Russia 090827

Basic Political Developments Medvedev, Lukashenko to meet in Sochi for economic talks - President Dmitry

Medvedev will receive his Belarussian counterpart Alexander Lukashenko at his summer residence in Sochi. These are the fifth talks between the two leaders since the start of the year and the second in the resort Black Sea city of Sochi.

Putin: question to Minsk on recognition of South Ossetia and Abkhazia is fair Pahor to Meet Putin to Finalise South Stream Agreement - Slovenia is nearing the

signing of an agreement on the construction of the part of the South Stream gas pipeline on its territory, Prime Minister Borut Pahor announced on Wednesday. He added that the details would be agreed shortly at a meeting he would have with his Russian counterpart Vladimir Putin.

EDB interested in building Nuclear Power Station in Armenia - “The bank attaches much importance to the development of energy network in Armenia, considering it an optimal way towards ensuring sustainable economic growth in its new member state,” Yevgeny Vinokurov, Head of the EDB Economic Analysis and Consulting Department said.

Ukrainian officials attempt seizure of Russian Black Sea Fleet property - Ukrainian court officials are reported to have illegally entered the base used by Russia's Black Sea Fleet deployed in the port of Sevastopol in Ukraine’s Crimea.

Black Sea Fleet command calls provocative Ukrainian bailiff’s intrusion - "An anonymous group, which later identified itself as Sevastopol bailiffs, illegally entered the premises of a Russian Black Sea Fleet unit on Wednesday and demanded the transfer of the Kherson Lighthouse's leading beacon to Ukraine," the fleet press office said.

CSTO kicks off joint military exercise in Moscow - The Collective Security Treaty Organization (CSTO) on Wednesday began the first stage of a joint military exercise aimed at testing the capability of its rapid reaction forces, local media reported.

Uzbekistan's removal from CSTO linked with Russian policy in region - "In recent months, Karimov has repeatedly demonstrated a negative attitude toward the CSTO and the collective peacekeeping forces, Research Fellow on the Russia and Eurasia Program of the Chatham House Royal Institute of International Affairs, Fedorov wrote to Trend News in an email.

NATO wants to improve relations with Russia - The NATO Secretary General Anders Fogh Rasmussen said at the meeting with the Lithuania’s President Mrs Dalia Grybauskaite that the priority for the NATO-Russia relationship now was to work on common security challenges. 

NATO member sells helicopter-carrying warship to Russia for $995 million - the Russian government daily Rossiiskaya Gazeta reported this month that the ship, which can carry 16 heavy helicopters, 470 airborne troops and other gear, costs 700 million euros (995 million dollars).

DVB arrests six Russian owned ships in Hong Kong Russia requests UN to put on GA agenda WW2 65th anniversary

Russia and North Korea's Uneasy Relationship - It seems that Russia is not convinced of the reliability of North Korea’s missile technology, and has therefore taken steps to defend against stray North Korean armaments. Meanwhile, investigative reporter Simon Ostrovsky, known for his work in remote locations, has made a film detailing the lives of North Koreans working under the protection of the S-400s in logging camps in Russia’s Far East.

Nicaragua plans meat exports to Russia from 2010 - Nicaragua plans to supply 12,000 metric tons of beef and pork products to Russia annually from 2010, the country's agriculture and forestry minister, Ariel Bucardo, said on Thursday.

Russia plans new maneuvers along Georgian borders - Russia plans to carry out military maneuvers along the Georgian borders. Russian Lieutenant General Valery Yevnevich says the soldiers will use the practical experience of the last year war in Georgia during the trainings. The trainings which aim at improving fighting skills in mountains will be conducted on Dariali polygon of the North Caucasian military district.

Putin: Russia Assists Georgia through IMF - “You probably know, that Georgia receives considerable funds through IMF. We [Russia] are active members of IMF and are regularly allocating significant resources to that international financial organization, which are then distributed among the countries in need, including to Georgia.”

Putin Slams U.S. on Rebel Regions’ Birthday - Prime Minister Vladimir Putin on Wednesday marked the first anniversary of Russia’s recognition of the independence of South Ossetia and Abkhazia from Georgia by saying more governments will eventually defy U.S. “pressure” and establish diplomatic ties with the tiny separatist regions.

State TV Caught in Reporting Scandal - A Channel One documentary accusing Western journalists of misrepresenting the South Ossetia war is itself at the center of a scandal over bad reporting. Novaya Gazeta journalist Arkady Babchenko said Wednesday that the film, “08.08.08: The War on Air,” featured a photograph that he took in Georgia without his permission and wrongly indicated that it was taken by a U.S. photographer in Iraq.

LN: Czech-Slovak investment group suspected of links to Kremlin - The Czech-Slovak investment group Penta is suspected in Poland of cooperation with Russian secret services and of having capital of an unclear and opaque origin, the Czech daily Lidové noviny (LN) writes Wednesday, citing Polish minister Aleksander Szczyglo.

Putin Orders Revision of Olympics Financing - The state corporation model has made it difficult to oversee expenses for Olympics preparations, government sources say, and Prime Minister Vladimir Putin has proposed returning to the previous financing model — a federal targeted program.

Experts doubt Russian military has moved Bulava production - According to the Russian Nezavisimaya Gazeta newspaper, Makarov's announcement took the Russian military and defense industry experts surprise because only one plant in Russia - the Votkinsky Zavod in the Urals - makes solid-fuel ballistic missiles for Russia's Armed Forces, including the Topol-M, the Iskander-M, and the Bulava-30.

Customs Officials Search S7 Office for Info on Jets - Customs officials seized documents Tuesday from the Moscow office of S7, the country’s second-largest airline, which is suspected of lowering its payments to the customs service.

Russia 10-15 years behind lead industries in computer engineering - Russian industries will stop being competitive if they do not actively adopt computer engineering technologies, head of the Altair Engineering Russian office Leonid Rvachev told Interfax-AVN on Wednesday.

6 Parties Registered for Vote - Six political parties had registered to run in the Oct. 11 elections for the Moscow City Duma by Wednesday, the last day for filing applications with the local election committee.

Yabloko Says Moscow Police Obstructing Its Campaign - The leader of Russia's opposition Yabloko party says police in Moscow are obstructing the party's campaign to collect signatures to register candidates for Moscow city Duma elections, RFE/RL's Russian Service reports.

Moscow’s Kennedy Has My Vote - The October Moscow Duma elections could just as well turn out like the ones before them. All Russian elections at the federal and local levels over the past four years have lacked anything even close to the semblance of actual competition.

Goal Set for E-Government - The country’s e-Government program, which aims to make most government services accessible through the Internet, may start by the end of the year, Communications and Press Minister Igor Shchyogolev said Wednesday.

Daghestanis Protest Abductions Of Young Muslim Men – on Wednesday some 200 people have protested in Makhachkala, Daghestan, against continuing abductions of young Muslim men by security forces.

The Mayor of Makhachkala asks Patriarch Kirill to help in settling conflicts in the Caucasus

Ingushetians On Trial For 'Nevsky Express' Bomb Attack - The Novgorod Oblast Court in northwestern Russia has resumed hearings into a two-year-old terrorist attack, RFE/RL's Russian Service reports. Customs officials seize 80 kg of heroin on train in south Russia

Some 80 kg of heroin seized in Dushanbe-Moscow train Dam Disaster Affecting Siberians the Way Chernobyl Affected Ukrainians - In

short, the journalist notes, “the powers that be made sure it was understood that they would not allow RusHydro to suffer,” however much Moscow’s past policies and current approach are having exactly that effect on Siberians, people who are smart enough to recognize that the government’s promises to them as opposed to those to the oligarchs are not worth much.

The Kremlin, Decorporated - Medvedev Asks State Prosecutor General to Inquire into the Activity of Seven Major State Corporations. Medvedev’s target is not only state corporations in general, but also one certain corporation in particular: Russian Technologies. Whereas for other state corporations the consequences will be limited to adjusting their status to conform with the Constitution and Russia’s laws, for Russian Technologies this is the beginning of the end of the project itself.

National Economic Trends Refinancing Rate Cuts Trickling Down - Interest rates on loans to Russian

companies hit a nine-month low in July, Central Bank data showed Wednesday, in a sign that official interest rate cuts are starting to filter through to the real economy.

Russian CPI flat in latest week - Russian consumer prices remained flat in the week to Aug. 24, making it the first week in a year when the inflation rate remained unchanged, data from the Federal Statistics Service showed Wednesday.

Russia daily c.bank swap limit at 5 bln rbls

Business, Energy or Environmental regulations or discussions Lukoil, VimpelCom, X5 Retail Group: Russia Stock Market Preview Energy Sector Plans to 2030 - The government plans to invest up to 60 trillion

rubles ($1.9 trillion) in its energy sector by 2030 in a drive to boost stagnating oil and gas output, two government sources said Wednesday.

Russia splashes cash on output booster - Russia plans to invest up to 60 trillion roubles ($1.9 trillion) in its energy sector by 2030 in a drive to boost stagnating oil and gas output, according to reports. Two sources in the Russian government told Reuters Asian markets would increase their share of Russia's energy export volumes to 25% by 2030 from only 6% today.

State reluctant to fund Sayano Shushensk GES recovery via tariff hikes RusHydro ‘Surprised’ RusAl - RusHydro, owner of a hydropower plant that

flooded last week, killing 75, should not try to avoid fulfilling contracts because of the disaster, United Company RusAl, the biggest user of power from the site, said Wednesday.

Rusal launches scathing attack on RusHydro - A statement placed on Rusal's corporate website has severely criticised RusHydro - and particularly the company's acting CEO, Vasily Zubakin - for publicly stating that RusHydro believes the loss of production at Sayano-Shushenskaya hydro plant to be adequate grounds for revoking an agreement to provide Rusal with electric power and capacity

Mosenergo will sell its offices - Mosenergo will sell its offices at Raushskaya embankment and Sadovnicheskaya St located near the Kremlin to a management company, Progressive Investment Ideas, for Rbl4.07bn, Interfax reports.

Gold Output Up 21% - Russia’s gold output jumped 21 percent in the first seven months of the year because of the start of several large projects in the Far East, including Kinross Gold’s Kupol mine in the remote Chukotka autonomous district.

Peter Hambro Says First-Half Profit Rises Fivefold - Net income grew to $74.2 million, or 59.1 cents a share, from $14.4 million, or 17.7 cents, a year earlier, the London- based company said today in a statement. Sales expanded 46 percent to $214.1 million.

Russian July crude steel output down by 14.2pct YoY - According to the data released by the Russian Federation Federal State Statistics Service, the manufacture of basic metals and fabricated metal products in Russia in July this

year registered a decrease for 14.2%YoY while in January to July 2009 a drop of 24.3%YoY was recorded compared to the same period last year.

NMZK September output to reach peak for 2009 Russian Nanotechnology Corp. to Sharply Boost Spending Joint Venture of Rusnano and Renova places 120 MW end-to-end line order with

Oerlikon Solar Russia's Sberbank to complete, sell developments -"We will complete and sell

(the projects) to the highest bidder. Our aim is to return as much money as possible," deputy chief executive Yevgeny Korolyov said on the sidelines of a banking conference

Sberbank to Gain Control of Vester Retailer, Kommersant Says

Central Bank revokes license from Moscow bank Vympel - The Central Bank of Russia (CBR) revoked the license from the Moscow-based commercial bank Vympel and appointed an interim administration there, PRIME-TASS reported on Thursday citing the CBR public relations department.

Vozrozhdeniye Posts Profit - Midsized bank Vozrozhdeniye reported higher-than-expected net profit for the second quarter but slashed its full-year 2009 earnings forecast by 70 percent Wednesday as provisions rose

Ford Russia Plant To Halt Production Aug 31-Sep 11 -Prime-Tass Comstar Reports Second-Quarter Net Income of $30 Million COMSTAR - United TeleSystems OJSC Financial Results for the Second Quarter

and First Half of 2009 Acron posts 1H 2009 Net profit of 947 million Roubles Acron H1 net plunges on volatile fertilizer market Russian retailer X5's Q2 net profit up 87 percent Russia Can Lose Its Taiga - International scientific think-tank warns that the only

pristine forests in the world taiga which cover large territories in Russia, Canada, Alaska and Scandinavia, quickly degrade.

Activity in the Oil and Gas sector (including regulatory) Russia increases domestic gas prices by 27% in connection with start of import

from Azerbaijan Investors Will Block Naftogaz Debt Deal - A group of Russian investors,

including the former head of a Gazprom affiliate, plans to block any attempt by Ukrainian gas utility Naftogaz to restructure a $500 million bond that matures next month.

Caspian oilfield is Big Oil's new energy frontier - Kashagan, developed by oil majors including Eni and Exxon Mobil, represents all the challenges Western countries face to secure energy supplies as Asia becomes more energy-hungry and Russia seeks to dominate resources on its borders.

Rosneft might buy out Stroitransgaz in Algeria project Russneft settles with MOL, to pay 6.3 bln roubles Integra appoints new CEO - Yesterday (26 Aug) Integra announced the

appointment of Antonio Campo as CEO, effective from 1 Sep. Prior to joining the company, Antonio Campo (age 51) spent 28 years at Schlumberger, leading its oilfield services (OFS) divisions in Europe, CIS, Africa and Latin America.

NOVATEK: scheduled maintenance at two fields; output will not drop PetroNeft signs crude transportation deal, expects to meet pipeline production

target Special Report: Oil and Gas investment in Russia: time to review the risk? - Mark

L. Robinson, Deloitte Touche Tohmatsu

Gazprom Gazprom, Novatek Discuss Yamal LNG Project Gazprom eyeing Yakutia blocks CITI: Gazprom expects domestic gas prices to grow Gazprom Says Exports Will Rise in Second Half on Lower Prices

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Full Text Articles

Basic Political Developments

Medvedev, Lukashenko to meet in Sochi for economic talkshttp://www.itar-tass.com/eng/level2.html?NewsID=14273387&PageNum=0

SOCHI, August 27 (Itar-Tass) - President Dmitry Medvedev will receive his Belarussian counterpart Alexander Lukashenko at his summer residence in Sochi. These are the fifth talks between the two leaders since the start of the year and the second in the resort Black Sea city of Sochi.

The Kremlin reported that the summit plans to discuss some acute issues of Belarussian-Russian cooperation. Experts drafted an extensive agenda of talks, including documents on cooperation in the fuel and energy sphere and partnership within the Euro-Asian Economic Community and the Customs Union.

Lukashenko arrived in Sochi early in the week and waited for Medvedev’ s return from his trip to Buryatia and Mongolia. The Belarussian president told reporters that he intends to discuss “the entire range of complicated questions which have not been settled”. “We should come to agreement and should stick to them to preclude a situation when we agree, but agreements are not translated into life by lower echelons.”

Putin: question to Minsk on recognition of South Ossetia and Abkhazia is fairhttp://www.charter97.org/en/news/2009/8/26/21435/

26.08.2009

The Russian Prime Minister made a loud statement a day before an informal meeting of Alyaksandr Lukashenka and Dmitry Medvedev.

Vladimir Putin made public one of the items of the agenda, to which Lukashenka will have to give a clear answer – recognition of South Ossetia and Abkhazia, AFN reports.

We remind that Lukashenka promised to consider this issue a year ago.

After a meeting with head of South Ossetia Eduard Kokoity, Putin said he though a question to the Bealrusain leadership on recognition South Ossetia and Abkhazia was “fair”, PRIME-TASS reports.

Putin noted that the issue should be settled only be the Belarusian authorities. according to him, Russia “never nudged and asked anyone” to recognize independence of the two “republics”.

However, Putin reminds that Russia and Belarus build a “union state”; moreover, Russia has been rendering economic and political support to Belarus for many years.

Pahor to Meet Putin to Finalise South Stream Agreementhttp://www.sta.si/en/vest.php?s=a&id=1421199

Ljubljana, 26 August (STA) - Slovenia is nearing the signing of an agreement on the construction of the part of the South Stream gas pipeline on its territory, Prime Minister Borut Pahor announced on Wednesday. He added that the details would be agreed shortly at a meeting he would have with his Russian counterpart Vladimir Putin.

EDB interested in building Nuclear Power Station in Armenia http://www.panarmenian.net/news/eng/?nid=35607

27.08.2009 11:44 GMT+04:00

/PanARMENIAN.Net/ Broadening nuclear energy network is an optimal way towards ensuring sustainable economic growth in Armenia, Yevgeny Vinokurov, Head of the EDB Economic Analysis and Consulting Department, told a PanARMENIANNet reporter. EDB is willing to fund nuclear power plant in Armenia. “The bank attaches much importance to the development of energy network in Armenia, considering it an optimal way towards ensuring sustainable economic growth in its new member state,” he said.

Armenia has been a full member of the bank since April 2009.

Apart from ensuring sustainable economic growth, EDB’s mission also consists in promoting economic integration among its member states, Vinokurov said, stressing the importance nuclear power plant construction. “Constructing a new station and supplying it with nuclear fuel extracted from Russia and Kazakhstan will strengthen mutually beneficial economic ties between our states and essentially broaden mutual trade and investments,” Vinokurov noted.According to him, new station will be equipped with most up to date security technologies, “We reiterate our commitment to using high standards to ensure

environmental and technical security,” he stated.

Construction of new energy block with a power of 1200 MWT is to be completed by the end of 2016. Its exploitation term is 60 years. The block will be equipped with security systems. The minimum time-limit for refueling is 18 months.

Ukrainian officials attempt seizure of Russian Black Sea Fleet propertyhttp://www.russiatoday.ru/Top_News/2009-08-27/sevastopol-black-sea-fleet.html/print

27 August, 2009, 05:03

Ukrainian court officials are reported to have illegally entered the base used by Russia's Black Sea Fleet deployed in the port of Sevastopol in Ukraine’s Crimea.

Citing the ruling of a local court, Ukrainians demanded the Russians transfer to them use of one of the leading beacons not far from the port.

Ukrainian citizens are not granted access to the base without special permission from Russian authorities.

The command of the Russian Fleet has expressed indignation about the incident and accused Ukraine of breaching international agreements.

“Military units fall under the legislation of the Russian Federation,” Interfax quotes Ivan Zrovka, the head of the Black Fleet legal service, as saying. “The actions taken contradict the agreements on the Black Fleet as this issue can only be settled on an intergovernmental level.”

Under bilateral agreements, the Russian navy is allowed to stay in the port of Sevastopol until 2017.

However, Ukrainian President Viktor Yushchenko has attempted to end the agreement with the Russian navy.

Ukraine's nationalist movement has repeatedly criticized the presence of the fleet in the Crimea.

Black Sea Fleet command calls provocative Ukrainian bailiff’s intrusionhttp://www.kyivpost.com/nation/47565

Today, 10:39 | Interfax-Ukraine

The Russian Black Sea Fleet command is indignant at Ukrainian bailiffs' penetration into the location of a Russian military unit.

"An anonymous group, which later identified itself as Sevastopol bailiffs, illegally entered the premises of a Russian Black Sea Fleet unit on Wednesday and demanded the transfer of the Kherson Lighthouse's leading beacon to Ukraine," the fleet press office said.

The bailiffs referred to a resolution of the Sevastopol Economic Court, the press office said.

Russian servicemen seized the Ukrainians and made a statement to the Sevastopol police chief. The detainees were handed over to him.

"The Russian Black Sea Fleet command is indignant at the unprecedented and flagrant violation of fundamental agreements concerning the Black Sea Fleet," the press office said.

