Russia 090708

Basic Political Developments US president winding up visit to Russia, departing for Italy - The American

leader's visit to Moscow was productive, to which testifies a large package of adopted bilateral documents.

Obama leaves Moscow for G8 meeting in Italy - US President Barack Obama left Moscow on Wednesday and headed for the G8 summit with few assurances of the Kremlin’s help in solving key issues central to his foreign policy agenda, Euronews writes.

Obama Calls for Fresh Start With Russia as Two-Day Summit Ends US trade chief urges Russia to lift meat bans - The U.S. Secretary of Commerce

said Wednesday that Moscow should lift restrictions on chicken and poultry imports to encourage the Congress to repeal the Jackson-Vanik amendment, a key irritant for U.S.-Russian relations.

U.S. says Russia may continue with unilateral WTO bid - "(Russian Economy) Minister (Elvira) Nabiullina seems to have indicated... they want to pursue a parallel track," U.S. Commerce Secretary Gary Locke said after talks in Moscow as part of U.S. President Barack Obama's visit to Russia on July 6-8.

Obama Charts Path to Bolster Trade - Foreign Minister Sergei Lavrov said economic ties could soon improve because he had received assurances from the Obama administration that it would prioritize the scrapping of the Jackson-Vanik amendment, a major Soviet-era trade barrier between the countries.

U.S. and Russian militaries to train together again - U.S. troops will soon resume training with their Russian counterparts, ending a nearly yearlong suspension in bilateral military relations prompted by last year’s conflict between Russia and the Republic of Georgia.

Kasparov Interview on Obama Meeting - Theotherrussia.org presents our interview with United Civil Front chairman Garry Kasparov after his meeting with US president Barack Obama. Kasparov was one of a group of Russian opposition figures to meet with Obama Tuesday afternoon in Moscow.

G8 leaders to renew tackle on economic downturn - Russian presidential aide, Arkady Dvorkovich, says Russia will be pushing for new financial and economic architecture. “Our main focus will be to discuss the ways out of the crisis and international cooperation in this field. We will also emphasise the need to create a new financial and economic architecture.”

Dvorkovich Downplays Dollar Focus for G8 - Speaking at a news conference dedicated to the three-day G8 summit starting Wednesday in L’Aquila, Italy, Dvorkovich said Russia would not discuss the creation of new reserve currencies as an alternative to the dollar — an issue that has long been a Kremlin pet topic and that has recently won a measure of support from India and China.

Medvedev to discuss Kurils issue with Japanese premier - Russian President Dmitry Medvedev will raise the issue of the disputed Kuril islands at a meeting with Japanese Prime Minister Taro Aso on the sidelines of the G8 summit, a Kremlin aide said on Wednesday.

Japan’s statements on Kurils have no legal force – envoy: Tokyo’s law declaring the South Kuril Islands as “an integral part” of Japan has no legal force, the president’s envoy in the Far Eastern federal district, Viktor Ishayev, told reporters on Wednesday.

Russia says China Xinjiang riots internal affair - "Using separatist slogans and provoking ethnic intolerance, the initiators of the disorder attacked citizens and beat them, turned over cars and torched them and looted shops and other buildings," Russia's Foreign Ministry said in a statement.

China, Russia to conduct joint anti-terror military exercise - Chinese and Russian armed forces will conduct a joint anti-terror military exercise beginning July 22, military sources said on Wednesday.  The exercise, code-named "Peace Mission-2009", will be carried out in Russia's Far East area and northeast China's Shenyang Military Command, according to the two countries' defense authorities. It will last five days.

Khalaf Khalafov: “We believe that delimitation of Russia-Azerbaijan borders will be finalized by the end of the year”

Putin to Visit Turkey - Prime Minister Vladimir Putin will visit Turkey on August 6 for talks that will focus primarily on the construction of the South Stream and Blue Stream 2 gas pipelines, the Aksam newspaper reported Tuesday.   

Putin, Union Boss Discuss Opel Bid - Prime Minister Vladimir Putin met with Berthold Huber, president of Germany’s IG Metall labor union, in Moscow on Tuesday in an attempt to drum up support for a Sberbank-backed bid to acquire carmaker Opel.

Hungary: ‘Russian money is good money, we just want to know what the intentions are’

Russia lifts temporary ban on Hungarian meat - Russia's animal and plant health authority has lifted a temporary ban on imports from four Hungarian meat processors, news agency Interfax reported on Tuesday.

Russia conducts largest military maneuvers in decades - More than 8,000 personnel have taken part in the life-like “Caucasus 2009” military drills, which took place in Russia’s south to test troop readiness in combating terrorism and maintaining regional security.

Arms Expo in Urals - Multi-million dollar deals could be on the table as Russia showcases some of its most advanced weaponry at the Seventh International Exhibition of Arms, Military Equipment and Ammunition in the Urals.

Channel of deliveries of Afghan heroin to Russia stopped by Tajikistan’s security service - The «complex multi-stage» special operation has been realized on the basis of received operative information that the suspect was preparing for sending to Russia a large party of the Afghan heroin, Central Asia-News adds. In case of successful realization of the given lot of the dangerous narcotic cargo in Russia, it would make over 250,000 dozes, according to online paper’s source.

Federation Council of Russia approved amendments to budget to pay $750 million to EurAsEC fund

Police officer killed, 3 wounded in S.Russia militant attacks - One police officer has been killed and three more wounded in two separate militant attacks in the

capital of Russia's North Caucasus Republic of Daghestan, a police source told RIA Novosti on Wednesday.

Serviceman killed, six injured in Ingushetia clash - One serviceman died and another six were injured in clash with militants in Russia's North Caucasus Republic of Ingushetia, a police source said.

Chechen authorities say 9 injured in bomb attack - The number of people injured in Tuesday's bomb attack in Russia's North Caucasus republic of Chechnya has been adjusted to nine, an Interior Ministry spokesman said.

Kadyrov favors return of ex-separatist emissary Zakayev to Chechnya - Chechen President Ramzan Kadyrov said he is negotiating for former Chechen separatist emissary Akhmed Zakayev's return home.

Moscow police detain 10 Khodorkovsky supporters

National Economic Trends Ruble Weakens to Seven-Week Low After Oil Retreats Below $62 Macroeconomic indicators - Bank of America lower Russia 2009 GDP forecast to

7.3pct Russian government expects recovery to start in 2011 - According to the Russian

government's economic forecast, the economy is expected to start showing signs of a recovery in 2011. Next year economic growth is expected to be flat, reflecting a continuing decline in investment and a stable unemployment rate.

Russian unemployment down - Unemployment in Russia was down 600,000 people, or 8,5 percent, in May month compared with February, figures from Russian Statistics show. However, unemployment in the country remains far higher than at the same time in 2008.

Business, Energy or Environmental regulations or discussions $1Bln Infrastructure Fund - Vneshekonombank chief Vladimir Dmitriyev said

Tuesday at a Russia-U.S. business meeting that Russia is creating a $1 billion infrastructure fund that will include his VEB, Renaissance Group, the European Bank for Reconstruction and Development and the World Bank’s International Financial Corporation.

Electricity production in 1H09 decreased 6.3%yoy Government to create incentives for electricity generation from associated gas Russian Electric Utilities: June 2009: Tariff Debates Russian nuclear fuel holding TVEL announces FY08 results Bank VTB filed a Rbl3.17bn ($100mn) suit in a London court against Shalva

Chigirinsky GAZ Group: State support provided Government reportedly approves state guarantees for GAZ Group - Russian

government's anti-crisis commission has agreed to provide state guarantees for up to RUB20bn of GAZ Group's loans

Sistema to Sell Svyazinvest Stake to Russia, Kommersant Says Sistema Rises in Moscow on Report of Svyazinvest Stake Sale Telenor Says Court to Consider Motion to Halt Shares Transfer Synterra and Verizon Business Sign Agreement to Provide Customers Direct

Network Connectivity to Russia and the World

Evraz Aims to Raise $900 Million in Bond, Share Offer (Update1) VEB provides Evraz one-year extension on $1.8 bln loan Russia Evraz may close book on bond issue Wed –source Interview with Polyus Gold CEO - Vedomosti published an in depth interview

with Evgeniy Ivanov, CEO of Polyus Gold today. VSMPO-Avisma and Boeing launch joint venture Russia needs more MTVs, investor tells Kremlin Deere Russia Farm Equipment Sales Fall 50% on Tariffs (Update3) Wabco gets supply contract with Russia's Kamaz Russian business airport plan stalls on take-off - Billionaire developer Suleiman

Kerimov's Nafta Moskva group had intended to redevelop Kubinka airfield, about 50km (30 miles) south-west of the capital.

Top priorities: Murmansk infrastructure and Sochi Olympic Games - The development of the Murmansk Transport Hub is just as important for Russia as the Sochi Olympic Games, Governor Dmitry Dmitriyenko argues. The implementation of the infrastructure plans are due to start after 2010.

The 4th Military and Naval Show in Saint-Petersburg: Interview with the Director of OPK's Shipbuilding Project Andrei Fomichev

Activity in the Oil and Gas sector (including regulatory) Russian gas exports in 5 months down by 50pct YoY LUKoil puts Venezuela's Junin-3 reserves at 600 mln tons Construction of Specialized Oil-Loading Port Finishes in Kozmino Bay EU, Russia struggle for stake in trans-Saharan gas pipeline - Brussels and

Moscow want in on a deal between Nigeria, Niger and Algeria to construct a 4000-kilometer pipeline for natural gas. It could be a very lucrative venture, but it's also comes with some serious risks.

Yamalo-Nenets Autonomous District - Workers of the geological exploration company “Northern Exhibition” stopped their hunger strike, which started on June 25 and lasted for over a week

Western Siberia’s Potential Is Far from Exhaustion - Interview with Sergey Ostapenko, Vice President, Exploration, TNK-BP.

Gazprom Gazprombank Has Q2 Loss Gazprom - Ukraine increased gas intake from 33mcm to 120mcm/day in July Gazprom: Ukraine pays for June gas deliveries - cash payments for gas from

Ukraine were received on time; demand for gas is recovering; and the political risks associated with the interruption of gas deliveries have been removed.

Gazprom: Sulphur limits gas - analyst trip to Astrakhan gas field

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Full Text Articles

Basic Political Developments

US president winding up visit to Russia, departing for Italy

http://www.itar-tass.com/eng/level2.html?NewsID=14126828

MOSCOW, July 8 (Itar-Tass) - US President Barack Obama on Wednesday is winding up his working visit to Russia and departing for the Italian city L’Aquila for the participation in the Group of Eight summit. The American leader's visit to Moscow was productive, to which testifies a large package of adopted bilateral documents.

In particular Russian President Dmitry Medvedev and Obama signed a document titled “Joint Understanding for a follow-on agreement to the Strategic Arms Reductions Treaty (START).” The future START will contain a clause according to which the Russian Federation and the United States in 7 years after the Treaty’s entry into force will reduce their strategic warheads to a range of 1,500–1,675, and their strategic delivery vehicles to a range of 500–1,100.

The sides also signed an intergovernmental agreement on the transit of armaments, military hardware and military equipment and personnel through the RF territory in connection of the participation of the US armed forces in efforts to ensure security, stabilisation and restoration of Afghanistan. The agreement envisages 4,500 shipments a year that are totally exempt from transit duty.

During the meeting the two presidents adopted joint statements on the missile defence issue, on cooperation in the nuclear sphere and on Afghanistan. The United States would like to interact with Russia in building such a missile defence system that would make sure that not a single or ten missiles – not from the United States or Russia, but from a third source – could inflict damage on their allies, Obama said. He also noted that by the end of summer the US side would give the Russian government its ideas what should be done in the future for this. Medvedev said for his part that several steps forwards have been taken on the issue of deployment of the US missile defence system in Europe that will make it possible to eventually reach compromise between Moscow and Washington.

The two heads of state agreed on the creation of the Russian-American presidential commission on the development of cooperation. It is a new coordination mechanism for the development of the bilateral interaction to replace the earlier Gore-Chernomyrdin commission.

The US and RF leaders also signed a framework document on the development of cooperation between the RF and US armed forces, as well as a memorandum on the approval of the working plan for the improvement of military cooperation between the two sides’ armed forces in 2009.

On the whole Obama characterised his talks with Medvedev as very productive. The sides agreed that US-RF relations had gaps during a certain period and they really decided to reset them in order to cooperate more efficiently in spheres of mutual interest, the US president stressed.

On July 7, Obama held a meeting with Russian Prime Minister Vladimir Putin at which he asked the prime minister to give his assessment to the two countries’ relations and analyse mistakes and causes of setbacks. Obama and Putin also discussed the missile defence problem, Iranian and North Korean nuclear dossier. Touching upon the situation in the post-Soviet space Obama promised Putin to take into account Russia’s positions in relations with Ukraine and Georgia.

At the end of the day Obama again met Dmitry Medvedev. The two heads of state summarised the results of the Russian-American summit.

The 35th regular meeting of the heads of state and government of the Group of Eight major economic nations comprising Great Britain, the United States, Germany, France, Italy, Japan, Canada and Russia will be held in L’ Aquila, Italy on July 8-10, 2009.

Obama leaves Moscow for G8 meeting in Italyhttp://www.mosnews.com/politics/2009/07/08/obamaleaves/

Today, 10:58 PM

US President Barack Obama left Moscow on Wednesday and headed for the G8 summit with few assurances of the Kremlin’s help in solving key issues central to his foreign policy agenda, Euronews writes.

While agreeing on nuclear policy and co-operation over Afghanistan, differences remain over US plans for a missile shield in Eastern Europe, as well as policy on Georgia and Iran.

Obama praised the Russian leadership during a speech at Moscow’s School of Economics:

“We have to promote transparency, accountability and the rule of law on which investments and economic growth depend, so I welcome very much President Medvedev’s initiatives to promote the rule of law and a mature and effective legal system as a condition for sustained economic growth,” he said.

Obama also held a private meeting with the leaders of Russia’s political opposition, including former chess champion Gary Kasparov.

The US President is traveling on to the G8 summit in Italy Wednesday morning.

Obama Calls for Fresh Start With Russia as Two-Day Summit Ends

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=avGr3OptLerU

By Roger Runningen and Hans Nichols

July 8 (Bloomberg) -- President Barack Obama called for a “fresh start” in relations with Russia and praised its global contributions, ending a two-day summit between the world’s two largest nuclear powers.

Obama heads next to Italy, where the Group of Eight leaders of industrialized nations will discuss the global economy, climate change and opposition to Iran’s nuclear program.

Obama used a speech in Moscow yesterday to build on his efforts to repair relations frayed during the Bush administration amid disputes over the eastward expansion of the North Atlantic Treaty Organization, a proposed U.S. missile shield in Europe and Russia’s war with Georgia.

“This must be more than a fresh start between the Kremlin and the White House,” Obama, 47, said. “It must be a sustained effort among the American and Russian people to identify mutual interests and expand dialogue and cooperation.”

Obama made “significant progress” in his talks with Russian Dmitry Medvedev, said James Collins, U.S. ambassador to Russia from 1997 to 2001. “He now has to ensure that the American side follows up on his openings and insist that his colleague in Moscow does the same.”

The two countries’ agreements during the summit covered reducing nuclear arsenals, transit of U.S. arms shipments to Afghanistan through Russia, increased military cooperation, a common effort to combat nuclear proliferation, and ways to increase business ties.

‘Spheres of Influence’

Speaking to graduates of an economics school, Obama sought to end perceptions that “the U.S. and Russia are destined to be antagonists” and competitors for “spheres of influence.”

“In 2009, a great power does not show strength by dominating or demonizing other countries,” Obama said. “The days when empires could treat sovereign states as pieces on a chess board are over.”

Obama can claim enough improvement in U.S.-Russian ties to declare his trip a success, Andrew Kuchins, director of the Russia program at the Center for Strategic and International Studies in Washington, said in an e-mail.

