesday, the Interior Minister Linda Murniece, after a meeting with President Valdis Zatlers, explained her harsh decision to include Yuri Luzhkov's on her "black list".

"The rationale was his attitude to Latvia, his hostile statements about Latvia, his desire to use Latvia for personal purposes, because it is obvious that his goal was not to invest in Latvia, the Latvian economy, but to use Latvia for travel to the Schengen zone," said Murniece.

At the same time she seemed to prove the world that the love of the proud Baltic republic cannot be bought with money, and that the Latvian authorities are able to discern ulterior motives behind papers and statements. However, Murniece referred to the information provided by Latvian security services.

It turns out that Luzhkov is not the only Russian celebrity on the black list. The list also includes Vladimir Zhirinovsky and Boris Berezovsky. For some time Russian singer Iosif Kobzon was persona non grata in the Baltic republic. Last year alone the Ministry of Internal Affairs added six people to the list. In total, it

has approximately five thousand individuals whose names are kept secret, reports Deutsche Welle.

After the statement of Latvian authorities, Luzhkov's neighbor on the black list Vladimir Zhirinovsky said that "Luzhkov has the right to expect support of the Russian Foreign Ministry on this issue, as it is humiliation of a Russian citizen and, therefore, a shot at Russia."

At the same time, many Latvian publications regarded this step as the government's unwillingness to ruin relations with Russia. However, the Latvian society is divided on the issue. Some followed the example of the prime minister and refused to comment on this very delicate political issue. The Minister of Defense Atis Pabriks spoke against the ban on the entry of ex-mayor of Moscow to the country. He based his opposition on the fact that criticism of the government is not a valid reason for refusing to issue a residence permit, especially since Luzhkov has formal grounds to obtain it.

"You cannot divide people according to what they were saying. In the end, he was an influential politician who has invested an amount prescribed by law. If you've passed such a law, he has the right to request a residence permit," Deutsche Welle quoted Pabriks.

Mayor of Liepaja Uldis Sesks also expressed his regret that this rejection will not allow the rich Russian and his wife to invest in the Latvian economy. While the Baltic Republic is in the midst of heated discussion, the European countries are wondering - what is the next door the ex-mayor of Moscow is going to knock at.

A "source familiar with the situation" named Austria and Britain among the countries where Luzhkov wants to get a residence permit. British press does not seem to be bothered with Luzhkov's possible move, although his daughters are there at the moment, and the wife of the former mayor Elena Baturina pays them frequent visits. As for Austrian journalists, they are actively but so far unsuccessfully trying to scout whether they will soon be having an honorable guest.

Tirol newspaper ORF released information that Elena Baturina wants to buy new property in Kitzbuehel, where she already owns a house and a hotel with a golf field, as well as a private property in the Aurach, which consists of a main building and a house for staff and guests. The object of the disgraced family's passion is located near Aurach. According to the newspaper, they already signed a lease contract with an option to purchase the property one year later.

It is unclear whether Tyrol will become a new refuge for the family of billionaires. Kitzbuehel authorities said that at the time there was no bid from the former mayor of Moscow. However, the newspaper notes that he may act through other channels, for example, ask for a long-term visa at the embassy.

Alexandra PolyakovaNewsinfo

Russia seizes three tonnes of ancient mammoth tuskshttp://www.sify.com/news/russia-seizes-three-tonnes-of-ancient-mammoth-tusks-news-international-lbvi4ccdffa.html

2011-01-21 08:30:00

Moscow, Jan 21 (DPA) Russian customs seized three tonnes of ancient and valuable mammoth tusks that a gang was attempting to smuggle, the Interfax agency quoted officials as saying Thursday.

Two men from St. Petersburg had 64 full tusks of the extinct mammals as well as 14 reconstructed tusks, officials said. Details of their value were not immediately known.

The tusks are typically found intact in northern Siberia, where the permafrost continues to melt due to climate change. In Yakutia, some 15 tonnes of tusks are unearthed every year. Mammoths were a genus of hairy elephant that became extinct 10,000 years ago.

National Economic Trends

January 21, 2011 16:31 PM

Russia's Economy May Barely Manage Forecasted Inflation 2011

http://www.bernama.com/bernama/v5/newsindex.php?id=558278

LONDON, Jan 21 (Bernama) -- It will be complicated for Russia's economy to meet the 6-7 percent inflation forecast of during 2011, Deputy Chairman of Russia's Central Bank Alexei Ulyukayev said on Thursday at Deutsche Bank's 9th annual Investment Forum - Russia One-on-One.

"Our official inflation forecast /for 2011/ is the same as we made in October of the past year," Russian news agency, Itar-Tass, quoted Ulyukayev as saying.

"It is 6-7 percent, but it will be very difficult to achieve this ambitious target.

"Of course we have certain instruments to use for this challenge - rates, our exchange rate policy, our obligatory reserves policy.

"We shall use these opportunities in certain combinations, in certain time and depending on our perception of the macro economic situation," he said.

"I have a feeling that at least over the first six months the risk of inflation may be more realistic, more serious than the risks for the level of economic growth," he added.

During the past year Russia practically finalised the implementation of specific anti-crisis measures, Ulyukayev said, adding "We finalised the strategy to overcome the crisis, which is another proof that we estimate the risks for the economic growth not as most critical."

"We forecast that the credit growth will be stable in 2011 and in near future," he said. "It will make from 20 to 20 plus percent in 2011," he said.

-- BERNAMA

Ulyukaev not worried about capital outflows

http://www.bne.eu/dispatch_text14024

Renaissance CapitalJanuary 21, 2011

Yesterday (20 January), Central Bank of Russia (CBR) First Deputy Chairman Alexey Ulyukaev commented on the course of the monetary policy in 2011.

• According to Ulyukaev, in 1H11 the risk of inflation acceleration is higher than the risk economic growth slowing. We think this could be viewed as a signal that increases in all refinancing rates will be as soon as in January. However, we believe this comment does not clarify the future course of the CBR's monetary policy course and timing of the rate increases. Previously, Ulyukaev commented that rates could be increased in 1Q11, which would essentially be aimed at curbing inflation as soon as in 1H11.

• For the first time, Ulyukaev argued that the 2011 inflation target of 6-7% may not be met. We share this view and even in the best-case scenario of good harvest in 2011, inflation would only decrease to 8.0-8.5% by the end of 2011.

• The CBR considers capital inflow in 2011 as a more important problem than outflow. As such, we do not believe that any rate hikes may be associated with the capital outflow we saw at the end of 2010. In addition, Russia will run a significant current account surplus of approximately $60bn in 2011. Thus, if there is capital inflow, we think the CBR will print plenty of roubles, adding pressure to inflation. As such, we believe if the CBR's intentions to fight inflation are real, it should decrease the level of FX interventions aimed at the rouble support. Thus, we think, long-duration rouble vs dollar- and dual-currency basket should be considered as the top trade idea for 2011.