The command warns that "the responsibility for possible tragic consequences of such incidents will be fully laid upon the organizers of the provocative acts."

CSTO kicks off joint military exercise in Moscow

http://en.trend.az/news/politics/foreign/1529147.html

http://news.xinhuanet.com/english/2009-08/27/content_11949781.htm

2009-08-27 00:07:46

MOSCOW, Aug. 26 (Xinhua) -- The Collective Security Treaty Organization (CSTO) on Wednesday began the first stage of a joint military exercise aimed at testing the capability of its rapid reaction forces, local media reported.

    The CSTO, a post-Soviet security bloc consisting of Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan, agreed in early February to form rapid reaction forces. ��

    The forces, which Russian President Dmitry Medvedev says are "just as good and comparable to NATO forces," are expected to counter such threats as military aggression, terrorist activities and drug trafficking.

    During the first stage of the war games, which are being held in Russia, the participants will evaluate the political, military and strategic situation in the CSTO member states and plan the deployment of the rapid reaction forces in Central Asia.

    Uzbekistan, a CSTO member country, has refused to send troops to take part in the first stage of the drills. "Uzbekistan's absence at the first stage of the joint exercise is a result of the country's consistent and principled position with respect to the rapid reaction

forces," Valery Semerikov, deputy CSTO secretary general, was quoted as saying by the Itar-Tass news agency.

    The CSTO troops would drill practical issues of providing military, political and technical assistance to Belarus at the second stage, which would be run from Sep. 19 to Sept. 28, followed by a third stage to be held in Kazakhstan in October, media reported.

Uzbekistan's removal from CSTO linked with Russian policy in region27.08.2009 12:34

Azerbaijan, Baku, Aug. 27 /Trend News, V.Zhavoronkova/

Uzbekistan's removal from the Collective Security Treaty Organization (CSTO) is connected with the country's dissatisfaction with the Russian policy in the region, experts say.

The first stage of the exercises of the CSTO rapid reaction force (RRF) on the topic of the "Training and use of the collective rapid reaction forces and troops of the CSTO countries' Armed Forces to ensure collective security" started in Moscow.

Uzbekistan, despite the membership of the CSTO, refused to participate in these exercises.

This step of Uzbekistan is completely predictable, experts believe.

Tashkent's refusal to participate in the CSTO exercises, including its first stage, designated to improve military and political aspects of the interaction forces and security forces, was expected, a European expert on Central Asia, Yuriy Fedorov believes.

"In recent months, Karimov has repeatedly demonstrated a negative attitude toward the CSTO and the collective peacekeeping forces, Research Fellow on the Russia and Eurasia Program of the Chatham House Royal Institute of International Affairs, Fedorov wrote to Trend News in an email.

In addition, after the military actions in Georgia in August last year, according to an expert on Central Asia, Neil Macfarlane, many CIS states have been "carefully distancing" themselves from Russia.

Uzbekistan's refusal to attend the exercise is also due to "its position on participation in the CRRF structures," says Russian Expert on CIS and Central Asia, Leonid Gusev.

Only five countries of the CSTO, including Russia, Armenia, Tajikistan, Kyrgyzstan and Kazakhstan signed an agreement to establish the CRRF in the organization's summit in June and Uzbekistan, as well as Belarus, have not approved the paper.

Tashkent put forward a number of conditions that restricted the opportunities of the CRRF, believes Gusev, Senior Research Fellow at the Institute of International Studies of the Russian Foreign Ministry's Moscow State Institute of the International Relations.

For example, Uzbekistan proposed not to use the Collective Rapid Reaction Force's units in conflicts between members of the bloc, as well as not to send them to other countries if it is contrary to national laws. Moreover, Tashkent also expressed its desire not to participate in the Collective Rapid Reaction Force permanently, but only delegate its units."

Restoring Uzbekistan's participation in the CSTO and signing the Treaty on the allied relations with Russia were a forced reaction to sharply negative attitude of the United States and European states to suppress the riots in Andijan in 2005, said Fedorov.

As soon as the West began to reconsider their approach to Uzbekistan, Tashkent, in turn, became more clearly showing that it is not interested in military cooperation with Russia and, especially, with Kazakhstan, which is considered in Uzbekistan as a rival in the struggle for leadership in the region, the expert said.

The experts believe this can be confirmed with some facts.

Uzbekistan suspended its activity in the Eurasian Economic Community (EurAsEC) in autumn 2008 and refused to participate in projects of the Shanghai Cooperation Organization, Gusev wrote to Trend News in an email.

"The fact that Uzbekistan has given the U.S. the opportunity to transport non-military goods to Afghanistan through the Navoi airport is a clear demonstration of the Uzbek leadership's interest in the development of relations with the United States," said Fedorov.

Further, the Uzbek leadership is dissatisfied with the Russian policy in the region.

Tashkent is annoyed by the fact that Moscow did not listen to Uzbekistan's objections regarding the establishment of a military base in Osh, Fedorov said. Memorandum on the possible opening of the Russian base in Kyrgyzstan was signed at the end of the CSTO informal summit in early August.

"Russia's contingent, which is planned to be deployed there, can play an important role in the event of clashes between Uzbeks and Kyrgyz in the area of the Ferghana Valley and disrupt, thus, the possible involvement of the Uzbek forces," said the expert.

Relations between the countries exacerbated with the water problem in the region, which they cannot resolve for many years.

Before flowing into Uzbekistan, the rivers run through Tajikistan and Kyrgyzstan, where they are losing much of their water. Uzbekistan greatly suffers from such a lack of water since its main crop is cotton.

Kyrgyzstan and Tajikistan, lacking electricity, need additional hydropower stations and they expect financial support from Russia. Constructing a power plant may reduce the waterways and hence is very disadvantageous to Uzbekistan.

"Uzbek President Islam Karimov thinks that Uzbekistan has been denied water by Tajikistan and Kyrgyzstan in the last year and a half," Gusev said. "According to the Uzbek authorities, Russia supports Tajikistan and Kyrgyzstan."

Moroever, Tashkent is interested in the Russian investments, primarily in the gas industry, said Fedorov, but it does not see Gazprom's readiness for a real participation in major projects on the scale needed to Uzbekistan.

But even under such a situation, experts doubt the possibility of Uzbekistan's withdrawal from the CSTO.

"But it is not clear to me what the strategic gain for Uzbekistan would be from leaving, and there would be a cost in Uzbek-Russian relations," Research Fellow of the British Chatham House Royal Institute of International Relations, Macfarlane wrote to Trend News in an email.

Russia Expert, Gusev believes such a step is not favorable for Uzbekistan because it will lose many in security.

Therefore there is no reason why Uzbekistan may withdraw from the organization under the current circumstances, "said McFarlane.

"So I don't see why Uzbekistan would leave the organization in current circumstances," Macfarlane said.

NATO wants to improve relations with Russia

http://www.geotimes.ge/index.php?m=home&newsid=18024

The NATO Secretary General Anders Fogh Rasmussen said at the meeting with the Lithuania’s President Mrs Dalia Grybauskaite that the priority for the NATO-Russia relationship now was to work on common security challenges. 

Recently, the Allies decided to restart the political engine of the NATO Russia Council, but this does not imply a change in NATO’s position on contentious dossiers, like enlargement, Georgia or missile defence; however, NATO is creating an opportunity to improve relations which will benefit all members and Russia. 

On the issue of the new Strategic Concept, President Grybauskaite said Lithuania would actively “and creatively” participate in the debate that will be launched soon by the Group of Experts that was tasked to lead the process of developing a new Strategic Concept.

Rustavi2 2009.08.27 12:26

NATO member sells helicopter-carrying warship to Russia for $995 million

http://milaz.info/en/news.php?id=3985

12:05 27-08-2009

Russia said Wednesday it plans to buy a new helicopter-carrying assault warship from NATO-member France in an unprecedented deal experts say reflects Kremlin efforts to accelerate military modernisation, AFP reported.

The agreement for purchase of one Mistral-class naval ship also equipped with hovercraft and landing craft will be completed by the end of the year, the Russian chief of staff, General Nikolai Makarov, said.

He did not name a price, but the Russian government daily Rossiiskaya Gazeta reported this month that the ship, which can carry 16 heavy helicopters, 470 airborne troops and other gear, costs 700 million euros (995 million dollars).

Makarov also said Russia wanted to forge a deal with France on joint production of more ships.

"We also want to establish production of a series of at least four or five ships of this class," he said.

Makarov, an influential proponent in Russia of modernizing the country’s conventional armed forces quickly through procurement from Western suppliers, admitted the military needs equipment that Russia cannot produce at present.

"No country in the world can do everything" on its own, he said, adding: "Some things will have to be purchased" from foreign producers.

France currently has two Mistral ships in service with a third under construction.

The 200-metre (656-foot) ship is equipped with high-grade communications equipment and is desiged to control a NATO amphibious operation -- beach landing from the sea, according to the specialized website globalsecurity.org.

When contacted by AFP, the French defence ministry and the naval military contractor DCNS declined to comment on the matter.Russia in tsarist and Soviet times prior to World War II, notably during Stalin’s

modernisation drive in the 1930s, routinely made substantial weapons purchases from suppliers in the West.

But the ship purchase deal with France is unprecedented since World War II both in terms of the size of the equipment in question and Russia’s insistance since the war on producing all military hardware for its own use and export.

Russia has in recent years talked a lot about modernising its armed forces, which still rely heavily on Soviet-era doctrine and equipment, and steadily boosted procurement budgets during Vladimir Putin’s tenure in the Kremlin.

The political rhetoric and the money however have failed to achieve desired results as Russia’s bloated military-industrial complex has raised prices on hardware without actually delivering much more of it or developing new systems.

"This is the first major step in that direction -- of Russia turning to the West to modernise its military and military industry," said Pavel Felgenhauer, a noted Russian military analyst and commentator on defence issues.

"It is a major change."

Felgenhauer said the ship purchase and production agreements with France however would likely come under scrutiny from Washington as naval ships built in France and other NATO states contain potentially sensitive US technologies.

"We’re talking not just about buying off the shelf but also getting the technology," he said. "There is going to be discussion about this."

Bob Ayers, a former US intelligence officer and current security analyst with the Chatham House research institute in London, disagreed, saying the French ship was not a particularly sensitive item.

"A helicopter ship by itself is not really capable of doing a whole lot," he said. "It makes a big, fat target."

More interesting, according to Ayers, was what the ship deal could say about changing thinking and behaviour among Russian military planners.

"The Russian navy is not into power projection these days," said Ayers, noting that the French vessel was best suited to special operations and light, rapid assaults.

Felgenhauer mentioned the ex-Soviet republic of Georgia as well as the Crimea peninsula in Ukraine and the Baltic states as areas where the ship could be used effectively for landing special forces onshore and other operations. MILAZ

DVB arrests six Russian owned ships in Hong Konghttp://lloydslist.com/ll/news/dvb-arrests-six-russian-owned-ships-in-hong-kong/20017691837.htm;.5fa4e8cc80be35e2653c9f87d8b8be45bf6ba69a

Keith Wallis, Hong Kong - Thursday 27 August 2009

Public bids will now have to be invited for the vessels which are all 1991-92-built and vary in size between 4,706 dwt and 6,912 dwt. The six ships are part of a nine-vessel fleet beneficially owned by Russia’s S&T Group based in Vladivostok. 

Court bailiff Sunny Kwan said he was awaiting the court’s instructions but advertisements were being prepared for publication in newspapers including Lloyd’s List. “We will invite tenders,” he said, adding that he hoped the advertisements could appear by the end of next week. 

Mayer Brown JSM is acting on behalf of DVB Bank. Partner Alastair MacAulay hoped the sale of the ships could be completed within three weeks to a month. “That is the best case scenario,” he said and added the court had already taken steps to expedite the sale. 

Mr MacAulay said the plaintiffs were “disappointed” by the court’s decision not to allow the private treaty sale, especially as all the crew had been paid and there were not thought to be any outstanding third party claims. 

He added the bank had already found a buyer offering a “price in line with valuations”. 

The bailiff will now have to arrange valuations from at least two valuers although it was conducsive to the valuation process that all the major shipbrokers had offices in Hong Kong. 

It is likely the bailiff would invite sealed bids for an enbloc package for all six vessels although bidders are also likely to be able to offer bids for individual ships. 

The ships, which are all Marshall Islands-flagged, comprise the 4,700 dwt tonne ships ST Brilliance, ST Fidelity, ST Spirit and ST Star, together with the 6,900 dwt ships ST Forward and ST Leader. The ships were managed by Vladivostok-based firm ST Shipmanagement. 

All arrived in Hong Kong between July 5 and August 8 and are under arrest at anchorages in the western approaches to the harbour. 

Insiders said the ships have a raft of deficiencies and would probably fail port state inspections. As a result, all would have to undergo repair before being allowed to leave Hong Kong once they are sold. 

Both the telephone and fax lines for S&T Group in Vladivostok appeared to have been disconnected and the company could not be contacted.

The other three vessels in the firm’s fleet are the 1993-built, 4,705 dwt ST Confidence flagged in St Vincent & Grenadines and two 4,706 dwt Russian-flagged ships, the 1992-built ST Olymp and 1992-built ST Wind. All are thought to be in the Russian Far East.

The arrests are the largest to take place in Hong Kong since four boxships belonging to Taiwan’s Kien Hung and Singapore associate company Powick Shipping were arrested in 2003. Two other vessels owned by the same companies were also subsequently seized. The four 1999-built, 1,500 teu vessels were subsequently sold to Singapore’s Pacific International Lines for $73.2m. 

Russia requests UN to put on GA agenda WW2 65th anniversary

http://www.itar-tass.com/eng/level2.html?NewsID=14273925&PageNum=0

UNITED NATIONS, August 27 (Itar-Tass) - Russia has turned to the United Nations with a request to put on the agenda of the regular session of the UN General Assembly an additional item of the 65th anniversary of the end of the Second World War, it is said in a letter of Russian Permanent Representative to the United Nations Vitaly Churkin circulated here on Wednesday.

The letter was addressed to the UN secretary-general on behalf of permanent representatives to the UN of another 6 states – Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. In 2010 the world will celebrate the 65th anniversary of the victory over fascism. The great victory in the WW2 was achieved by efforts of many countries, the document says. At the same time this war brought the greatest tragedy for the peoples of Europe and the world, it is said in the letter.

“In 2010 the world will commemorate the sixty-fifth anniversary of the victory over fascism. The great victory in the Second World War was achieved through the efforts of many countries. That war proved to be the greatest tragedy to afflict the peoples of Europe and the world. Through the suffering and death of millions of people, the world community came to realize the indispensability of a system of collective security and the necessity of establishing reliable machinery to ensure international peace,” the letter says.

“The burning desire to spare humanity forever from the miseries of war served as the basis for the founding of the United Nations, whose Charter has come to serve as the code of conduct for States and international organizations and the generally recognized foundation for the building of a new world order and the system of international law,” it says.

“It is important today to bear in mind the lessons of the Second World War, to hold sacred the memory of the fallen and to work to promote the preservation of the historical memory of peoples. The meaning of the victory won in the Second World War is especially significant today, when the international community needs to join forces to

address global challenges and threats, such as international terrorism, the proliferation of weapons of mass destruction and transnational organized crime,” the letter says.

“The memory of the victory over fascism is also of current relevance in view of the increasing attempts to rewrite history and revise the conclusions to be drawn from the Second World War and the Nuremberg Tribunal. The rise of neo-fascist and neo-Nazi ideologies and organizations and the growth of aggressive nationalism, anti-Semitism and xenophobia make it necessary for the United Nations to oppose crimes based on race, nationality and ethnic origin and the spread of intolerance and related forms of racial discrimination,” it says.

“The States Members of the United Nations must jointly take all possible measures to put an end through political means to present-day armed conflicts, prevent their emergence in the future and promote the joint efforts of the international community to combat new challenges and threats, with the United Nations playing the central role. That is why it is especially important to promote the improvement of United Nations machinery for preventing and resolving conflicts by peaceful means, strengthening the Organization’s capacities in peacebuilding and the consolidation of peace, and promoting democratic values, human rights and fundamental freedoms. It is in the direct interest of humanity to further strengthen the effectiveness of the United Nations as the central element in the collective security system, inter alia, through a process of rational reform,” it says.

“Consideration of this agenda item could lead to the adoption by the General Assembly of a resolution on the sixty-fifth anniversary of the Second World War. This would make it possible to hold a solemn meeting of the General Assembly in memory of all victims of the war,” believe representatives of the 6 CIS states.

Russia and North Korea's Uneasy Relationship

http://www.dailynk.com/english/read.php?cataId=nk00100&num=5347

By Chris Green[2009-08-27 16:26 ]

It seems that Russia is not convinced of the reliability of North Korea’s missile technology, and has therefore taken steps to defend against stray North Korean armaments.

Speaking in Ulan Bator on Wednesday, the Chief of the Russian General Staff, General Nikolai Makarov announced that Moscow has deployed an advanced missile system in the area.

"We have deployed an S-400 battalion [in the Far East] already,” General Makarov explained, “We are taking these preventative measures as a security guarantee against faulty launches of the [North Korean] missiles and to guarantee that fragments of these missiles never fall on Russian territory.”

The S-400 is a modern surface-to-air missile system designed to detect and engage aircraft, cruise and ballistic missiles travelling at up to 4.5km/s.

Meanwhile, investigative reporter Simon Ostrovsky, known for his work in remote locations, has made a film detailing the lives of North Koreans working under the protection of the S-400s in logging camps in Russia’s Far East.

The remote camps, part of an agreement between Kim Il Sung and Soviet Union General Secretary Leonid Brezhnev signed in 1966, originally contained between ten and twenty thousand North Koreans, mostly prisoners, although more recent working visa holders have apparently been urban dwellers seeking to escape the grinding poverty of their North Korean hometowns.

North Korean loggers interviewed by Ostrovsky said that they earned up to $250 per month, although payment is erratic or non-existent at times. The North Korean state apparently takes 35% of the proceeds, which amounts to some $7 million per annum, while the rest goes to an Anglo-Russian logging firm called Tynda Les.

According to the testimony of a North Korean defector who escaped one of the logging camps in the 1990s and was interviewed for the film, "I was working endless hours. Twelve hours is normal in North Korea, but working 12 hours at the camps is very hard. In winter it's very cold... It's hard to work on an empty stomach. But the living conditions were the worst part.”

"The logs cause injuries. The drivers drop logs and people get killed. Because people are so cold, they can't avoid falling trees and are killed."

Nevertheless, the CEO of Russian Timber Group, which owns Tynda Les, told Ostrovsky that the camps comply with Russian labor law, although the pay of the North Korean workers was not their choice to make.

Simon Ostrovsky’s film was due to be broadcast in full on the BBC news analysis show Newsnight on August 26th, 2009.

Nicaragua plans meat exports to Russia from 2010http://en.rian.ru/business/20090827/155938628.html

10:0527/08/2009

MEXICO, August 27 (RIA Novosti) - Nicaragua plans to supply 12,000 metric tons of beef and pork products to Russia annually from 2010, the country's agriculture and forestry minister, Ariel Bucardo, said on Thursday.

"We plan to supply annually 12,000 metric tons of meat to Russia priced at $3,000 per ton beginning from 2010," the minister told the national radio.

He said officials from Russia's agricultural watchdog, Rospotrebnadzor, who had been on a two-week fact-finding visit to Nicaragua, reported that meat was produced in compliance with Russia's strict health and safety regulations.