“Obviously, differences remain and hard negotiations will follow, but the comparison between where we were with Moscow in the fall of 2008 and today is pretty stark,” he said.

Americans and Russians “share common ground,” Obama said in his speech, seeking to persuade Russians their interests, from missile defense to combating terrorism, were linked to America’s. He also prodded Russia’s leaders to respect the sovereignty of Georgia and Ukraine.

Georgia, Ukraine

“Just as all states should have the right to choose their leaders, states must have the right to borders that are secure, and to their own foreign policies,” Obama said. “That is true for Russia just as it is true for the United States. Any system that cedes those rights will lead to anarchy. That is why we must apply this principle to all nations, and that includes nations like Georgia and Ukraine.”

He stressed that for those countries to become NATO members, the majority of their population would need to support it. “They must undertake reforms, and they must be able to contribute to the alliance’s mission,” he said, adding that NATO “should be seeking collaboration with Russia, not confrontation.”

U.S.-Russian relations soured last August after Russia’s war with the former Soviet republic of Georgia. The strain was compounded by the U.S. pursuit, under then-President George W. Bush, of a missile-defense system in Eastern Europe and U.S. support for the admission of Georgia and Ukraine into NATO.

Praise for Putin

Obama praised Medvedev’s predecessor, Prime Minister Vladimir Putin, for his service to Russia at a breakfast meeting yesterday with Putin. In two hours of private talks, Obama and Putin discussed several issues and points of disagreement, though oil prices and the dollar didn’t come up, a U.S. official said.

U.S. and Russian leaders both say they want to increase trade and business ties between the two nations.

“The volume of bilateral trade more generally between Russia and the States is not what it should be,” Medvedev said in a July 5 interview with Italy’s Corriere della Sera newspaper.

Trade between the U.S. and Russia rose 35 percent to $36.1 billion in 2008 from $26.6 billion a year earlier, figures from the U.S. International Trade Commission show. Russia’s share of American trade with the world is about 1 percent.

Fortunes ‘Linked’

At a business forum, Obama urged the two countries to unlock their business potential. “Our fortunes are linked and yet so much potential remains untapped,” he said.

Russia’s ruble strengthened 0.0705 to 31.5295 to the dollar from 31.4590 the previous day. The 30-stock Micex Index added 0.2 percent to 927.01 at the close in Moscow as prospects for higher prices lifted OAO RusHydro, the world’s largest publicly traded hydropower producer, and OAO Novatek, Russia’s second- biggest gas producer. The RTS Index increased 0.3 percent to 924.11.

In his speech, Obama cited an “extraordinary potential” for governments to cooperate on “free and fair” trade, energy partnerships and job creation.

“Success depends upon economies that function within the rule of law,” Obama said. “People everywhere should have the right to do business or get an education without paying a bribe.”

To contact the reporters on this story: Hans Nichols in Moscow at hnichols2@bloomberg.net; Roger Runningen in Moscow at rrunningen@bloomberg.net; Lucian Kim in Moscow at lkim3@bloomberg.net

Last Updated: July 7, 2009 20:00 EDT

US trade chief urges Russia to lift meat banshttp://www.forbes.com/feeds/ap/2009/07/08/ap6629110.html

Associated Press, 07.08.09, 03:45 AM EDT

MOSCOW -- The U.S. Secretary of Commerce said Wednesday that Moscow should lift restrictions on chicken and poultry imports to encourage the Congress to repeal the Jackson-Vanik amendment, a key irritant for U.S.-Russian relations.

Secretary Gary Locke said U.S. lawmakers would likely regard action on meat imports as a first step toward repealing the 1974 law that limited trade with Communist nations restricting the immigration of Soviet Jews.

The law remains on the books due to lingering post-Cold War disputes on human rights, trade and other issues.

Russia restricted poultry imports in 2008 and banned pork imports from some states after the outbreak of swine flu in the U.S., although the World Health Organization says meat products cannot transmit the illness.

Russia raised tariffs on meat imports earlier this year.

U.S. says Russia may continue with unilateral WTO bidhttp://www.washingtonpost.com/wp-dyn/content/article/2009/07/08/AR2009070800607.html

By Dmitry ZhdannikovReuters Wednesday, July 8, 2009; 3:44 AM

MOSCOW (Reuters) - Russia has indicated to the United States that it plans to pursue a unilateral bid to join the WTO in parallel with membership talks as part of a customs union, a senior U.S. official said on Wednesday.

"(Russian Economy) Minister (Elvira) Nabiullina seems to have indicated... they want to pursue a parallel track," U.S. Commerce Secretary Gary Locke said after talks in Moscow as part of U.S. President Barack Obama's visit to Russia on July 6-8.

"We are still seeking clarification on this point but we are still very hopeful, very eager and very supportive of Russia acceding to the WTO," he added.

Russia's Prime Minister Vladimir Putin surprised the World Trade Organization last month by saying Russia would pull out of unilateral membership talks and seek to join the trade body with Kazakhstan and Belarus as part of a customs union.

The United States have said Russia was very close to joining the WTO after 16 years of talks and Locke said that accession as part of the customs union would very problematic.

"According to most of the members of the WTO that is just unworkable, unprecedented and would only delay matters," he said.

MEAT BANS

Russia has often blamed the United States for raising new obstacles in its WTO accession talks and has also criticized Washington for keeping in place trade restrictions, some of them dating back to the Cold War years.

Those include the Jackson-Vanik amendment, which tied trade relations with the Soviet Union to the rights of religious minorities to emigrate. Religious minorities have been free to leave Russia for many years.

Russian Foreign Minister Sergei Lavrov said on Tuesday that dropping the 1974 Jackson-Vanik amendment would be a priority for the United States administration.

But Locke said the ball was now in Russia's court and the U.S. administration now wanted to see Moscow easing some trade restrictions.

"The president (Obama) made it very clear this is something he could not do unilaterally," he said.

"It requires congressional approval and the members of the Congress were looking for some sort of sign of true interest by the Russian government in encouraging U.S. investment and exports into Russia."

"To take this to the Congress would require steps by Russia to take measure with respect of some of the issues that are of a great concern to American companies with political representation across the country - mainly some of the bans on food products like pork and poultry," he said.

(Writing by Dmitry Zhdannikov, editing by Toby Chopra)

Obama Charts Path to Bolster Tradehttp://www.themoscowtimes.com/article/600/42/379385.htm

08 July 2009 By Nadia Popova / The Moscow Times

U.S. President Barack Obama on Tuesday said making good on a Kremlin promise to promote the rule of law would be a vital step toward boosting trade between U.S. and Russian companies.

Foreign Minister Sergei Lavrov said economic ties could soon improve because he had received assurances from the Obama administration that it would prioritize the scrapping of the Jackson-Vanik amendment, a major Soviet-era trade barrier between the countries.

The heads of U.S. and Russian companies, meanwhile, griped at a business conference about the challenges of working in each other’s countries.

“We want Russia to be selling us goods, and we want Russia to be buying from us,” Obama told the Moscow Business Summit co-organized by the American Chamber of Commerce in Russia. “Our fortunes are linked, and yet so much potential remains untapped.”

Annual trade between the countries totals $36 billion, which is about 1 percent of U.S. trade with the rest of the world.

The percentage has remained “virtually unchanged since the Cold War,” Obama said. “That $36 billion is about the same as our trade with Thailand, a country with less than half the population of Russia. Surely we can do better.”

But a condition for better trade relations is Russia’s observance of the rule of law, he said.

“We have to promote transparency, accountability [and] rule of law, on which investments and economic growth depend,” Obama said. “And so I welcome very much

President Medvedev’s initiatives to promote the rule of law and ensure a mature and effective legal system as a condition for sustained economic growth.”

Medvedev urged business executives to look beyond Russia’s oil and gas.

“It is important that our American partners not only work in the oil and gas sector … but also invest in other spheres, both in those that are traditional for Russia and in high-technology,” he said.

In a sign that Obama is ready to encourage trade, Lavrov told Vesti state television that the U.S. administration intended to drop the 1975 Jackson-Vanik amendment, which has prevented Washington from granting most-favored nation status to countries that have non-market economies and restrict emigration.

“President Obama has acknowledged that this is, in general, the problem of the American side now,” Lavrov said about the amendment. “President Obama understands all the awkwardness of the situation, and has assured [us] that the dropping of the amendment will be one of the priorities of his administration.”

Russia should scrap visa rules for U.S. citizens in exchange for lifting Jackson-Vanik, said Alexander Shokhin, head of the Russian Union of Entrepreneurs and Industrialists, the other co-organizer of the conference. Calls to Shokhin’s cell phone for further comment went unanswered later in the day.

Russian and U.S. executives held intensive talks for several hours at the conference before Obama and Medvedev arrived. “We talked a lot about high-tech, innovation, investment opportunities, transportation, energy,” Andrew Somers, president of the American Chamber of Commerce, said after the conference. “What we focused on particularly was innovation and high-tech.”

Executives complained about problems with the investment climate in each other’s countries.

“One thing — and I would call that the big white elephant in the room — is the foundation which we all need to have successful business, and that is the rule of law. And that’s not negotiable,” Alcoa chief executive Klaus Kleinfeld told the conference.

On the Russian side, Vladimir Lisin, chairman of Novolipetsk Steel, which runs three mills in Pennsylvania, complained about new U.S. legislation that toughened certification rules for finished steel products from outside the United States.

“The results are the following: Two of our plants have been forced to halve production, 600 people have been sent on the street,” Lisin said. “We think it is an absolutely inadequate measure to support industries because jobs are being lost. We think U.S. authorities must review and amend this legislation.”

The criticism on the part of private Russian firms was echoed by state-run companies. “Today we heard reproach aimed at the U.S. administration that Russian companies … are clearly being discriminated against in the United States,” Vneshekonombank head Vladimir Dmitriyev told reporters.

Billionaire Victor Vekselberg, who chairs the TNK-BP board, said the time was ripe to sign an agreement on protecting mutual investments in both countries.

In an attempt to lighten the mood, Obama mentioned Russia’s sale of Alaska to the United States in his speech. “Along the way, you gave us a pretty good deal on Alaska. Thank you,” Obama said.

Tsar Alexander II sold Alaska to the United States in 1867 for $7.2 million in gold to help Russia’s cash-strapped treasury. The deal is regarded by some Russians as a national disgrace, especially in light of the gold and oil subsequently discovered there.

U.S. and Russian militaries to train together again http://www.stripes.com/article.asp?section=104&article=63626

By John Vandiver, Stars and StripesEuropean edition, Wednesday, July 8, 2009

STUTTGART, Germany — U.S. troops will soon resume training with their Russian counterparts, ending a nearly yearlong suspension in bilateral military relations prompted by last year’s conflict between Russia and the Republic of Georgia.

Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, and Gen. Nikolai Makarov, Russia’s top military man, signed a new strategic framework on Monday that will kick-start military partnerships between the two countries in the coming months.

“We look forward to U.S.-Russian military interaction that will ensure mutual support in addressing shared interests and challenges,” Lt. Cmdr. Taylor Clark, a U.S. European Command spokesman in Stuttgart, said in a prepared statement.

In the next six months, Russia and the U.S. will take part in nearly 20 military exchanges and training operations, according to the new framework.

Those include strategic discussions between the U.S. joint staff and the Russian general staff and visits by faculty at the Russian Combined Arms Academy to the U.S. Army Combined Arms Center at Fort Leavenworth, Kan. Russian military cadets also will visit the U.S. Military Academy at West Point.

Military exercises will include a training scenario involving a response to a hijacked aircraft and a naval war game to be conducted by the Kuznetsov Naval Academy and the U.S. Naval War College.

In addition, EUCOM and the Russian Ministry of Defense have agreed to meet and develop a more robust work plan for 2010, according to a White House news release.

The military accord, announced during President Barack Obama’s visit to Moscow, is one aspect in the push to “reset” relations. During Obama’s visit, a deal also was reached on reducing nuclear stockpiles.

But some analysts are cautioning against expectations of big changes in how Russia and the U.S. engage with each other.

“We have a new leader, President Obama, who is ready to adjust some policies from the previous administration. In Moscow we don’t have a new leader. We essentially have the same leadership we had before. And I think it’s very dubious about what interest there is on the Russian side in resetting the relationship,” said Andrew Kuchins from the Center for Strategic and International Studies during a pre-summit media briefing.

Still, before being temporarily derailed by the conflict in Georgia, military-to-military partnerships between Russia and the U.S. had started to blossom.

As Gen. John Craddock, the recently retired EUCOM commander, noted earlier this year, Russia had taken a number of steps that signaled a desire to engage with U.S. forces before ties were suspended.

For starters, Russia had recently begun fully funding their participation in activities with U.S. forces, which Craddock described as a significant change from previous years.

With Monday’s agreement, closer military cooperation appears imminent.

“This new framework will set conditions that raise military cooperation to a new level and deepen mutual understanding between our respective armed forces,” the White House said.

Kasparov Interview on Obama Meetinghttp://www.theotherrussia.org/2009/07/08/kasparov-interview-on-obama-meeting/

July 8th, 2009 • Related • Filed Under

Theotherrussia.org presents our interview with United Civil Front chairman Garry Kasparov after his meeting with US president Barack Obama. Kasparov was one of a group of Russian opposition figures to meet with Obama Tuesday afternoon in Moscow.

Interview with United Civil Front Chairman Garry Kasparov after meeting with President Barack ObamaJuly 7, 2009 - Moscow

Q: You said at the press conference after the meeting with President Obama that his speech today was “less than what we wanted but more than what we expected.” What did you mean?

Garry Kasparov: Ideally he would have named names. He made some strong statements about democracy being the solution and the failure of totalitarianism, far stronger than anything we heard from the last two administrations. But he avoided directly criticizing Putin and Medvedev, the core of our dictatorial system. Nor did Obama mention Mikhail Khodorkovsky, whose jailing by Putin and continued imprisonment by Medvedev symbolizes everything Obama was criticizing about authoritarian states.

But he was strong and gave a consistent message. He repeatedly emphasized that the important relationship between America and Russia is about the people, not their regimes. That got a very positive reception here. Obama opened direct lines of communication instead of dealing only with official Kremlin channels.

Q: Aside from Obama’s tone, what about specific positions or policy proposals?

GK: It looks like Putin and his gang have finally met someone who won’t play their little game of give and take. Obama’s tough and he didn’t back away from the most difficult issues. Sovereignty of Russia’s neighbors, mentioning Georgia and Ukraine in particular. He refused to link missile defense to Iran or anything else.

In fact, I don’t see anything that Obama gave up, which likely came as a surprise to Putin, who expected the new American president to be eager to make deals to have a success to report back home. Obama likely surprised some Republicans in the US as well. Before he started his trip, several conservative GOP members wrote an open letter to Obama with recommendations. Not linking missile defense to nuclear arms reduction, defending the rights of Ukraine and Georgia, and meeting with the opposition. From what I can tell, Obama followed each one.

Obama seems like a man who doesn’t try to solve problems that don’t have solutions. He saves his energy and political capital on realistic goals. If there’s a big obstacle he simply takes it off the table and deals with what can be done. Perhaps more importantly he is honest about saying that is what he’s doing. For example, instead of making a lot of meaningless statements about Iran, where Putin’s interests are in direct opposition, Obama moves on to areas where progress can be made. I have to admit I found this practical approach attractive in the end.

Q: What was Obama’s message to the opposition members at your meeting this afternoon?

GK: I think he left a positive impression and I felt he was being open and direct with us. He said he “didn’t live in the abstract, he lived in history,” and that he had to protect the interests of the people who elected him. When he said he wouldn’t make any deals that compromised American principles he sounded more like Reagan than what we have heard from US administrations over the past twenty years. And he kept his word to invite opposition figures from across the ideological spectrum instead of just a few liberals whose are considered pro-American.