Spike in budget spending destabilizes economy http://www.bne.eu/dispatch_text14024

Troika DialogJanuary 21, 2011

Budget revenues grew to R867.2 bln ($28.1 bln) in December, the highest monthly figure for 2010. Spending also peaked, reaching R1.8 trln ($57.4 bln), compared with average monthly expenditures over 11m10 of R760 bln. The deficit totaled R0.9 trln ($29.3 bln). As usual, budget expenditures soared at year end, as did the deficit and money supply growth. This is the major reason for the acceleration of inflation at the beginning of the year.

Annual figures for the budget were very close to our projections with revenues at R8.3 trln ($274.3 bln), expenditures at R10.1 trln ($333.7 bln) and the deficit at R1.8 trln ($59.4 bln). The spending plan (R10.3 trln) was not fully met, and this can be treated as a positive event. Indeed, the acceleration of inflation at the beginning of the year shows that the economy is unable to absorb the money injected in December, and the less the government spends, the better the economy feels. In December, the government spent 18% of the annual budget, which clearly illustrates that budget spending was excessive. Meanwhile, the Stabilization Fund contracted by around $15 bln in December alone and remained at $25.4 bln as of January 1 (over 2010 the Stabilization Fund shrank by around $35 bln).

The absurdity of extremely uneven and excessively high expenditures within the year seems to be becoming clear to a wider range of people among the authorities. President Dmitri Medvedev has recently requested that budget expenditures not be increased automatically if revenues are higher than expected. If his wish comes true, disinflation could become a very real thing.

Evgeny Gavrilenkov

Ministry of Finance: In need of liquidity? http://www.bne.eu/dispatch_text14024

Renaissance CapitalJanuary 21, 2011

Yesterday (20 January), the Ministry of Finance (MinFin) confirmed that the preliminary federal budget deficit was 3.9% of GDP in 2010. The result is clearly positive compared with the official forecast of 4.3% of GDP announced in late 2010.

No cut in expenditures. According to the MinFin, expenditures were RUB10.1trn and only RUB150bn were not completed (less than usual). Budget income was RUB8.3trn or approximately 6.6% more than the budget plan. Thus, the budget deficit was lower, due to higher nominal GDP and non-oil-and-gas revenues (additional RUB400bn) rather than lower spending.

Federal budget used operational accounts extensively. The MinFin reported that the monthly budget deficit in December was RUB900bn. Among the financing sources, the Reserve Fund provided RUB450bn and RUB160bn was raised on the domestic bond market. Other financing sources contributed RUB420bn (including RUB110bn in net deposit placements) to net outflow of budget funds. Therefore, the Reserve Fund was not the major financing source, as the MinFin withdrew approximately RUB600bn from its operational accounts in December.

Will MinFin be sourcing liquidity? In order to avoid temporary cash gaps, the average volume of liquidity held in MinFin operational accounts was approximately RUB1.1trn in 2009-10. As at 1 January 2011, the federal budget operational accounts dropped to RUB400-450bn, we estimate. Hence, the MinFin needs to somehow replace funds spent in December.

Deposits are not enough. According to the Minfin, RUB200bn was placed in deposits in December. According to Central Bank of Russia (CBR) data, RUB150bn will be paid back. This is not enough, we believe, and other sources will be needed.

MinFin likely to run substantial budget surplus. As Minister of Finance Alexei Kudrin commented, there is no intention to use the Reserve Fund in 2011. Indeed, the MinFin even sent back RUB150bn to the Reserve Fund. So, to refill its operational accounts, we think the MinFin will have to either source temporarily available funds or use maturing deposits, run a substantial budget surplus in 1Q11 and at the same time complete a borrowing program in full.

FX interventions will support the current liquidity level. The figure below shows that regional budget accounts accumulated approximately RUB350bn at the peak in 1H10. So, consolidated budget needs may reach RUB700bn by the end of 1Q11 and the current excessive liquidity environment could be distorted by the consolidated budget accounts. At the same time, the CBR is likely to launch FX purchases into international reserves and buy approximately $20bn, which will be mopped up by the MinFin, we estimate. Hence, we see no threats to the excessive liquidity conditions until the end of 1Q11, at least.

COMMENT: Russia talks modernisation, but still prioritises energy http://www.bne.eu/storyf2468/COMMENT_Russia_talks_modernisation_but_still_prioritises_energy

Chris Weafer of Uralsib January 21, 2011The most prominent buzzword in Russian politics today is "modernisation." Everybody understands this is something that must happen or the country will face a declining growth rate and increasing social instability. In practice, the more significant actions continue to be in the energy sector.

Establishing Russia as the world's biggest energy provider was critical in returning the country to a position of importance in geopolitics and in restoring the strong sense of national pride and confidence that, as much as improving living standards, underpins majority public support for Vladimir Putin. For that reason, maintaining average daily oil production at 10m barrels per day (b/d) and connecting additional gas pipes to Europe and Asia are by far the greatest priorities in Russia.

Since the start of the Putin administration on January 1 2000, Russia's average daily oil production has grown from 6.2m b/d (1999) to 10.15m b/d (2010). More importantly, Russia's average daily exports of both crude and refined oil products grew from an average 2.6m b/d to 7.3m b/d in the same period. Today, Russia is the world's largest oil producer and the largest exporter. In that same period, Russia earned approximately $1.5 trillion from exporting oil and gas.

When Putin became president in 2000, his most important economic/industrial policy was to push the oil companies to stop playing corporate politics and to invest in the industry, ie. to restore production. The tax reforms put in place during Putin's first term as president were as much about stopping capital flight in the oil sector - eg. via such mechanisms as transfer pricing - as they were to stimulate investment in the broader economy.

Raising oil production had two important objectives: to increase oil revenues for the budget and to make Russia too important to be left out of geopolitics. Those are still the key objectives today.

Juggling act

Keeping oil production at the current rate over the next 10 years - the declared objective of government - while keeping tax revenue high enough to fund planned budget expenditures, is going to be a difficult juggling act. Nobody doubts that there will have to be changes to the current tax oil and gas sector structures and that capital investment in the industry will have to be increased. Otherwise, average daily production will inevitably decline. The evidence points to the fact that remaining the world's most important oil producer is a greater priority than, for example, domestic projects like the Skolkovo business school, for both domestic and geopolitical reasons. The debate over how this may be achieved will likely dictate investor approach to the sector, and the debate over government fiscal priorities, later this year and post election.

From a strategic viewpoint, the most likely outcome is that tax breaks will be applied to greenfield projects in East Siberia, Sakhalin, the Caspian and in other offshore areas. Energy Minister Shmatko recently said that Russia is considering creating new Production Sharing Agreements (PSAs) to involve international oil majors in new projects. That way, the Finance Ministry can keep a high tax take from existing, albeit maturing, oil fields, while the 10m b/d oil target might be achieved with new investments in greenfield projects and using a lot of foreign investor capital.