A memo was also signed followed the visit of Russian experts, Bucardo said.

He stressed that meat supplies to Russia and Venezuela would help Nicaragua diversify its exports and reduce its dependency on the North American market.

Russia's ties with Nicaragua were boosted last year when the Central American country became the only country to join Moscow in recognizing the independence of Abkhazia and South Ossetia.

Moscow and Managua are also negotiating joint projects in electricity generation, increasing bilateral trade, and oil exploration in the Atlantic and Pacific oceans.

Russia plans new maneuvers along Georgian borders

http://www.geotimes.ge/index.php?m=home&newsid=18025

Russia plans to carry out military maneuvers along the Georgian borders. Russian Lieutenant General Valery Yevnevich says the soldiers will use the practical experience of the last year war in Georgia during the trainings. The trainings which aim at improving fighting skills in mountains will be conducted on Dariali polygon of the North Caucasian military district.

The trainings will begin in 2010. Yevnevich says the Russian army revealed in the last year war that they lack experience. Russian commanders plan to improve these lapses during the military reform.

Rustavi2 2009.08.27 12:29

Putin: Russia Assists Georgia through IMFhttp://www.civil.ge/eng/article.php?id=21396

Civil Georgia, Tbilisi / 27 Aug.'09 / 00:40

Russia’s Prime Minister, Vladimir Putin, said on August 26 that Russia was also contributing to international financial assistance to Georgia via IMF.

“Russia provides assistance to Georgia too,” Putin said at a joint news conference in Moscow with breakaway South Ossetian leader, Eduard Kokoity.

“You probably know, that Georgia receives considerable funds through IMF. We [Russia] are active members of IMF and are regularly allocating significant resources to that international financial organization, which are then distributed among the countries in need, including to Georgia.”

“It once again confirms that we are not interested in humiliating Georgia; we are not interested in having winners and losers,” Putin said. “We are interested in creating stable situation, which would guarantee a long-term peace and stability for all the people living in the Caucasus region.”

His remarks followed a question about Russia’s assistance to Tskhinvali.

Putin reiterated that Russia remained committed to its pledge of providing 10 billion rubles (about USD 317 million) of assistance to South Ossetia of which 2.8 billion rubles aim at budgetary support and 8.5 billion rubles for infrastructure rehabilitation. 3.5 billion rubles out of 8.5 billion have already been allocated, Putin said.

Putin Slams U.S. on Rebel Regions’ Birthdayhttp://www.moscowtimes.ru/article/600/42/381352.htm

27 August 2009By Anatoly Medetsky / The Moscow Times

Prime Minister Vladimir Putin on Wednesday marked the first anniversary of Russia’s recognition of the independence of South Ossetia and Abkhazia from Georgia by saying more governments will eventually defy U.S. “pressure” and establish diplomatic ties with the tiny separatist regions.

In an event timed to the anniversary, Gazprom opened a pipeline snaking through high mountain ridges to feed gas to South Ossetia, which lifted the region’s dependence on deliveries through Georgia proper.

Russia recognized South Ossetia and Abkhazia after a brief war with Georgia last August that began when Georgian troops attempted to retake South Ossetia. None of Russia’s allies have followed suit, and Nicaragua is the only other country to recognize the regions’ independence.

Putin attributed the lack of progress to U.S. influence over the world.

“What is happening now … attests to one thing: Not many members of the international community use their sovereignty in the full sense of the word,” Putin said at a news conference. “All of them, being under pressure from one superpower, the United States, are executing its political will without penetrating — and not wishing to penetrate — the gist of the events.”

But things will change with time, he said, speaking with South Ossetian leader Eduard Kokoity at his side after they emerged from talks.

“I am sure that the situation will gradually change because no one wants to be a vassal,” Putin said. “Cold War-era thinking in terms of blocs will gradually dissolve in the reality of modern times.”

The statement drew skepticism from some Western analysts.

“I shouldn’t laugh, but it’s highly unlikely,” said James Nixey, a Russia and Eurasia research fellow at Britain’s Chatham House, referring to the chances of broader international recognition. “If Putin can’t convince states close to Russia … it’s a bit of a bluff.”

Putin made a point of saying Wednesday that Russia had left the issue up to its allies from the very beginning.

“We never pushed or asked anyone to recognize the independence of these two republics,” he said. “I want to stress this: We never asked anyone.”

After the talks with Kokoity, Putin said Russia, despite the global economic debacle, would not withdraw any of the funding that it had promised to South Ossetia to fill its budget and rebuild its post-war economy. Russia sent 2.8 billion rubles ($89 million) to the region’s budget this year. It set aside another 8.5 billion rubles for the reconstruction of schools, hospitals and roads this year, of which 3.5 billion rubles has been spent so far, Putin said. Russia is ready to consider more subsidies if necessary, he said.

In another sort of aid, Gazprom built a pipeline that will carry a modest 250 million cubic meters of gas to South Ossetia every year at such a height — at one point reaching 3,148 meters above sea level — that Kokoity said it belonged in the Guinness World Records. Gazprom warned that the pipeline could rupture at times because it runs through avalanche-prone areas.

Kokoity said South Ossetia was “immeasurably” thankful to Moscow and stressed that it aimed to stay independent of Russia, responding to what he described as “false rumors” to the contrary from the West.

Andrew Wood, the British ambassador to Russia from 1995 to 2000, said Russia and South Ossetia might not be one country but their leaders are now in many ways more dependent on each other than a year ago.

“It is difficult to see how that may change in such a way that South Ossetia can become a genuinely independent and widely recognized entity contributing to a more stable Caucasus,” he said.

Angela Stent, director of the Center for Eurasian, Russian and East European Studies at Georgetown University, agreed that the region would remain largely under Russia’s political and economic reign in the foreseeable future, saying it will enjoy “little room to maneuver.”

Abkhaz leader Sergei Bagapsh also expressed gratitude to Russia on Wednesday but stayed home for the celebrations.

Nixey said Abkhazia was a more viable state and required less attention from Moscow in comparison with the more economically ruined and politically unaccomplished South Ossetia.

State TV Caught in Reporting Scandalhttp://www.moscowtimes.ru/article/1010/42/381330.htm

27 August 2009By Alexandra Odynova / The Moscow Times

A Channel One documentary accusing Western journalists of misrepresenting the South Ossetia war is itself at the center of a scandal over bad reporting.

Novaya Gazeta journalist Arkady Babchenko said Wednesday that the film, “08.08.08: The War on Air,” featured a photograph that he took in Georgia without his permission and wrongly indicated that it was taken by a U.S. photographer in Iraq.

The 18-minute documentary — broadcast on the anniversary of the start of the five-day conflict on Aug. 8 and still available on Channel One’s web site — accuses the foreign media of using various tricks to improperly depict Russian aggression against Georgia.

U.S.-based war photographer David Axe appears in the film in the 16th minute and raises several questions about the U.S. media’s coverage of the conflict.

The films shows Axe questioning the authenticity of some pictures released by the Western media, saying they look staged. Then Axe points at a photo of a wounded soldier.

“This is a photo I took in Iraq. It hardly looks like it’s fake,” he says in the translation dubbed in Russian.

Through the dubbing, though, Axe can be heard saying, “This is a man who has been wounded in combat. It looks hard to fake.”

Babchenko said the photo that Axe is pointing to is actually one that he took of a Russian soldier in Georgia during the conflict.

“Weird. I’ve always thought that the photo had been taken by me, not David Axe. And in Georgia. Not in Iraq,” Babchenko wrote on his LiveJournal blog.

The soldier in the photo is wearing a Russian uniform and has an Orthodox cross around his neck. Babchenko said the photo had been published in Novaya Gazeta.

Babchenko said on Ekho Moskvy radio that he would file a lawsuit against Channel One in Moscow’s Ostankinsky District Court for 100,000 rubles ($3,180) in damages.

“Either David Axe is a liar or Channel One journalists are liars,” he said. “The rest of the film’s content is doubtful, too.”

Axe said the film misinterpreted his comments. “No, I did not claim that photo was mine. My words were taken out of context,” he told The Moscow Times.

Channel One spokeswoman Larisa Krymova acknowledged that the photo had ended up in the film because of “a technical mistake” during the editing process.

“The author of the film didn’t know that the photo belonged to Babchenko,” she said in e-mailed comments.

She did not say whether Channel One planned to rectify the mistake.

LN: Czech-Slovak investment group suspected of links to Kremlinhttp://praguemonitor.com/2009/08/27/ln-czech-slovak-investment-group-suspected-links-kremlin

ČTK | 27 August 2009

Prague, Aug 26 (CTK) - The Czech-Slovak investment group Penta is suspected in Poland of cooperation with Russian secret services and of having capital of an unclear and opaque origin, the Czech daily Lidové noviny (LN) writes Wednesday, citing Polish minister Aleksander Szczyglo.

Szczyglo, head of the National Security Office, voiced the suspicion in connection with the privatisation of the Polish helicopter producer, PZL Swidnik, LN writes.

He also challenged as "a very strange thing" the widely-known participation of General Alojz Lorenc, former head of the then communist Czechoslovak secret service (StB), in Penta's structures.

"The Polish secret services are automatically obliged to monitor the privatisation involving strategic companies," LN quotes Szczyglo as saying.

Penta, which did not succeed in the final phase of PZL Swidnik's privatisation and is reportedly to invest a billion dollars in Poland, has launched a counterattack. Last week it published a full-page advertisement in Polish newspapers, in which it asks Szczyglo to apologize and distance himself from the information he had presented.

"Penta has never been a Russian company, it has never used the capital of Russian persons or organisations (public or private), neither in its economic activities nor for other purposes," LN quotes from the advertisement.

"Penta has no connections with Russian secret or security services or any other state security services," Penta writes in the advertisement.

It adds it is proud of enjoying the Czech government's confidence and having passed security vettings, not only Czech and Polish, but also NATO's, the daily writes.

Apart from the advertisement, Penta reportedly wants to defend itself against the accusations by suing the Warsaw radio RMF FM, which broadcast the information about Penta's alleged "Russian background," citing Szczyglo, LN writes.

"We are convinced that Minister Szczyglo has no evidence to prove the accusation," Polish daily Rzeczpospolita quotes Marek Dospiva, one of Penta's owners, as saying.

For Penta it is important to refute the Polish intelligence's suspicion, as it plans to invest over a billion dollars in Poland, where it owns an extensive network of shops and other firms.

Penta was founded by five investors who are its exclusive owners. It is difficult to verify the information as Penta has been registered in Cyprus where such information is strictly protected, Rzeczpospolita has written.

"This only nourishes the speculations that have surrounded Penta for a long time. Any statements are of no use until the company discloses all documents," an investment bank employee told Rzeczpospolita.

Cyprus is reportedly among favourite countries for people to establish companies with the help of Russian businessmen's capital.

Penta is one of the most important investors in the Czech Republic and Slovakia. It has been operating on the market since 1994 and its assets reach about 2.5 billion euros. The Penta group includes almost 50 companies operating, among others, in Poland, Hungary and Germany.

In the Czech Republic, Penta has since 2007 owned the country's largest arms maker, Aero Vodochody. Under its management, the originally loss-making aircraft producer has turned into profit-making.

Putin Orders Revision of Olympics Financinghttp://www.themoscowtimes.com/article/1009/42/381342.htm

27 August 2009By Yevgenia Pismennaya, Maxim Tovkailo, Bela Lyauv, Yekaterina Derbilova / VedomostiThe state corporation model has made it difficult to oversee expenses for Olympics preparations, government sources say, and Prime Minister Vladimir Putin has proposed returning to the previous financing model — a federal targeted program.

The Regional Development Ministry is changing the way it finances construction work for the 2014 Winter Olympic Games in Sochi, sources in the Regional Development, Finance and Economic Development ministries said.

The construction program is spelled out in a government order from Dec. 29, 2007, which lists 235 sites and events that are part of the preparations. According to the Regional Development Ministry, the program’s overall cost is 1.3 trillion rubles ($41.5 billion).

The effort is being overseen by Olimpstroi, a state corporation created Oct. 10, 2007, whose supervisory board is led by Deputy Prime Minister Dmitry Kozak. It received state assets worth 72 billion rubles in 2008.

The ministry sources said Putin issued an order that would reform the program for the work in Sochi. “The order goes like this: ‘Prepare a proposal on reforming the construction program for the Olympics sites and the development of Sochi as a mountain resort into a federal targeted program,’” one of the officials said.

“We’ll prepare such an order and get it approved with the relevant ministries and agencies,” a senior regions ministry official said.

Spokespeople for the Regional Development Ministry declined comment.

“When we won the rights to hold the Olympics, the federal targeted program was hastily turned into a government program, and the money just kept flowing out,” the regions ministry source said. “With the targeted program, that would have been impossible because everything was clearly spelled out with an explanation of the project’s costs.”

When told of the proposal, Olimpstroi president Taimuraz Bolloyev said that “any experiments conducted on the Olympics project will only lead to negative consequences.”

Another Olimpstroi official said the building needed to start later this year or early next year. “If it doesn’t happen, we won’t finish,” he said. “We’re just the administrators,” not the ones ordering all of the work, he added.

After weeks of discussion, it was decided not to create a completely new targeted program, a senior Finance Ministry source said. “It would be really strange, since we already had a big targeted program to develop Sochi as a resort, and in 2007 it was wrapped up, with most of its money going to Olimpstroi.”

Creating a new targeted program would mean a return to the past and the closure of Olimpstroi, he said. “Olimpstroi has become something of a black box: They approve the list of sites but with no numbers.”

But a deal was reached, he said. “The construction cost of each Olympic site will be determined, but the money will be deposited as equity capital, not through a federal targeted program.”

The arrangement is somewhat strange, the Finance Ministry official conceded. The planning element will be borrowed from the federal targeted program model, while the expenditures will continue to be made through the state corporation. “The aims justify the means. We need to strengthen oversight of the state corporation, as well as speed up, and most important, coordinate the Olympics building work.”

“Putting prices on the sites needs be done to make the construction more transparent,” Kozak told Vedomosti.

An Economic Development Ministry source said it was Kozak’s decision.

Now, money will be added to Olimpstroi’s equity capital as work on each project progresses, a regions ministry source said. “As before, we’ll need to oversee the money,” the source said.

An Audit Chamber official said the changes would also strengthen oversight of other state bodies involved, including the Transportation Ministry, the Federal Road Agency and the Office for Presidential Affairs.

The ensuing disagreements within the government over construction dates could put some projects at risk, however, a source in the Cabinet warned.

“We’re glad that the government has paid attention to the president’s comments on the need to rethink the organizational and legal basis of the state corporations,” a Kremlin official said.

He said the Kremlin had not yet seen the order. “Even the partial reformation of any state corporation is a step forward and the start of the transformation of these legal entities, which people are still questioning.”

Another source in the Kremlin said President Dmitry Medvedev had not given orders about any specific state corporation. “The change in financing Olimpstroi is an internal matter for the White House and isn’t at all connected with questions about the state corporations.”

Experts doubt Russian military has moved Bulava productionhttp://en.rian.ru/mlitary_news/20090827/155939680.html

12:5127/08/2009

MOSCOW, August 27 (RIA Novosti) - Russia cannot assign production of Bulava ballistic missiles to another manufacturer because there is only one plant in the country that makes solid-fuel ballistic missiles, Russian experts have said.

Chief of the Russian General Staff, Gen. Nikolai Makarov, said on Wednesday that production of the troubled Bulava missile had been moved to an alternative factory due to problems in the production cycle. He did not specify its name.

According to the Russian Nezavisimaya Gazeta newspaper, Makarov's announcement took the Russian military and defense industry experts surprise because only one plant in Russia - the Votkinsky Zavod in the Urals - makes solid-fuel ballistic missiles for Russia's Armed Forces, including the Topol-M, the Iskander-M, and the Bulava-30.

"Apparently, the media misinterpreted what Gen. Makarov said because there is nowhere to transfer Bulava production to from the Votkinsky plant," former chief of staff of Russia's Strategic Missile Forces, Col. Gen. Viktor Yesin, said in an interview with the NG.

"On the other hand, it is possible to change manufacturers of faulty components supplied to the plant. Here we have some options, but the choice is still limited," Yesin added.

The Bulava submarine-launched ballistic missile (SLBM), which is being developed by the Moscow Institute of Thermal Technology (MITT), has suffered six failures in 11 tests. The general director of the institute has resigned over the failures, seen as a setback in the development of Russia's nuclear deterrent.

A final report on the causes of the previous faulty test launches is expected to be ready soon, but no date has been set for the next Bulava trial.

Makarov expressed hope on Wednesday that Russian industry "will tackle the problems and cope with the [production] task."

The Bulava (SS-NX-30) SLBM carries up to 10 MIRV warheads and has an estimated range of over 8,000 kilometers (5,000 miles). The three-stage solid-propellant ballistic missile is designed for deployment on new Borey class nuclear-powered strategic submarines.

Russia's top brass expects the Bulava, along with Topol-M land-based ballistic missiles, to become the core of Russia's nuclear triad.

Customs Officials Search S7 Office for Info on Jetshttp://www.moscowtimes.ru/article/1009/42/381344.htm

27 August 2009By Alexei Nepomnyashchy, Alexei Nikolsky, Mikhail Rudnev / Vedomosti

Customs officials seized documents Tuesday from the Moscow office of S7, the country’s second-largest airline, which is suspected of lowering its payments to the customs service.

About 10 officials — some in civilian clothes, some wearing camouflage and rapid-response force badges — arrived at 10 a.m. and were at the office until after working hours, an S7 employee said. They were particularly interested in the accounting, legal and IT departments, where they were “looking for something” on the computers, the employee said.

“Seizing documents is a traditional type of inspection, and it’s yet another chance for the company to show that all of the group’s activity is transparent and strictly within the bounds of the law,” S7 spokesman Kirill Alyavdin said.

The airline is majority owned by Natalya Filyova, with 63.26 percent, while the state has a blocking stake of 25.5 percent.

A source close to the company’s board of directors told Vedomosti that the searches were done by customs officials and other law enforcement officers, who were accompanied by members of the customs service’s rapid-response force. They seized documents relating to customs payments for imported Airbus A320s.

A spokesman for the Federal Customs Service declined comment. A customs service official said a search was carried out in the company’s office in Novosibirsk, as well. The S7 source confirmed the information, saying the search was done last week.

A source in one of S7’s partner companies and the S7 employee said the customs officials suspected the airline of paying less than required.

In June 2008, S7 shareholders approved the purchase of six A320s for a combined $192.9 million. Given the planes’ 20 percent import duty, the payment would have been $38.6 million.

Customs officials regularly conduct such checks, although they rarely lead to serious consequences, said Boris Rybak, head of consulting company Infomost. Airlines make customs and leasing payments monthly, he said.

In November 2008, the Federal Customs Service carried out checks at Sky Express and the now-bankrupt KrasAir and subsequently fined them 1.2 billion rubles ($38 million) and 638 million rubles ($20.3 million), respectively.

Sky Express successfully contested the fine in court and was not required to pay any penalties, chief executive Marina Bukalova said.

“The service comes at us and other airlines with several complaints per month, but they only manage to prove in court that they’re right one time in 50,” she said.