In my statement I quoted the American civil rights leader John Lewis about not being patient when waiting for freedom. Obama told a story about his time in the state senate of Illinois, how the Republicans were in charge for six years. He felt irrelevant in the opposition, like he couldn’t change anything meaningful. Things change, he said. Then [Communist Party leader Gennady] Zyuganov said that was exactly the way things are now in the Russian Duma! Zyuganov also told Obama he’d done a good job nationalizing the banks and auto companies. It was all he could do not to say, “You’re on the right track, comrade Obama!”

Q: In your statement you mentioned Khodorkovsky and a Senate resolution Obama signed about him in 2005.

GK: Yes, yes, and I was not the only one. Yelena Lukyanova and Boris Nemtsov also brought up Resolution 322 in our meeting. And it was not only Obama, it was also Biden and McCain - something of a coincidence, no? In the resolution they express concern that the case is politically motivated and that it shows the Russian court system is corrupt. And now here we are four years later with Khodorkovsky still in jail and being tried again for even more absurd charges. Obviously Obama’s concerns from 2005 have been more than validated.

So why isn’t the name of this prominent political prisoner a topic? I think the term “political prisoner” is too powerful and brings up heavy memories from the Cold War and the USSR. But it is also accurate, so the truth must be spoken. Several of our activists were arrested for protesting in front of the hotel where our meeting took place today, simply for standing there with a sign.

Q: Several members at the meeting broached the topic of the US improving relations with Cuba. What was Obama’s reaction?

GK: That came from Ilya Ponomariov and Zyuganov. Obama said his administration was open to contacts with the Cuban government and the opposition. He pointed out, however, that unlike in Russia, it was unlikely the Cuban opposition to Castro in the United States would be eager for the US to have closer relations with Cuba. He also frankly admitted there are political restraints on establishing such contacts.

Q: Did you have any parting advice for President Obama? Or he for you?

GK: Well, we both agree it is not for the United States to interfere in Russia. He said “we are watching but not interfering.” I suggested that he have his staff keep an eye on the Russian translations of his remarks, as the Kremlin likes to make little “corrections” to create the image they wish to present. I also presented Obama with a list of victims of state oppression. It helps that Obama’s top advisor on Russia, Mike McFaul, is extremely capable and knowledgeable, and that Obama relies on him.

G8 leaders to renew tackle on economic downturnhttp://www.russiatoday.com/Business/2009-07-08/G8_leaders_to_renew_tackle_on_economic_downturn.html

08 July, 2009, 11:23

G8 leaders meet in Italy on Wednesday, with key decisions needed on food security, financial regulation, and climate change. But, the ongoing economic crisis will be the major challenge under consideration.

This time it’s all about aftershocks – literally and metaphorically. From the decision to move the summit to quake-stricken L’Aquila in an effort to boost the region’s economy and reconstruction, to the more challenging task of dealing with the aftermath of the economic crisis. Italian Foreign Affairs Minister, Franco Frattini, is looking for agreement on how to come out of stimulus measures bought in to fend off a deeper economic downturn.

”Many, many countries in the world have been increasing their public spending in order to face the crisis and help industrial sectors in need and this is leading to increasing public debt, which is another source of great concern. So, an exit strategy and how to face the crisis in the same time will be on the table.”

But with G8 nations weathering the biggest economic slump since the great depression of the early 1930s, a large part of the summit is expected to renew a focus on global financial regulation. Russian presidential aide, Arkady Dvorkovich, says Russia will be pushing for new financial and economic architecture.

“Our main focus will be to discuss the ways out of the crisis and international cooperation in this field. We will also emphasise the need to create a new financial and economic architecture.”

This year’s event will see a vast sideline programme, with the most anticipated prospect a push for a conclusion to the Doha round of the WTO talks to revive the world economy. At least the G8 leaders have a few things they won’t have to worry about. The oil price is below half its high point last year, and inflation is the last thing on anyone’s mind, although the prospect of both jumping at the first sign of a sustained economic turnaround, will lend a note of caution.

Dvorkovich Downplays Dollar Focus for G8http://www.themoscowtimes.com/article/600/42/379369.htm

08 July 2009 By Nadia Popova / The Moscow Times

Russia’s agenda at the Group of Eight summit will include international disaster relief, North Korea and the Middle East, but President Dmitry Medvedev will make little mention of new reserve currencies, his economic aide Arkady Dvorkovich said Tuesday.

Speaking at a news conference dedicated to the three-day G8 summit starting Wednesday in L’Aquila, Italy, Dvorkovich said Russia would not discuss the creation of new reserve currencies as an alternative to the dollar — an issue that has long been a Kremlin pet topic and that has recently won a measure of support from India and China.

The currency debate “will not be discussed at the G8,” Dvorkovich said.

China and Russia, however, “will state that the creation of any reserve currencies is a gradual process that needs evolutionary development,” Dvorkovich said. “This is connected with the creation of several regional reserve currencies, which may then become international.”

China, the world’s largest holder of U.S. government debt, is slated to discuss proposals for a currency to replace the dollar on Thursday, during a meeting of the G14, a group that combines the G8 with developing countries such as Brazil and India.

The issue has lately gained some traction beyond Russia and China. India said Monday that the world financial system was too dependent on the dollar, while France hinted Sunday that the currency’s future could be discussed in the near term.

The debate, however, has so far largely been theoretical, with most G8 members going out of their way to note that the dollar’s future as a reserve currency was assured for years to come.

Dvorkovich described the summit agenda as packed, even in the absence of a discussion on global currencies.

One of Russia’s proposals will be a treaty on cooperation in international disaster relief, Dvorkovich said.

“Russia has significant experience in this, and we want to share it,” he said.

Dvorkovich said Russia was helping Italy tackle the aftermath of an earthquake that took place in April in L’Aquila, where the summit will be held. The quake killed around 300 people and left some 65,000 homeless.

Medvedev will “place special emphasis” on discussing the Middle East and North Korea, Dvorkovich said.

Medvedev will meet with South Korean President Lee Myung-Bak in addition to other leaders, Kremlin spokesman Alexei Pavlov said Tuesday.

A meeting with Japanese Prime Minister Taro in particular may be thorny.

On Friday, Japan’s parliament unanimously passed a law asserting sovereignty over the Kuril Islands, which both Japan and Russia claim as their territory.  The Federation Council on Monday called the move “an insult.”

Food security was also on the president’s agenda, Dvorkovich said.

“President Medvedev will share the conclusions he made when he traveled around Africa with his colleagues,” Dvorkovich said.

When asked about a different food issue — meat imports to Russia from the U.S. — Dvorkovich said the problems had not been resolved during President Barack Obama’s visit.

“There is a strong meat lobby in the U.S., and it restrains our cooperation in many other spheres,” Dvorkovich said.

G8 Schedule

WEDNESDAY

The first day will involve G8 leaders plus European Commission President Jose Manuel Barroso and current EU president Sweden.

1 p.m. G8 convenes with working lunch on world economy. To discuss signs of end of recession, financial regulation, Doha trade round.

3 p.m. Family photo of G8 leaders.

3:30 p.m. G8 holds working session on global issues. Will discuss climate change, aid and development.

5:30 p.m. Italian Prime Minister Silvio Berlusconi and U.S. President Barack Obama are due to tour the earthquake stricken town of L’Aquila.

7:00 p.m. Berlusconi holds news conference. Bilateral meetings.

8:30 p.m. G8 has working dinner on international issues, expected to focus on the Middle East, Iran, North Korea, piracy off Somalia, terrorism and nuclear proliferation.

THURSDAY

Bilateral meetings

10 a.m. G8 leaders to meet with heads of the G5 — Brazil, China, India, Mexico, South Africa — and Egypt. Talks will focus on global issues and development policies.

12 p.m. Family photograph of G8, G5 and Egypt.

12:30 p.m. Working lunch of the G14 plus heads of international organizations including United Nations, World Trade Organization, World Bank, International Monetary Fund and the International Energy Association. To discuss future sources of growth.

At the request of China, the G14 may discuss proposals for a new global reserve currency.

2:30 p.m. G14 leaders will meet with young representatives from their countries for a session of question and answers.

3:00 p.m. Working session of the 17-member Major Economies Forum and the head of the WTO to discuss progress toward the Doha round trade deal.

4:15 p.m. Working session of the MEF with UN and Denmark to discuss global warming. Press conference afterward.

8:30 p.m. Dinner at the invitation of Italian President Giorgio Napolitano.

FRIDAY, JULY 10

8:30 a.m. Working breakfast with G8 and leaders from Algeria, Angola, Egypt, Ethiopia, Libya, Nigeria, Senegal, South Africa and the African Union Commission to discuss the impact of the global economic crisis on Africa. To include the heads of international organizations.

10:30 a.m. Working session on food security grouping the G8 and G5, African nations, Australia, South Korea, Indonesia, Denmark, Netherlands, Spain, Turkey, and international organizations. There will be a statement on food security and the start of a new initiative to fund farming and tackle global hunger.

12:30 p.m. Heads of state will meet 100 relatives of victims of April’s earthquake in

L’Aquila and will unveil a memorial plaque.

1 p.m. The Italian G8 presidency will give a final news conference. Other national leaders may also hold individual news briefings.

2 p.m. President Obama is due to hold a news conference in L’Aquila.

3:30 p.m. Obama is due to have an audience with Pope Benedict.

— Reuters

Medvedev to discuss Kurils issue with Japanese premierhttp://en.rian.ru/russia/20090708/155467046.html

MOSCOW, July 8 (RIA Novosti) - Russian President Dmitry Medvedev will raise the issue of the disputed Kuril islands at a meeting with Japanese Prime Minister Taro Aso on the sidelines of the G8 summit, a Kremlin aide said on Wednesday.

Arkady Dvorkovich declined to predict whether the two leaders would make any progress on the issue.

The lengthy dispute over the islands has so far prevented Russia and Japan from signing a formal WWII peace treaty. The islands were annexed by the Soviet Union at the end of the war.

The Japanese parliament recognized the four southern islands of the Kuril chain as "historical" Japanese territory on July 3. Russia's upper house of parliament retaliated on Tuesday by asking the president to consider ending the visa-free system between Japan and the islands, which has been in force since 1992.

The leaders of the G8 will meet in Italy's L'Aquila on July 8-10.

Japan’s statements on Kurils have no legal force – envoy

http://www.itar-tass.com/eng/level2.html?NewsID=14126572&PageNum=0

PETROPAVLOVSK-KAMCHATSKY, July 8 (Itar-Tass) - Tokyo’s law declaring the South Kuril Islands as “an integral part” of Japan has no legal force, the president’s envoy in the Far Eastern federal district, Viktor Ishayev, told reporters on Wednesday.

He recalled that the Soviet Union had never recognized the existence of a territorial dispute with Japan. However, seeking to establish constructive and mutually

advantageous cooperation with the neighboring country the then Russian President, Boris Yelstin, recognized that such a dispute exists and offered to consider discrepancies in a wider context of business, political and humanitarian cooperation.

“First, a big step towards Japan was made. Second, the former President, Vladimir Putin, took a decision to introduce visa-free trips for Japanese citizens to the Kuril Islands. And, third, Japan’s fishermen enjoy the right to catch sea bioresources in Russia’s exclusive economic zone,” Ishayev said.

However, Japan made no reciprocal steps, he said adding that this problem can be resolved in the far future and “now it is not in the political dimension.”

Social and economic development of the Kuril Islands receives the government’s priority attention and should not been linked with fluctuations in the foreign policy.

“Economy of the Kuril Islands should be compatible with the average Russian rates. They should not be worse, but should be better that in the rest of Russia,” Ishayev said.

Russia says China Xinjiang riots internal affairhttp://www.reuters.com/article/worldNews/idUSTRE5671SM20090708

Wed Jul 8, 2009 4:17am EDT

MOSCOW (Reuters) - Russia on Wednesday put its support firmly behind China, saying violent clashes in China's northwestern region of Xinjiang were a purely internal affair.

Chinese President Hu Jintao has abandoned plans to attend a G8 summit in Italy, returning home early to deal with ethnic violence that has killed at least 156 in Xinjiang.

"Using separatist slogans and provoking ethnic intolerance, the initiators of the disorder attacked citizens and beat them, turned over cars and torched them and looted shops and other buildings," Russia's Foreign Ministry said in a statement.

"We would like to confirm that Russia views the Xinjiang Uighur Autonomous Region as an inalienable part of the People's Republic of China and considers that events there are purely the internal affair of China," the foreign ministry said.

"We hope that the actions, which taken within the bounds of the law, by the Chinese authorities to support order in the Xinjiang Uighur Autonomous Region will allow the situation to be swiftly normalised," the ministry said.

Russian Foreign Minister Sergei Lavrov expressed his condolences to the relatives of those killed during a phone conversation on Tuesday with his Chinese counterpart Jang Jiechi, the ministry stated in a separate release.

(Reporting by Guy Faulconbridge)

China, Russia to conduct joint anti-terror military exercisehttp://news.xinhuanet.com/english/2009-07/08/content_11673915.htm

2009-07-08 15:04:04

 BEIJING, July 8 (Xinhua) -- Chinese and Russian armed forces will conduct a joint anti-terror military exercise beginning July 22, military sources said on Wednesday.

    The exercise, code-named "Peace Mission-2009", will be carried out in Russia's Far East area and northeast China's Shenyang Military Command, according to the two countries' defense authorities. It will last five days.

    Chiefs of General Staff of the Russian Armed Forces and the People's Liberation Army (PLA) will hold strategic talks in Russia's Khabarovsk on July 22, said Hu Changming, spokesman with Defense Ministry.

    The two armed forces will send 1,300 personnel from each army and air force services to participate in the exercise, the spokesman said.

    China, Russia and other member states of Shanghai Cooperation Organization previously held two similar anti-terrorism exercises under the name "Peace Mission" in 2005 and 2007.

    The exercise is not targeted at any particular third party but will showcase the abilities and resolutions of both sides to jointly cope with various kinds of security threats and crack down on terrorist, separatist and extremist forces, the spokesman said.

Khalaf Khalafov: “We believe that delimitation of Russia-Azerbaijan borders will be finalized by the end of the year”

http://en.apa.az/news.php?id=104857

08 Jul 2009 12:14 ] Baku. Lachin Sultanova – APA.

“Azerbaijan and Russia have reached an understanding to approach positions on the uncoordinated border issues during Russian President Dmitriy Medvedev’s visit to Azerbaijan”, said Deputy Foreign Minister of Azerbaijan Khalaf Khalafov, APA reports.

The Deputy Minister said the situation would completely be clarified by the end of the year and expressed confidence that the process would be finalized.

Khalafov said talks about the delimitation of the Azerbaijan-Georgia borders were

continued. “There are many questions on this issues remained open”.

He told journalists that the issue of David Garedji church was not discussed in the negotiations. “The work is done towards the delimitation of the state borders. There are many factors and elements for that. The issue should be coordinated within all these realities”.

Putin to Visit Turkey

http://www.themoscowtimes.com/article/1009/42/379380.htm

Prime Minister Vladimir Putin will visit Turkey on August 6 for talks that will focus primarily on the construction of the South Stream and Blue Stream 2 gas pipelines, the Aksam newspaper reported Tuesday.   

Turkey will use the visit to press Putin to commit Russian crude to the Samsun-Ceyhan oil pipeline, the newspaper said. The leaders will also discuss Atomstroyexport’s bid to build Turkey’s first nuclear plant.  (Bloomberg)

Putin, Union Boss Discuss Opel Bidhttp://www.themoscowtimes.com/article/600/42/379361.htm

08 July 2009 By Maria Antonova / The Moscow Times

Prime Minister Vladimir Putin met with Berthold Huber, president of Germany’s IG Metall labor union, in Moscow on Tuesday in an attempt to drum up support for a Sberbank-backed bid to acquire carmaker Opel.