Russian PSAs have become are a bad word in the oil industry because of Sakhalin II, where Shell was forced to cede control to Gazprom. It is, however, important to bear in mind that Putin's government did not like the PSAs that it inherited because of what it considered to be unfair terms agreed under the previous administration. However, over the past eight years new "rules of the game" have been established and PSAs concluded under these rules will be safer. That is entirely consistent with the oil majors' experiences in other oil regions over the past 100 years. The National Oil Companies of countries such as China, India, Malaysia and Gulf Arab states are already eager participants and several oil majors already active in Russia, eg. Shell, BP, Total, ENI, are also expected to have active roles.

For investors that doesn't mean that Russia should only be considered an energy, or materials, theme within global markets. Far from it. The trickle-down effect of oil and gas tax revenues via budget distribution and the confidence factor generated by the country's energy strength provide a very strong foundation for the investment case. The fast pace of growth in consumer spending and services is very evident for all to see. But what it does mean is those investment opportunities in the most attractive industries for stock market investors are far fewer than in the highly regulated industries.

Russian listed stocks can be split into distinct categories; state-controlled energy producers/distributors; state regulated utilities; metals and miners; commercial

sector; infrastructure. Breaking down the current $1-trillion market capitalisation of all Russian listed equities into those broad categories shows:

Oil & Gas: 45% of total stock market* Metals & Miners: 20% Utilities: Electricity & Telecoms** 16% Consumer: Banks, Retail, Pharma, Housing, Media*** 17.5% Infrastructure: Transport, IT, Manufacturing 1.5%

* as of December 31 ** assumes a greater role for Rostelecom *** includes Mail.ru

The most attractive long-term growth categories only account for less than 20% of the total stock market capitalisation.

New direction

As 2010 gave way to 2011 on Russia's Far East border with China, the first direct oil pipeline connecting both countries was officially inaugurated. This is Russia's first eastern oil export pipeline and China's second direct oil import pipeline (the first was from Kazakhstan). Over the next six months, it is expected that Russia and China will finally bring to an end the long-drawn-out negotiations to build a gas pipeline between both countries.

In 2011, Russia also wants to wrap up talks to build the South Stream gas pipeline, to push ahead with plans to co-ordinate gas exports from North Africa to Europe, to conclude talks to build two Bosphorus bypass oil pipelines, and to push its claim for greater sovereignty in the potentially energy-rich Arctic.

Contrast the near frenetic activity, and real progress, in the energy sector with the much more modest advances in the modernisation agenda. Most of the hype about Russia's future, and the core of investor expectations, is based on the assumption that the country is accelerating efforts to make the country more attractive for strategic investors outside of extractive industries and that the country will continue to diversify both in terms of economic growth drivers and budget revenues. That is also the base case assumption that I recently set out in a note, "Economic Glasnost" - ie. that there is today simply no choice but to make the changes/reforms required to advance that goal.

Aggressively pushing ahead with energy projects of course does not exclude progress with the modernisation agenda. But what it does mean is that progress in the latter will remain slow and project specific, so long as the government priority is focused on the former. We have seen time and time again that even as the president and prime minister talk about wide-ranging reforms and investment priorities, the only real progress is in those areas where the most senior members

of government are personally active. Last year, those efforts were mainly directed towards rebuilding the auto sector; this year, the signs are that the pharmaceutical, housing and agriculture sectors will be prioritised.

Bottom line is that so long as energy projects remain the key priority, as they clearly are today, progress elsewhere will be slow and selective.

Chris Weafer is chief strategist at Uralsib

Yields Diverge on Downgrade for Bank of Moscow: Russia Credit http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aujifv4fOPJ4

By Jason Webb and Maria Levitov

Jan. 21 (Bloomberg) -- Russian plans to sell government- owned companies are causing tremors in the bond market, with Bank of Moscow debt falling by the most in three months on concern the lender is better off under the city’s control.

Bank of Moscow dollar bonds due in 2013 fell the most since Oct. 19 after Moody’s Investors Service cut its rating because of the reduced prospects the lender would be rescued in the event of financial problems after a sale by the Moscow city government. The yield rose to the highest level since Dec. 7 compared with notes of state-run VTB Group due the same year after the Jan. 19 downgrade, according to prices on Bloomberg.

“There could be some negative changes in things like permits and real estate, or something that might affect the value of some of the assets used as collateral for loans made by the Bank of Moscow,” Tim McCarthy, who helps manage $1 billion at Valartis Asset Management, said in a phone interview from Geneva. Government ownership is a “positive factor” for bondholders.

Russia’s capital plans to sell stakes in 200 of its 433 companies, including Bank of Moscow, this year, the city’s Mayor Sergei Sobyanin said on Dec. 31. Prime Minister Vladimir Putin’s federal government is seeking to raise about 1 trillion rubles ($33 billion) from privatizations over the next three years. Poland aims to raise 55 billion zloty ($19 billion) in 2010-2013 from state asset sales, while India expects to generate 400 billion rupees ($8.8 billion) in the year to March 31.

Stakes in 900 companies including OAO Rosneft, the country’s biggest oil producer, and Moscow-based lenders OAO Sberbank and VTB, will be sold, First Deputy Prime Minister Igor Shuvalov said on Oct. 20.

Lower Rating

Moody’s said it cut Bank of Moscow’s long-term local and foreign-currency debt and deposit ratings by one level to Baa2, the second-lowest investment-grade ranking. The bank had been rated Baa1, equal with the government.

The new rating reflects the higher yields on Bank of Moscow bonds compared with those of state-owned banks with a Baa1 rating, including VTB and Sberbank, Moscow-based investment bank Troika Dialog said in a research note.

Bank of Moscow’s 2013 bonds yielded 4.384 percent on Jan. 20, compared with 2.81 percent for VTB’s 2012 securities. The 153 basis-point spread between the two bonds has widened by 11 basis points since Jan. 5. Sberbank’s 2013 dollar bond yielded 3.356 percent on Jan. 20.

Default Swaps

Russia’s dollar bonds due in 2020 fell yesterday, pushing the yield 8 basis points higher to 5.045 percent. The extra yield investors demand to hold Russian debt rather than U.S. Treasuries declined 3 basis points to 191 yesterday, according to JPMorgan Chase & Co.’s EMBI+ indexes. The difference compares with 135 for debt of similarly rated Mexico and 172 for Brazil, which is rated two steps lower at Baa3 by Moody’s Investors Service.

The yieldspread on Russian bonds is 48 basis points below the average for emerging markets, according to JPMorgan.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps rose 3 basis points yesterday to 144, down from this year’s peak of 217, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

Credit-default swaps for Russia cost 3 basis points less than contracts for Turkey, which is rated four levels lower at Ba2. Russia swaps cost as much as 40 points less on April 20.

The ruble, which is managed by the central bank against a dollar-euro basket to limit swings, fell 0.6 percent to 29.9800 per dollar in Moscow yesterday. Non-deliverable forwards, which provide a guide to expectations of currency movements and interest-rate differentials, show the ruble weakening to 30.2875 per dollar in three months.