Russia 10-15 years behind lead industries in computer engineering –experthttp://www.interfax.com/3/513443/news.aspx

MOSCOW. Aug 27 (Interfax-AVN) - Russian industries will stop beingcompetitive if they do not actively adopt computer engineeringtechnologies, head of the Altair Engineering Russian office LeonidRvachev told Interfax-AVN on Wednesday. "Computer engineering boomed in industrialized countries in the1990s due to the spread of computers and specialized modeling, analysisand optimization software. Modern production is unthinkable withoutcomputer engineering, be it shipbuilding, aviation, space, constructionor nano-technologies. In industrialized countries, that is. As forRussian industries, they are equipped with such technologies at no morethan 5-10%. They also lag behind developed industries by ten to fifteenyears," he said. If the lag widens, competitiveness of Russian industries willshrink, Rvachev said. "In fact, Russian products may stop being in worlddemand at all," he said.

6 Parties Registered for Vote

http://www.themoscowtimes.com/article/1010/42/381350.htm

Six political parties had registered to run in the Oct. 11 elections for the Moscow City Duma by Wednesday, the last day for filing applications with the local election committee.

The registered parties are United Russia, A Just Russia, the Liberal Democratic Party, the Communist Party, the liberal Yabloko party, and Patriots of Russia.

In addition, nine candidates with the Solidarity opposition movement have applied to run independently in single-mandate districts, one of the candidates, Ilya Yashin, told The Moscow Times. Their applications will be processed by Sept. 6, he said. (MT)

Yabloko Says Moscow Police Obstructing Its Campaign http://www.rferl.org/content/Yabloko_Says_Moscow_Police_Obstructing_Its_Campaign/1808578.html

August 26, 2009

MOSCOW -- The leader of Russia's opposition Yabloko party says police in Moscow are obstructing the party's campaign to collect signatures to register candidates for Moscow city Duma elections, RFE/RL's Russian Service reports.

Party head Sergei Mitrokhin told RFE/RL that Moscow police blocked a convoy of 15 cars carrying the party's sign on August 25.

Mitrokhin said the incident was politically motivated and was organized by forces that do not want to see Yabloko party members in the Moscow Duma.

The deadline for handing in signatures to Moscow's Election Commission is August 26. The elections are scheduled for October 11.

Long-time Moscow Mayor Yuri Luzhkov is a strong supporter of Prime Minister Vladimir Putin and Russia's ruling party.

Moscow’s Kennedy Has My Votehttp://www.themoscowtimes.com/article/1016/42/381327.htm

27 August 2009By Konstantin Sonin

The October Moscow Duma elections could just as well turn out like the ones before them. All Russian elections at the federal and local levels over the past four years have lacked anything even close to the semblance of actual competition.

But there is still a good chance that these elections could be a game changer, just like those in 1989 at the Congress of People’s Deputies that were the first relatively free elections in the Soviet Union. “Opposition candidates” in 1989 — the quotes are needed since the only thing that the candidates had in common was that they did not represent the controlling Communist Party — had it easier and tougher than opposition candidates today. It was easier because the dissatisfaction with the Communists that had been accumulating over the years was much greater than it is now with the current leadership, while the political environment made it much tougher because the access to modern campaigning tools was much tighter.

People are definitely tired of today’s leadership. The only thing left to do is to convince Muscovites that the opposition candidate is the better one.

Ilya Yashin, one of the leaders of the liberal opposition group Solidarity, is the most promising opposition candidate from the Universitet district, where I happen to live. Yashin managed to receive 15 percent of the vote in the previous elections in 2005. Although at first glance this may seem modest, it was a big success for a young politician. I have no idea what will secure Yashin the thousands of votes he needs to be

victorious, but I can say that he has my vote. Should another candidate deliver what I want, then I guess I will just have to weigh the situation in an honest manner.

I intend to vote for the candidate who has visited each and every block — or better yet courtyard — by the election campaign’s conclusion and has become aware of the problems in each of the courtyards. Yashin has a LiveJournal blog that would be pretty interesting to glance at each day to find out which apartment buildings he has visited, which courtyards has he made speeches in and what the latest concerns are in those courtyards. The key to a successful campaign is the candidate’s ability to convince each voter that whatever problem people may have — whether it be uncollected trash in the courtyard or the need to install a new pedestrian crossing — is now the candidate’s personal problem as well.

A little more than 400,000 voters live in the Universitet district. Meeting with at least 20,000 in person during the remaining six weeks of campaigning is not out of reach. Winston Churchill and John F. Kennedy, albeit from aristocratic backgrounds, won their first elections using this method. The same can be said for French President Nicolas Sarkozy and U.S. President Barack Obama, two politicians with more modest backgrounds.

Meeting in person with voters and finding out what their real, down-to-earth problems are is exactly how seemingly powerless candidates triumphed over district committee secretaries and large factory managers. In the end, I personally would like to vote for the winner.

Konstantin Sonin, a professor at the New Economic School/CEFIR, is a columnist for Vedomosti.

Goal Set for E-Government

http://www.themoscowtimes.com/article/1009/42/381345.htm

The country’s e-Government program, which aims to make most government services accessible through the Internet, may start by the end of the year, Communications and Press Minister Igor Shchyogolev said Wednesday.

“By the end of the year, we are planning to launch our state services portal, where there are already about 200 services. By the end of the year, there will be dozens more services,” he said.

By the end of 2010, citizens will be able to file forms online, he said. (MT)

Daghestanis Protest Abductions Of Young Muslim Men http://www.rferl.org/content/Daghestanis_Protest_Abductions_Of_Young_Muslim_Men/1808297.html

August 26, 2009

MAKHACHKALA, Russia -- Some 200 people have protested in Makhachkala, Daghestan, against continuing abductions of young Muslim men by security forces.

The protestors gathered on August 26 outside the government building in the regional capital, but were forced by police to move to a nearby park.

The protestors accuse police of coercing the abducted men to commit acts of terrorism that brand them as militants.

On August 19, the relatives of a young practicing Muslim in the southern town of Derbent staged a similar protest after his disappearances two days earlier.

His family later identified him from photographs of a group of alleged militants killed in a counterterror operation in the area. He had been shot 22 times but his body also bore traces of beatings and torture.

According to Russian human rights group Memorial, there have been 12 abductions in Daghestan so far this year.

26 August 2009, 17:49

The Mayor of Makhachkala asks Patriarch Kirill to help in settling conflicts in the Caucasushttp://www.interfax-religion.com/?act=news&div=6377

Moscow, August 28, Interfax - The Mayor of Makhachkala, Said Amirov, asked Patriarch Kirill to help in bringing about peace in the North Caucaus and overcoming schism among Dagestan's Muslims.

"I stated my proposals to Patriarch Kirill so that he could use his authority and his resources to achieve peace and friendship across Russia, in particular, in the Caucasus. Indeed, if the situation gets back to normal in the Caucasus, the question of Russia's integrity will be almost solved," Amirov told journalists on Wednesday commenting the results of his meeting with Patriarch Kirill at Patriarch's residence in Chisty Pereulok, Moscow.

Amirov hopes that Patriarch's contribution will encourage the Orthodox clergy and the Muslim leaders to take the necessary efforts to overcome schism among Dagestan's Muslims. According to him, believers of different religions - Muslims, Christians and

Judaists - are living in peace in the Caucasus, whereas the Muslim community suffers a split.

Ingushetians On Trial For 'Nevsky Express' Bomb Attack http://www.rferl.org/content/Ingushetians_On_Trial_For_Nevsky_Express_Bomb_Attack_/1807919.html

August 26, 2009

NOVGOROD, Russia -- The Novgorod Oblast Court in northwestern Russia has resumed hearings into a two-year-old terrorist attack, RFE/RL's Russian Service reports.

Defendants Maksharip Khidriev and Salambek Dzakhkiev, from the Russian Republic of Ingushetia in the North Caucasus, are charged with placing and detonating an explosive device aboard the Nevsky Express train going from Moscow to St. Petersburg on August 13, 2007.

The explosion derailed the train and scores of people were injured.

A third suspect, Pavel Kosolapov, is still being sought by the authorities.

Customs officials seize 80 kg of heroin on train in south Russiahttp://en.rian.ru/russia/20090827/155938521.html

09:4427/08/2009ROSTOV-ON-DON, August 27 (RIA Novosti) - Customs officials in southern Russia have seized a record stash of about 80 kg (176 lbs) of heroin, a spokesman for the local customs office said on Thursday.

The drugs were found when customs officers carried out an inspection of a train heading from Tajikistan to Russia.

"About 80 kg of heroin, produced in Afghanistan, were kept in 15 plastic bags hidden in sacks containing chewing tobacco 'nasvai,'" the official said.

It is one of the largest shipments of heroin seized by Russian authorities in southern Russia in the past 10 years.

The ex-Soviet Central Asian states remain major drug suppliers to Russia. According to estimates, about 90% of heroin consumed in Russia is trafficked from Afghanistan via Tajikistan and Uzbekistan. Illegal drug production in Afghanistan has reportedly risen more than 40 times since 2001.

Some 80 kg of heroin seized in Dushanbe-Moscow train

http://www.itar-tass.com/eng/level2.html?NewsID=14273984&PageNum=0

ROSTOV-ON-DON, August 27 (Itar-Tass) -- Smuggling of a major batch of drugs has been prevented in Russia’s south. About 80 kilograms of heroin were found and seized during an examination of the Dushanbe-Moscow train at the customs post in the Astrakhan Region. As ITAR-TASS learnt at the Southern Customs Department, this is one of the biggest batches of drugs seized in Russia’s south over the last ten years.

Packages with Afghan heroin were hidden in sacks with greens.

Criminal proceedings were instituted.

Dam Disaster Affecting Siberians the Way Chernobyl Affected Ukrainians

http://georgiandaily.com/index.php?option=com_content&task=view&id=14224&Itemid=72

August 26, 2009 Paul Goble

Just as the 1986 Chernobyl nuclear accident convinced many Ukrainians that they did not want to remain part of the Soviet Union, so too, despite all the differences in the extent of the disaster, the Sayan-Shushen dam accident is leading many Siberians to conclude the same thing about remaining part of the Russian Federation. In the current issue of “Novaya gazeta,” journalist Aleksey Tarasov says that in the wake of the August 17 dam disaster, “Siberia is changing” in large measure because “the cheap electric energy” which the dam provided in “compensation” to that region for all that Moscow has taken from it is now a thing of the past (www.novayagazeta.ru/data/2009/093/11.html).The shift from inexpensive hydro-power to the vastly more expensive coal-produced energy will affect “all the industry” of the enormous region as well as the lives of people there who have grown accustomed to “cheap electricity.” And Moscow’s call for cutting back use of power at least in the near term is thus especially infuriating.“Different times are coming to Siberia,” Tarasov continues, “and that means different ones are coming to Russia as well.” Unfortunately, he says, “the reaction of the government [to the latest disaster] shows that [Moscow] either is not in a position to understand that or does not want to.”One might have thought that this was the ideal time for Moscow to show that it is prepared to view Siberia as something other than “a colony,” the “Novaya gazeta” journalist argues. But instead, Prime Minister Vladimir Putin “in the first hours after the catastrophe” voiced his support for RusHydro and the construction of even more hydro-electric dams.That and Putin’s promises to subsidize the owners of the Sayan-Shushen dam may help oligarchs like Oleg Deripaska to keep their profits high, Tarasov continues, but by

themselves, these steps are unlikely to do much to help Siberia develop a more modern and diversified economy with “energy saving technologies.”In short, the journalist notes, “the powers that be made sure it was understood that they would not allow RusHydro to suffer,” however much Moscow’s past policies and current approach are having exactly that effect on Siberians, people who are smart enough to recognize that the government’s promises to them as opposed to those to the oligarchs are not worth much.The powers that be in the Russian capital have failed to recognize two things: first, the Siberians of today are a very different group than those of a generation ago, and second, the media coverage of the Sayan-Shushen dam disaster has been far more extensive and raised far more questions than the coverage of Chernobyl in 1986.In the 1990s, Tarasov points out, Sayanogorsk “became a Siberian Chicago,” with “a large fraction of active and ambitious men. They have great expectations from life. And that life is now being destroyed -- because its foundation was the indestructible and eternal hydro-electric power station, ‘designed to withstand even a direct nuclear hit,’ as they learned in school.”“These people,” Tarasov writes, “are now burying their friends and observing the reaction of the powers that be and their propaganda apparatus,” the effort by officials to deny responsibility by shifting it from one thing to another and to suppress coverage by bringing criminal charges against one journalist, actions that have been covered in the media.And reports on those aspects of the disaster are only part of the vastly greater media coverage of this incident and the reactions of Putin and President Dmitry Medvedev, coverage that has had a much greater impact on Siberians than all the propaganda that Siberian “separatists” have been conducting.Many in Moscow and elsewhere continue to comfort themselves with the notion that it is wrong to draw any parallels between the impact of Chernobyl on Ukrainians and the impact of Sayan-Shushen on Siberians. After all, they say, Siberia has “nowhere to go.” But that is not quite the case, Tarasov suggests.“Under Gorbachev and Yeltsin, only a politician who did not need public support could fail to speak about the necessity of decolonizing [that region with its immense natural resources] and the establishment of a Siberian (Eastern Siberian, Central Siberian and Yenisey) Republic” as a goal of Russian policy.Under Putin, however, no one remembered “Siberian separatism” because Moscow had “buried the theme of regional patriotism.” And efforts by the supporters of that idea seldom found much support. But if a problem is not discussed, Tarasov says, “it does not disappear. It simply goes into the underground.”The Sayan-Shushen dam disaster and even more the way Moscow has mishandled it and the media have discussed it suggest that Siberian separatism may be about to re-emerge and challenge not only the relationship between Putin and the oligarchs but also that between “the colony” of Siberia and the imperial center.

August 26, 2009The Kremlin, Decorporated

http://www.russiaprofile.org/page.php?pageid=Politics&articleid=a1251306084

By Graham Stack Special to Russia Profile

Medvedev Asks State Prosecutor General to Inquire into the Activity of Seven Major State Corporations

The much-anticipated shift toward more liberalism in Russia marked by Dmitry Medvedev’s election as president in March of 2008 but delayed by last year’s war with Georgia and this year’s economic crisis looks to be slowly getting started. Under the Kremlin’s patronage, an alliance appears to be forming against the state corporation juggernaut. Could the time have come for Russian private enterprise and innovation to take the lead?

In December of 2007, a key Medvedev friend and confidante, university friend and law faculty colleague Anton Ivanov, now chairman of the Supreme Arbitrage Court and as such the chief of Russia’s system of commercial courts, said that “relations between state and business are like a seesaw – they tip to one side and then to another. There was a time when the state had lost influence over business to the extent that it practically handed out indulgences for the non-payment of taxes. Now we are in tougher times. Perhaps the seesaw has even tipped too far in the other direction, and it is time to re-determine the correct balance between business interests and state authority.”

Anton Ivanov plays a similar role for Dmitry Medvedev to the one that Sergei Ivanov played for former-President and now Prime Minister Vladimir Putin – a trusted friend and a top official. And whereas Sergei Ivanov counted as a key member of Putin’s hawkish network of former St. Petersburg KGB agents known as the “siloviki,” Anton Ivanov is a key figure in Medvedev’s liberal network of the St. Petersburg civil law scholars, nicknamed the “civiliki.”

However, the shift from statism back toward liberalism has been slow in coming. Cynics argue that Medvedev is merely a placeman until Putin resumes the presidency in 2012. Optimists say a planned policy shift has been derailed by the Georgian war in 2008 and the economic collapse in 2009.

Until now the cynics seemed to have the better arguments. However, in what is seen as Medvedev’s first real independent initiative, on August 10 he requested the State Prosecutor General Yuri Chaika to audit the activity of the seven state corporations set up in 2007 to manage various fields of the economy, from the defense sector production and export to the construction of facilities for the 2014 Sochi winter Olympics.

With their wide-ranging powers and little room for oversight and accountability, the state corporations seem to adhere to a state-dominated model of bureaucratic capitalism that could crowd out private enterprise and increase corruption. Moreover, over the previous eight years their anomalous legal form – neither truly state-owned nor private, neither

truly non-commercial nor solely profit-oriented – has outright contradicted much of the progress in creating a unified legal space in Russia.

In speeches and interviews in the run-up to his election as president, Medvedev frequently repudiated “state capitalism,” calling it a dead end and declaring that he is on the side of private enterprise and innovation. His failure to back words with deeds until now only reinforced the impression that he was a puppet of his Prime Minister Vladimir Putin.

Collective discontent

Medvedev’s move comes just after a number of different bodies raised a chorus of criticism of state corporations in June and July. This points to a carefully orchestrated campaign to discredit state corporations and to the fact that the president has enough political backing across state bureaucracies to get his way.

The first blow was dealt by the “civilik” Anton Ivanov. In early June, in an interview to the Vedomosti business daily, Ivanov publicly reprimanded state corporations, calling for a moratorium on their creation and for the enforcement of “generally-binding norms for all legal entities.” “It is not for nothing that legal scholars criticize state corporations,” he said. “Because their assets are private, but you can’t call them private in essence. And if the decision was to be taken to liquidate a state corporation, who would get the stakes in the companies owned by them? We need to stop calling old structures by new names, when they in fact remain the same in essence.”

In June, the Presidential Council on Legal Codification went even further, calling for the elimination of state corporations as a legal form altogether, since they have no place in Russia’s civil code.

Then in July and August, the powerful Audit Chamber and the Anti-Monopoly Service joined in the chorus. Both are headed by former members of the liberal Yabloko party, Sergei Stepashin and Igor Artemev, respectively. Perhaps more importantly, they both have little jurisdiction over state corporations and would like to change this.

Thus, a report prepared by the Federal Anti-Monopoly Service (FAS) and leaked to the Kommersant daily named state corporations as one of the main threats to competition in the Russian economy. Writing in Vedomosti about the correct way to go about modernizing the Russian economy, the Head of the Audit Chamber Sergei Stepashin argued that this had to be done by changing legal norms to support and reward innovations, not by Soviet-style “sectoral” corporations, which he said “had failed to justify themselves.”

Finally, Valentin Zavadnikov, the chairman of the Federation Council’s industry committee, put up bitter resistance to a draft bill setting up a state corporation to run Russia’s roads. Back in February of 2008, Zavadnikov authored a damning Federation Council report on state corporations, calling them “the perfect chance to transfer state

property to the non-state sector with no financial benefit for the state and at the risk of uncontrolled use and alienation of assets.”

Civiliki vs. siloviki

The Kremlin’s move against state corporations has two targets: the “civiliki’s” concern about the disastrous implications for Russia’s developing civil code of the state corporation anomaly and the desire to eradicate it by converting state corporations into other legal forms provided for in the civil code – such as joint stock companies or government agencies.

Ironically, this might be the easier part. A number of state corporations themselves are headed by liberals who are likely to tow the Kremlin’s new line. Liberal Anatoly Chubais, the head of Rosnanotech, the state corporation for developing nanotechnologies, declared in August that changing the legal form would make no real difference in Rosnanotech’s activities. Sergei Kirienko, a former liberal party colleague of Chubais and now the head of atomic power state corporation Rosatom, is also unlikely to object to a change in form. Nor is Dmitry Kozak, the head of the Olimpstroi State Corporation for constructing the facilities for the Sochi 2014 Olympics and a liberal colleague of Medvedev’s at the St. Petersburg law faculty, likely to kick up a fuss. In fact, Vedomosti recently reported that Olimpstroi is likely to be transformed from a state corporation into a federal target program.

