Russia 100603

Basic Political Developments Itar-Tass: Lavrov begins visit to China to synchronize watches on Iran, NKorea VOR: Lavrov leaves for China for talks on Iran, Korea VOR: Polish Minister says Poland should trust Russia's investigation of

Kaczynski plane crash Itar-Tass: Cabinet to discuss economic development scenario for 2011-2013 -

“The budget for 2011 will be drafted proceeding from the oil price of $75 per barrel,” a source in the government said on Wednesday. At the same time the growth of inflation and industrial production will be a bit lower that the Economic Development Ministry forecast earlier.

Itar-Tass: Medvedev legalises amendments to Customs Code treaty RIA: Russia ratifies Customs Code - Russian President Dmitry Medvedev has

signed a federal law ratifying the Customs Code, which paves the way for the creation of a Customs Union with Belarus and Kazakhstan, the Kremlin said on its website.

RIA: Russia hosts international anti-terrorism forum - Russia will host on June 3-5 an international forum on the ways to counter terrorist propaganda among the public.

RIA: World to face growing terrorist threats - Russia security chief - Bortnikov said the most deadly terrorism attack threats are aimed at the United States, Russia, Great Britain, Spain, Israel, Afghanistan, Iraq and many other countries.

Interfax: Terrorists plan to foil 2014 Sochi Olympics – FSB (Part 2) Itar-Tass: Some 23 terror acts averted in RF 2010 - Bortnikov RIA: Russian missile cruiser ready to visit San Francisco - A task force from the

Russian Pacific Fleet led by the missile cruiser Varyag will set sail on June 4 on a friendly visit to the United States, the fleet's spokesman said on Thursday.

RIA: Russia-Vietnam submarine deal worth record $3.2 bln — magazine - "The construction cost is $2.1 billion, but the building of all necessary coastal infrastructure and the delivery of armaments and other equipment may bring the total to $3.2 bln, which makes this deal the largest in the history of Russian exports of naval equipment," the Export of Arms magazine says in an editorial published in its June issue.

RIA: Russia to give Nicaragua $10 million in aid - Russia will provide Nicaragua with $10 million to help the Central American country tackle its budget deficit, Russian Deputy Foreign Minister Sergei Ryabkov said on Thursday.

Itar-Tass: Russia to extend $10 mln to Nicaragua Itar-Tass: Nicaragua presents ratified agreement on visa-free travel to Russia VOR: Russians will travel to Nicaragua visa-free RIA: Abkhazia, S. Ossetia may soon open embassies in Nicaragua Am.gov.lv: Fourth session of Latvian-Russian Inter-Governmental Commission

to be held in Pskov - On 4 June, the fourth session of the Latvian-Russian Inter-Governmental Commission on economic, scientific, technological, humanitarian and cultural co-operation is to be held in Pskov.

AP: Russia plans 25 percent cut to US poultry imports

Detroit News: U.S., Russia partner to cut global road deaths - At an event at the Russian Embassy in Washington on Wednesday night, both U.S. and Russian officials pledged to work to improve worldwide auto safety. That pledge follows a conference on auto safety in Moscow last November.

Georgian Daily: Beijing ‘Renting’ Russian Border Area for Chinese Farmers - Beijing has rented 426,600 hectares of Russian territory in the Jewish Autonomous Oblast and Khabarovsk Kray for agricultural use by Chinese farmers, the Xinhua News Agency Reports, a 42 percent increase in the size of such Chinese holdings inside Russia and one likely to infuriate many Russian nationalists.

Itar-Tass: Medvedev to receive credentials of eight new ambassadors - Envoys of Mauritania, Panama, South Korea, Egypt, Thailand, Sudan, Uzbekistan and Germany will present their credentials to the head of state.

Itar-Tass: Medvedev nominates incumbent Tambov governor for new term Itar-Tass: Medvedev nominates incumbent Kaluga governor for new term RFE/RL: KBR Supreme Court Again Calls For Abolition Of Balkar NGO Itar-Tass: Court convicts attempted killer of Isa Yamadayev Iinterfax: Militants, killed in Makhachkala, belonged to criminal armed group, led

by Vagabov, a suspected organizer of Moscow metro bombings – Dagestan Security Dpt.