‘Stability’

“Bank of Moscow’s rating only differs from Russia’s sovereign rating by one level, which points to a high level of stability of the credit organization,” Oleg Fedorchenko, Bank of Moscow’s spokesman, said in an e-mail yesterday.

VTB, Russia’s second-largest lender, may buy the city’s entire 46 percent stake in Bank of Moscow, Finance Minister Alexei Kudrin told reporters in Moscow on Nov. 24. The Russian government plans to sell a 10 percent stake in VTB this year.

Companies on the government’s for-sale list, including VTB, Sberbank and Rosneft, will continue to have some government ownership, which should continue to bolster their bonds, Olga Budovnits, an emerging-market credit analyst at Union Bancaire Privee in Zurich, said in a phone interview yesterday.

Fitch Upgrade?

“I don’t think that the issue of state support will be questioned even during the privatization process, because they are strategically important,” Budovnits said.

Fitch Ratings would probably lift Bank of Moscow from its current “negative” outlook to “stable” should the deal with VTB go through, Alexander Danilov, Fitch’s Russian banking analyst, said in an interview in Moscow yesterday.

“If the VTB deal goes through that could lead to positive rating action on the Bank of Moscow because that would mean there is a potential of support ultimately from the Russian government,” Danilov said.

To contact the reporters on this story: Jason Webb in London at jwebb25@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net.

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

Last Updated: January 20, 2011 22:03 EST

Fitch Says Russia Rating Upgrade ‘Highly Probable’ (Update1) http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aVEAoLunIFA0

By Emma O’Brien

Jan. 21 (Bloomberg) -- Fitch Ratings will probably upgrade Russia’s credit score this year if the economy continues to expand and the budget deficit and inflation remain in check. Bonds gained the most in two weeks.

“I think we will see all these trends and if they are in line with our positive expectations, then it is highly probable that there will be an upgrade this year,” Vladimir Redkin, who oversees Russia’s rating at Fitch, said in an interview in Moscow.

Fitch last changed its score for Russia in February 2009, cutting it one step to BBB, the second-lowest investment grade. It put Russia on “watch positive,” indicating optimism, last September and will probably issue a new rating this September, Redkin said. Standard & Poor’s ranks Russia the same as Fitch, while Moody’s Investors Service rates the country one level higher at Baa1, the same as Ireland.

The country’s sovereign dollar bonds maturing in 2020 climbed the most in two weeks, pushing the yield down 6 basis points to 5.047 percent. Dollar debt due 2015 climbed the most since Jan. 4, lowering the yield 10 basis points to 3.594 percent. The ruble was little changed versus the dollar at 29.9999 by 11:48 a.m. in Moscow.

Russia in 2009 ran its first deficit in a decade amid the global recession and had one again last year, when it reached 3.9 percent of gross domestic product. Finance Minister Alexei Kudrin has said the shortfall may shrink to as little as 3 percent of GDP this year, when the budget is based on an average oil price of $75 a barrel. Urals, Russia’s main export blend of crude, closed yesterday at $92.65.

Turning Point

Commerzbank AG said this week that Russia’s rating is at a “turning point,” with upgrades likely within six months. Higher oil prices may allow the government this year to balance the budget and increase its stockpile of foreign currency by about $50 billion from almost $500 billion, said Barbara Nestor, an emerging-market specialist at the Frankfurt-based bank.

“We expect them to narrow the deficit,” Redkin said. “What is important is the downward trend.”

Another factor supporting an upgrade is the government’s three-year plan to raise at least 1 trillion rubles ($33 billion) selling assets, Redkin said. “It means revenue into the budget and more competitiveness in the market,” he said.

To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net.

Last Updated: January 21, 2011 03:59 EST

Russia IPOs Set for Three-Year High on State Sales, RenCap Says http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aFcx4onV_MBs

By Jason Corcoran

Jan. 21 (Bloomberg) -- Russian companies may raise the most money this year from share sales since 2007 as the government starts its 1 trillion-ruble ($34 billion) privatization program, Renaissance Capital said.

Equity offerings by companies including hydropower producers, gold miners, pipemakers and state-run banks will probably raise $30 billion, Arie Kravtchin, head of equity capital markets for Russia, said in a phone interview yesterday. Initial public offerings will account for up to $20 billion and government asset sales for up to $10 billion, he said.

“There is plenty of liquidity on the market to meet this large pipeline,” said Kravtchin. “Investors will find the cash if it’s an interesting deal at the right price.”

Prime Minister Vladimir Putin’s government in October selected RenCap and nine other banks to help sell assets over the next three years, raising funds to narrow the country’s budget deficit. The privatization list includes OAO Sberbank and VTB Group, Russia’s two largest lenders.

Equity sales could return to a pre-crisis peak as long as oil and metal prices remain high, boosting investor appetite for assets in the world’s biggest energy exporter, Kravtchin said. Russian companies raised a record $36 billion in 2007, according to data from Morgan Stanley, when the price of oil averaged $72.32 a barrel. Crude averaged $79.61 a barrel last year.

Five Russian companies have already announced plans to raise more than $3 billion so far this year. Nord Gold NV, a unit of billionaire Alexei Mordashov’s steelmaker OAO Severstal, said on Jan. 17 it plans to raise more than $1 billion in London for expansion and to repay debt. Billionaire Oleg Deripaska’s OAO EuroSibEnergo, Russia’s second-largest hydropower producer, is planning a $1.5 billion IPO in Hong Kong in the first quarter, according to two people familiar with the matter.

Pig-Iron, Pipes, Pumps

OAO Koks, a Siberian coking-coal and pig-iron producer, said Jan. 12 it will seek about $600 million in a London listing. Pipe company ChelPipe Group and pump manufacturer HMS Hydraulic Machine & Systems Group both announced plans for IPOs this month without disclosing how much they planned to raise.

RenCap, which underwrote the most Russian equity sales last year after VTB Capital, is advising both EuroSibEnergo and HMS on their share sales.

The increasing volume of Russian issue may prove “a drag on the market” if liquidity dries up, according to Chris Weafer, Moscow-based chief strategist at UralSib Capital.

There are “undoubtedly” more listings to come, Weafer wrote in a Jan. 18 report. “Issuers that lost out in 2010 will be keen not to miss any favorable listing window this year.”

To contact the reporter on this story: Jason Corcoran at Jcorcoran13@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

Last Updated: January 20, 2011 17:00 EST

Russia. Siberia will increase grain storage capacity by 2013 http://www.blackseagrain.net/about-ukragroconsult/news-bsg/russia.-siberia-will-increase-grain-storage-capacity-by-2013-1

The volume of grain storage capacity to meet modern requirements, in the Siberian Federal District in 2013 to increase by 32.8% compared to 2010 - to more than 6.4 million tons of simultaneous storage.

As informs by Food processing and pharmaceutical industry of the Altai region, Russian Federation Ministry of Agriculture has developed and adopted a program of "Development of infrastructure and logistic support of agricultural and food market, providing increased opportunities for storage and marketing of agricultural products using the potential of "United Grain Company " in 2010-2012 . It provides the modernization and construction of new enterprises on part-storage and handling of grains.