As a sign of the tide turning against state corporations, one planned state corporation to own and run Russia’s roads was scaled down to a state company in July, thanks to the efforts of the above-mentioned Valentin Zavadnikov in the Federation Council. Likewise, there apparently will be no state corporations in the space and rocket industry, Deputy Prime Minister Sergei Ivanov told journalists yesterday. Instead, the country will resort to forming vertically integrated public joint-stock companies.

And in August, Russia’s Finance Ministry abandoned the project of a state corporation for managing Russia’s financial assets. Deputy Prime Minister and Finance Minister Alexei Kudrin, who in 2007 criticized state corporations for de facto privatizing state assets free of charge, said that the state corporation form “was no longer deemed suitable” and another legal form would be found instead to do the same job.

But the big stumbling block will be what to do with the mother of all state corporations – Russian Technologies (RT) – the very first state corporation established in December of 2007. RT was originally based on defense sector exporters and their suppliers, but rapidly snowballed to include companies ranging from metallurgy to carmakers. The corporation is headed by the influential friend of Putin’s Sergei Chemezov. He is the man who single-handedly tailored the state corporation legislation to suit his personal goals, and is not likely to surrender his huge privileges without a major struggle.

Suspicion of Russian Technologies’ activity runs even deeper than suspicion of the legal form of state corporations. Chemezov’s activity as head of RT seems not just to threaten

the integrity of the civil code, but the overall primacy of private property in the Russian economy. In contrast to the other state corporations that operate in specific fields of activity, Russian Technologies has acted as a cross-sectoral “Ministry of Deprivatization,” acquiring privately-owned companies and often prompting accusations of behaving semi-legally as a “corporate raider.” RT’s latest major hostile acquisition was the fairly successful engine and turbine producer Saturn, which, as a private company owned by CEO Yuri Lastochkin, developed engines for the Superjet aircraft and a new generation of turbines for gas-fuelled power stations.

According to Kirill Rogov of the Institute of Economy in Transition, “Medvedev’s target is not only state corporations in general, but also one certain corporation in particular: Russian Technologies. Whereas for other state corporations the consequences will be limited to adjusting their status to conform with the Constitution and Russia’s laws, for Russian Technologies this is the beginning of the end of the project itself.”

Halting the Russian Technologies juggernaut would thus finally mark a modest beginning to the project announced by Anton Ivanov in December of 2007 of re-tipping the scales away from the state, and back toward private enterprise

National Economic Trends

Refinancing Rate Cuts Trickling Downhttp://www.themoscowtimes.com/article/1009/42/381336.htm

27 August 2009Reuters

Interest rates on loans to Russian companies hit a nine-month low in July, Central Bank data showed Wednesday, in a sign that official interest rate cuts are starting to filter through to the real economy.

The Central Bank has cut rates five times since April, by a total of 225 basis points, and officials have urged commercial lenders to pass on the easing to end-borrowers.

The average interest rate on loans to nonfinancial organizations was 14.7 percent in July, the lowest since October and down from 15.4 percent in June.

Sberbank has cut its ruble loan rates by 3.5 percentage points in the past two months and is seeing faster debt repayments. Analysts expect that the Central Bank’s benchmark refinancing rate will be reduced to 10 percent by the end of the year from 10.75 percent currently.

The Central Bank does not announce in advance the dates of its board meetings, and First Deputy Chairman Alexei Ulyukayev said Tuesday that the next easing could come any day.

The loan rates held roughly in the 9 percent to 11 percent range from 2005 and until the second half of 2008.

UPDATE 1-Russian CPI flat in latest weekhttp://www.forbes.com/feeds/afx/2009/08/26/afx6817228.html

08.26.09, 11:50 AM EDT

MOSCOW, Aug 26 (Reuters) - Russian consumer prices remained flat in the week to Aug. 24, making it the first week in a year when the inflation rate remained unchanged, data from the Federal Statistics Service showed Wednesday.

The data could pave the way for more interest rate cuts from Russia's central bank, which has taken advantage of easing inflationary pressures to embark on a path of monetary moves aimed at lifting the economy out of recession.

The latest CPI reading follows nearly two months of minimal, 0.1 percent, weekly rises in consumer prices, due to seasonal decline in fruit and vegetable prices, deteriorating consumer demand and virtually no inflow of capital.

Inflation for the first 24 days of August came to 0.2 percent. The Economy Ministry expects inflation for the whole of this month at around 0.3-0.4 percent. Since the start of the year, prices are up 8.3 percent, compared to a rise of 9.5 percent in the same period of 2008, the agencies said.

The central bank has gradually cut key lending rates by cumulative 225 basis points in recent months.

On Tuesday, the central bank's First Deputy Chairman Alexei Ulyukayev said the next cut in rates 'can be expected any day.'

Analysts expect the regulator will lower the benchmark refinancing rate to 10.00 percent by year-end, from the current 10.75 percent.

(Writing by Toni Vorobyova and Lidia Kelly; Editing by Andy Bruce)

(antonina.vorobyova@reuters.com; Tel: +7495 7751242, Reuters Messaging: antonina.vorobyova.reuters.com@reuters.net)

Russia daily c.bank swap limit at 5 bln rblshttp://www.forbes.com/feeds/afx/2009/08/27/afx6820106.html

08.27.09, 04:05 AM EDT

MOSCOW, Aug 27 (Reuters) - Russia set the daily limit for currency swap operations with the central bank at 5 billion roubles ($158.5 million) on Thursday, the same as in the previous trading session.

Limits on how much foreign currency banks can swap for roubles in the central bank were introduced from Oct. 20 in a bid to hinder currency speculators. Operations which do not involve the central bank are unaffected. ($1=31.54 Rouble) Keywords: RUSSIA SWAP/

(Moscow Newsroom, +7495 775 12 42, moscow.newsroom@reuters.com)

Business, Energy or Environmental regulations or discussions

Lukoil, VimpelCom, X5 Retail Group: Russia Stock Market Previewhttp://www.bloomberg.com/apps/news?pid=20601095&sid=aJRpt8Flh2is

By Lucian Kim

Aug. 27 (Bloomberg) -- The following companies may have unusual price changes in Russian trading. Stock symbols are in parentheses and share prices are from the previous close.

The 30-stock Micex Index fell 1.4 percent to 1,099.77 at the close in Moscow, its second day of losses. The RTS Index declined 2.8 percent to 1,072.05.

OAO Lukoil (LKOH RX): Crude oil fell for a second day as the dollar strengthened. Shares in Russia’s largest non-state oil producer fell 1.9 percent to 1,595.50 rubles.

OAO VimpelCom (VIP US): Russia’s second-largest mobile phone company is expected to release second-quarter results on Aug. 27. VimpelCom was down 2.9 percent at $14.48 as of 1:37 p.m. in New York trading.

X5 Retail Group NV (FIVE LI): Russia’s largest food retailer is due to publish first-half results on Aug. 27. X5 rose 0.7 percent to $18.70 in London trading.

To contact the reporter on this story: Lucian Kim in Moscow at lkim3@bloomberg.net

Last Updated: August 26, 2009 22:00 EDT

Energy Sector Plans to 2030

http://www.themoscowtimes.com/article/1009/42/381345.htm

The government plans to invest up to 60 trillion rubles ($1.9 trillion) in its energy sector by 2030 in a drive to boost stagnating oil and gas output, two government sources said Wednesday.

They said Asian markets would increase their share of Russia’s energy export volumes to 25 percent by 2030 from only 6 percent now.

One of the sources said the plan foresaw an increase in Russian oil output to 530 million to 535 million tons by 2030 from 481.1 million tons in 2008. Gas output would rise to 880 billion to 940 billion cubic meters from 665 bcm last year, he said. (Bloomberg)

Russia splashes cash on output booster

http://www.upstreamonline.com/live/article186531.ece

News wires

Russia plans to invest up to 60 trillion roubles ($1.9 trillion) in its energy sector by 2030 in a drive to boost stagnating oil and gas output, according to reports.

Two sources in the Russian government told Reuters Asian markets would increase their share of Russia's energy export volumes to 25% by 2030 from only 6% today.

"Europe's share is set to decrease, although volumes will be rising," one of the sources told the news agency, on condition of anonymity.

Energy Minister Sergei Shmatko said Russia's Energy Strategy-2030 would be revised on Thursday at a government meeting presided over by Prime Minister Vladimir Putin. He gave no further details.

One of the government sources said the plan foresaw an increase in Russian oil output to between 4.18 billion barrels and 4.22 billion barrels by 2030 from 3.80 billion barrels last year.

Natural gas output would rise to between 880 billion cubic metres to 940 Bcm from 665 Bcm last year, he said.

For this, the authorities plan to set aside a total 60 trillion roubles, or between 5% and 5.5% of gross domestic product each year.

Energy exports contribute a large share of Russia's budget, but oil output fell last year for the first time in a decade.

Wednesday, 26 August, 2009, 12:22 GMT | last updated: Wednesday, 26 August, 2009, 12:49 GMT

State reluctant to fund Sayano Shushensk GES recovery via tariff hikes

http://www.businessneweurope.eu/dispatch_text9679

TroikaAugust 27, 2009

The state does not want to finance Sayano Shushensk GES' recovery via tariff growth, preferring "non tariff" sources of financing recovery work at the power plant (i.e. through direct financing from the budget) Energy Minister Sergei Shmatko is cited by the Kommersant daily as saying. He added that the idea of providing additional support by making a share capital injection into RusHydro is currently being considered. Generally, a new share issue would be worse for RusHydro than tariff growth in 2010. However, the impact will depend on the parameters of the placement, especially the price. Already, an upcoming R19 bln issue at RusHydro has been approved by shareholders, although the price has not yet been set. Alexander_Kotiko

RusHydro ‘Surprised’ RusAl

http://www.themoscowtimes.com/article/1009/42/381345.htm

RusHydro, owner of a hydropower plant that flooded last week, killing 75, should not try to avoid fulfilling contracts because of the disaster, United Company RusAl, the biggest user of power from the site, said Wednesday.

RusHydro chief executive Vasily Zubakin on Tuesday said the company “hopes” the state will exempt it from a 6 percent cap on higher tariffs for next year.

RusAl said in an e-mailed statement that it was “surprised” by RusHydro’s suggestions given that the utility’s clients have “already incurred losses due to the accident.” RusHydro spokesman Yevgeny Druzyaka wasn’t immediately available for comment. (Bloomberg)

Rusal launches scathing attack on RusHydro

http://www.businessneweurope.eu/dispatch_text9679

RencapAugust 27, 2009

Event: A statement placed on Rusal's corporate website has severely criticised RusHydro - and particularly the company's acting CEO, Vasily Zubakin - for publicly stating that RusHydro believes the loss of production at Sayano-Shushenskaya hydro plant to be adequate grounds for revoking an agreement to provide Rusal with electric power and capacity. According to the Rusal statement, RusHydro management was fully aware of the potential risks, "including this type of risk" when they concluded the agreements. However the statement goes further by stating that "...precisely this kind of irresponsibility may be the cause of what was the most serious accident at a Russian hydro plant, which put out of action the Siberian power system and which has led to a critical situation at the region's largest enterprises."

Action: Neutral for RusHydro, in our view.

Rationale: In our view, one of the consequences of last week's (17-21 Aug) incident at Sayano-Shushenskaya is that it has exposed the economic imbalance between the plant, which, according to various sources (including UES and Kommersant) has been starved of funds for almost 20 years, and the privately-owned Rusal, whose impressive profitability has in large part been due to very cheap electricity supplies from Sayano-Shushenskaya. Given that Rusal's main - and perhaps only - competitive advantage would seem to be cheap electricity, it is perhaps understandable that the company would fight to retain it. However, we think that the extensive involvement of Prime Minister Vladimir Putin in managing the consequences of the Sayano-Shushenskaya incident and the unusually aggressive nature of the Rusal statement mean that the situation can only be resolved at the highest levels of government. Vladimir Sklyar

Mosenergo will sell its offices

http://www.businessneweurope.eu/dispatch_text9679

CitiAugust 27, 2009

Mosenergo will sell its offices at Raushskaya embankment and Sadovnicheskaya St located near the Kremlin to a management company, Progressive Investment Ideas, for Rbl4.07bn, Interfax reports. The company expects to close the deal by year end. The buyer was determined as a result of open tender.

Mosenergo has already announced its intentions to sell non-core assets in order to optimise its costs and to use the proceeds for debt repayments and its investment programme. The company estimated overall proceeds from selling its non-core assets at Rbl5-Rbl5.5bn at the analyst meeting in May. As a result of the deal we expect the company's net debt/EBITDA ratio will fall from 1.25x to 0.88x. We welcome the company's policy to get rid of non-core assets and reduce its debt burden. Alexander Korneev

Gold Output Up 21%

http://www.themoscowtimes.com/article/1009/42/381345.htm

Russia’s gold output jumped 21 percent in the first seven months of the year because of the start of several large projects in the Far East, including Kinross Gold’s Kupol mine in the remote Chukotka autonomous district.

The country produced 101.77 tons of the metal between January and July, the Russian Gold Industrialists’ Union said Wednesday. In the same period of 2008, it produced 84.13 tons. (Reuters)

Peter Hambro Says First-Half Profit Rises Fivefold (Update1)

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a3JAS6FteAWg

By Thomas Biesheuvel

Aug. 27 (Bloomberg) -- Peter Hambro Mining Plc, the second- biggest gold producer in Russia, said first-half profit gained more than fivefold after production of the precious metal rose.

Net income grew to $74.2 million, or 59.1 cents a share, from $14.4 million, or 17.7 cents, a year earlier, the London- based company said today in a statement. Sales expanded 46 percent to $214.1 million.

Peter Hambro produced 222,600 ounces of so-called attributable gold production in the first six months of the year. The company today reiterated it is targeting full-year production of about 500,000 ounces. That would see it surpass Randgold Resources Ltd., which is forecasting 490,000 ounces, to become the largest U.K.-listed gold producer.

“With the current gold price providing expectations of good cash flow over the next few quarters, we are in a strong financial position to address our future growth plans,” Chairman Peter Hambro said in the statement.

To contact the reporter on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net.

Last Updated: August 27, 2009 02:31 EDT

Russian July crude steel output down by 14.2pct YoYhttp://www.steelguru.com/news/russian.html

Thursday, 27 Aug 2009

According to the data released by the Russian Federation Federal State Statistics Service, the manufacture of basic metals and fabricated metal products in Russia in July this year registered a decrease for 14.2%YoY while in January to July 2009 a drop of 24.3%YoY was recorded compared to the same period last year.

In July Russia registered a 16.9% decrease in its crude steel production year on year to 5.3 million tonnes up 10%MoM. In July, Russia produced 4 million tonnes of pig iron and blast furnace ferroalloys down by 8.7%YoY and up 11.7%MoM 4.3 million tonnes of billets down by 7.9%YoY and up by 10.8%MoM, 2.5 million tonnes of long products down by 14.7%YoY and up by 10.9%MoM and 2 million tonnes of flat rolled products down by 9.3%YoY and up by 9.2%MoM. The above flat rolled production figure

includes 600,000 tonnes of cold rolled down by 15.4% and 1.4 million tonnes of hot rolled down by 6.3%YoY both compared to July 2008.

In addition, in July this year Russia produced 449,000 tonnes rolled products from low alloyed steel down by 52.3%, 283,000 tonnes of coated sheet and tinplate down by 8.8%, 34,000 tonnes of cold rolled steel strip down by 55.7% YoY, 58,400 tonnes of bent steel sections down by 21.2% YoY, and 25,500 tonnes of wire rod down by 66.7%YoY all compared to the same month last year.

Meanwhile, Russia’s output of steel pipes in July decreased by 22%YoY to 551,200 tonnes including 162,000 tonnes of seamless pipes down by 35.2%YoY, 16,200 tonnes of welded pipes down by 42%YoY and 373,000 tonnes of electric-welded pipes down by 18.3%YoY all compared with the same month last year. Of the total steel pipe production figure, the share of casing pipes accounted for 41,400 tonnes down by 49.3%YoY. In addition, during the month in question, Russia produced 1,600 tonnes of drill pipes down by 47% YoY and 26,500 of tubing pipes down by 23.9% YoY both compared to July 2008.

(Sourced from SteelOrbis)

NMZK September output to reach peak for 2009http://www.steelguru.com/news/index/2009/08/27/MTA4ODM4/NMZK_September_output_to_reach_peak_for_2009.html

Thursday, 27 Aug 2009

According to the Novosibirsk regional administration in September this year, Russian steelmaker Novosibirsk Metallurgical Works, named after Kuzmin, plans to reach its highest level of output since the beginning of the current year and to produce 17, 364 tonnes of steel products including 14,193 tonnes of electric welded and shaped pipes and pipes for water and gas supply, and 3,170 tonnes of rolled steel products.

NMZK has resolved its problem of raw material supply shortage, which has been its main problem up to now. In August, about 17,000 tonnes of slabs will be delivered to NMZK by Evraz West-Siberian Steel Works and by Metalloinvest’s subsidiary Ural Steel. Up to the end of the current month 4,800 tonnes of steel products will be manufactured at NMZK.

According to the Novosibirsk regional administration, the uninterrupted production activity of NMZK will be also ensured by the developed sales network of Russia’s largest metal trader Metallservis Group.

(Sourced from SteelOrbis)

Posted: August 27, 2009

Russian Nanotechnology Corp. to Sharply Boost Spending http://www.nanowerk.com/news/newsid=12332.php

(Nanowerk News) According to an article in The Moscow Times, Rusnano will approve 40 billion rubles ($1.25 billion) worth of investment this year, one-third more than it planned in May, a spokeswoman said Wednesday.

Prime Minister Vladimir Putin said earlier Wednesday that Rusnano would approve investment into 50 projects this year that will require 80 billion rubles of funding.

Rusnano spokeswoman Irina Shabanova said the state corporation would chip in 40 billion rubles of that money. Anatoly Chubais, the corporation’s chief, said in May that the plan was to invest 28 billion rubles this year.

Neither Putin nor Rusnano offered any explanation for the steep increase, but the new plans came after Deputy Prime Minister Sergei Ivanov accused the state corporation of being too slow in developing the industry in May.

Putin made the announcement at a meeting dedicated to the nanoindustry, or innovations that work on a scale of nanometers, one-billionth of a meter. Russia wants to capture 3 percent of the global nanotechnology market by 2015.

Addressing a government commission on technology and innovation in May, Ivanov criticized Rusnano for little progress in fulfilling its goal of funding projects.

The increase means that Rusnano will disburse almost all of its money this year. The corporation is also bound to return 85 billion rubles from its budget of 130 billion rubles to the state later this year to help plug a gaping federal budget deficit.

On Wednesday, Putin praised Rusnano for progress in applying the technology to medical equipment, preserving the environment, improving energy efficiency and creating new materials. He did not elaborate.

Chubais also said Rusnano secured Putin’s permission Wednesday to issue bonds under state guarantees. Rusnano may offer bonds as soon as the end of this year, he said, without specifying a figure.

Joint Venture of Rusnano and Renova places 120 MW end-to-end line order with Oerlikon Solar

http://www.renewableenergymagazine.com/paginas/Contenidosecciones.asp?ID=14&Cod=3984&Tipo=&Nombre=Latest%20news

27/8/2009

The order for a factory in the Chuvash Republic is the world’s largest production equipment order to date in 2009 and opens up the Russian market for this leading thin film solar PV technology supplier.