Sberbank joined Canadian car parts maker Magna and GAZ, the carmaker controlled by Oleg Deripaska, to bid for the German unit of General Motors, and the consortium won the backing of the German government in late May.

The bid was hailed as a coup for Russia’s struggling carmakers, which hope that an influx of know-how from Opel could revive the sector.  But it has also faced criticism from some German business leaders and politicians, as well as competition from rival bidders.

Huber — whose influential union represents Germany’s metal workers, including in the auto sector — thanked Putin for the invitation and stressed the “important role played by social organizations, including unions. We believe that they must be supported,” according to a translation of his comments on the government web site.

The transcript of their opening remarks did not refer to the Opel bid.

But a spokesman for IG Metall, Jörg Köther, confirmed by telephone that Sberbank and Magna’s bid for Opel was “one of the three or four topics” Putin and Huber discussed.

“Both agreed that it should be a necessary investment, and they are quite optimistic that the agreement between Magna and General Motors will be seen as successful,” Köther said, adding that the labor union still considered Magna’s bid as the best for Opel.

Opel’s workers own 10 percent of the company and would hold the stake under the Russian-backed bid. Sberbank would take 35 percent, Magna would take 20 percent and GM would keep 35 percent.

The German government was scheduled to hold a private meeting with GM executives in Berlin on Tuesday to discuss Magna’s bid as well as the rival offers from China’s BAIC and Belgian industrial holding RHJ International.

The haggling over loss-making Opel appeared to intensify last week, when BAIC made a non-binding offer to invest 660 million euros ($925 million) for a 51 percent stake in the new Opel, Reuters reported. Magna had offered to invest 500 million euros.

GM has until Friday to submit papers to a U.S. bankruptcy court. Selling Opel is part of the plan to create a new streamlined GM.

The Russian-backed bid received a vote of confidence Sunday from GM Europe president Carl-Peter Forester, who said the bid had “considerable” advantages over its competitors and that he expected a deal would be reached soon.

On Monday, Putin met with Deripaska, whose Basic Element holding controls GAZ, but it was not immediately clear what they discussed. At their last meeting in early June, Putin berated Deripaska over unpaid wages at a factory he owned in Pikalyovo. The government called it a “working meeting.”

‘Russian money is good money, we just want to know what the intentions are’ http://www.budapesttimes.hu/content/view/12460/220/

Wednesday, 08 July 2009 Foreign Minister Péter Balázs told his Russian counterpart Sergei Lavrov that Hungary is not opposed to Russian acquisition of Hungarian assets provided deals are “proportionate, transparent and expected”. The pair met in Corfu last week during a meeting of foreign ministers for the NATO-Russian Council. “Russian money is good money, we just want to know what the intentions are,” said Balázs.

Meanwhile Russian Deputy PM Igor Sechin expressed concern over the treatment of Surgut Neftegaz, which recently acquired a 21.4 per cent stake in MOL. Surgut was not permitted to take part in MOL’s AGM, ostensibly because its stake had not been entered into MOL’s share register in time. “The size of investment is such that the Russian government cannot help but pay attention to the unfavorable situation around the deal,”

Sechin said.

The previous week, a Hungarian court rejected a petition from the Cyprus-registered firm Mabofi holdings, which sought to outlaw the recent sale of the Hungarian gas distribution company Emfesz to a Swiss-registered firm called RosGas. The comapny is thought to be owned, indirectly, by Russian energy giant Gazprom, although it has denied this. Mabofi is majority owned by a Ukrainian oligarch.

Russia lifts temporary ban on Hungarian meathttp://bbjonline.hu/index.php?col=1000&id=49354

Tuesday 13:19, July 7th, 2009 Russia's animal and plant health authority has lifted a temporary ban on imports from four Hungarian meat processors, news agency Interfax reported on Tuesday.

The news came after a meeting, a week earlier, between Hungary's ambassador to Russia György Gilyán and head of the Russian authority Sergej Dankvert, who promised the ban on the imports - in place for almost a year - would be lifted within days

The ban was introduced after toxin levels in products from the companies were found to exceed Russian, although not EU norms, Gilyán said. The companies have since taken steps to bring these levels under the Russian threshold, he added.

The ban affected Pick Szeged, Hungary's biggest meat company, as well as Hungerit, Kométa 99 and Holla Baromfi, MTI learnt.

Hungary's Agriculture Ministry would not confirm the report by Interfax at it had not been officially informed of any decision on the matter. (MTI-ECONEWS)

Russia conducts largest military maneuvers in decadeshttp://www.russiatoday.ru/Top_News/2009-07-08/Russia_conducts_largest_military_maneuvers_in_decades.html/print

08 July, 2009, 10:32

More than 8,000 personnel have taken part in the life-like “Caucasus 2009” military drills, which took place in Russia’s south to test troop readiness in combating terrorism and maintaining regional security.

“How can one get tired of defending the motherland? That’s my duty,” says twenty-five year old soldier Maxim Tretyakov, who is no stranger to the maneuvers.

Thousands of troops were backed by hundreds of tanks rumbling through the North Caucasus. The military says the location wasn’t picked at random. The area has all sorts

of terrain, ranging from seashore and plains to high mountains, but the main reason for holding the exercise in this particular part of the country is due to the potential threat of terrorism.

The exercises are based on a scenario of international terrorists trying to break through the Russian border. Their aim is to set up bases in the North Caucasus and destabilize the region. Therefore, the troops have to conduct a counter-terrorist operation to neutralize them and guarantee security in Russia’s South.

It took the troops some two hours to destroy the militant’s plans. Shortly after they were spotted, the soldiers went on the attack and ultimately defeated the terrorists. Senior officers, watching from the command post, are satisfied with the result.

“The exercises have proved the artillery and aviation were very well-organized and they are capable of fulfilling their tasks,” the drills’ General-Colonel Aleksandr Larchenko complemented.

Russian soldiers deployed in South Ossetia and Abkhazia also took part in the maneuvers.

Georgia has expressed concern, calling the exercises a “pure provocation”.

“It’s just nonsense, these exercises were scheduled last year and the only goal was to test the military and find out their weak points,” said Larchenko, dismissing accusations.

It will take a little while for the military to estimate the effectiveness of the maneuvers and the readiness of the troops to react quickly.

During a week-long military drill in the North Caucasus, alongside the region’s unit and Air Force, there were also the Black Sea and Caspian Fleets involved in what are said to be the largest naval exercises since the Soviet Union’s collapse. The military says the “Caucasus 2009” training is going to play a positive role in stabilizing the situation in the area.

Arms Expo in Uralshttp://www.russiatoday.com/Top_News/2009-07-08/Arms_Expo_in_Urals.html

08 July, 2009, 11:51

Multi-million dollar deals could be on the table as Russia showcases some of its most advanced weaponry at the Seventh International Exhibition of Arms, Military Equipment and Ammunition in the Urals.

Despite the financial crisis that is affecting most of the world, the number of participants of the arms exposition in Russia’s Nijny Tagil has only reduced by at most 8% in comparison to last year, the organizers of the event assure.

Over 400 companies are taking part together with about 40 foreign delegations. Organizers boast that the budget of this year’s show is larger than ever.

The reason for so many countries coming to this exhibition is that some major arms deals could be signed. Last year several contracts were signed to supply arms to India and to the UN.

The participants of the exhibition, apart from demonstrating their products, are holding seminars and conferences to attract more customers.

The spectacular display of arms attracts a good deal of military specialists, arms producers, and ordinary people interested in modern arms likewise.

Channel of deliveries of Afghan heroin to Russia stopped by Tajikistan’s security service http://www.axisglobe.com/article.asp?article=186007.07.2009The next channel of deliveries of strong drugs from Afghanistan to Russia through the territory of Tajikistan has been stopped by the security services in Dushanbe, online paper Central Asia-News reports today.Referring to the Centre of public relations of the Drugs Control Agency (AKN) of Tajikistan, Central Asia-News expands that the agency’s agents have detained a 46-years-old citizen of Tajikistan. Four cellophane packages with heroin of high quality in gross weight of 3 kg 677 grams have been found out by his inspection and withdrawn, the person was detained. The «complex multi-stage» special operation has been realized on the basis of received operative information that the suspect was preparing for sending to Russia a large party of the Afghan heroin, Central Asia-News adds. In case of successful realization of the given lot of the dangerous narcotic cargo in Russia, it would make over 250,000 dozes, according to online paper’s source. A criminal case has been brought on the given fact within the framework of which the Agency has been spending operative and search and investigatory actions on establishment and attraction to responsibility of other persons involved in the given crime, Central Asia-News notes.In the first six months of 2009, the Agency has stopped 86 cases of illegal circulation of narcotics, more than 504.38 kg of drugs ahas been withdrawn, including, 204.25 kg of heroin. For the similar period of last year the AKN stopped 52 cases of illegal circulation of drugs in the volume of 952.5 kg withdrawn, including 241.28 kg of heroin, online paper expands.

Federation Council of Russia approved amendments to budget to pay $750 million to EurAsEC fundhttp://eng.gazeta.kz/art.asp?aid=134279

[13:35] 08.07.2009,  Kazakhstan Today

The plenary session of the Federation Council of Russia on July, 7th approved the Federal Law on Amendments to Federal Law on Federal Budget for 2009 and for the planned period of 2010-2011, "Kazakhstan Today" agency reports citing the official site of the Council of Federation of Russia.

"The Federation Council at 250th plenary session approved the Federal Law on Amendments to the Federal Law on Federal Budget for 2009 and for the planned period of 2010-2011."

According to the law, the funds will be allocated by Russia for the Anti-Crisis Fund of the Eurasian Economic Community (EurAsEC).

The State Duma passed the Law on Amendments to Federal Law on Federal Budget for 2009 and for the planned period of 2010-2011 on July 3rd, 2009.

As informed earlier, the leaders of EurAsEC member states signed the contract on creation of Anti-Crisis Fund of the organization on June 9th, 2009.

Police officer killed, 3 wounded in S.Russia militant attackshttp://en.rian.ru/russia/20090708/155466760.html

MOSCOW, July 8 (RIA Novosti) - One police officer has been killed and three more wounded in two separate militant attacks in the capital of Russia's North Caucasus Republic of Daghestan, a police source told RIA Novosti on Wednesday.

The source said that unknown suspects opened fire on policemen who had stopped their Lada car to check documents in the Sovetsky district of the republic's capital of Makhachkala.

"One of the police officers died in hospital from gunshot wounds and the other remains hospitalized," he said.

In a separate development late on Tuesday night, unknown suspects driving a Lada car opened fire on a police car near Makhachkala's central square, wounding two officers.

Militant attacks and clashes remain common in Russia's North Caucasus, although the Kremlin campaign to fight separatists and terrorists in neighboring Chechnya has officially ended. Violence often spills over into nearby republics, in particular Ingushetia and Daghestan.

Serviceman killed, six injured in Ingushetia clashhttp://en.rian.ru/russia/20090708/155466252.html

MOSCOW, July 8 (RIA Novosti) - One serviceman died and another six were injured in clash with militants in Russia's North Caucasus Republic of Ingushetia, a police source said.

Police located a group of up to 20 militants in a forest in Ingushetia's Sunzha district on Tuesday.

One gunman was killed in the shootout. His body is being identified.

Russia's North Caucasus has seen an upsurge in violence of late, with the killing of Daghestan's Interior Minister Adilgerei Magomedtagirov and an assassination attempt on the Ingush President Yunus-bek Yevkurov last month.

Chechen authorities say 9 injured in bomb attackhttp://en.rian.ru/russia/20090708/155467881.html

GROZNY, July 8 (RIA Novosti) - The number of people injured in Tuesday's bomb attack in Russia's North Caucasus republic of Chechnya has been adjusted to nine, an Interior Ministry spokesman said.

Earlier reports said six people, including two police officers, were injured on Tuesday when an explosive device went off in a public garden in Chechnya's capital, Grozny.

The bomb had been planted in a garbage can. A criminal case has been opened and an investigation into the incident is underway.

Eight people have received medical assistance and have been discharged from hospital. One police officer is in hospital in a "medium to grave" condition, the spokesman said.

The Kremlin announced a formal end to its 10-year counter-terrorism operation in the troubled region on April 16, but violence has continued in Chechnya and neighboring republics.

Kadyrov favors return of ex-separatist emissary Zakayev to Chechnyahttp://www.interfax.com/17/504439/Interview.aspx

            Chechen President Ramzan Kadyrov said he is negotiating for former Chechen separatist emissary Akhmed Zakayev's return home.            "We are negotiating with Zakayev today. If somebody tells him now that I am waiting for his call, he will call me. He will tell me that he is ready to come [home]. We have this kind of good relationship with him. I am saying that he should become helpful

to his people at least once. I want this. But everything is in the hands of the Most High," Kadyrov said.            "He [Zakayev] is the only man on the part of Ichkeria who I would like to bring back home. I do not know what the competent bodies think, but I believe he did not commit serious crimes. He is an actor who can talk nicely," Kadyrov said.            "Between five to ten thousand our people are born in Europe every year," Kadyrov said.            "They will all become Europeans in ten years. The children who have been born there in these seven or eight years have also become Europeans. They will lose our values and our culture. The West will use them and incite them against the Chechen people and Russia. If they are not brought back home today, there will always be problems. But Zakayev can do this, because a certain category of people are still listening to him," he said.            "But if he is jailed or killed, no good will come of this. There will be a result if he comes home and brings those who always did harm to our people. Now they have the opportunity to be useful to their republic. I am looking exactly for moments that could be useful to our people," he said.            Commenting on the recent attack on Ingush President Yunus-Bek Yevkurov, Kadyrov said that it was masterminded by the warlords Doku Umarov and Magas Yevloyev.            "The organizers of the attacks were Yevloyev and Umarov. We are killing their emirs every day. The investigation will be completed when there are no Umarov and Yevloyev," Kadyrov said in an interview with Interfax on Tuesday.            "Umarov has said they have put together the group called Riyad us-Salihin. This is a group of suicide attackers. They have claimed responsibility. They need to be eliminated, and then the investigation will be finished. This is what I believe. I am saying this as a Chechen, a Muslim, and Yevkurov's friend. We will show how we can conduct investigations. These thugs are hunting for us and we are hunting for them. At least we have pure intentions," he added.            Kadyrov also described as "dishonorable" former Ingush President Ruslan Aushev's recent remark to the effect that he could rule Ingushetia until Yevkurov recovers. "If he wants to help somehow, he does not have to become president. This is a dishonorable statement. To be frank, I consider this to be mean on his part and a way to attain his own ends. He cares little about the Ingush people's fate," he said.            "Gangsterism took roots under him. If I were the federal center, I would have held Aushev and the like responsible for what they did long ago. They are playing into the West's hands and are pursuing a policy against the federal center," Kadyrov said.            Thanks to the made effort Umarov was wounded; however, he is still alive, but "a search for him is under way," Kadyrov said.            "According to our information, he [Umarov] has been wounded. Five of his closest bodyguards, including a Georgian, an Azeri, and others, have been killed. We do not have information that he was killed," Kadyrov.            "We are looking for him not only in Ingushetia or the Chechen republic but also far outside our regions. He was evacuated and he is wounded. This is what we learned from our informer, who was with him. There were also informers from Europe, from

Turkey and England. This [the information] is from their sources who are there. They said Umarov was wounded, but he is not dead," he said.            Kadyrov vowed that Umarov would be killed sooner or later. "Next time we will get him. It is good that we have eliminated his closest entourage. The only thing he is facing is death," Kadyrov said.            When a son of Abusupyan Abdullayev, a so-called vice president of Ichkeria, came to Chechnya from Egypt recently, he was asked whether he would go to war if his father ordered him to do so, Kadyrov said.            "He said no. Their children are not fighting. They are proposing our children take weapons in their hands and fight. If they had the right ideas, their children would support them. Nothing is sacred to them. We have started special operations and will know no rest until we wipe them out," he said.            According to Kadyrov, the special troops under his control have killed about 40 militants during the joint operation with Ingush law enforcement agencies and that he is determined to bring the ongoing special operation in Chechnya, Ingushetia, and the adjacent regions to an end.            "We keep finding militant bases and destroying them every day. Not a single soldier and not a single reconnaissance group previously reached the places where our guys are staying now. We have found dozens of terrorist bases. There were a lot of weapons, medicines, and foodstuffs there. This was their den. We have dispersed them from there and are now catching them either in Ingushetia, or in Chechnya, or in Dagestan," Kadyrov said.            "Emirs close to Arab representatives and an Azeri mercenary have been killed in the operation zone over the past few days," Kadyrov said.            "On the whole, about forty militants have been eliminated since the beginning of the operation," he said.            "We kill these thugs every day. They have lost all their ideas now. One detainee told us that they had big plans to invade Ingushetia, Chechnya, and some communities. They have lost all they had now. We will finish off the rest of them. Every day we have more and more opportunities for this, and results," he said.            "A major special operation to eliminate a large group of thugs including several emirs" should be completed within the next few weeks, Kadyrov said.            "We are conducting this operation both in the territory of Ingushetia and Chechnya and also at the border. We will fulfill the order given by the Russian supreme commander-in-chief. I am sure we will not let him down. This work will have a logical end," Kadyrov said.            Kadyrov said Ingush President Yunus-Bek Yevkurov and he had an agreement to conduct special operations together. "I have been leading the special operations because taking part in them are mainly Chechen policemen and the guys with whom we served together. I know them well, and I know their potential. And I am keeping all operations in the neighboring territory under control. But as regards the special operations right at the border between Chechnya and Ingushetia, my advisor and State Duma deputy Adam Delimkhanov is supervising them," he said.            Kadyrov thinks that the federal headquarters in the North Caucasus grossly overestimates the number of members of illegal armed units actually operating in Chechnya.