To date lack of modern grain storage facilities for in Siberia is more than 12.3 MMT. Under the program, the construction of silos and grain elevators and nodal line (where by receiving, drying and part-products) is assumed in the Altai, Omsk and Novosibirsk regions.

Business, Energy or Environmental regulations or discussions

Magnitogorsk, Mechel, Norilsk, Rosneft: Russian Equity Preview http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=akmVH8VQlEQg

By Jason Corcoran

Jan. 21 (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 30-stock Micex Index dropped 1.7 percent to 1,733.89. The dollar-denominated RTS Index fell 1.8 percent to 1,868.46.

OAO Magnitogorsk Iron & Steel (MAGN RX): Russian billionaire Viktor Rashnikov’s company is scheduled to report full-year operating results. Magnitogorsk slumped 2.7 percent to 35.24 rubles.

OAO Mechel (MTLR RX): Russia’s biggest producer of coal for steelmakers is due to report full-year operating results. Mechel retreated 3.1 percent to 910.79 rubles.

OAO GMK Norilsk Nickel (GMKN RX): Copper fell the most in two months on the Comex in New York on speculation that China, the world’s biggest metal consumer, will make more steps to restrain the economy. Norilsk, Russia’s biggest miner, decreased 0.5 percent to 7,421.97 rubles.

OAO Rosneft (ROSN RX): Crude oil fell the most in nine weeks on concern China will raise interest rates to combat inflation, slowing economic growth and demand for energy. Rosneft, Russia’s largest oil producer, lost 0.6 percent to 214.88 rubles.

To contact the reporter on this story: Jason Corcoran in Moscow at Jcorcoran13@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

Last Updated: January 20, 2011 16:00 EST

Russia sees 6pct increase in coal output in 2010http://www.steelguru.com/raw_material_news/Russia_sees_6pct_increase_in_coal_output_in_2010/187342.html

Friday, 21 Jan 2011

According to the data issued by Russia's Ministry of Energy, in 2010 Russia coal output increased by 6.5%YoY rising to 320.92 million tonnes of which 30.64 million tonnes were produced in December 2010 down by 0.6%YoY.

Russia exports of coal in 2010 amounted to 97.42 million tonnes registering an increase of 0.4%YoY. In December 2010, Russia coal exports increased by 1.8%YoY to 7.89 million tonnes.

(Sourced from Steel Orbis)Visit www.steelorbis.com for more

UPDATE 1-Russia's NLMK sees Q1 production in line with Q4http://af.reuters.com/article/metalsNews/idAFLDE70K0AW20110121

Fri Jan 21, 2011 7:57am GMT

* Q4 production rose 0.9 pct q-on-q to 3 mln tonnes

* Group sees "visible recovery" in demand early 2011

* Q4 revenue up 4 percent, EBITDA margin around 25 pct

* 2010 finished products up 9.9 pct at 11.6 mln tonnes

(Adds detail)

MOSCOW, Jan 21 (Reuters) - Novolipetsk Steel NLMK.L (NLMKq.L), Russia's fourth largest steelmaker, said it sees first quarter production in line with the final quarter of 2010 as demand continues to grow into the new year.

Russian steelmakers are enjoying a healthy recovery from the economic crisis as industrial powerhouses such as China keep exports strong and internal demand grows ahead of the Winter Olympics in 2014 and soccer World Cup four years later.

"There is a visible recovery in demand at the beginning of the year, accompanied by rising prices for steel products, especially evident in export markets," NLMK said in a statement.

NLMK, controlled by Russia's richest man Vladimir Lisin, said 2010 finished products rose 9.9 percent to 11.6 million tonnes, while Q4 came in at 3 million tonnes.

The group said revenue grew 4 percent in the final quarter of last year to $2.3 billion on an Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) margin of 25 percent, according to preliminary estimates.

(Reporting by John Bowker, Editing by Conor Humphries)

Mordashov sets out new conditions to the banks for Lucchini http://www.steelorbis.com/steel-news/latest-news/mordashov-sets-out-new-conditions-to-the-banks-for-lucchini-578789.htm

Friday, 21 January 2011 09:40:57 (GMT+2)

New reports have emerged concerning the Italian steel company Lucchini and its owner, the Russian Alexei Mordashov, as well as the banks involved in the company rescue plan.

Based on a report published by the Italian newspaper Il Sole 24 Ore, Mordashov has allegedly put pressure on the banks, excluding the possibility of a meeting unless they accept his new conditions. Mordashov's requests are: 1) the conversion of €200 million of the company's debts into bank loans (as opposed to the €150 million offered by the banks a few weeks ago); 2) the presence of an additional advisor - appointed by him - on the group's board of directors after its reorganization, in order to maintain the control over the company; 3) the immediate sale of its subsidiary AscoMetal, the revenue of which will go to Severstal (Mordashov's Russian giant, which had controlled Lucchini until last June) to pay off debts. If these demands are not met, Mordashov will refuse to attend the planned meeting in Moscow on February 2. These conditions seem too difficult for the creditor banks to accept them. Thus, the summit in question - which is considered to be crucial to finding a solution to the Lucchini difficulties - risks being cancelled.

In recent weeks, the solution to the issue seemed to be closer. A few days before Christmas, the banks said they did not want to become shareholder in exchange of a reduction of the debt of the Italian steel group (which amounts to €700 million). BNP Paribas, UniCredit and Intesa San Paolo had accepted the rescue package, which planned new finance of €150 million euro through recapitalization and partner capital loans, the conversion of company debts into bank loans, and new credit lines. This way the banks would have accepted to convert €150 million (instead of the €200 million currently sought by Mordashov) without receiving 35 percent of the capital. Consequently, Mordashov would have remained the sole owner of the company. However, in the event of sale of the company, the banks demanded a share in the revenue depending on ranking (the so-called ‘waterfall repayment', according to which the group of creditors would have been refunded first, and then the banks would have been repaid). The condition for the

realization of this scenario would be the sale of the group, and this seems difficult since Lucchini had already been put on sale a year ago, without success.

Mordashov is now putting the whole rescue plan in question, giving the banks in a blunt choice - accept his three demands or reject the rescue package.

Polyus changes management of Irkutsk business unit

http://www.bne.eu/dispatch_text14024

Alfa BankJanuary 21, 2011

Yesterday, Interfax reported that Polyus has changed the structure of its Irkutsk business units. The alluvial operations (seven small enterprises) and ore-milling operations in the region (the Zapadnoye legacy mine and Verninskoye project) will be jointly run by Valeriy Konstantinov, who was previously responsible for the alluvial business only. The commissioning of Verninskoye (200 koz of gold at full capacity) is one of the key events to watch for this year regarding Polyus, and this latest change suggests the project may have encountered problems.