Oerlikon Solar has announced that Nano Solar Technology Ltd. (NST), a newly formed Russian high-tech joint venture between Renova Group and the Russian Corporation of Nanotechnologies (Rusnano), has ordered a 120 MW end-to-end Micromorph® line for production of thin film solar modules. With the envisaged production capacity of one million solar modules annually, this is the largest equipment order in the worldwide thin film silicon photovoltaic (PV) market to date in 2009.

The order, which includes Oerlikon Solar's Micromorph® technology that can boost module efficiency by up to 50% over prior generation technologies, will be delivered to the new site currently under construction in Novocheboksarsk (Chuvash Republic) in 2010.

Establishing production of thin film solar modules in the Chuvash Republic is part of Rusnano's strategy to develop the high tech economy in Russia by co-investing in nanotechnology industry projects. Through acting as a catalyst for private co-investments, Rusnano aims at creating conditions favourable to developing cutting edge nanotechnology in Russia, the joint venture with Renova being a good example.

 "Oerlikon Solar emerged from a thorough evaluation process to identify the best technology partner for our project, because of its leading technology" said Yaroslav Kuznetsov, CEO of NST. "This is a win-win situation for all parties involved. Oerlikon Solar can establish a strong presence in the Russian market and the Russian economy has made another step as a state-of-the-art production site", continued Yaroslav Kuznetsov.

In addition to the planned production line from Oerlikon, Rusnano plans to set up a major research centre that will focus on increasing the effectiveness of the solar modules in cooperation with the Ioffe Physical Technical Institute of the Russian Academy of Sciences.

Oerlikon Solar's leading edge production solutions are having a major impact on the market as more and more companies launch their production. "Russia and the Commonwealth of Independent States offer great market potential for Oerlikon in the medium and long-term", said Oerlikon CEO Dr. Uwe Krueger. Already today, the Oerlikon Segments Coating, Vacuum, Textile and Drive Systems are conducting business in Russia. With the substantial order from NST, Oerlikon Solar established itself in this important economic zone as well. "The contract confirms our leading edge technology and our unique ability to quickly implement and scale up commercially successful mass production of thin film solar modules. The 120 MW Micromorph® end-to-end production line will position NST as a key player among thin film PV manufacturers", continued Dr Krueger.

Oerlikon Solar's technology gaining momentum

In addition to expansion into new markets, several existing Oerlikon Solar customers have recently announced new off-take agreements to deliver PV panels manufactured on Oerlikon Solar's end-to-end lines. HelioSphera (Greece) announced the signing of a long-term supply agreement with Techno Spot, a major Italian distributor of photovoltaic modules and components. Under this agreement, HelioSphera will supply a minimum of 9 MW of

Micromorph® thin film modules between 2009 and 2010. German based Sinosol AG has announced agreements with two Taiwanese Oerlikon Solar customers for a total of 68 MW.

Russia's Sberbank to complete, sell developmentshttp://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSLR15741720090827

Thu Aug 27, 2009 3:02am EDT

NIZHNY NOVGOROD, Russia, Aug 27 (Reuters) - Russia's top bank, state owned Sberbank (SBER03.MM: Quote, Profile, Research, Stock Buzz), a major lender to developers, will complete and sell real estate projects after foreclosure, the bank's deputy chief executive said on Thursday.

"We will complete and sell (the projects) to the highest bidder. Our aim is to return as much money as possible," deputy chief executive Yevgeny Korolyov said on the sidelines of a banking conference.

"For now (the bank) hasn't foreclosed on many projects. I would say that less than five percent of the projects we financed have come into our hands." (Reporting by Dmitry Sergeyev, writing by Melissa Akin; editing by Simon Shuster)

Sberbank to Gain Control of Vester Retailer, Kommersant Sayshttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6dUz6rcKMhc

By Maria Ermakova

Aug. 27 (Bloomberg) -- OAO Sberbank may gain control of Vester Group, the Kaliningrad-based food retailer, because it can’t pay its debt to the Russian lender, Kommersant reported, citing an unidentified Russian investment banker and a person from Sberbank.

Oleg Bolychev, Vester’s co-owner, declined to comment to the newspaper. Vester’s total debt is 6 billion rubles ($190 million), including 1.8 billion rubles owed to Sberbank, according to Kommersant. The company’s owners would give control of the retail assets to Sberbank and would keep the group’s real estate business, the newspaper said.

To contact the reporter on this story: Maria Ermakova in Moscow at mermakova@bloomberg.net

Last Updated: August 27, 2009 01:43 EDT

Central Bank revokes license from Moscow bank Vympelhttp://www.itar-tass.com/eng/level2.html?NewsID=14273879&PageNum=0

MOSCOW, August 27 (Itar-Tass) - The Central Bank of Russia (CBR) revoked the license

from the Moscow-based commercial bank Vympel and appointed an interim administration there, PRIME-TASS reported on Thursday citing the CBR public relations department.

The license was revoked due to the bank's failure to comply with the federal laws, unauthentic accounting reports and the inability to meet its financial liabilities to the creditors.

Vympel made untimely settlements on clients' account, did not comply with accounting regulations, and supplied unauthentic accounting reports to the CBR, apparently to prevent it from taking anti-bankruptcy measures.

The Vympel bank is a participant in the deposit insurance system and the revocation of license is an insurance event, envisioned by the federal law.

Vozrozhdeniye Posts Profit

http://www.themoscowtimes.com/article/1009/42/381345.htm

Midsized bank Vozrozhdeniye reported higher-than-expected net profit for the second quarter but slashed its full-year 2009 earnings forecast by 70 percent Wednesday as provisions rose.

Vozrozhdeniye posted second-quarter net profit of 256 million rubles ($8.1 million). It cut its full-year earnings forecast to 1 billion rubles. (Reuters)

Ford Russia Plant To Halt Production Aug 31-Sep 11 -Prime-Tasshttp://www.easybourse.com/bourse/actualite/Ford-Motor/US3453708600-25/Ford-Russia-Plant-To-Halt-Production-Aug-31-Sep-11-Prime-Tass-722525MOSCOW -(Dow Jones)- U.S. automaker Ford Motor Co.'s (F) Russian plant plans to suspend production from Aug. 31 until Sept. 11 due to falling demand, a spokesperson for the company told Prime-Tass Wednesday. The plant resumed production Aug. 10 after a scheduled corporate summer vacation. The plant suspended production July 20. The plant is located in the city of Vsevolozhsk in the Leningrad region, and assembles Ford Focus and Ford Mondeo cars. In June, the plant introduced a four-day working week in order to avoid personnel cuts on falling car sales. According to ASM Holding, which monitors Russia's car industry, Ford assembled 24,619 cars between January and June at the Russian plant. Agency Web site: www.prime-tass.com

Comstar Reports Second-Quarter Net Income of $30 Millionhttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYeTHl1xDUWc

By Maria Ermakova

Aug. 27 (Bloomberg) -- OAO Comstar Mobile Telesystems reported second-quarter net income of $30 million compared with a profit of $29.9 million in the year-earlier period.

To contact the reporter on this story: Maria Ermakova in Moscow at mermakova@bloomberg.net

Last Updated: August 27, 2009 02:18 EDT

COMSTAR - United TeleSystems OJSC Financial Results for the Second Quarter and First Half of 2009http://finance.yahoo.com/news/COMSTAR-United-TeleSystems-bw-2475042700.html?x=0&.v=1

Press Release Source: COMSTAR On Thursday August 27, 2009, 2:16 am EDT

“COMSTAR – United TeleSystems” OJSC (“Comstar” or “the Group”) (LSE: CMST - News), the largest integrated telecommunications provider in Moscow and 69 Russian cities, today announced its unaudited consolidated US GAAP1 financial results for the quarter and six months ended June 30, 2009.

SECOND QUARTER HIGHLIGHTS

Consolidated revenues up 19% year on year and 3% quarter on quarter in ruble terms to US$ 363.6 million2

OIBDA3 up 28% year on year and 12% quarter on quarter in ruble terms to US$ 149.3 million with increased OIBDA margin of 41.1%

Net income attributable to Comstar-UTS up 36% year on year and doubled quarter on quarter in ruble terms to US$ 30.0 million

Cash flow from operations up 12% year on year and down 4% quarter on quarter in ruble terms to US$ 102.2 million

Cash capital expenditure4 of US$ 15.5 million Total assets of US$ 3.7 billion Residential broadband ARPU in Moscow up 2% quarter on quarter to RUR 330 Residential broadband subscriber base in Moscow up 11 thousand since June 30,

2009 to 802 thousand as at August 16, 2009 DLD/ILD traffic passed through Comstar’ proprietary network increased by 50%

quarter on quarter to 71.8 million minutes

HALF YEAR HIGHLIGHTS

Consolidated revenues up 15% year on year in ruble terms to US$ 698.0 million

OIBDA up 15% year on year in ruble terms to US$ 275.7 million with stable OIBDA margin of 39.5%

Net income attributable to Comstar-UTS down 28% year on year in ruble terms to US$ 42.6 million

Cash flow from operations up 3% year on year in ruble terms to US$ 201.4 million Cash capital expenditure of US$ 75.2 million

DELIVERY IN LINE WITH STRATEGIC GOALS

Broadband development o Commercial launch of mobile WiMax network in Moscow o 1,000 “Comstar-FON” WiFi hot spots in Moscow o Residential broadband sales launched in Tver, Kaluga, Tambov, Balakovo

and Mirny Restructuring of regional operations

o 7 largest regional subsidiaries merged into “Comstar-Regions” in August 2009

o STREAM-TV headcount reduced by 12% to 2.9 thousand from since the beginning of 2009

o New organizational structure for Comstar-Regions created with common standards for cash management, budgeting, financial and management reporting introduced across STREAM-TV Group

42% increase in weighted average regulated per minute ruble charge for operators interconnected to Comstar network in Moscow from the second quarter of 2009

17% increase in weighted average regulated per minute ruble charge for operators interconnected to MGTS network in Moscow from September 2009

Acron posts 1H 2009 Net profit of 947 million Roubleshttp://www.russiatoday.ru/Business/2009-08-27/acron-posts-1h-2009.html/print

27 August, 2009, 11:17

Russian fertilizer producer Acron, has posted a 1H 2009 net profit of 947 million Roubles under IFRS.

The Net result is down 55% on the 1H 2008 figure with EBITDA falling 44% year on year to 1.4 billion Roubles, as Revenues slid 9% year on year to 5.13 billion Roubles.

Despite the slide in net result the figures came in better than expected against a backdrop of a sharp fall in fertilizer prices. Senior Vice President Alexander Popov was upbeat about the posting, noting rising production volumes and continued profitability.

“Against the backdrop of stable demand in the Russian market, we managed to increase

output in H1 2009. Revenue shrank only by 9% despite a more significant drop in product prices. Profitability is at the acceptable level.”

UPDATE 1-Acron H1 net plunges on volatile fertilizer markethttp://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSLR60455420090827

Thu Aug 27, 2009 4:22am EDT

*H1 net profit down 85 pct

*Sees fertilising market stabilising (Adds details, comments)

MOSCOW, Aug 27 (Reuters) - Russian fertiliser producer Acron (AKRN.MM: Quote, Profile, Research, Stock Buzz) reported on Thursday sharp falls in first-half profit, citing foreign exchange losses and a volatile fertiliser market, and said it expects the sector to stabilise.

"We see that the world mineral fertiliser market is quite stable comparing to other sectors, and expect further stabilisation of the level and rate of growth in demand," Chairman Alexander Popov said in a statement.

Acron said net profit fell 85 percent year-on-year to 1.09 billion roubles ($33 million), while earnings before interest, taxation, depreciation and amortisation (EBITDA) shrank 64 percent to 3.69 billion roubles.

The EBITDA margin was 20 percent, down from 45 percent in the first half of 2008. Revenue fell to 18.86 billion roubles from compared to 22.33 billion roubles a year ago.

"Acron's financial results showed considerable fluctuations due to unstable currency rates," the chairman said.

"In summer we see seasonal market slackening and decrease in prices but this is only natural before the autumn growth," he added.

($1=33.08 Rouble on average for H1)

(Reporting by Vladimir Sodatkin; Editing by Erica Billingham)

UPDATE 1-Russian retailer X5's Q2 net profit up 87 percenthttp://www.forexyard.com/en/reuters_inner.tpl?action=2009-08-27T075626Z_01_LR631783_RTRIDST_0_X5-UPDATE-1

* Net profit $130 million, vs forecast $117.5 million

* Net sales $2.11 billion, in line with forecast

* EBITDA $184 million, margin 8.7 percent

MOSCOW, Aug 27 (Reutesr) - Russian food retailer X5 reported an 87 percent increase in second-quarter net profit on Thursday, including a steep currency gain, while margins fell after it cut prices to lure customers.

April-June net profit rose to $130 million, boosted by an $86 million foreign exchange gain on the back of a recovery of the rouble during the quarter. It made a $69.6 million profit in the second quarter of 2008.

X5 said it would focus on efficiency after its largest rival, Magnit, which operates a straight discount format, won analyst praise for cost cuts and supply management after reporting a three-point margin gain.

X5, which operates several chains in multiple formats and had said it would cut prices to go downmarket in the crisis, posted a decline in margins, though less than expected.

Earnings before interest, taxes, depreciation and amortisation came in at $184 million, with a margin of 8.7 percent, compared to forecasts for $176.7 million and a margin of 8.4 pecent. (Writing by Melissa Akin; Editing by Dan Lalor)

Russia Can Lose Its Taigahttp://www.russia-ic.com/news/show/8819/27.08.2009International scientific think-tank warns that the only pristine forests in the world taiga which cover large territories in Russia, Canada, Alaska and Scandinavia, quickly degrade.            Taiga plays a significant role in smoothing greenhouse effect and global climate warming. Its history knows only two disasters insect invasions and fires, which were natural controls over taiga areas.             However, human impact becomes more and more visible we cut trees, extract valuable mineral and build houses instead of forests. Forest fires now happen oftener due to human impact and climate warming. Taiga splits into small fragments, which are unsuitable for normal life of large forest animals.            Researchers claim that Russian taiga suffers the heaviest defragmentation and area loss. Unfortunately, pride of Russia can soon share the lot of Amazonian rainforests, which are now irreversibly degraded. Source: Science News

Activity in the Oil and Gas sector (including regulatory)

Russia increases domestic gas prices by 27% in connection with start of import from Azerbaijanhttp://abc.az/eng/news_27_08_2009_37863.html

Baku, Fineko/abc.az.

In 2010, Russia will increase sharply domestic natural gas prices in a parallel way with start of import of this fuel from Azerbaijan.

Helena Karpel, head of economic expertise and price formation department of the Russian monopoly Gazprom, says that in 2010, gas price in the Russian domestic  market will increase by 26.6% in comparison with prices of 2009.

«Over several months negotiations with the ministries of economic development and energy were held on the prospects of increase in prices in 2010-2012, and the decision was made on the increase in prices from 2010 by 15% at the same time. If to compare the indices of average prices, increase will be 26.6% in 2010, because quarterly increase in prices is used in 2009. In 2011-2012, prices are also expected to increase by 15% per annum, but it is the subject of negotiations next year,” H.Karpel said.

At the same time, Gazprom expects growth of volume of purchases by 5% in the domestic market despite the increase of gas price.

On 29 June, the Major Terms of the Contract for Sale & Purchase of Azeri Natural Gas signed in Baku between the State Oil Company of Azerbaijan (SOCAR) and Gazprom.

After signing of the agreement with SOCAR Alexey Miller, CEO of Gazprom OJSC, said that gas would be supplied since 1 January 2010.

“Its volume will make 500 million cu m a year but can increase in the future. Calculations will be conducted on international formulae of gas price definition, but the agreement also contains basic price that is competitive for the Azerbaijani party,” Miller said.

Today Azerbaijan already has infrastructure for export of at least 5 bn cu m of gas a year to Russia and at first stage it will be used only by 10%.

Last year Gazprom bought 66.1 bn cu m in Turkmenistan, Uzbekistan and Kazakhstan.

According to SOCAR vice president Elshad Nasirov, SOCAR and Gazprom are negotiating not only about those not large gas volumes that be delivered to the Russian market already in 2010, but also about large supplies within Phase 2 of Shah Deniz Project (extracted reserves of 1.2 trillion cu m of gas and 240 million tons of condensate) in Azerbaijani sector of the Caspian.

The parties are also discussing opportunities of Caspian gas transit to Europe. In this connection Nasirov indicated possible relevant co-operation between SOCAR, Gazprom and Turkmenistan for reduction of export costs, including in a way of Trans-Caspian Gas Pipeline construction.

Investors Will Block Naftogaz Debt Dealhttp://www.themoscowtimes.com/article/600/42/381332.htm

27 August 2009By Sebastian Tong / ReutersLONDON — A group of Russian investors, including the former head of a Gazprom affiliate, plans to block any attempt by Ukrainian gas utility Naftogaz to restructure a $500 million bond that matures next month.

A Belize-registered holding company for Russian interests, Corlblow, said it is forming a bondholders’ group that aims to veto any offer by Naftogaz to restructure its bond.

Corlblow’s legal adviser Philipp Thomas said political uncertainty ahead of Ukraine’s presidential elections next year made Naftogaz bondholders eager to redeem the bonds.

“Every investor that we have spoken to has been categorically against restructuring, whether this involves the extension of maturity or a discount,” Thomas said.

Ukraine surprised markets last month when it said it wanted to restructure Naftogaz’s eurobond before it matures at the end of September despite receiving funds from the International Monetary Fund that made repayment affordable.

“People want their money back, and they are mad. … They [Naftogaz] have a full battle coming if they do not repay the bond,” Thomas said.

Corlblow holds about $11 million worth of the bonds, and Thomas said bondholders representing about $100 million, or 20 percent of the issue, have expressed support for the block.

The group needs to attract creditors representing over 25 percent of the debt in order to veto any restructuring offer.

Thomas said the group would take legal action against the Ukrainian government and Naftogaz if the restructuring failed and the bond defaulted.

He said the various assurances given by Ukrainian officials in the past on Naftogaz debt were tantamount to a sovereign guarantee on the firm’s debt and this would form the basis of his argument should a legal suit be filed in London courts.

One of the acting individuals named on the web site of the proposed bondholder group is Alexei Olshansky, the former head of Sogaz Insurance, once 100 percent and now minority-owned by Gazprom.

Olshansky said in an e-mail that he was the sole director of Corlblow, adding that the firm was not close to Gazprom.

A Gazprom spokesman in Moscow denied any link to Corlblow and market rumors that Russian firms and banks were buying Naftogaz’s bonds on behalf of the world’s largest gas firm to give it a trump card at talks over gas transit, supplies and debt with Ukraine.

“This company is not related to Gazprom and is not acting on behalf of us. Gazprom is not interested in the bankruptcy of Naftogaz because we have a long-term gas supply and transit contract and because we have made advance payments for gas transit [to Europe],” said Gazprom spokesman Sergei Kupriyanov.

Naftogaz has required constant support from the government, as the price it has had to pay for gas has tripled since 2005.

Caspian oilfield is Big Oil's new energy frontierhttp://www.reuters.com/article/ousiv/idUSTRE57Q04X20090827

Wed Aug 26, 2009 9:36pm EDT

By Maria Golovnina

KASHAGAN, Kazakhstan (Reuters) - Face wrapped in a thick scarf against clouds of blinding dust, the electrician gazed at a maze of pipes and pumps teeming with 15,000 workers and said his work was like building the Tower of Babel.