Interfax: Militant arsenal found near scene of clash with militants in Dagestan Moscow Times: Bortnikov Reports on Dagestan Operations Moscow Times: Special Forces Are Now 'Homeless' - The Interior Ministry is

expected to reduce the number of staff in its central apparatus by withdrawing the Operative and Search Bureau, special forces and other police structures directly involved in the fight against crime.

Jamestown: Russian Military Prepares for Vostok 2010 - Preparations are intensifying ahead of the Russian operational-strategic military exercise, Vostok 2010, scheduled for June 29 to July 8 in the Siberian and Far East military districts involving more than 10,000 servicemen under the command of Army-General, Nikolai Makarov, the Chief of the General Staff.

Vremya Novostei/Russia Today: The core of domestic navigation - The first competitive chip set GLONASS/GPS will be manufactured in Japan

Georgian Daily: Has Moscow Decided to Turn to a Businessman to Save Sochi Olympics? - According to Aleksey Polukhin, the economics editor of “Novaya gazeta,” the Russian government will soon name Vladimir Potanin head of the Olympic Construction agency, Olimpstroy, in the hopes that he will solve the problems bedeviling a program in which Moscow has invested so much money and prestige

Georgian Daily: Reported Levels of Popular Support for Russian Leaders Don’t Mean what Most Commentators Think

Georgian Daily: Moscow City to Fight Appearance of Ethnic Neighborhoods Bloomberg: PineBridge’s Philipps Hired by Kremlin’s M&A Adviser Xenon -

Charlotte Philipps, the chief executive of Hong Kong billionaire Richard Li’s private equity business in Moscow, was hired by an investment firm that advises the Russian state on mergers and acquisitions in the energy sector.

BBC: Struggle for Central Asian energy riches - A year ago, the Kremlin issued a stark warning: that growing competition for control of global energy resources could spark wars on Russia's borders, including those in Central Asia.

National Economic Trends VOR: Russia taps Reserve Fund to cover budget deficit Reuters: UPDATE 1-E.Siberian oil tax back from July 1-Russia's Kudrin Moscow Times: Government May Use Higher Oil Price Estimate for 2011 Moscow Times: Government Looks to 3.4% GDP Growth in 2011 Prime-Tass: PMI shows Russian service sector recovery slows in May Bloomberg: Russian Service Industries Grew for 10th Month in May, VTB Says Bloomberg: Russia Fights for World Wheat Dominance, Undercuts U.S. Grain Bne: COMMENT: Russia must modernise or die - Unlike its Bric peers of China,

India and Brazil, Russia had a terrible crisis. After five years of ballistic growth, the Russian economy contracted by 7.9% in 2009. Analysts believe the economy will bounce back strongly in the second half of this year thanks to higher-than-expected oil prices and a gradual recovery in consumption, but the respite will only be temporary. Two papers released in May warn that after good years in 2011 and 2012, the economy could slump again, contracting by about 1.4% in 2013, unless the modernisation campaign launched by Medvedev this spring bears fruit.

Business, Energy or Environmental regulations or discussions Reuters: Russian markets -- Factors to Watch on June 3 Bloomberg: Rosneft, Gazprom Neft, Norilsk: Russian Stock Market Preview Reuters: Ex-Goldman exec Gupta quits Sberbank's board DJ: Sberbank Reveals Shake-Up Among Shareholders –Vedomosti Bloomberg: Aeroflot Airlines Says 2009 Net Income Tripled to $86 Million Reuters: Aeroflot profit triples but misses target-UPDATE 1 RBC: MegaFon about to purchase Synterra CIOL: Sistema Shyam to invest $1 bn in India Nanowerk: RUSNANO invests in a major preclinical studies center near Moscow UralSib: RusHydro looking to acquire additional hydro assets

Activity in the Oil and Gas sector (including regulatory) Prime-Tass: Kudrin: Russia to abolish zero oil duty for East Siberia Jul 1 Oil and Gas Eurasia: Unified Scale for Russian Crude Export Duties To Come