VimpelCom Announces Intent to Raise Financing in the International Bond Marketshttp://www.sys-con.com/node/1684948

By: PR NewswireJan. 21, 2011 02:55 AM

MOSCOW, January 21, 2011 /PRNewswire/ -- Open Joint Stock Company "Vimpel-Communications" ("VimpelCom" or the "Company") announced its intention to raise, subject to market and other conditions, debt financing by the issuance of notes in the international bond markets. The terms of the notes, including aggregate principal amount, interest rate and maturity date, have yet to be determined. The Company intends to use the net proceeds from the issuance for its general corporate purposes or to lend all or a portion of the net proceeds to VimpelCom Ltd. or one of its wholly owned subsidiaries to use for its general corporate purposes, which may include (i) funding a portion of the cash consideration to be paid in connection with VimpelCom Ltd.'s acquisition of Wind Telecom S.p.A. ("Wind Telecom") or (ii) following the closing of the acquisition of Wind Telecom, refinancing by direct or indirect intercompany loan a portion of the indebtedness associated with the Wind Telecom group.

Barclays Bank PLC, BNP Paribas, Citigroup Global Markets Limited and the Royal Bank of Scotland plc will act as lead managers for the financing. …

Telenor Says It’s Committed to VimpelCom Investment, FT Reports http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=anwPKsV3EnFs

By Alan Purkiss

Jan. 21 (Bloomberg) -- Telenor ASA, the Nordic region’s biggest phone company, which owns almost 40 percent of Russia’s VimpelCom, is committed to that investment for the long term, according to Chief Executive Officer Jon Fredrik Baksaas, the Financial Times reported.

VimpelCom is trying, against Telenor’s wishes, to push through a $6.5 billion merger with the parent company of Egypt’s Orascom Telecom that would dilute the Nordic company’s holding, the newspaper said.

“We will fight for our rights,” the FT cited Baksaas as saying.

To contact the reporter on this story: Alan Purkiss in London on apurkiss@bloomberg.net.

To contact the editor responsible for this story: Colin Keatinge in London at ckeatinge@bloomberg.net.

Last Updated: January 21, 2011 01:15 EST

Investor pool may buy News Outdoor Russia for $300-400 mln in Febhttp://en.rian.ru/business/20110121/162233371.html

A pool of investors, including VTB Capital, the investment banking arm of Russia's number two lender VTB, Alfa Capital Partners managing company, owned by country's financial-industrial conglomerate Alfa Group and Russian Media Ventures fund (RMV), may buy top advertising operator News Outdoor for $300-400 million in February, Kommersant business daily said on Friday, quoting sources close to the pool.

The companies declined to comment.

News Outdoor is part of the empire of Rupert Murdoch, an American media magnate and head of News Corporation. Murdoch became disenchanted with his Russian business back in 2008 after investigators raided the offices of his outdoor

advertising company in Moscow in connection with a probe into whether it received favorable contracts from the city's advertising committee, the paper said.

France's JCDecaux group, which was interested in buying News Outdoor Russia in 2009, said that the company's revenue fell by half to $250 million that year.

MOSCOW, January 21 (RIA Novosti) 

Alexander Lebedev might not sell his remaining stake in Aeroflot on the market

http://www.bne.eu/dispatch_text14024

Alfa BankJanuary 21, 2011

According to Interfax, Alexander Lebedev, who owns around 15% in Aeroflot, could sell his stake to finance the purchase of 44 TU-204SM airplanes for his Red Wings airline.

We view the news as POSITIVE for Aeroflot. The sale of Mr. Lebedev's stake is linked to the politically important TU-204 project, which is on the verge of being cancelled. Therefore, the stake will most likely not be sold on the market, but to Aeroflot itself, as was planned a year ago (or to VEB). This would remove the share overhang that has put negative pressure on the stock since the private placement of around 4% from Lebedev's stake in December. 15% of Aeroflot was worth $440m at yesterday's close.

Pharmstandard mulls purchases of foreign assets in 2011

http://www.rbcnews.com/free/20110121105503.shtml

      RBC, 21.01.2011, Moscow 10:55:03.Russian pharmaceutical company Pharmstandard plans to acquire production assets abroad in 2011, the company's Deputy CEO for Finances Yelena Arkhangelskaya announced during a conference call yesterday.

      According to her, Pharmstandard intends to buy companies that produce medicines not made in Russia. The company is in talks on two acquisition deals that it expects to close by the end of 2011, Arkhangelskaya said without elaborating. Pharmstandard also plans to develop through organic growth, she added.

Tartarstan to build agricultural centrehttp://www.bne.eu/dispatch_text14024

bne21 January, 2010

The Republic of Tartarstan is ready to pump $40m into developing an industrial and retail agricultural park in the capital Kazan, reports Skrin.

The regional authorities will provide half of the $80m price tag to build the project, with the remainder to come from the federal budget. The park will be built on a 44,800-square-meter site on Agrarnaya Street.

When completed, the 100,000-square-meter complex will offer retail outlets and sanitary and veterinary expertise laboratories, as well as facilities for product processing lines, packing shops, warehouses, agricultural machinery stores and weekend fairs.

For the Record http://www.themoscowtimes.com/business/article/for-the-record/429396.html

21 January 2011

Swedish Tele2 announced that Tele2 Russia added 283,000 new customers in December 2010, with 147,000 customers in new regions, to bring its total number of subscribers to 18.4 million. (Reuters)

President Dmitry Medvedev ordered the Central Bank by June 1 to determine the timing and method for unloading its 29.8 percent stake in the MICEX stock exchange, Kommersant reported Thursday, citing an unidentified official. (Bloomberg)

Sberbank and Western Union signed an agreement Thursday to carry out international money transfers in more than 8,000 Sberbank outlets beginning this year and later to be expanded to all branches of the bank. (MT)

Activity in the Oil and Gas sector (including regulatory)

Fitch Ratings: CIS oil and gas companies will maintain production levels and financial results in 2011http://en.trend.az/capital/energy/1815258.html

21.01.2011 11:17 

Azerbaijan, Baku, Jan. 21 / Trend N.Ismayilova /

Fitch Ratings' Report "2011 Outlook: Russian and CIS Oil and Gas Companies" reads that its outlook for Russian and CIS oil and gas companies is stable.

The stable outlook for Russian and CIS oil and gas companies reflects Fitch's view that the main regional oil and gas companies it rates will maintain their production and financial profiles and have sufficient headroom and debt capacity to fund their sizeable capex programmes. The ratings of most CIS oil and gas companies benefit from implicit state support and are linked to the sovereign's rating.

Global demand for energy in 2011 will remain healthy. Fitch expects that the overall hydrocarbon production in Russia and CIS will demonstrate low single-digit growth as a result of flat brownfield output combined with a ramp-up of greenfield production from Russia's Eastern Siberian fields and the Caspian shelf.

Russian domestic gas prices are expected to increase by about 15% in 2011 in order to achieve netback parity with Europe by 2014. Russian integrated oil companies are accelerating plans to develop their associated gas businesses, which should benefit their ratings in the long term.