            "The headquarters has counted as many as 500 to 700 of them. I have a different count - there are 50 to 70 of them," Kadyrov said.            Asked to estimate the militants' potential, Kadyrov replied, "They don't have any potential."            Moreover, there are no more than "a dozen or two" Chechen residents among the militants, and the rest are foreign mercenaries, Kadyrov said.            "Most of those staying on the border between Chechnya and Ingushetia are Azeris, Turks, Ukrainians, Georgians, Arabs, and others," he said.            "We have information from a detained militant who said that they are being given some tablets, and a man taking them becomes like a robot and does not understand anything. These are perfectly trained workers of Western special services working against Russia. They are using us knowing our mentality and knowing that we are mostly Muslims. They have good supplies and good specialists," he said.            "All foreign special services are working against Russia. And the people of Russia accuse us. They think that the war is still going on and that the Chechens are bandits and terrorists, while Chechens are dying for Russia's integrity. Hundreds of thousands of our people have been killed, thousands have gone missing, and thousands of policemen have been killed in action. But they just don't care about Islam, Chechens, or Chechnya," he said.            Kadyrov also thinks that the cancellation of the counter-terrorist operation regime in the Chechen republic has not produced tangible results so far.            "I see absolutely no results so far. There is only an official statement that the counter-terrorist operation regime has been canceled. There is no positive effect for the republic so far," Kadyrov said.            Nevertheless, "it is good that this has been lifted," Kadyrov said.            "The process is on going. If we are allowed to open customs checkpoints and if the policemen posted here from other regions are withdrawn when everything is normalized, then there will be results. At the present time, there are no changes following the lifting of the counter-terrorist operation regime. The Chechen police and the local FSB [the Federal Security Service department for Chechnya] are continuing to fight the bandits successfully, just as they did before," he said.            Asked whether any troops are being withdrawn from the republic, Kadyrov replied, "Not a single soldier has been either withdrawn or posted here."            Kadyrov also commented on the problem of opening an international airport and a customs checkpoint in Grozny.            "Our highly esteemed special institutions have compiled a memo for the president of the Russian Federation that a customs checkpoint can be opened here only in the third quarter of 2010. This is absolutely groundless. I think this memo was written by people supervising the contraband smuggled to the southern regions of Russia. Opening a customs checkpoint in the Chechen republic is disadvantageous to them. It is much safer here than in Dagestan and other regions of Russia. We can be held up as an example in all respects," he said.

Moscow police detain 10 Khodorkovsky supporters http://en.rian.ru/russia/20090708/155467752.html

MOSCOW, July 8 (RIA Novosti) - The police have arrested 10 protesters attempting to hold pickets in support of jailed ex-Yukos founder Mikhail Khodorkovsky in central Moscow, a local police spokesman said on Wednesday.

Three people attempted to campaign against Khodorkovsky's imprisonment in front of the National and Ritz-Carlton hotels on downtown Moscow's Tverskaya Street around 7:00 p.m. (15:00 GMT) on Tuesday. U.S. President Barack Obama stayed at the Ritz-Carlton during his visit to Russia, which ended on Wednesday morning.

Another seven people tried to demonstrate on Red Square at about the same time. They carried a banner with an inscription in English reading "Dear Mr. Obama, you are invited to the trial of Mr. Khodorkovsky."

All the detainees were released after being charged with administrative offences, which they said they would appeal.

In an interview with Russia's Novaya Gazeta newspaper ahead of his visit to Russia, U.S. President Barack Obama expressed his concern over the new trial of Khodorkovsky and his business partner Platon Lebedev.

Although Obama said it was "odd" that the new charges came as Khodorkovsky neared eligibility for parole, he added that "it is improper for outsiders to interfere in the legal processes of Russia."

National Economic TrendsRuble Weakens to Seven-Week Low After Oil Retreats Below $62http://www.bloomberg.com/apps/news?pid=newsarchive&sid=auIX4fQFlloA

By Denis Maternovsky

July 8 (Bloomberg) -- The ruble weakened against the dollar, heading for its lowest closing level in seven weeks, after oil, Russia’s chief export, fell for a sixth day.

The Russian currency declined 1.2 percent to 31.8415 per dollar, heading for its lowest close since May 19, by 10:24 a.m. in Moscow. It weakened 0.2 percent to 44.1551 per euro.

Crude headed for its longest losing streak since December, declining as much as 1.5 percent to $61.99 in New York, its lowest intraday price since May 26, after an industry report showed an increase in U.S. fuel inventories.

The ruble’s movements against the dollar and the euro left it at 37.3765 against the central bank’s target currency basket, the lowest level in almost two months.

The basket, which is used to manage swings that hurt Russian exporters, is calculated by multiplying the dollar’s rate to the ruble by 0.55, the euro to ruble rate by 0.45, then adding them together. The ruble remains within the 26 to 41 band the central bank pledged Jan. 22 to defend.

To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net

Last Updated: July 8, 2009 03:29 EDT

Macroeconomic indicators - Bank of America lower Russia 2009 GDP forecast to 7.3pcthttp://www.steelguru.com/news/index/2009/07/08/MTAxMzc1/Macroeconomic_indicators_-_Bank_of_America_lower_Russia_2009_GDP_forecast_to_7.3pct.html

Wednesday, 08 Jul 2009

Interfax reported that Bank of America Securities-Merrill Lynch has lowered its forecast for the decline in Russian GDP in 2009 to 7.3% from 4.9% due to what it called the delayed effect of measures being implemented to stimulate the economy.

The bank has raised its forecast for GDP growth in 2010 to 2.4% from 1%.

The Bank of America analysts said Russia's financial stimulus policy has yet to have a positive impact on the economy and predicted that GDP will fall as much in the Q2 of 2009 as it did in the Q1.

According to the report, only in the Q4 will Russia see a significant increase in state expenditures and a noticeable increase in lending

The analysts said they actually expect growth in lending in the third quarter of 2009 thanks to measures implemented by the government.

(Sourced from Interfax)

Russian government expects recovery to start in 2011http://www.businessneweurope.eu/dispatch_text9062

AlfaJuly 8, 2009

According to the Russian government's economic forecast, the economy is expected to start showing signs of a recovery in 2011. Next year economic growth is expected to be flat, reflecting a continuing decline in investment and a stable unemployment rate.

Our take is that the expected decline in investment in 2010 suggests that the Russian

government does not intend to generate an investment-driven economic recovery and expects consumption to remain the key growth driver. However, our concern is that with inflation remaining high, at 10% in 2010 and 8% in 2011, a recovery in consumption would trigger an increase in imports of over $190 bln, in contrast to government forecasts which expect imports to remain stable in 2009 and 2010. Our concern is that the social and consumption-focused growth strategy will hurt Russia's trade balance and will not lead to growth for domestic industries. Therefore, the 0.1% GDP growth forecast for 2010 looks optimistic.Natalia Orlova

Russian unemployment downhttp://www.barentsobserver.com/russian-unemployment-down.4613005-116321.html

2009-07-08 Unemployment in Russia was down 600,000 people, or 8,5 percent, in May month compared with February, figures from Russian Statistics show. However, unemployment in the country remains far higher than at the same time in 2008.

Figures from the statistical service does show a significant drop in the number of unemployed in May compared with February. However, the drop is likely to be linked with seasonal factors, Oilru.com reports.

In addition, the unemployment figures remain far higher than at the same time in 2008. Almost 2,5 million more people were without jobs in May 2009 compared with May 2008.

Women make up 44,8 percent of the unemployed. A

Business, Energy or Environmental regulations or discussions

$1Bln Infrastructure Fund

http://www.themoscowtimes.com/article/1009/42/379380.htm

Vneshekonombank chief Vladimir Dmitriyev said Tuesday at a Russia-U.S. business meeting that Russia is creating a $1 billion infrastructure fund that will include his VEB, Renaissance Group, the European Bank for Reconstruction and Development and the World Bank’s International Financial Corporation.

He also said the Development Bank of Kazakhstan and investment firm Macquarie Group would participate, RIA-Novosti reported. An agreement on creating the fund, which will invest in transport and communications infrastructure, could be signed soon.

“We’re counting on the closest cooperation with our American colleagues,” Dmitriyev told the business meeting. (MT)

Electricity production in 1H09 decreased 6.3%yoyhttp://www.businessneweurope.eu/dispatch_text9062

CitiJuly 8, 2009

Electricity production in 1H09 decreased 6.3%yoy to 489.5 GWh, Interfax reports, citing System Operator. Electricity consumption decreased 6.8%yoy to 481.4 GWh. Our model suggests that electricity demand should fall by 5.4%yoy in '09 based on 6.5% GDP contraction forecast by Citi. Thermal power plants decreased their production by 11%yoy, while hydro power plants increased production by 10.7%yoy. Higher production by hydro power plants results in upside risk to our forecast of +3.5%yoy growth in output for RusHydro (HYDR.MM; Rbl1.23; 2M), however the news is largely expected by the market.Alexander Korneev

Government to create incentives for electricity generation from associated gashttp://www.businessneweurope.eu/dispatch_text9062

RencapJuly 8, 2009

Quoting Prime Minister Vladimir Putin, Itar-TASS reported yesterday (7 July) that the government is considering legislative amendments to create incentives for power plants that use associated gas as their primary fuel source. According to Putin, this is "directly connected to the efficiency with which the nation uses its natural resources". The report did not provide any detail as to the nature of the incentives.

In our view, obvious beneficiaries of this scheme would be the 4,800 MW (and 740 MW of newly commissioned capacity) Surgutskaya GRES plant owned by OGK4, and OGK1's 1,600 MW (and another 1,600 MW of newly-commissioned capacity) Nizhnevartovskaya plant, which already use associated gas. These are both large plants and are therefore strong profit generators for the two companies. Furthermore, we think the financial incentives would also enhance returns on the new capex projects.

Russian Electric Utilities: June 2009: Tariff Debateshttp://www.businessneweurope.eu/dispatch_text9062

VTB CapitalJuly 8, 2009

Utilities indices posted losses this month, but still ahead of the RTS

The utilities sector, and generation names in particular, have performed well both YTD and on the 3-mo horizon, gaining the top inter-sectoral scores. Now, however, the short term outlook is unclear and investors are facing uncertainty over next year's tariffs growth, capacity market rules and the possibility of excessive control over the free market because of the contracting economy.

June electricity production brings some relief after severe drop in May

Despite the almost 10% contraction in electricity consumption in the first days of June, the situation improved as the average drop printed 7%. Electricity consumption in the European energy zone improved YoY and this in part positively impacted free prices (which for the first time this year broke our average annual forecast).

Electricity market free share reaches 50%

Electricity market liberalisation continues as planned: as expected, the state took the important 20% step on 1 July and the share of the free market reached 50%. However, the Head of Market Council Dmitry Ponomarev recently suggested that in order to prevent excessive price growth for electricity, a government decree should be introduced obliging generation companies to sign medium-term contracts to sell the newly liberalised volumes under regulated tariffs. This could emerge as a negative surprise. Also, we see increasing pressure on utilities from consumers who are continuing to lobby for measures to limit prices on the free market.

Next year's tariff decision might not be favourable for utilities

While the decision on electricity tariff growth has not been taken and submitted to the government for a final ruling, the likely outcome reportedly implies electricity tariffs growing 5% YoY in 2010 while gas tariffs are to increase 15% YoY. This could mean a delay in launching RAB and a risk of gencos' margins being squeezed.

Dmitry Skryabin

Russian nuclear fuel holding TVEL announces FY08 resultshttp://www.businessneweurope.eu/dispatch_text9062

RencapJuly 8, 2009

TVEL Corporation, the holding for nuclear fuel manufacturers Machine plant Electrostal (MASZ) and Novosibirsk Chemical Concentrates (NZHK) has announced FY08 results. Net income rose 5.1x to RUB29.93bn ($1.2bn), revenues rose to RUB51.96bn ($2.1bn) vs RUB37.29bn in 2007, and net asset value reached RUB65.25bn ($2.6bn).

In 2008, TVEL signed a contract with Slovenske elektrarne (Slovakia), revised long-term contract prices with East and Central European partners, and started preparation of the transfer of nuclear power plants (NPP) in Hungry and Ukraine to next-generation fuel. The holding had negotiations with 11 of the 31 US NPP operators, and presented a potential cooperation project with Machine plant to produce fuel for all types of NPP, including square fuel assemblies. TVEL has also supplied nuclear materials to Indian customers. It provides fuel for 76 power reactors in Russia and 16 other countries across Asia and Europe, as well as 30 research reactors in Russia and abroad.

TVEL has demonstrated very high profitability, confirming the high margin of uranium operations at MASZ and NZHK. We are positive on the long-term story for nuclear fuel manufacturers.

Marina Alexeenkova

Bank VTB filed a Rbl3.17bn ($100mn) suit in a London court against Shalva Chigirinskyhttp://www.businessneweurope.eu/dispatch_text9062

CitiJuly 8, 2009

The suit was filed against Shalva Chigirinsky and Gradison Consultants Inc which guaranteed the loan to the developer, Vedomosti reports. The court has prohibited Shalva Chigirinsky from selling assets of Russian Land or personal property before the hearing which will take place on July 17. Besides VTB, oil company Sibir Energy is also suing Chigirinsky, Gradison Consultants and former CEO Henry Cameron for $328mn of unauthorized transfers to Chigirinsky.