He was speaking casually. But for the oil industry Kashagan, the world's biggest discovery since 1968 with reserves locked amid lethal, high-pressure gases beneath the north Caspian Sea, is a challenge of biblical proportions.

"There are people from 30 different countries working here," said electrician Leonid, asking not to be identified because he was not authorized to speak to the media. "But we do try to find a common language."

Kashagan, developed by oil majors including Eni and Exxon Mobil, represents all the challenges Western countries face to secure energy supplies as Asia becomes more energy-hungry and Russia seeks to dominate resources on its borders.

The field's difficult geology, remote location, harsh climate and environmental challenges make it one of the world's most complex and, at $136 billion so far, expensive energy projects.

As state-owned companies now control most global reserves, Kashagan shows how Western majors, which once dominated the industry, now have to take what chances they can to produce oil.

With an estimated 9 billion barrels of recoverable oil in the Central Asian state of Kazakhstan, Kashagan is, like the tower in the Bible story, an almighty undertaking.

In temperature swings from minus 40 to plus 40 degrees Celsius, the oil in the Kazakh field is heavy in sulphur -- a hazard to health and the environment.

"It's a project of immense difficulty," said Eduard Poletayev, an independent analyst who closely watches Kashagan.

Due onstream in three years, Kashagan is one of a dwindling group of giant oilfields, as cheaper and more accessible ones dry up. Only 11 such giant fields were found in the 1990s, down from 29 in the 1960s, according to investment bank Simmons & Co.

"All the big oilfields have now been gobbled up and Kashagan is the last pearl in the crown of the world oil industry. That's why oil companies are fighting for it so stubbornly," Poletayev said.

TUSSLE

Expected to produce the equivalent of 10 percent of Europe's energy needs once at the height of its production, Kashagan can make Kazakhstan a new global source of non-OPEC energy.

It is at the heart of a tussle between Russia, China and Europe, reflecting the challenges faced by the West in maintaining its place as the market of choice for oil producers, and Europe's battle to reduce its reliance on Russia for energy.

The main question is where the oil will go.

One option is to ship it by tanker across the Caspian Sea to the Baku-Tbilisi-Ceyhan oil pipeline that runs to Europe. BP leads that pipeline, but is not a partner in Kashagan.

Such a route is likely to irritate Russia: Moscow wants to boost its role as Europe's leading energy supplier by persuading operators to feed the oil into a separate, Russia-bound line run by the Caspian Pipeline Consortium, for transit to Europe.

But the oil could also flow east to energy-hungry China, or -- a more controversial possibility -- to southern markets via Iran. No single operator holds a deciding majority.

The consortium's media department in Kazakhstan said it could not comment on possible export routes.

"Kashagan isn't producing any oil yet so they are being very careful," said Poletayev. "Because otherwise it's like selling the bear's skin before the bear has been caught."

GIANT

An hour's helicopter flight over the emerald green waters of the north Caspian reveals a field of magnificent proportion.

Forming the heart of drilling operations is a scattering of artificial islands encircled by huge man-made reefs designed to prevent shifting ice from destroying drilling rigs in winter.

Onshore, an oil processing facility the size of Washington DC is a swarm of construction activity. In stifling summer heat, that is where Leonid and hundreds of others work.

Once at full capacity, Kashagan will produce 1.5 million barrels of oil per day -- enough to power Italy.

Three onshore storage tanks will contain 2 percent of global daily crude consumption. Electricity will be carried to the field via 6,000 km (3,700 miles) of cable -- roughly the distance between London and Kabul.

"This is where the oil will flow from," said one Kashagan official, who, like most, spoke on condition of anonymity. Where it flows is "for the politicians to decide."

Further up the Caspian shore near Kashagan, people in the village of Dossor see no need for anonymity in discussing their experience of oil wealth.

"We have been producing oil for 100 years here," said Bakhyt Smatullin, an official in charge of local oil production in Dossor, which is home to Kazakhstan's oldest deposit.

"This village should be made of gold by now," said Smatullin. Oil was discovered by Swedish investors 100 years ago, but the village is a ramshackle collection of huts around a few creaking oil rigs. Herds of camels graze nearby.

Up to a quarter of the Kazakh population still lives in poverty despite the oil and metals wealth.

TENSIONS

Kashagan became a source of particular tension in 2007 when the Kazakh government accused its operators of allowing costs to spiral and missing the original 2005 production start target.

The row unnerved investors and sparked concerns that the government led by President Nursultan Nazarbayev may embark on a course of resource nationalism, potentially denying the multinationals access.

Adding to its complexity, Kashagan lies at the heart of a delicate ecosystem, home to many species unique only to these waters, such as the sturgeon and the rare Caspian seal.

Local campaigners say thousands of dead baby seals have washed ashore since 2000, suggesting the deaths may be linked to oil drilling -- a charge denied by Kashagan operators who say they are strongly committed to protecting the environment.

Sulphur is another point of contention. Yellow piles the size of several soccer fields produced elsewhere in Kazakhstan are a common concern cited by the government.

Ecologists say biodiversity has eroded since the Caspian Sea became subject of mass industrial exploration in Soviet times.

"After the Soviet Union collapsed, all industrial activity stopped and nature became clean," said Fyodor Sarayev, a local photographer who is documenting disappearing wildlife.

"But now the steppe is empty again. The steppe is full of grass but there are no animals to eat it."

(Editing by Tom Bergin and Sara Ledwith)

Rosneft might buy out Stroitransgaz in Algeria project

http://www.businessneweurope.eu/dispatch_text9679

CitiAugust 27, 2009

Rosneft could buy Stroitransgaz's 50% in the JV (Rosneft holds the remaining 50%) that controls a 60% stake in 245-South block in Algeria, Vedomosti reports. As of 2007, total reserves were estimated at 415Mbbl of oil and 24.6bcm of natural gas and the expected purchase price of $200mn, as reported by the newspaper, which includes outstanding debt, would imply an acquisition price of c$1/bbl of reserves, which looks fair to us. Given the relatively small size of the reserves, we view the news as neutral for Rosneft.Alexander Korneev

Russneft settles with MOL, to pay 6.3 bln roubleshttp://uk.reuters.com/article/idUKLR69607020090827

Thu Aug 27, 2009 10:18am BST

BUDAPEST, Aug 27 (Reuters) - Russian oil firm Russneft and Hungarian MOL MOLB.BU have settled a dispute out of court, with Russneft agreeing to pay 6.3 billion roubles ($201 million) to the two firms' jointly held oil production firm.

Russneft will pay the money over a period of 18 months to the production firm operating the ZMB field in west Siberia, MOL spokeswoman Dora Somlyai said on Thursday.

"MOL has disputed a trade agreement concluded by ZMB which was not approved by MOL's board," Somlyai said. "We argued that this contract was not valid and the payments should have never been made. This money will not be paid to MOL, it will be paid to ZMB."

Russneft and MOL each own 50 percent of the ZMB production firm. The agreement between the two firms came less than a month after they struck a deal to invest in gas-powered electric generators at ZMB to defuse closure threats from the mining regulator.

The Russian Federation's Mining Authority (Rosnedra) threatened to revoke the field's production licence because the operation was flaring gas.

The new generators will cost about 21 million euros ($30 million) and will generate 16 MW, MOL said earlier. (Reporting by Balazs Koranyi; Editing by Dan Lalor)

Integra appoints new CEOhttp://www.businessneweurope.eu/dispatch_text9679

RencapAugust 27, 2009

Event: Yesterday (26 Aug) Integra announced the appointment of Antonio Campo as CEO, effective from 1 Sep. Prior to joining the company, Antonio Campo (age 51) spent 28 years at Schlumberger, leading its oilfield services (OFS) divisions in Europe, CIS, Africa and Latin America.

The management transition period is expected to continue until YE09. Felix Lubashevsky who has been running the company since 2005, will remain Integra president and will retain both his place on the board of directors and his stake in the company. After the transition period is over, Felix Lubashevsky will focus on strategic development and client relationships, while Antonio Campo will deal with operating management. Both top executives will report to the board of directors.

Action: The announcement is positive for the company, in our view.

Rationale: Antonio Campo will bring to Integra the invaluable expertise of running a diversified oilfield services business in multiple emerging markets. Schlumberger is one of the leading OFS providers in the world, and its operational practices may be instrumental for Integra to increase the quality and efficiency of its services, in our view. As far as we understand, Felix Lubashevsky is not going to leave the company, but focus instead on his key area of expertise - strategic opportunities in the Russian OFS market. The combination of Campo's international organsational experience with Lubashevsky's local knowledge and client relationships should definitely provide positive synergy for

Integra, we believe.Irina Elinevskaya

NOVATEK: scheduled maintenance at two fields; output will not drop http://www.businessneweurope.eu/dispatch_text9679

TroikaAugust 27, 2009

NOVATEK announced last night that it has stopped production at its East Tarkosalinskoye field for four days and at the Khancheyskoye field for two days as the two projects undergo routine maintenance work. The Khancheyskoye field was back to full production volumes as of yesterday, and East Tarkosalinskoye is expected to be by Friday. East Tarkosalinskoye accounts for about a third of the company's gas production and Khancheyskoye for about 10%. However, NOVATEK stated in a press release that it was able to increase production from the fields both before and after the stoppage in order to fulfill a delivery agreement with Gazprom, and it expects overall production volumes to be the same in August as in July. This implies output of about 83.5 mln m3 per day. The news is therefore neutral for the company. Oleg_Maximov

Thursday, August 27, 2009

PetroNeft signs crude transportation deal, expects to meet pipeline production targethttp://proactiveinvestors.co.uk/companies/news/7629/petroneft-signs-crude-transportation-deal-expects-to-meet-pipeline-production-target-7629.html

Russian focused oil and gas producer PetroNeft Resources plc (LSE: PTR) said today it has reached a transportation deal advantageous to its previous option in the north and cut Phase 1 project costs to first oil by 58%, expecting to meet the schedule for first pipeline production, set for Q3 2010.

PetroNeft said its wholly owned Russian subsidiary LLC Stimul-T reached a transportation and custody agreement with Imperial Energy’s subsidiary Nord Imperial, which will transport PetroNeft’s crude from the Kiev-Eganskoye field to its custody point at Zavyalovo for transfer into the pipeline system of Russia’s state-owned national pipeline operator Transneft.

The company plans to build the pipeline segment from Lineynoye to Kiev-Eganskoye in winter, given it can secure enough funds.

PetroNeft said it has been able to cut the overall costs of developing the Lineynoye and West-Lineynoye oilfields to US$25 million from US$60 million in 2008 after reviewing the development plan and securing the new pipeline route. The deferral of the second drilling rig until year two of the project and changes in the currency exchange rates have also been beneficial.

The company said it was confident in meeting the schedule for first pipeline oil, set for Q3 2010.

“We are delighted to have executed the crude oil transportation and custody transfer agreement with Imperial. The cost, schedule and operational efficiencies which are now possible have materially enhanced the value of our assets. We are now confident that, with our greatly reduced funding requirement of approximately $25 million, we can meet the targeted schedule for first pipeline oil. This provides an outstanding platform for PetroNeft's continued growth and development,” said Chief Executive Officer Dennis Francis.

Shares in PetroNeft surges 6.7% following the release of the update this morning.

Special Report: Oil and Gas investment in Russia: time to review the risk?http://www.ogfj.com/index/article-display/233336/s-articles/s-oil-gas-financial-journal/s-volume-2/s-issue-6/s-features/s-special-report-oil-and-gas-investment-in-russia-time-to-review-the-risk.html

Mark L. RobinsonDeloitte Touche TohmatsuMcLean, Va.

Until recently, there was hope that Russia would liberalize its energy sector and rely much more heavily on foreign capital, technology, and know-how. However, the role of private capital was called into question by the arrest of Russian businessman Mikhail Khodorkovsky and by other government actions curtailing activity by private interests.

The reality of limits has been confirmed by the Putin government’s new policy on developing oil and gas fields. The Ministry of Natural Resources recently announced that the government will offer licenses to develop 250 oil and gas fields this year, six of which will be categorized as “strategic” and therefore limited to joint ventures in which Russian partners hold at least a 51 percent share.

The message seems to be that the government will keep a close eye on the Russian energy sector, and access to the most desirable resources will come only with special conditions. Although the country remains high on the list of places with promise, these messages should require foreign companies to revise their thinking about Russia.

The recent government announcement will increase the number of assets that foreign firms can pursue and gives them a chance to secure a share of proven reserves that by some estimates may total between 60 and 200 billion barrels of oil and over 1,500 trillion cubic feet of gas. This represents a huge opportunity for oil and gas companies that are not already active in the region.

Although business risks continue and future events cannot be accurately predicted, there are a few conclusions that can be reasonably made:

• According to the International Energy Agency, investments required to maintain and grow Russia’s energy infrastructure will total some $935 billion between now and the year 2030. A significant amount of investment will come from multi-national loans and international corporations.

• Russia’s oil and gas industry will continue to be dominated by a small group of vertically integrated oil and gas companies, some with significant foreign ownership. The government will continue to exercise significant influence via its control of the Transneft oil pipeline monopoly and its strategic shareholding in Gazprom which controls the gas pipelines.

• Foreign investment opportunities will be available, but controlled.

• China and India, with their rapidly expanding economies, will continue to increase their energy investment funds in Russia to fill the need for their growing energy imports.

Recent developments have added new complexities, challenges, and uncertainties about future directions for Russia’s energy sector policies. Exactly what role foreign companies will be able to play and what policies will govern their participation remain unclear. Moreover, there is little reason to believe these issues will be clarified any time soon.

As with any new venture, companies looking to participate in the future of Russia’s oil and gas industry will need to develop an investment and territory entry plan that includes an in-depth assessment of multiple scenarios regarding the political and economic climate, the legal framework under which the company would operate, taxes and royalties (especially wellhead and export taxes), and the level of risk. The variety of potential business environments should influence companies’ due diligence plan for evaluating potential energy partners.

In this article, we examine the importance of Russia in the global energy economy, the evolution of investments in its oil and gas industry, where the industry may be headed, and the use of a strategic flexibility process for mitigating future risk.

Russia’s role in global energy

In terms of oil and gas, Russia is a country with enormous energy resources. Because it holds the world’s largest proven natural gas reserves and the seventh-largest oil reserves, Russia plays a critical role in the global energy market.

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Since 2001, Russia’s increases in crude oil production have more than matched increases in China’s demand. Further, Russia is the world’s biggest producer and exporter of natural gas, providing close to one-fourth of the requirements of European countries that are part of the Organization for Economic Cooperation and Development. Russia supplies nearly one-third of the natural gas needs of the growing economies of Eastern Europe and the Baltic states.

Gazprom: Russia’s energy giant

The world’s largest gas company, Gazprom holds more than 20 percent of the world’s total gas reserves, and in 2004 produced close to 80 percent of Russia’s total gas output. The company’s supplier position in Eastern Europe is remarkable. Gazprom provides approximately 91 percent of Hungary’s gas imports, 79 percent of Poland’s, and nearly 75 percent of the Czech Republic’s.

In Western Europe, Gazprom supplies about one-fourth of the region’s natural gas. Based on its size, production capabilities, and market position, the Russian government is reinforcing Gazprom’s position as an international energy giant.

Gazprom is currently looking beyond Europe to America and Asia and has targeted the development of LNG projects as part of an ambitious expansion plan. The company recently signed memorandums of understanding with a number of international firms such as Chevron, ConocoPhillips, Statoil, and Petro-Canada regarding the development of the giant Shtokman field, and is also involved in several large pipeline projects.

Foreign companies that wish to gain access to Russian gas will have to partner with Gazprom based upon its size, pipeline connections, and reserves. The company will rely on international firms to supply the substantial funding for project development and infrastructure costs.

The race for Russian hydrocarbons

During late 2004 and early 2005, oil prices on the New York Mercantile Exchange (NYMEX) traded at all-time highs of over $55 per barrel. Some analysts, including Goldman Sachs, are even predicting oil prices in excess of $100 per barrel within a short period. Reasons given by analysts for the high price include supply disruptions brought about by weather, oil worker strikes, trading speculators, and the ‘terror premium.’

Demand from growing economies such as China and India also has led to the increase in the price of oil. In a classic example of the laws of supply and demand at work, huge growth in these countries’ need to import oil has put significant upward pressure on prices. While each country has relied on the Middle East for the bulk of oil imports, additional supplies are coming from Russia.

India. Through its 95 percent ownership of the Oil and Natural Gas Corporation (ONGC), India is using a variety of strategies to develop Russian oil and gas assets. ONGC owns a 20 percent share in the development of the Sakhalin-1 operated by ExxonMobil and is reportedly close to finalizing a deal with Russia’s Rosneft to bid jointly for operator status of the Sakhalin-3 project. ONGC is also interested in acquiring a 15 to 20 percent stake in Yuganskneftegaz, the production arm of Yukos.

China. China relies on the Middle East for approximately 40 percent of its crude oil imports and is negotiating with Russian firms on a number of initiatives. It is competing with India’s state-owned oil company ONGC to obtain an equity stake in Yuganskneftegaz and has advanced Rosneft $6 billion in return for 48 million tons of crude oil by the year 2010.

Japan. In a race to obtain additional oil supplies, Japan’s proposal to build a 2,700-mile pipeline across Siberia into northeast Asia was selected by Russia over a competing plan by China. Japan plans to bankroll not only the construction of the pipeline - $5 billion by some estimates - but also invest $7 billion in exploration and development costs with an

additional $2 billion to be spent on social projects. The Chinese had anticipated the pipeline ending in the refining capital of Daqing, but Japan’s ability to provide the necessary capital and geographical access to international markets was responsible for their winning the project, as was the promise of creating more construction jobs - all in Russia. Japanese companies are also heavily involved in the Sakhalin-2 project.

Russian evolution

In light of Russia’s current investment climate, it is worth reviewing the historical context of Russia’s oil and gas industry. The political and economic reforms in Russia during the early 1990s came about by advisers brought in under then-president Boris Yeltsin.

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Sensing that the general population felt that reforms weren’t progressing, Yeltsin’s advisory team accelerated the process by selling off state assets and enterprises at prices that were arguably lower than their actual value. Some of Russia’s most valuable resources were auctioned off by banks owned by the oligarchs under a scheme called “Loans for Shares.” In many cases, the banks ended up as the winning bidders.

Following the collapse of the Soviet Union in 1991, the Russian oil and gas sector opened up to foreign investment beginning with the exploration of large undeveloped resources. As part of its energy investment strategy, the country adopted an underground, or subsoil, law in February 1992 that defined the government’s ownership of the country’s natural resources and detailed how they would be developed.

Under the law, the government would own all of the country’s oil, gas, and mineral deposits and would make them available by auction to foreign investors for exploration and extraction. In return, the government would receive royalties and tax payments.

Detailed implementation laws and regulations were lacking however. The law was enacted just prior to the establishment of a 50:50 joint venture - the Polar Lights Company, between ConocoPhillips and Lukoil - for the development of the Ardalin field in the Timan-Pechora basin some 1,000 miles northeast of Moscow.

Even with the subsoil law being enacted, Russia’s oil and gas production was declining and without a workable legal and fiscal regime, the country would be unable to attract the necessary foreign investment to increase production, much less develop greenfield projects. Foreign capital was needed at the time because the Russian oil companies were only starting to emerge and didn’t yet have the financial muscle to develop these projects themselves.