Most Russian and CIS oil and gas companies that Fitch rates have reported progress with their capex-intensive upstream projects, which mainly relate to maintaining brownfield production and commissioning greenfields in remote locations with little infrastructure and harsh climate. They are also continuing to upgrade their downstream assets and invest in distribution and expansion abroad.

Fitch expects that in 2011 Kazakh and Azeri oil and gas companies will moderately improve their median FFO-adjusted leverage to 2.1x and 1.8x, respectively, as a result of improved cash flows from operations. Ratings for CIS oil and gas companies take into consideration the high reserve replacement rates and reserve life of these companies, as well as their strong links with the respective states.

In 2011, M&A activity could increasingly come from Russian and CIS oil and gas companies continuing to make acquisitions in both developed and emerging markets. As the economy picks up, Russian and CIS oil and gas companies could be increasingly interested in improving their market positions. Fitch anticipates

increased M&A activity as Russian and CIS oil and gas companies take selective opportunities in 2011 either to expand their businesses or increase market share and compete head-to-head with developed market counterparts.

21.01.2011

Russian Export Duties for Oil Products May Be Adjusted to 66 Percent of Crude Duties Beginning in Aprilhttp://www.oilandgaseurasia.com/news/p/0/news/10400

The export duty on oil products could be set at 66 percent of the duty on crude across the board beginning in April 2011, State Secretary and Deputy Russian Finance Minister Sergey Shatalov said, RBK reports.

Shatalov said a decision would likely be made raise duties on oil products to 66 percent of the export duty for crude. He suggested this decision could be made in February or March 2011.

"In April, the export duty on crude will be lowered and the duty on oil products raised to the level discussed in the Energy Ministry. This is a possible outcome but it is not obligatory. It is most likely that the export duty on light and heavy products will be the same", Shatalov said.

Copyright 2010, Russian Economy Ministry Statistics Department. All rights reserved.

21.01.2011

India's OVL Shows Interest in Rosnefthttp://www.oilandgaseurasia.com/news/p/0/news/10397

The Indian state oil and gas company ONGC Videsh Ltd. (OVL) is interested acquiring strategic stakes of shares in Rosneft and other energy companies in which the Russian state is a stakeholder, Rusenergy reports citing the newspaper Mint.

"We have been thinking about investments like this. We have consulted with the government about it, but we need more than just shares and dividends, we need other sets as well. We said that we were ready to invest if we are allowed access to good assets", the newspaper reported citing an anonymous manager with OVL.

Copyright 2010, Vslukh. All rights reserved.

Rosneft Seeks 25 Licenses http://www.themoscowtimes.com/business/article/rosneft-seeks-25-licenses/429353.html

21 January 2011Interfax

Rosneft has applied to the Federal Subsoil Resource Use Agency for licenses to 25 Russian offshore properties, the oil company's chief, Eduard Khudainatov, told reporters.

"Rosneft already has 17 offshore licenses, and we've applied for another 25. We're in the process of receiving them," he said.

The company might involve foreign partners in developing these properties, Khudainatov said. "Talks with leading companies are held on a constant basis," he said.

Khudainatov said the main thing for Rosneft is to attract partners with leading offshore development technologies. Rosneft does not yet plan to involve Russian partners in shelf projects.

"We're in the process of obtaining important, attractive shelf properties. They are complex. Which of the Russian companies is capable of drilling on the deepwater shelf?" Khudainatov said.

Rosneft plans to draft and approve the company growth strategy to 2030 in the first half of 2011, Khudainatov told journalists. "I hope we manage to approve the strategy. It is, as you know, a very big document," he said.

The growth strategy calls for transforming Rosneft into a global oil and gas company, and was supposed to be submitted to the board of directors in the first quarter, but the $8 billion share swap with British Petroleum that was announced at the end of last week has caused a delay.

Khudainatov said he expects the completed growth strategy to be submitted during the first half of 2011.

TNK-BP may join BP-Rosneft Arctic project

http://www.rbcnews.com/free/20110121115555.shtml

      RBC, 21.01.2011, Moscow 11:55:55.BP President Robert Dudley is in talks with TNK-BP CEO and co-owner Mikhail Fridman over TNK-BP's possible participation in BP's project with Rosneft on the development of the Russian Arctic shelf, RBC Daily reported today.

      According to Dudley, BP, which owns half of TNK-BP, has an agreement with Russian shareholders of TNK-BP -a consortium of Alfa Group, Access Industries, and Renova - on the development of projects in Russia. In accordance with this agreement, BP and TNK-BP are currently discussing TNK-BP's possible role in the BP-Rosneft Arctic project.

      At the same time, however, Dudley warned that TNK-BP's participation in the project could very well prove to be impossible, because it is quite expensive and requires a comprehensive examination by experts. Meanwhile, Rosneft President Eduard Khudainatov told reporters yesterday that no third partner in the project with BP was being considered.

TNK-BP says it will start search this year for shale gas in Donetsk Oblasthttp://www.kyivpost.com/news/business/bus_general/detail/95314/

Today at 01:08 | Reuters Russia’s third largest oil producer, British and Russian owned TNK-BP, plans to start a shale gas exploration project in Ukraine in the first half of this year, the company’s Ukrainian-based office said on Jan. 17.

In October, TNK-BP and the Ukrainian government signed a memorandum saying the firm would explore shale gas in Ukraine’s eastern Donetsk region.

“We expect that the first stage of the project – surveying and test drilling – will be launched this year,” a TNK-BP spokesman said.One of TNK-BP’s billionaire shareholders, German Khan, told Reuters last year the company planned to plough between $1 billion and $2 billion into the project in the next 25 years.

He also said that TNK-BP was hoping to produce some 5 billion cubic meters of shale gas – natural gas trapped in layered rock, rather than porous reservoirs – in five to seven years.

In November, TNK-BP said it would invest $3.8 billion in its gas business over the next three years as it aimed to more than double production to 30 billion cubic meters (bcm) by 2020.

Ukraine, largely dependent of imports of Russian gas, has said it wants to increase domestic gas production and to find other directions of imports. Ukraine also

plans to open its first liquefied natural gas terminal in the Black Sea region in 2015, with a capacity of 5 billion cubic meters.

Ukraine imports about 60 percent of its domestic gas needs from Russia and has repeatedly said the gas price is too high for Ukrainian goods to compete on world markets.

Statoil Says Shtokman Will ‘Undoubtedly’ Go Ahead, TU Reports http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aggAlKWzYdwQ

By Marianne Stigset

Jan. 21 (Bloomberg) -- Statoil ASA’s Chief Executive Officer Helge Lund said the Shtokman gas project would “undoubtedly” be developed, Teknisk Ukeblad reported yesterday.

The project represented a“big opportunity” for Statoil, the magazine cited the executive as saying.

Lund also said oil producers would struggle to keep up with growing global demand, Teknisk Ukeblad reported.