VTB has relatively high exposure to the vulnerable construction sector. According to 2008 IFRS results, 14% ($12.8mn) of the loan portfolio consisted of loans to developers with such problem borrowers as PIK Group (overdue loan of Rbl2.7bn ($86mn)) and Glavstroy (Rbl2.1bn ($67mn)). Simon Nellis

GAZ Group: State support provided http://www.businessneweurope.eu/dispatch_text9062

UralSibJuly 8, 2009

$637 mln in state guarantees approved. The state anti-crisis commission, under the direction of Igor Shuvalov, yesterday approved state guarantees for GAZ Group (GAZA RU - Not Rated) of RUB20 bln ($637 mln), which should allow the company to

restructure its roughly RUB40 bln ($1.27 bln) debt to banks. The mechanism of debt restructuring and state guarantees implies that (1) the company will get a new credit line (five years, in rubles, at a 17% interest rate to be reviewed annually) with existing creditors (a total of 12, the main ones being Sberbank, VEB, and VTB) to refinance its outstanding obligations; (2) new credit will be 50% secured by the company's assets and 50% (or RUB20 bln) by state guarantees. KAMAZ (KMAZ RU - Not Rated) and Sollers (SVAV RU - Not Rated) have previously received guarantees from the state, for RUB4.6 bln ($146 mln) and RUB5 bln ($159 mln), respectively.

Overloaded with debt. GAZ Group expects its 2009 EBITDA to reach RUB401 mln ($11.7 mln) as a result of its cost-cutting policy (part of its anti-crisis management plan presented to creditors in March 2009), which we believe may be optimistic. But even using the forecast 2009 EBITDA of $11.7 mln, its 2009E net debt/EBITDA equals nearly 112.

Government reportedly approves state guarantees for GAZ Grouphttp://www.businessneweurope.eu/dispatch_text9062

RencapJuly 8, 2009

Reuters reported yesterday (7 July) that the Russian government's anti-crisis commission has agreed to provide state guarantees for up to RUB20bn of GAZ Group's loans. In accordance with the order for state guarantee provisions, the amount of the guarantee for a single borrower cannot exceed RUB10bn and the state guarantees up to 50% of loans.

However, according to today's Vedomosti, the government is going to provide RUB20bn to GAZ Group, based on the fact that the group consists of several legal entities, each of which is eligible for the guarantee. Hence, the RUB20bn guarantee will be used to cover RUB40bn of loans, or almost all GAZ Group's debt to banks. A previously negotiated restructuring scheme did not include the partial coverage of local bonds with the state guarantee. That said, this latest development could spur GAZ debt restructuring talks with banks, which would be a prerequisite for GAZ to remain a going concern.

Andrey Markov

Sistema to Sell Svyazinvest Stake to Russia, Kommersant Sayshttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=aqqL5pkvFbqo

By Anastasia Ustinova

July 8 (Bloomberg) -- OAO AFK Sistema, Russian billionaire Vladimir Yevtushenkov’s holding company, will sell its stake in national fixed-line holding company OAO Svyazinvest to the government for debt relief and assets, Kommersant said.

Sistema will get the 23 percent of OAO Moscow City Telephone that it doesn’t already control in exchange for 25 percent of Svyazinvest and half of mobile operator Sky Link, the newspaper said, citing unidentified people familiar with the matter. In addition, state bailout bank VEB will assume Moscow City Telephone’s 26 billion-ruble ($825 million) debt, Kommersant said.

To contact the reporter on this story: Anastasia Ustinova in Moscow at austinova@bloomberg.net

Last Updated: July 8, 2009 00:37 EDT

Sistema Rises in Moscow on Report of Svyazinvest Stake Salehttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=abaxRG4570YI

By William Mauldin

July 8 (Bloomberg) -- AFK Sistema headed for its biggest gain in a month after Kommersant reported the holding company of billionaire Vladimir Yevtushenkov agreed to sell its stake in OAO Svyazinvest to the government.

Sistema will sell its 25 percent stake in Russia’s fixed- line telephone holding as well as half of mobile operator Sky Link in exchange for the 23 percent of OAO Moscow City Telephone that it doesn’t already own and debt relief, Kommersant reported, citing unidentified people familiar with the deal.

Sistema advanced 7.8 percent to 12.30 rubles on the Micex Stock Exchange as of 10:56 a.m. in Moscow, heading for the steepest advance since June 9.

Sistema spokesman Vsevolod Sementsov declined to comment on the report when telephoned by Bloomberg News.

To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net

Last Updated: July 8, 2009 03:05 EDT

Telenor Says Court to Consider Motion to Halt Shares Transferhttp://www.themoscowtimes.com/article/1009/42/379370.htm

08 July 2009 Reuters

OSLO — Norway’s Telenor said Tuesday that a Moscow court had agreed to hear on July 21 a motion to halt the transfer of its shares in mobile firm VimpelCom to the government agency in charge of auctioning them off.

“We’ll do whatever we can to stop a potential forced sale,” Telenor spokesman Dag Melgaard said.

He added, however, that a separate motion for a stay of execution of the transfer of its shares to the Federal Property Management Agency, until after the court hearing, had been denied.

VimpelCom, Russia’s second-biggest mobile operator, is 44 percent owned by billionaire Mikhail Fridman’s Alfa Group, while Telenor owns 29.9 percent.

The Federal Court Marshals Service was ordered last month to auction the shares and the property agency was entrusted with organizing the sale. The marshals plan to sell Telenor’s stake to cover a $1.7 billion fine awarded by a Siberian court, which had ordered the Norwegian group to pay to VimpelCom damages after tiny shareholder Farimex claimed Telenor had held back VimpelCom’s expansion in Ukraine.

Telenor is contesting this ruling, which it views as part of its protracted dispute with Alfa Group, although Alfa has denied links to Farimex. Telenor’s appeal against the fine is due to be heard by another Siberian court on Sept. 30, but bailiffs have said the hearing of the appeal would not halt enforcement or stop them from selling the stake.

Melgaard said Telenor was confident the shares would not be transferred before July 21, even though the motion for a stay had been denied.

“They have said that a preparation of the sale will take at least two months … so there is no clear and present danger of that,” Melgaard said.

Synterra and Verizon Business Sign Agreement to Provide Customers Direct Network Connectivity to Russia and the Worldhttp://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/07-08-2009/0005056285&EDATE=

Verizon Business' Expansive Global Network Offers Advanced Network Capabilities for Multinational Customers

BASKING RIDGE, N.J. and MOSCOW, July 8 /PRNewswire/ -- Synterra, a national telecommunications service provider of the Russian Federation, and U.S.-based Verizon Business, a leader in delivering communications services around the world, have signed a master services agreement that will provide significant benefits to customers of both companies. The signing occurred in Moscow on Wednesday (July 8) during the week of the U.S.-Russian Presidential Summit.

The joint agreement will allow Synterra customers in Russia to expand their geographic presence by accessing the Verizon Business advanced global communications network, which spans six continents. Verizon Business also will be able to leverage the Synterra network and send customer traffic to major cities throughout Russia.

Independent telecommunications system operators in Russia will send their traffic to the Synterra data center in Moscow, where the traffic will be transferred to the Verizon Business global network. The network will provide Synterra customers with access to more than 150 counties, 2,700 cities and 200 data centers located around the world, as well as to Verizon Business' voice, data, video and IP services.

Verizon Business also will use Synterra's Moscow data center to deliver customer traffic directly to the Synterra network.

"Signing of this agreement between one of the biggest communications companies in the world, Verizon Business, and the Russian national communications service provider Synterra is an important step on the way to innovative cooperation between our countries and the realization of arrangements of the world summit concerning the development of the information society," said Vitaly Slisen, general director of Synterra.

In 1996, a Verizon Business predecessor company began offering multinational customers communications services to Russia. One of the most recent offerings is the fast-growing Private IP service. The new agreement with Synterra will expand the reach and service offerings for Verizon Business enterprise customers throughout Russia.

"Verizon Business is focused on providing communications solutions for our enterprise, government and wholesale customers around the world," said Blair Crump, Verizon Business group president of worldwide sales. "Our expansive global network infrastructure gives our Verizon Business customers a firm foundation on which to build their future success. With this new agreement, Synterra customers also will have the opportunity to use our advanced global network for their communications needs, while our Verizon Business customers can expand into additional Russian cities."

During the signing ceremony in Moscow, Detlef Eppig, director of Verizon Business operations and technology for Central and Eastern Europe, said: "The Russian market is a growing region for international business. We have many multinational customers with company locations in Russia and look forward to offering them more network services, connections to more cities and diversity for their mission-critical communications needs. Our agreement with Synterra gives us the opportunity to strengthen our position in Russia."

Evraz Aims to Raise $900 Million in Bond, Share Offer (Update1)

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4AQG8jah9Fw

By Yuriy Humber and Maria Kolesnikova

July 8 (Bloomberg) -- Evraz Group SA, the largest steel supplier to U.S. and Russian railroads, said it plans to raise $900 million through an offering of convertible bonds and shares to refinance debt.

The steelmaker, which has $3.8 billion in debt payable before June 30 next year, plans to sell $600 million of bonds due 2014 and $300 million of new global depositary receipts, Moscow-based Evraz said today in a statement. The offerings are to eligible institutional investors, Evraz said.

Lanebrook, a holding company that owns about 78 percent of Evraz on behalf of Chairman Alexander Abramov, Chief Executive Officer Alexander Frolov, and investors led by billionaire Roman Abramovich, has told the steelmaker it will spend $200 million on new shares and buy $200 million of bonds, Evraz said.

The bonds carry a quarterly coupon of 6.75 percent to 7.25 percent and can be convertible into London-listed GDRs for a price that’s 28 percent to 35 percent more than the offer price of the new GDRs.

Goldman Sachs Group Inc and Morgan Stanley & Co. will manage the sales with Deutsche Bank AG, Evraz said. Lazard & Co. will acts as financial adviser for Evraz for the offering.

Evraz has $8.5 billion in total debt, it said in a separate statement today.

To contact the reporters on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net

Last Updated: July 8, 2009 03:05 EDT

Corrected - VEB provides Evraz one-year extension on $1.8 bln loanhttp://www.interfax.com/3/504477/news.aspx

(To correct amount of loan in headline)

MOSCOW. July 8 (Interfax) - The supervisory board ofVnesheconombank (VEB) has approved a one-year extension on a$1.8-billion credit line provided to Evraz Group, Evraz said in astatement.

Russia Evraz may close book on bond issue Wed –sourcehttp://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSL848558420090708

Wed Jul 8, 2009 3:04am EDT

MOSCOW, July 8 (Reuters) - Russia's Evraz (HK1q.L: Quote, Profile, Research, Stock Buzz), part-owned by billionaire Roman Abramovich, could close the book on its $600 million bond issue and $300 million share issue as early as Wednesday, a source close to the placement said.

"The organisers hope that everything will be closed within the next few days, though it is possible that the placement will be completed today," the source said.

Lanebrook, the investment vehicle that holds 77.6 percent of Evraz, said it expects to subscribe for about $400 million of the offerings, split roughly equally between the bonds and GDRs.

(Reporting by Olga Popova, writing by Alfred Kueppers, editing by Toni Vorobyova)

Interview with Polyus Gold CEOhttp://www.businessneweurope.eu/dispatch_text9062AlfaJuly 8, 2009

Vedomosti published an in depth interview with Evgeniy Ivanov, CEO of Polyus Gold today. We think most of the details in the interview on the company's development plans and the acquisition of KazakhGold were already well known to the market. The only news was that management is going to propose interim dividends for the 1H09. However no details on the amount of the dividends payment were given.

VSMPO-Avisma and Boeing launch joint venturehttp://www.businessneweurope.eu/dispatch_text9062

RencapJuly 8, 2009

Yesterday (7 July), Boeing and VSMPO-Avisma announced the launch of a 50/50 joint venture (JV), Ural Boeing Manufacturing (UBM), originally created in 2007 to produce high added value parts, mainly for Boeing's 787 aircraft. The JV's initial budget was about $60mn. Production capacity is for 10 aircraft sets per month. Boeing has announced it will spend $27bn in Russia over the next 30 years, of which $18bn will go towards titanium purchases. Some $5bn will be spend on design and projects in Russia, and $4bn on purchases of aerospace equipment. UBM is expected to produce $700-900mn worth of titanium for the Boeing 787, which is Boeing's most titanium-intensive aircraft with about a 10% share of titanium in its total weight. The JV will also process parts for the Sukhoi Superjet-100. Boeing has requested Federal Antimonopoly Service approval to increase its share in the JV to 69.5%, as VSMPO has not yet paid its share in cash, according to Vedomosti today (8 July). Boeing contributed its share with equipment. After VSMPO pays in full its share, the partners are to have 50/50 shares.

VSMPO-Avisma CEO Eugeny Romanov said yesterday that the company's production level will likely remain flat YoY in 2009. VSMPO-Avisma is negotiating a $100-150mn credit with Sberbank to finance its investment programme and its share in the JV. Last year, the company planned to borrow $1bn for production development, but these plans were suspended. In Nov 2008, the company announced an approximate $400mn credit from VEB for its capex programme.Romanov has announced that he is leaving VSMPO-Avisma to join another company under the Russian Technologies umbrella (Russian Technologies owns over 66% of VSMPO). The company's Chairman Mikhail Voevodin has said the new candidate for the post of CEO will likely be discussed today by the board of directors.

Russia needs more MTVs, investor tells Kremlinhttp://wiadomosci.onet.pl/2004338,10,russia_needs_more_mtvs_investor_tells_kremlin,item.html

The Kremlin should cut red tape to encourage private equity investment in future business stars, the investor who brought MTV to Russia said as business leaders met in Moscow during the visit of U.S. President Barack Obama."We'd like to see laws changed, we'd like to see the environment changed (in a way) that would further promote private equity investment," Drew Guff, managing director of Siguler Guff, a private equity investment group managing $8 billion, said in an interview.

"What is good for small and medium business is good for us."Guff said Russia needed to make elementary bureaucratic reforms -- such as reducing the paperwork involved in registering a new business -- as well as legislative reforms to codify elementary transactions such as securities conversion.

Siguler Guff developed MTV Russia with a local entrepreneur, before bringing in U.S. MTV owner Viacom, which ultimately sold its stake to Russian tycoon, who now operates it under licence.

On Tuesday, Guff represented the U.S. financial community at a summit of Russian and U.S. business leaders, who met with senior Russian officials.

While big headline investments were few, analysts said warming ties and successful lobbying at the summit could have more lasting benefits at the middle echelons of the economy where private equity is most active.

"The benefits will be longer term and, currently, more concentrated in private equity and venture capital deals in areas such as technology, agriculture, pharmaceuticals and medicare," Uralsib strategist Chris Weafer said in a note.

Private equity helped create many Russian household names, though the deals and the products are largely unknown outside Russia, apart from the broadcast industry, where investors launched both MTV and popular Nasdaq-listed entertainment channel CTC

Media.

Private equity has also financed cutting edge businesses on which the Kremlin is depending to diversify Russia's commodity-focussed economy and to continue the Soviet legacy of achievement in science and engineering.

Guff, who said he usually had 5-6 potential investments on his radar, plans to continue investing in information technology, telecoms and retail, where the bulk of Siguler Guff's $1 billion Russia portfolio is already invested.

It is persisting in retail in spite of a downturn in real wages and high unemployment during Russia's first recession in a decade.

"People still need to buy food and buy their basic goods," Guff said. "We would avoid frivolous areas of retail, things that people don't absolutely need to buy today, like toys for their canaries... or diamond studded dog collars."

(c) Copyright Thomson Reuters 2009.

Deere Russia Farm Equipment Sales Fall 50% on Tariffs (Update3)

http://www.bloomberg.com/apps/news?pid=20601103&sid=az6wL4E9dyeo

By Maria Kolesnikova and Paul Abelsky

July 7 (Bloomberg) -- Deere & Co., the world’s largest maker of agricultural equipment, said sales in Russia have plunged more than 50 percent this year after the country imposed tariffs and loan limits on foreign farming machinery.

“The combination of that is very significant and cut our business more than half,” Samuel Allen, chief operating officer and president, said in an interview in Moscow today.

Loan restrictions have more than doubled borrowing costs for farmers willing to buy foreign machinery, said Allen, who will succeed Robert W. Lane as chief executive officer of the Moline, Illinois-based company on Aug. 1.