In the search for a model that would attract foreign investment, Russia, with input from outside experts, settled for a production sharing agreement (PSA) regime. A PSA is a legal agreement between a government and investor that provides for:

• reimbursement for field development costs out of proceeds from hydrocarbon sales;

• division of profits (i.e., after recovery of costs) with the state;

• payment of corporate income tax from the contractor’s share of production; and

• a stable contract environment protecting the contractor from law changes and setting tax rates and royalty payments for the entire term of the agreement.

The mid-1990s saw the start of expensive and technically challenging exploration and development projects with Russia signing three production sharing agreements with international firms: Sakhalin-1 and 2, and the Kharyaga project in Siberia. Foreign companies such as ExxonMobil, Royal Dutch/Shell and Total SA of France led the way in developing these oil and gas projects with additional participation from Japan and India.

While PSA arrangements proved to be an attractive method for foreign firms to invest billions in Russia’s oil and gas industry, they were unpopular with the emerging Russian oil companies that believed PSAs gave foreign firms a competitive advantage.

Russian companies typically had more mature fields that were easier to develop while foreign companies had the newer and more difficult projects. After intense lobbying efforts by Russia’s domestic producers, the PSA structure was relegated to a small list of fields approved by the state Duma (legislative body).

With an increasingly favorable business climate beginning to emerge during President Vladimir Putin’s first term in office, foreign firms purchased assets in Russian oil and gas firms. Unique among these was the completion of a 50:50 joint venture between Russia’s TNK, and British oil super major BP to form TNK-BP. The deal cost BP an unprecedented US$6.35 billion.

Other announced and completed acquisitions include: Total SA’s intention to acquire a 25 percent stake in Russian gas producer Novatek for $1 billion; ConocoPhillips’s completed 7.6 percent stake in Lukoil for $2.36 billion; and Marathon Oil’s acquisition of Khanty Mansiysk Oil Corp. for $275 million.

The winds of political change

In mid-2003, Yukos CEO Mikhail Khodorkovsky was arrested and jailed in a move that many saw as an attempt by the Kremlin to curb his growing influence in politics. The subsequent attacks by the tax authorities on Yukos may have been seen as manifesting a dramatic shift in how Russia plans to conduct business in the energy sector.

In early 2004, the Russian government announced the annulment of a tender - originally won in 1993 by ExxonMobil, Chevron, and Russian firm Rosneft - for the rights to develop one of the three Sakhalin-3 parcels, the choice Kirinsky block. This block, the largest of the project’s three, has estimated reserves of 453 million tons of extractable oil and close to 700 billion cubic meters of gas.

While the cancellation of the tender was seen as unfair to the firms involved, followers of Russian political analysts have drawn attention to the ways in which President Putin laid out the foundation for a new Russian energy industry in a number of public statements.

During his studies at St. Petersburg’s State Mining Institute in the mid-1990s, Putin wrote a candidate of science dissertation on the topic of using mineral and other natural resources as a core strategy for the development of the Russian economy. In an abstract that appeared in “Notes of the Mining Institute” in 1999, he laid the groundwork for the changes now occurring in Russia.

In his discussion, Putin describes the use of the country’s oil, gas, and mining base as a way to secure not only Russia’s economic development, but also - and more importantly - the country’s international position. In a strongly worded, uncompromising tone, Putin writes that the state would dictate the ways in which the oil and gas industry would operate. Russia cannot limit itself to be solely an exporter of raw and unfinished materials, Putin writes, but must develop a national processing industry to become a leading economic power.

As the paper concludes, the future Russian president writes that the government should take steps to both develop and increase the international market position of state-owned enterprises in the oil and gas sector.

The stalled merger between gas monopoly Gazprom and its oil counterpart, Rosneft, is a critical component of this goal. This merger, if and when completed, will create a state-owned company with estimated oil and gas reserves of 117 billion boe - five times that of ExxonMobil. The government has said that it will take a 51 percent ownership in the new company, thereby preventing foreign firms from owning a majority share in a key Russian energy firm.

In a rare interview that appeared in the New York Times in late 2003, Putin declared himself to be a supporter of “managed democracy.” This approach is consistent with his philosophy of strengthening not only the presidency, but also the enhancement of state-owned enterprises.

By reorganizing government-owned oil and gas firms, Russia hopes to create an energy industry on par with the international majors. Once this reorganization is complete and national interests firmly secured, it is anticipated that foreign firms will have a definable path to participate in the Russian oil and gas market.

Unpredictable business environment

Although there have been developments that have increased foreign firms’ access to Russia’s energy sector and improved the investment climate, Russia’s recent past has also been marked by a lack of consistent policy, reversals of set policies, and some unexpected turns away from liberalization.

Furthermore, there are serious challenges in forecasting what the future may hold. For example, President Putin is scheduled to leave office in 2008, and it is difficult to know at this stage what administration might succeed him. Some political analysts claim that new challengers could emerge prior to the election, with agendas that differ from each other’s and from the current government’s.

There are thus important questions about how the change in administration might affect energy policy decisions and foreign investment rules. These uncertainties are compounded by speculation of an effort to enable President Putin to run again.

A strategic dilemma

Despite some developments that seem to clarify the situation, at least in the short term, much is still uncertain about Russia’s oil and gas industry. Energy companies are thus likely to be caught unprepared for political and economic developments that could render their current strategies obsolete.

One way to handle this problem is to use traditional scenario planning techniques that attempt to manage all risks and possible outcomes. Another is to excel at predicting how the market will evolve. Yet another approach is to push ahead with the expectation that changes will be required, while believing that the company has sufficient agility to react to whatever surprises may emerge. None of these approaches, however, provides for a foolproof solution.

Even if a firm has developed a scenario for every potential market event, the response is likely to be thin. Studies have shown that many predictions about future events are off or outright wrong. Given the fact that many energy investments are large in scale and entail long development cycles, even a quick response will have its limitations.

Strategic Flexibility framework

Deloitte Research has developed a framework called Strategic Flexibility to cope with the uncertainty of the future marketplace. This approach allows a company to compete effectively today while being prepared to respond to future events.

Strategic Flexibility involves using traditional scenario building techniques to anticipate and prepare for alternative market events while defining a strategy that includes actions that will be appropriate regardless of which scenario actual events resemble. Real options concepts are used to plan contingent arrangements for elements of the strategy that will be needed under some circumstances but not others.

In using traditional scenario-based planning, a company defines a set of scenarios that identifies the full range of plausible futures. The company then adopts a core strategy that will work in as many of the scenarios as possible. With respect to the potential developments that are included in the scenarios but not addressed by the robust strategy, the company holds off. It waits until unfolding events signal which of these other scenario conditions are materializing before committing the extra money and effort needed to deal with them.

Strategic Flexibility differs from this approach in that a company not only moves forward with the “no regrets” initiatives, but also makes limited investments in assets and capabilities that would be advantageous in some scenarios but not others. These arrangements include a provision for increasing or decreasing the level of commitment.

Obtaining the right to invest more or pull back will cost more, but in many cases the added flexibility will justify the extra expense. This is an application of real options theory: as with an investor who holds financial options, the company applying Strategic Flexibility has the right, but not the obligation, to commit to full ownership.

Strategic Flexibility can be helpful in evaluating Russia’s uncertain energy investment climate. Given questions about fundamental issues such as future foreign investment rules, resource development policies, and political stability, a new and more effective framework for managing strategic risk is required. Scenarios provide a means of defining

the range of plausible alternative futures. Real options supply the mechanism for making provision for conditions that could, but may not emerge.

With respect to the Russian energy sector, creating real options might involve measures such as buying a piece of a Russian oil and gas company, or E&P venture, or LNG facility, or establishing a joint venture - in each case with the right to ratchet the investment up or down, or to exit altogether. The option price is the cost of acquiring the asset. The “strike price” is the incremental cost associated with activation - buying more of the company, or funding more of a project. The option would be exercised when the cash flow exceeds the cost.

Strategic Flexibility in action

The Strategic Flexibility framework in real-world applications serves to provide a way to sort through the myriad of possibilities and identify a manageable number of investment opportunities that hedge the most significant and likely future outcomes. These initial investments are intended to be small, but “small” is a relative term that depends upon a number of criteria that include the financial strength of the company involved and the amount of funds that it makes available for an investment.

As an example, an initial investment made by an oil major may total hundreds of millions of dollars, whereas a large independent firm could decide to make an up-front commitment costing tens of millions of dollars. The key element of a real option is its leverage structure such that when certain conditions are met, the follow-on investment must exceed the initial investment, sometimes by a significant amount.

In the real world, an initial investment of $10 million that creates an option to avoid unnecessarily committing an additional $10,000 is not much of an option. When market signals indicate that a much-desired scenario is likely to unfold, the initial investment of $10 million may require a follow-on investment of $100 million. By contrast, a $25 million up-front commitment that saves a misapplication of $250 million illustrates the true flexibility of investment options that lie at the core of the Strategic Flexibility framework.

Using the Strategic Flexibility process in Russia can be applied to investment decisions now facing many firms: the uncertainties surrounding the viability of building a domestic oil and gas business versus an export production play. A company could make a major commitment to E&P in Russia, but use Strategic Flexibility with respect to investments that pertain to the export versus domestic market.

The investor might make contingent investments in infrastructure for transporting product out of the country, and also in infrastructure for distributing product within the country. Over the next three to five years, as events unfold and it becomes clearer under what circumstances the Russians will allow exportation, or serving the Russian market becomes attractive, the company could adjust its investments accordingly.

With that said, Strategic Flexibility won’t necessarily work in every circumstance. The key criteria for applying the framework are whether the investment can be staged and how soon a total commitment is essential. Strategic Flexibility is best used where it is possible to proceed in a series of steps and where the business environment is such that it will take 12 to 36 months before all of the pieces have to be in place.

In cases where it’s critical to be in play now with a major financial commitment, Strategic Flexibility may not be practical. Being able to identify clearly the circumstances in which Strategic Flexibility is an appropriate tool is critical.

Future investment opportunities

While the uncertainties that make it so difficult to predict the future business environment in the Russian energy sector might be daunting, the use of Strategic Flexibility can mitigate risk and make doing business in Russia more feasible. Some points to consider when using the Strategic Flexibility approach:

• Although the last 10 years has seen massive consolidation in the Russian oil and gas sector, there may be as many as 400 small and mid-sized Russian companies that could represent future investment targets.

• The Russian government needs financially stable oil companies to provide substantial funding and technical expertise for the forthcoming Sakhalin-3 and Shtokman projects as they did for Sakhalin-1 and Sakhalin-2.

• The stalled merger between Gazprom and Rosneft may portend a period of further industry consolidation that will create new entities and make merged companies more attractive to outside investors.

• Russian majors may be looking for opportunities to rationalize their asset portfolios.

• Opportunities may exist in oil and gas infrastructure projects if monopolies are liberalized.

• The latest draft law revision on subsoil use may not apply to the development of offshore assets, which may indicate the availability of additional projects.

• New opportunities will come from developments in Russia’s burgeoning LNG industry which requires substantial investments in liquefaction plants.

• Additional capacity will need to come from greenfield developments in portions of East and West Siberia, the Timan-Pechora area, and Russia’s Far East.

Old Russian fields should not be completely written off. By employing good oilfield practices, some experts believe that a one percent improvement in recovery rates may add up to 700 million barrels to reserves.

Conclusion

Adjusting corporate strategy to allow for alternative possibilities in Russia’s oil and gas industry presents challenges since it is not feasible to prepare fully for all future scenarios, nor is it possible to make quick alterations to projects that require sizeable investments and long lead times. By applying the principles of Strategic Flexibility, companies can develop a corporate strategy and manage risks in order to avoid being surprised by developments in Russia’s oil and gas industry. OGFJ

The author

Mark L. Robinson (mlrobinson@deloitte.com) is an energy analyst with Deloitte Touche Tohmatsu in the Global Energy & Resources practice. He is also a member of Deloitte’s Intellectual Capital Committee. Robinson served in a similar role with the former Mobil Oil Corp. He holds an MBA from Marymount University.

Gazprom

AUGUST 27, 2009, 2:56 A.M. ET

Gazprom, Novatek Discuss Yamal LNG Project http://online.wsj.com/article/BT-CO-20090827-702571.html

MOSCOW (Dow Jones)--Russia's two biggest natural gas producers, OAO Gazprom (GAZP.RS) and OAO Novatek (NVTK.RS), have held a working meeting to discuss production of liquified natural gas, or LNG, on the Yamal peninsula, and will start talks with potential partners, Novatek said Thursday.

Gazprom Chief Executive Alexei Miller and his Novatek counterpart Leonid Mikhelson "discussed the development plan for Novatek's subsidiary, Yamal LNG, as part of the general plan to create LNG production capacity at the Yamal peninsula," Novatek said in a statement.

Novatek's board last month approved the $650 million acquisition of a 51% equity stake in OAO Yamal LNG, which operates the big South-Tambeyskoye gas condensate field on the Yamal peninsula.

The peninsula in northern Russia is estimated to hold 5.9 trillion cubic meters of gas reserves, and state-controlled Gazprom has set development of the region as a top priority as production at its current Soviet-era fields begins to decline.

The Tambeyskoye group of fields, of which Gazprom also holds licenses, will provide the basis for the development of LNG facilities, Novatek said.

Gazprom plans to start a feasibility study for an LNG plant on the peninsula early next year. The company has said it may invite international energy majors such as Royal

Dutch Shell PLC (RDSA), ConocoPhillips (COP) and Exxon Mobil Corp. (XOM) to jointly develop gas projects in the country's Arctic region.

"To effectively develop Yamal LNG it would be prudent to begin discussions with potential partners in the project," the statement said summing up the results of the meeting.

Company Web site: www.novatek.ru

-By Jacob Gronholt-Pedersen, Dow Jones Newswires; +7 495 937 8445; jacob.pedersen@dowjones.com

Gazprom eyeing Yakutia blocks http://www.upstreamonline.com/live/article186587.ece

By Vladimir Afanasiev

Russian gas monopoly Gazprom has asked the government to issue the company exploration and development licences for four gas blocks in the Yakutia region in East Siberia.

The Upper Vilyuchanskoye, Middle Tyungskoye, Tas-Yuryakhskoye and Sobolokh-Nedzhelinskoye blocks will be required by the gas giant for the planned Yakutia-Khabarovsk-Vladivostok pipeline.

Read the full story - and more - in this week's edition of Hardcopy.

Thursday, 27 August, 2009, 04:01 GMT | last updated: Thursday, 27 August, 2009, 04:18 GMT

Gazprom expects domestic gas prices to growhttp://www.businessneweurope.eu/dispatch_text9679

CitiAugust 27, 2009

Gazprom's head of pricing department Elena Karpel said yesterday that the company expects domestic gas prices to increase by 15% in January 2010 based on discussions with the Economy Ministry and other related government bodies. The average 2010 domestic gas price, therefore, should increase by 26.6% YoY given the schedule of gas price hikes in 2009 (5%, 7%, 7% and 6% hikes in each consecutive quarter). The company's preliminary estimates for further growth of domestic gas prices are 15% hikes in 2011 and 2012. Further, Karpel said that the company expects domestic gas demand to grow by 5% YoY in 2010.

In our model we currently forecast average growth of gas prices in Russia at 20.7%, 15.5% and 16.0% in 2010, 2011 and 2012 respectively and thus view the news as supportive for the stock.

Growth of the domestic gas price is also supportive for Novatek, but given that 2009 tariff hikes failed to translate into equally higher average gas sales prices for Novatek this year, the news looks less positive for the stock, in our view.Alexander Korneev

Gazprom Says Exports Will Rise in Second Half on Lower Priceshttp://www.bloomberg.com/apps/news?pid=20601085&sid=aM9Sp_q9yo74

By Anna Shiryaevskaya

Aug. 26 (Bloomberg) -- OAO Gazprom, the world’s biggest gas producer, expects second-half exports to increase on lower gas prices, offsetting a 31 percent decline in foreign shipment volumes in the first quarter.

Exports will be boosted by the obligation of European consumers to take contracted volumes by year-end and a lower price, which will fall from the first-quarter level, Mikhail Malgin, a representative of the Russian natural gas producer’s export unit, said on a conference call today.

“Already in June we saw some positive trends, our gas supplies came close to last year’s level,” he said.

Gazprom sold 37.1 billion cubic meters of gas to Europe, the main source of its revenue, in the first quarter, down from 53.5 billion cubic meters a year ago, after the economic slump reduced demand for fuel.

European consumers have been waiting for the gas price, which is linked to crude price with a lag of six to nine months, to decrease after reaching the highest level in the first quarter.

Sales rose to 931.4 billion rubles from 911.75 billion rubles a year earlier as export sales increased 28 percent to 433.2 billion rubles on the back of higher prices, the Moscow- based company said in an e-mailed statement today.

The average price for gas to Europe stood at $413.89 per 1,000 cubic meters, compared with $267.15 a year earlier.

Weaker Demand

To respond to weaker demand, Gazprom will consider amendments to its investment plan for this year at a board of directors’ meeting in September, Andrei Silchuk, deputy head of Gazprom’s financial management department, said on the call.

Gazprom will take into account a recommendation from Prime Minister Vladimir Putin’s government in July to cut the gas producer’s investments by 16 percent to 775 billion rubles, he said.

Net income fell 62 percent after the world’s largest gas producer reported an increase in the cost of purchased gas and a foreign exchange loss. Profit declined to 103.7 billion rubles ($3.3 billion) from 273.4 billion rubles in the year-earlier period, the company said. That beat the 74.9 billion-ruble median estimate of eight analysts surveyed by Bloomberg.

Gazprom fell 1 percent to 167.97 rubles in Moscow, its first decline in six days.

Lower Earnings

The company had a foreign-exchange loss of 140.4 billion rubles as Russia’s national currency weakened, according to a management statement posted on its Web site. The average ruble rate against the dollar in the quarter declined 29 percent from the year earlier, according to data compiled by Bloomberg. Gazprom has foreign-currency denominated debt.

“The foreign-exchange loss and increase in the price of purchased gas, mainly from Turkmenistan, were the main factors affecting profit,” Pavel Sorokin, a Moscow-based analyst with UniCredit SpA, said by telephone.

The cost of purchased oil and gas more than doubled to 303.5 billion rubles after Central Asian suppliers raised their prices, Gazprom said.

Gazprom, which relies on purchases to offset declining output at Siberian fields, increased gas imports 46 percent in the first quarter, mainly re-selling gas in Europe, Mikhail Roseyev, the head of the company’s consolidated reporting department, said on the call today.

Gazprom’s imports of gas from Turkmenistan, the biggest gas producer in Central Asia, were halted in April after an explosion on a pipeline.

Asian Gas

It’s unclear whether imports from Turkmenistan will resume as the Russian company has put forward terms on taking supplies and is yet to receive an answer, Andrei Zotov, a representative of the economic department of Gazprom’s export unit, said.

Demand at home has also been affected by the crisis, as the share of industrial consumers dropped.

As Russia is looking to bring domestic gas prices, traditionally lower than European prices, in line with the market level, it will further raise the regulated price and

transportation tariff by 15 percent next year, Elena Karpel, head of Gazprom’s pricing department, said on the call.

The average price increase will be 26.6 percent from 2009, when prices were adjusted on the quarterly basis, she added.

The domestic gas price stood at $53.7 per 1,000 cubic meters in the first quarter, according to the earnings report.

For Related News and Information:

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

Last Updated: August 26, 2009 14:41 EDT