Click here for web link

To contact the editor responsible for this story: Marianne Stigset at mstigset@bloomberg.net

Last Updated: January 21, 2011 01:45 EST

Chornomornaftogaz, Lukoil to develop Black Sea shelf together http://bsanna-news.ukrinform.ua/newsitem.php?id=15270&lang=en

KYIV, January 20. /UKRINFORM/. The Cabinet authorized Chornomornaftogaz (Simferopol, Crimea, southern Ukraine), in conjunction with the oil company Lukoil (Russia), to explore for and produce oil and natural gas on the Black Sea shelf, the press service of the government reported.

An appropriate decision was approved by the order of the Cabinet. As specified in the document, the object of joint activities is the development of Odesa, Bezymenne and Subotynske deposits.

The share of Chornomornaftogaz in joint activities will be not less than 50%, while the contribution of the state company should be economic-geological

evaluation of oil, natural gas reserves and associated components of these deposits.

In turn, Lukoil will invest financing resources, equipment and technology.

Chornomornaftogaz carries out work on the development of Ukrainian part of the Black and Azov sea shelves. The company also produces hydrocarbons in the oil fields in Crimea and uses Hlibovske underground gas storage and gas mains located on the Crimean peninsula.

100% of the shares in Chornomornaftogaz belong to Naftogaz of Ukraine.

21.01.2011

LUKOIL Invests Over $6 Billion in Kazakhstan Oil Production Sectorhttp://www.oilandgaseurasia.com/news/p/0/news/10396

During a meeting on January 20 with Kazakhstan President Nursultan Nazarbayev, LUKOIL President Vagit Alekperov disclosed that LUKOIL has spent over $6 billion in the Central Asia state's oil production sector, Nazarbayev's press office reported in a news release.

According to the press office, this year LUKOIL will launch a gas refining complex in Aktyubinskaya Region. A number of other industrial projects are also being considered.

"Kazakhstan is one of a few countries in the world which has provided reliable protection for foreign investment. This is the personal achievement of Nursultan Nazarbayev. He is the guarantor today of this investments which have been made into Kazakhstan these past 20 years. Just look at how the republic has changed in these 20 years and how cities have been transformed. Of course, this is due to the president who has stimulated investment and his policies which have increased the country's tax base".

Copyright 2010, Kazakhstan Today. All rights reserved.

Technip Gets EUR70 Million Contract For Bulgaria Refineryhttp://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201101210129dowjonesdjonline000104&title=technip-gets-eur70-million-contract-for-bulgaria-refinery

PARIS -(Dow Jones)- French oil service company Technip SA (TEC.FR) said Friday it was awarded by Burgasnefteproekt EOOD, a unit of Russia's Lukoil Holdings ( LKOH.RS) a lump sum services contract, worth approximately EUR70 million, for the phase 1 of a hydrocracking complex to be built at their refinery located in Burgas, Bulgaria.

MAIN FACTS:

- The contract covers the detailed engineering and procurement services for a 2.5 million tons per year residue hydrocracker based on Axens H-Oil process.

- By Paris Bureau, Dow Jones Newswires; +331-4017-1740; inti.landauro@ dowjones.com

Novatek makes mandatory buyout offer to Itera for remaining 49% of Sibneftegaz

http://www.bne.eu/dispatch_text14024

Alfa BankJanuary 21, 2011

Novatek has made a mandatory buyout offer to Itera for the remaining 49% of Sibneftegaz, of which Novatek acquired 51% on December 19. This report appears in Vedomosti, which cites the company's bond prospectus. The offer is priced at RUB25.88bn ($868m), which matches the price Novatek paid for the asset, and expires in April.

Novatek is required to make the offer, and Itera has no obligation to sell. We believe it is unlikely to do so, as the move would deprive Itera of one of its two core assets and greatly undermine its ability to service the Sverdlovsk region, where its core customer base is located. At the same time, the price offered ($2.27 per boe) is hardly attractive for the seller of an asset that not only already produces gas, but enjoys some of the lowest per boe costs in the sector ($0.9 per boe).

Pavel Sorokin

C.A.T. Oil discloses strong 2011 order book of €222m, up 8% y-o-y

http://www.bne.eu/dispatch_text14024

Alfa BankJanuary 21, 2011

Yesterday, C.A.T.oil announced that its five largest customers have already placed sidetrack drilling and hydraulic fracturing orders worth €222m for 2011 at a EUR/RUB exchange rate of 40.0. On top of this, the company has already secured €37m in orders for 2012, bringing total orders to €259m.

According to C.A.T.oil's CEO Manfred Kastner, the company has historically been able to book in advance some 80% of each year's annual sales. We note that the reported order book of €222m is 8% above the corresponding number reported in the same period of last year (€206 mln @ 43.0 EUR/RUB). Therefore, we believe the company is on track to reach or even surpass our 2011 revenue estimate of €273m.

C.A.T.oil is going ahead with the previously announced plans of expansion and diversification into a new segment of conventional drilling and reiterated its intention to invest as much as €150m in total in 2011 and 2012 to expand sidetracking and conventional drilling. We strongly welcome C.A.T.oil's plans to diversify into a new business segment, as we believe that dilution of the share of the fracking business will be a positive driver for the stock, increasing the chances of the company becoming an M&A target. At the same time, conventional drilling is a very competitive market, which would require significant effort from C.A.T.oil to prove its ability to investors to take its share on it.

Gazprom

Gazprom owns Armenian gas infrastructure http://www.messenger.com.ge/issues/2279_january_20_2011/2279_econ_four.html

By Messenger Staff Thursday, January 20 Gazprom chairman Alexey Miller stated that 80% of natural gas infrastructure in Armenia belongs to Gazprom. According to a recent decision, Armenia will be paying market price for consumed gas. The previous strategy when so called partner countries were paying an artificially decreased price has changed. The final decision has not been taken yet and will be known in the coming 2-3 months. Armenia’s Minister of Energy and Natural Resources, Armen Movsisian stated that this country is taking all necessary measures so that the price would not increase dramatically.

Gazprom sells 28% of Cherepovetsk Azothttp://www.bne.eu/dispatch_text14024 Renaissance CapitalJanuary 21, 2011

Event: Kommersant reported today (21 January) that Gazprom has sold 28% of Cherepovetsk Azot to Gazprombank. Referring to unidentified sources close to the deal, the newspaper wrote that Gazprombank may then re-sell the stake to Phosagro or Sibur Russian Tyres. No official transaction price has been disclosed.

Action: Neutral for Gazprom, in our view.

Rationale: While disposing of non-core assets generally represents a good strategy to create more value for shareholders, in our view the lack of transparency in these deals and the unclear use of the proceeds may bring questions about corporate governance at Gazprom into focus. Arguably, following a multi-year period of underperformance, resulting in a significant valuation discount (some 50% to international majors and 30% to Russian peers), this corporate governance risk should already be reflected in the share price of Gazprom, we think, while now there is a free option to draw some additional cash into the company. In our view, minority shareholders have not benefited much from Gazprom's positions in non-core assets anyway, so they have not much to lose from these transactions. The sale raises the possibility of higher dividends or another use of the proceeds, which is a free option for minority shareholders, in our view.

Ildar Davletshin