Deere and Peoria, Illinois-based Caterpillar Inc. were most affected by loan restrictions and tariffs of as much as 25 percent imposed by Prime Minister Vladimir Putin, according to a U.S. Chamber of Commerce survey earlier this year of the top 50 American businesses in Russia. Putin said yesterday Russia has no plans to extend farm machinery tariffs beyond the “severe” phase of the economic crisis.

International producers expect the Russian government to eliminate import tariffs and provide support for companies who set up assembly lines in Russia, similarly to the way it supports carmakers, said Allen, 56.

Deere may invest about $500 million in Russia during the next five to seven years, Allen said. Deere has a production unit in Orenburg and is developing an $80 million project in Kaluga, where it may also build a production plant. The company and its dealers employ about 2,000 people in Russia.

“We’d look at investing in a manufacturing facility that’s stamped ‘Russian-made’ for all of our businesses,” Allen said. The facility will be flexible and may produce tractors, combines, forestry and construction products, he said.

Transition Time

Deere could start such production as early as 2010 in a leased facility if the government provides favorable transition time in terms of allowing a ramp-up, he said.

While the U.S. and Europe will remain “good” markets, “the growth opportunities of the world are in the emerging markets,” Allen said. Russia and other former Soviet states, Brazil and Argentina present “significant opportunities and the rate of growth will be much more accelerated there in comparison to that of the western world,” he said.

Allen, who headed Deere’s construction unit before being named last month to succeed Lane, expanded the company’s construction and forestry division in emerging markets.

Joint Ventures

Deere formed a joint venture in India last year with Ashok Leyland Ltd. to make and market backhoes and four-wheel drive loaders. Earlier in 2008, Deere announced a joint venture to build excavators in China, the first time it had built non- agricultural equipment in that market.

Allen said he plans to “capture a lot of the growth that will be going on in the agriculture around the world over the next 20 years” once he becomes CEO.

The company doesn’t expect to lay off more employees and may start hiring soon, Allen said. “We have put on the brakes real hard early on, so our field inventories are less than half of what our competitors are,” he said.”

Deere, which also makes equipment for the construction industry, expects the decline in the North American building market to bottom out in 2009 with improvement next year, he said. “It won’t be until some time in 2010 that we’ll see a turn back up,” Allen said.

Deere declined $2.04, or 5.4 percent, to $35.98 at 4:01 p.m. in New York Stock Exchange composite trading.

-- With reporting by Ellen Pinchuk in Moscow. Editors: Mark Sweetman, M. Shankar, Kevin Miller

To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net; Paul Abelsky in St. Petersburg at pabelsky@bloomberg.net.

Last Updated: July 7, 2009 16:05 EDT

Wabco gets supply contract with Russia's Kamazhttp://www.forbes.com/feeds/ap/2009/07/07/ap6625841.html

Associated Press, 07.07.09, 11:38 AM EDT

WASHINGTON -- Wabco Holdings Inc., which makes safety and control systems for commercial vehicles, said Tuesday it received a contract to supply antilock braking systems to Russian vehicle maker Kamaz.

Terms of the deal were not disclosed.

The Hartford, Conn.-based company will also supply air disc brakes and actuators for the company's commercial vehicles. Kamaz is the largest manufacturer of heavy duty trucks, buses and trailers in Russia.

The Russian manufacturer has had a relationship with Wabco since 1992.

Shares of Wabco fell 60 cents, or 3.5 percent, to $16.34 in midday trading.

Russian business airport plan stalls on take-off

http://www.flightglobal.com/articles/2009/07/07/329306/russian-business-airport-plan-stalls-on-take-off.html

Development of Russia's first dedicated business airport appears to have come to a halt after the government removed the military site from a list of approved dual-use facilities.

Billionaire developer Suleiman Kerimov's Nafta Moskva group had intended to redevelop Kubinka airfield, about 50km (30 miles) south-west of the capital.

Military units at the site, including the Russian air force's aerobatic display team, had begun preparing to move out of the base later this year in readiness for its redevelopment.

Nafta Moskva had already set up a subsidiary company, Kubinka Airport, and was close to completing the concept phase of the project.

However, Prime Minister Vladimir Putin signed an order on 22 June taking Kubinka off a list of approved dual-use sites, according to Kommersant newspaper. The reason for the move is not known.

Russian law allows designated military bases to be used for civil flights, government transport and test-flying.

Kerimov's business empire has previously carried out projects in co-operation with the Russian defence ministry.

The company declines to comment on the situation.

Top priorities: Murmansk infrastructure and Sochi Olympic Gameshttp://www.barentsobserver.com/top-priorities-murmansk-infrastructure-and-sochi-olympic-games.4613004-16175.html

2009-07-08 The development of the Murmansk Transport Hub is just as important for Russia as the Sochi Olympic Games, Governor Dmitry Dmitriyenko argues. The implementation of the infrastructure plans are due to start after 2010.

In this week’s meeting with federal Transport Minister Igor Levitin, Governor Dmitriyenko highlighted the vital role of the Murmansk Transport Hub, comparing its importance with the upcoming 2014 Olympic Games in Sochi as well as the Asian-Pacific Economic Cooperation, Regnum reports.

Minister Levitin was in Murmansk to attend a meeting on the development of the transport hub, a process which Levitin himself is leading. In the meeting, the outer borders of the Murmansk Sea Port were agreed upon, something will take the port development plans an important step closer implementation. The port areas will stretch over to the western side of the Kola Bay where both a new railway line and several industrial facilities are planned.

The projecting phase of the grand infrastructure plans will continue to 2010, when the construction of infrastructure objects can start, the minister confirmed. A total of 750 million RUB of federal money is earmarked the project phase.

As reported earlier by BarentsObserver, however, Mr. Levitin recently admitted that the development of the transport hub is being delayed if compared with the development of the huge Shtokman gas field in the Barents Sea.

The Murmansk Transport Hub will be vital for the oil and gas industry in the region, which is in dire need of additional port, service and infrastructure facilities. Gazprom and its partners in the Shtokman Development Company plan to have the Shtokman field in production from year 2013.

With him to Murmansk, Minister Levitin also brought promises of 2,5 billion RUB of extra infrastructure development money, half of which will be spent on the upgrade of the highway linking Murmansk with Sankt Petersburg.

The stakeholders in the Murmansk Transport Hub are the Murmansk the Murmansk Commercial Sea Port (40%), Russian Railways (25%), Rosneft (15%), the federal Russian Sea Port Agency (15%) and the Murmansk regional administration (5%).

The 4th Military and Naval Show in Saint-Petersburg: Interview with the Director of OPK's Shipbuilding Project Andrei Fomichev http://www.earthtimes.org/articles/show/the-4th-military-and-naval,884314.shtml

Tue, 07 Jul 2009 17:12:17 GMTIZVESTIA, Russia, July 7 /PRNewswire/ --

- Russia Develops Highly Competitive Military Goods Keeping With The XXICentury Standards

The 4th Military and Naval Show became a showcase for the achievements ofRussian shipbuilders and designers and proved that 2007 and 2008 werelandmark years for the Russian Navy. The most important participant of theshow was the United Industrial Corporation (OPK), which embraces the largestshipbuilding factories Severnaya Verf (Northern Shipyard), Baltiysky Zavodand Iceberg design Bureau. But the real star of the show was the OPK-builtcorvette Steregushchy, designated as Project 20380. In 2008 the corvettejoined the Russian Navy. Izvestia correspondent Artem Ostrovsky discussed theimportance of this event for the domestic navy and the prospects of militaryshipbuilding with the Director of OPK's Shipbuilding Project Andrei Fomichev.

Question: Andrei Borisovich, what makes Steregushchy unique?

Answer: First of all, Project 20380, of which Steregushchy is a part, isnot a rehash of old Soviet design. The project has been developed practicallyfrom scratch by the Almaz Central Marine Design bureau in the post-SovietRussia. During the design stage 21 inventions were patented and 14certificates issued for registration of computer programs. The corvetteemploys stealth technology which makes it invisible to enemy detectors.Highly automated operation and firing systems require fewer crew members tooperate them. And last but not least, Steregushchy is equipped withup-to-date weapons, Russian made. The weapons, including a deck-padhelicopter, allow the corvette to destroy surface, subsurface, air andshore-based targets, fight as a combined team or on its own, includingfighting even heavier ships.

Question: Are you planning further construction?

Answer: Of course, Steregushchy is not the only ship of its kind. It is alead ship of a series of corvettes designated Project 20380. The OPK yard hasa government commission to expand the series with the Storozhevoy,Soobrazitelny, Boiky and Stoiky corvettes. Three ships out of the four are

already in various stages of construction.

Admiral Vladimir S. Vysotsky, head of the Russian Navy, has said thatSteregushchy-type corvettes will form the basis of the Russian Navy until2030. According to the management's estimations the Navy will need severaldozens of new corvettes. In other words the transfer of Steregushchy to thecustomer marked not just the start of production of surface vessels in thenew Russia, it marked large-scale production.

Question: Does the corvette compare favorably with its foreign peers?

Answer: Steregushchy is unique not only for the Russian Navy, as far asits technical and combating qualities go. Project 20380 comprising newlybuilt ships is known abroad as project 20382 Tiger and caused excitementamong foreign customers. Foreign experts estimate that on the global weaponsmarket Project 20382 ships will have no competitors in their class in theforeseeable future. Therefore the export potential of Tiger corvettes is veryhigh, estimated between twenty to thirty billion dollars.

Question: Does this mean that Russia will have a competitive edge on theglobal weapons market?

Answer: Absolutely. Until recently, under cooperation programs in themilitary and technical area, Russia has been supplying abroad mostly reworkedUSSR-developed weapons. Russia's foreign competitors reckoned that in thefollowing decade the modernization potential would run out. In that case,they believed, Russia would start to lose cooperation partners and slowlywithdraw from the weapons market. The development of Steregushchy and itsexport version means that the Russian Federation is beginning to possesshighly competitive military goods for foreign customers up to the standardsof the XXI century. They will not only preserve Russia's current stance onthe weapons market but will most likely expand the country's role in theglobal military and technical cooperation.

Question: Is OPK developing other areas within the confines of militaryshipbuilding?

Answer: OPK enterprises are the leaders of the military and industrialcomplex, accounting for 75 % of the surface ships construction program. Inthe last year apart from Steregushchy OPK gave the Russian Navy three newships. In 2008 the Federal Service for Defense Contracts (the Rosoboronzakaz)approved the Severnaya Verf's (part of OPK) status as the only Project 20380corvette and Project 21270 motor boat supplier. Today this is the onlyenterprise to have been included in the register of the exclusive suppliersof Russian weapons and military equipment. Besides, OPK's shipyards have beenaccepted by the Federal Industry Agency and Rosoboronexport as a prospective

contractor under a number of orders and agreements with different countriescomprising 10 different areas of military and technical cooperation.

The yards of OPK are in the process of construction of the ocean frigate"Admiral Flota Sovetskogo Soyuza Gorshkov" for the Navy, designated asProject 22350, as well as a lead communications ship and a special purposemotor boat. We are also developing military and technical cooperation.Several vessels are being modernized for the Algeria Navy. At the recentMilitary and Naval Show in Saint-Petersburg Vladimir Vysotskiy announced thegovernment's intention to have another frigate built by the OPK shipyards.

Question: Such large-scale prospects will certainly require upgrading andexpanding the capacity of the yards...

Answer: According to experts' estimates, Russia needs approximatelyseventy surface vessels for offshore maritime zone. OPK's yards already haveenough capacity to increase the scale of the state defense contracts programthreefold. Nevertheless OPK has started large-scale modernization andexpansion of capacity. OPK's strategic aim is to create an advanced,internationally competitive compact shipyard, capable of producing the entireline of large-capacity vessels with a deadweight of up to 300,000 tons andmilitary vessels of virtually every class. As regards civil shipbuilding theunited yards specialize in the construction of high-technology, technicallyadvanced ships for exploration, extraction and transportation of rawhydrocarbons from oil and gas fields developed on the continental shelves.Moreover, OPK-built military ships can also be used to complete the shelfprojects: the Naval Doctrine of the Russian Federation makes the Navydirectly responsible for the protection of the inshore area, including thevast Russian shelf territory.

Questions: It is evident the OPK enterprises don't have a shortage oforders. But according to recent information Severnaya Verf ended in the redin 2008. How can you account for that?

Answer: The losses shown in the accounting statements of the factory aretechnical and attributable to the restatement of foreign currencyliabilities, namely loans from Russian banks. This was due to the sharp Rubledecline against the Dollar and the Euro. Severnaya Verf is obtaining foreigncurrency loans to finance its export contracts and the repayment of the loanswill be effected out of the foreign currency revenue. However the expectedproceeds are not recognized in the accounting statements and not restated.This is why the growth of the dollar and the Euro results in loss recognition.

Question: What are the prospects of financing the state defense ordersgiven the current economic situation?

Answer: The Deputy Prime Minister Sergei Borisovich Ivanov, directlyaddressed this issue at the recent show. According to his words the Russiancorvette and frigate construction program is under way and will be fundedfully and without delay.

About OPK

United Industrial Corporation (OPK) is a diversified holding company withtotal value of assets of more than US$13 billion. OPK develops and manages aninvestment portfolio in major sectors of the Russian economy, including thefinancial sector, real estate development, shipbuilding, mining and media.For more information please visit the OPK website http://eng.opk.ru/

Activity in the Oil and Gas sector (including regulatory)

Russian gas exports in 5 months down by 50pct YoYhttp://www.steelguru.com/news/index/2009/07/08/MTAxMzc0/Russian_gas_exports_in_5_months_down_by_50pct_YoY.html

Wednesday, 08 Jul 2009

RIA Novosti quoted the Federal Customs Service as saying that, Russia natural gas exports to countries other than former Soviet republics declined 50%YoY in January to May 2009 to 37.8 billion cubic meters.

The Federal Customs Service said exports to the Commonwealth of Independent States a loose association of former Soviet republics excluding the Baltic States fell by 41.2% to 5.3 billion cubic meters. Overall, Russia exported 43.1 billion cubic meters worth USD 12.9 billion in the first five months of the year.

The national statistics service Rosstat earlier said that Russia natural gas output declined 19.2%YoY in the first five months of 2009 to 238 billion cubic meters.

Natural gas production had been expected to reach 620 billion cubic meters to 644 billion cubic meters in 2009 with exports estimated at 190-196 billion cubic meters. In 2008, output grew 1.6%YoY to 663 billion cubic meters with exports of 174.3 billion cubic meters bringing in USD 66.4 billion.

(Sourced from RIA Novosti)

LUKoil puts Venezuela's Junin-3 reserves at 600 mln tonshttp://en.rian.ru/business/20090707/155460126.html

MOSCOW, July 7 (RIA Novosti) - LUKoil estimates the oil reserves of the Junin-3 block in Venezuela at 600 million tons, the president of Russia's largest private oil producer said on Tuesday.

LUKoil and the State Petroleum Company of Venezuela signed an agreement on joint study of the Junin-3 block in the Orinoco heavy oil belt in Venezuela's Guarico state last July.

The study was carried out to evaluate the project's potential for producing, refining and exporting extra heavy oil.

Construction of Specialized Oil-Loading Port Finishes in Kozmino Bayhttp://vladivostoktimes.ru/show/?id=40246&r=8&p=

Capacity of the port will allow to accept to 50mln oil a yearVLADIVOSTOK, July 7, vladivostoktimes.com Construction of the specialized sea oil-loading port finishes in Kozmino Bay. It is situated in the end point of the pipeline system "Eastern Siberia – Pacific Ocean." At the first stage it will accept 15mln tons a year with an opportunity of increase to 50mln tons. The press-service of the Nakhodka city district Administration reported it to RIA PrimaMedia. The Head of Nakhodka Oleg KOLYADIN has reported at the meeting with representatives of big business of the city that construction of the specialized sea oil-loading port finishes in Kozmino Bay. It is situated in the end point of the pipeline system "Eastern Siberia – Pacific Ocean." At the first stage it will accept 15mln tons a year with an opportunity of increase to 50mln tons. The oil port includes the railway cargo station and a ground of discharge jetties for 144 places, technological corridor of communications 23km long, a ground of the oil plant with capacity of the storage park of 350 thousand cubic meters, complex of coastal and sea constructions with jetties, providing placing of tankers of deadweight to 150 thousand tons. Readiness of the port at present moment is 80%, the first tanker is to come to the port in the end of December 2009. Nakhodka expects implementation of the most scale project in the near future. It is construction of the Rosneft oil-processing plant at the border of the Partizansk district, in Yelizarova Pad. Its capacity will be 20mln tons of oil a year with processing depth of 95%. Meanwhile the work on the project continues, the company "Rosneft" has begun to solve the housing problem of present and future workers of the oil-processing plant. A 100-apartment house in Rybatskaya Street is being built, in future – construction of the whole district, where there will be not only houses, but also kindergartens, schools, polyclinics, sports institutions. According to Oleg KOLYADIN, concentration of so scale projects at the territory of the city district will provide its economic development and social stability. First of all, it is employment of population of Nakhodka and nearby districts. Already now over five thousand people are busy at objects in Kozmino Bay, 1600 more will be necessary for construction of concrete foundations, and almost 20 thousand people will be attracted for implementation of the project of the oil-processing plant. Construction industry, services sector and others will start developing, extra taxes for solution of local problems will be received by the city budget.

Energy | 07.07.2009

EU, Russia struggle for stake in trans-Saharan gas pipeline http://www.dw-world.de/dw/article/0,,4461768,00.html

Brussels and Moscow want in on a deal between Nigeria, Niger and Algeria to construct a 4000-kilometer pipeline for natural gas. It could be a very lucrative venture, but it's also comes with some serious risks.

The $10 billion (7.2 billion euros) pipeline agreement, which was formally signed on Friday, could send as many as 30 billion cubic meters of natural gas from Nigeria to Europe.

The French energy company Total as well as Royal Dutch Shell are eager to get involved, and many European leaders hope that a direct connection with Nigeria, would help ease the EU's dependency on Russia for its gas needs.

But that fact hasn't at all been lost on those in power in Moscow, who also want a stake in the pipeline.

Last week, Russian gas giant Gazprom signed a 50-50 joint venture with the Nigerian National Petroleum Company that would see the Russians invest $2.5 billion in oil, gas processing and transport activities.

"Now that this agreement is in place, we will be talking with prospective partners who might be interested in going to bed with us on this project," Nigerian Energy Minister Rilwan Lukman told AFP news agency after the deal with Niger and Algeria was announced.

The question is: Which of the potential suitors will be successful?

The Algerian alternative

Gazprom's success in quickly cooperating with Nigeria has dismayed many business and political leaders in Europe, who have been trying for years to establish similar investment links.

But Andreas Hergenroether, the head of the German foreign trade office in Algiers, says that existing agreements between the EU and Algeria - the world's second largest producer of natural gas - could provide a hedge against the bloc becoming completely dependent on Russia.

He points out that plans already exist for two pipelines which would directly connect Algeria and the EU.

"Of course, the corresponding contracts with European gas providers have to be signed, but they would in fact represent alternatives that could be considered for diversifying the provision of gas," Hergenroether told DW-WORLD.DE.

Still, various types of uncertainties make all deals of this kind a risky enterprise.

Prices and security

Natural gas is a lucrative business, but investors have to cope with the fact that the energy market in the current global economic situation is extremely volatile.

Heino Eifert, an expert with the Energy Information Service in Hamburg, thinks that would-be money-makers could get burned.

"I'd be careful with all Gazprom investments because no one knows what's going to happen to gas prices in the future," Elfert told DW-WORLD. "It is likely that gas prices will fall further than Gazprom is assuming."

And even if the price is right, the trans-Saharan pipeline is routed through some very dangerous parts of the world, and rebel groups oppose the project.

In Nigeria, for example, a group called the Movement for the Emancipation of the Niger Delta or MEND has vowed to torpedo the pipeline.

The same group attacked a Chevron oil platform junction, hijacked a chemical tanker and kidnapped six oil workers in Monday - those actions underscored MEND's willingness and ability to disrupt economic projects it considers to be exploiting the local populace.

Islamist attacks by al Qaeda and affiliated or similar groups are also a worry.

So while the EU and Russia compete to get a stake in the 4000 kilometer-long trans-Saharan pipeline, some are questioning whether the massive project will pay off or can be protected once it is completed.

Author: Alexander Göbel (jc/AFP)Editor: Michael Knigge

Yamalo-Nenets Autonomous District

Northern Expedition

http://www.fedpress.ru/federal/spec/top_regional/id_145875.html

Workers of the geological exploration company “Northern Exhibition” stopped their hunger strike, which started on June 25 and lasted for over a week. Administration of the company paid off all wage debts to these specialists. The situation was solved thanks to

active participation of the regional authorities. Thus, vice-governor Alexander Kim went to Moscow to solve financial problems and managed to persuade “BurGas” to pay its debt to Northern Expedition.

Western Siberia’s Potential Is Far from Exhaustionhttp://www.youroilandgasnews.com/western+siberia%E2%80%99s+potential+is+far+from+exhaustion_35386.html

Wednesday, Jul 08, 2009

Interview with Sergey Ostapenko, Vice President, Exploration, TNK-BP.

The financial crisis made oil companies cut their expenditures for geological exploration, which has become the subject of numerous concerns among officials and officers. Sergey Ostapenko, Vice President, Exploration, TNK-BP, told about the funds spent by TNK-BP for exploration, current activities of the company, and plans for future to Galina Starinskaya, correspondent of RBK Daily.

— In March, the company declared about additional allocation of approximately 1 billion rubles for geological exploration works. How much will the company spend for financing these works in 2009 and in future?

— Approximately $350–400 million will be invested into geological exploration works annually in the nearest 10 years. Most of these funds will be spent for implementation of new projects, such as the Uvat project and development of the Bolshekhetsky, Astrakhansky, and Timan-Pechora license areas. Other new projects will possibly emerge in this period. Still, we are not forgetting the old regions and are actively working in the Orenburg Region, Khanty-Mansi Autonomous Area, and Samotlor field. We do not hope to discover any large fields there and just want to find small deposits development of which could be started in the nearest year or two.

—Which territories are interesting for TNK-BP?

— Western Siberia, including the Yamalo-Nenets Autonomous Area, Khanty-Mansi Autonomous Area, and southern Tyumen Region, remains to be very promising for us. I think that the potential of Western Siberia is far from being exhausted and active geological exploration works can ensure the increment of reserves required for maintaining the production in this region. There are still considerable undiscovered reserves here, and we are going to find and develop them. Apart from that, modern technologies help us continue our search of hydrocarbons overlooked in old fields. The upper parts of the geological section remained under-explored in the soviet period. We are now returning to the upper parts of the section and finding additional sources of reserves in them. This is how we are working in Western Siberia and the Tyumen Region.

The Orenburg Region is very important for us. In spite of financial difficulties, the company acquired three more new licenses in February for development of fields in this region. Moreover, recently TNK-BP got new license areas in the neighboring regions – two areas in the Samara Region and one area in the Saratov Region.

In previous years, the company exerted considerable efforts for acquiring new licenses and laid a good groundwork for future. We are following the publications of the Ministry of Natural Resources on new tenders and planning to take part in them if the offered licenses are interesting for us.

— What geological exploration works are performed by TNK-BP abroad?

— We have a project in Venezuela with deposits of heavy oil. A year ago, we signed a contract with the state oil company PDVSA for joint exploration of the Ayacucho-2 block in the Orinoco province. We are keeping track of all events throughout the world and analyzing possibilities of acquiring new projects in the near and far abroad.

— What is the progress of geological exploration works in the Timan-Pechora and Astrakhansky license areas recently acquired by the company?

— In one of the Astrakhansky license areas, we have completed seismic exploration works and are performing such works in the other two Astrakhansky license areas. In late 2010, we will start drilling of an exploration well there. In Timan-Pechora, where we have four licenses, the situation is similar, and the works are in their opening stage. We are now holding a tender for performance of seismic exploration works here. In 2010, these territories will be covered by 2D and in some cases 3D seismic exploration works.

— In June, TNK-BP sold its oilfield service enterprises to the American company Weatherford. Did this fact have any impact on the geological exploration activities of the company?

— No, hardly any impact at all. First, our contacts with the sold oilfield service enterprises still remain in force. We have the right to contract Weatherford for provision of drilling rigs and advanced technologies. Second, geological exploration works in the fields and license areas of TNK-BP are performed by the winners of tenders. Our role here is to provide statements of requirements, sign contracts, and control their execution. For us, actual safety standards is one of the most important criteria for selection of contractors, followed by the price and quality of works.

— Do you prefer Russian or foreign companies?

— Russian service companies prevail. The main reason behind this trend is high prices of foreign companies. Contemporary Russian seismic exploration companies made a huge progress in recent decades. They all use western equipment, know western technologies, and are quite proficient in industrial safety and environmental protection. We would like to invoke more western companies for performance of seismic exploration

and drilling works, but right now they have to cut their costs to compete with Russian companies. The only foreign company working with us that managed to compete with Russian enterprises and win several tenders is the Chinese company BGP. Western companies are fairly competitive in processing and interpretation of seismic exploration data, and we are actively cooperating with WesternGeco (subsidiary of Schlumberger), CGG Veritas, Fugro Jason, and other world leaders in this field.

— Will TNK-BP continue replenishment of its reserves at the level of 100% in 2009?

— I think it will. The company has a large portfolio of assets and makes sufficient investments into geological exploration and development to compensate the production.

— Do oil companies need a support of the state in geological exploration? Is it necessary to create a governmental structure or, for example, a state corporation to handle geological exploration problems?

— In their license areas, oil companies perform geological exploration works with their own forces. The problem is intensification of geological exploration works on new territories, such as Eastern Siberia, northern regions of Western Siberia, and Far East. The risks there are high, and the costs are hefty. The state should probably provide preferences for working on these territories and, most importantly, participate more actively in regional activities to prepare regional geological foundations. What does this mean? Discovery of new fields is preceded by prospecting and exploration of resources, and here the role of regional governmental structures should grow. The Ministry of Geology will definitely not be restored, but some kind of state participation is absolutely necessary.

One field needing state support is education. TNK-BP is helping many higher education institutions. The problem, however, is that the industry is still based on scholars and instructors of the previous period. It is necessary to invite the new generation and talented people into universities and colleges, and this should be the state policy.

Gazprom

Gazprombank Has Q2 Loss

http://www.themoscowtimes.com/article/1009/42/379380.htm

Gazprombank reported a 4.27 billion ruble net loss for the second quarter of 2009, the bank said in a statement Tuesday, Interfax reported.

Over 90% of the loss is from paying a profit tax in the first quarter of 2009 and advanced tax payments for the second quarter, the statement said. (MT)

Gazprom - Ukraine increased gas intake from 33mcm to 120mcm/day in July http://www.businessneweurope.eu/dispatch_text9062

CitiJuly 8, 2009

Ukraine increased purchases of Russian gas in July to 120mcm/day and a large part of the gas is obviously being used to refill storage facilities, according to Gazprom's announcement. The growth of gas intake by Ukraine coincided with 27% decrease in the gas purchase price from $271/mcm to $198/mcm in 3Q09 and explains the 5% growth in Gazprom's gas output in the first week of July.

Naftogas of Ukraine's Valentin Zemlyansky said that Ukraine plans to purchase 10bcm of gas in 3Q09. For gas purchases in July alone Naftogas could have to pay about $675mn.

Although it is not clear yet how Naftogas of Ukraine would be able to accumulate sufficient funds for the timely payments, we view the news as potentially positive for Gazprom.

Alexander Korneev

Gazprom: Ukraine pays for June gas deliverieshttp://www.businessneweurope.eu/dispatch_text9062

UralSibJuly 8, 2009

Timely payment, July order up MoM. During our meeting with Gazprom (GSPBX - Buy) yesterday, we were told that Ukraine had paid in full for June gas deliveries. Payment for July should be received on August 7. Ukraine also increased its order for gas delivered in July fourfold relative to actual June purchases, newswires reported yesterday. The July order implies 120 mcmpd vs. 33 mcmpd of gas delivered to Ukraine in June. Gazprom's representatives confirmed that actual deliveries during first week of July reflect this growth, with Ukraine beginning to pump gas into underground storage facilities. This is necessary to support the potential growth in gas transit to European countries in 2H09, when EU demand recovers, as is anticipated by Gazprom. All of these facts are positive for Gazprom: cash payments for gas from Ukraine were received on time; demand for gas is recovering; and the political risks associated with the interruption of gas deliveries have been removed.

Transit route - trouble point. Ukraine is the core transit country for Russian gas exports, with approximately 75% (175 bcmpa) of Russia's gas export capacity to the EU (236 bcmpa) going through the country. Three transit trunk strings run through Ukraine, with two dedicated to exports to the EU. Ukraine also controls 13 underground storage facilities of nearly 34.5 bcm (a maximum daily output 250 mcmpd) of capacity, which are able to support the pressure needed for export transportation and to provide emergency supplies of gas to EU during the winter.

Bypassing Ukraine is the core task. During the pre-AGM press conferences in June, Gazprom confirmed that a solution to logistical dependence on transits via Ukraine is its core target, though capex will be cut from RUB700 bln ($21.9 bln) to RUB500 bln ($15.6 bln), and certain upstream projects, including the Bovanenkovo field, could be postponed. All plans regarding transportation expansion remain intact. Gazprom plans to accelerate the Nord Stream project, and there are indications that the South Stream project might go ahead as well. Victor Mishnyakov

Gazprom: Sulphur limits gas - analyst trip to Astrakhan gas field http://www.businessneweurope.eu/dispatch_text9062

UralSibJuly 8, 2009

Another step to openness and better corporate governance. We recently participated in Gazprom's (GSPBEX - Buy) field trip to the Astrakhanskoye gas field, which included a visit to the Astrakhan gas processing plant. We had the opportunity to discuss specific details of gas production at the sites, as well as strategic overviews for the Astrakhan region, with the top management and general director of Gazprom subsidiary Gazprom DobychaAstrakhan. The management members whom we met had previously worked at Gazprom's giant Orenburgskoye field, which is also located in Southern Russia. Thus, we were able to obtain a very broad comparative picture of the Astrakhanskoye and Orenburgskoye gas fields. We believe that the trip was another step by Gazprom to improve its corporate governance and provide detailed information of its core assets. The quality of the meetings confirmed our impression that Gazprom is ready to become more investor-friendly; to provide high-quality disclosures and to establish direct communication between analysts and site management members.

50% upside on DCF; target unchanged. Although we reviewed our production profiles of the Astrakhanskoye and Orenburgskoye fields upwards based on the information obtained, the positive effect on our valuation is not significant. We reiterate our Buy recommendation and target price of $7.5/ share.

All about sulphur. The Astrakhanskoye field has 30% Hydrogen Sulphide (H2S) content; thus, Gazprom's ability to exploit the Astrakhanskoye field's reserves further is fully dependent on its ability to sell sulphur (S), to meet specific ecological requirements, and to fight the main enemy - corrosion - which is linked with high sulphur content.

Even South Stream to rely on Western Siberia. We are now confident that the South Stream pipeline will - and should - rely on west Siberian gas. The corrosive characteristics of gas produced in the south of Russia are too aggressive for the pipeline. Production at the southern fields cannot be accelerated without overstocking sulphur, as the amount produced will be beyond the utilization capacities of the gas plant.