July 1 TNK-BP: RUSIA Petroleum Filed a Bankruptcy Petition after TNK-BP Served

Early Repayment Notice Dow Jones: TNK-BP: Kovykta Field Operator Files For Bankruptcy Reuters: Russia TNK-BP’s Kovykta licence holder files bankruptcy Interfax: Kovykta license holder RUSIA Petroleum files for bankruptcy Bloomberg: TNK-BP Unit Seeks Bankruptcy Amid Gazprom Feud Over Gas

Field Moscow Times: Slavneft to Sell Service Units

Gazprom Steel Guru: Government lowers forecast for Gazprom exports Upstreamonline: Kirinsky takes on Shtokman newbuilds Reuters: RLPC-Gazprom Neft's $1 bln loan pays LIB+240 bps margin-bankers PRweek: Russian oil producer Gazprom Neft appoints Hudson Sandler for PR

boost Aviationweek: Thales Alenia Gets Green Light For Yamal 400

------------------------------------------------------------------------------------------

Full Text Articles

Basic Political Developments

Itar-Tass: Lavrov begins visit to China to synchronize watches on Iran, NKorea

http://www.itar-tass.com/eng/level2.html?NewsID=15190978&PageNum=0

03.06.2010, 01.57

MOSCOW, June 3 (Itar-Tass) - Russian Foreign Minister Sergei Lavrov begins his official visit to China on Thursday.

In Beijing he will meet with China’s President Hu Jintao, State Councilor Dai Bingguo and Foreign Minister Yang Jiechi.

High on the agenda of the talks in the Chinese capital will be the most pressing problems in international relations. In particular, the Russian diplomat will synchronize watches with Chinese counterparts on the whole range of issues on Iran’s nuclear program. Russia and China are members of the six-party group of international mediators on Iran. In contrast to the European Troika – the UK, Germany, France, and the United States that actively promote tougher sanctions against Tehran, Moscow and Beijing adhere to a more balanced and restrained position. They consider that the dialogue and diplomatic efforts are the most effective way to ease concerns of the West and to bring Iran back to productive cooperation with the world community and the International Atomic Energy Agency (IAEA).

Lavrov will also coordinate positions in relation to possible settlement of the crisis on the Korean Peninsula that broke out after the sinking of South Korea’s warship Cheonan in the Yellow Sea. Russia and China closely coordinate their approaches on the issue as two Permanent Members of the UN Security Council, where Seoul seeks to raise the issue of North Korea’s responsibility for the warship’s accident and to impose additional sanctions against Pyongyang.

VOR: Lavrov leaves for China for talks on Iran, Koreahttp://english.ruvr.ru/2010/06/03/8984824.html

Jun 3, 2010 10:29 Moscow TimeRussia’s Foreign Minister Sergei Lavrov is leaving for Beijing to coordinate positions on Iran and Korea. He will meet President Hu Jintao, Foreign Minister Yang Jiechi and other Chinese officials. Russia and China are among the six international mediators for Iran, but unlike the United States and its allies, they stick to a weighed approach, calling for dialogue as the most effective way of handling the issue. Tensions have been mounting between North and South Korea following the sinking of the South Korean Cheonan corvette in the Yellow Sea. Seoul claims the ship was hit by a North Korean torpedo.

VOR: Polish Minister says Poland should trust Russia's investigation of Kaczynski plane crash

Jun 3, 2010 10:44 Moscow TimePolish people should trust Russia's investigation of the plane crash that killed Polish president Lech Kaczynski, Polish interior minister Jerzy Miller said in a TV interview. He noted that Russia has handed over the copies of cockpit recordings to Poland. Handing over the copies will help Poland with its own investigation and analysis of the crash, he said. Earlier Kaczynski's twin brother Jaroslaw expressed his distrust to the Russian investigators. The investigation shows that it was the mistake of Polish pilots which led to the tragedy but someone could influence their decision to land the plane in poor visibility conditions.

Itar-Tass: Cabinet to discuss economic development scenario for 2011-2013

http://www.itar-tass.com/eng/level2.html?NewsID=15190241&PageNum=0

03.06.2010, 00.40

MOSCOW, June 3 (Itar-Tass) - Russia’s Cabinet on Thursday will discuss the economic development scenario and the marginal growth of prices on services of natural monopolies in 2011-2013.

“The budget for 2011 will be drafted proceeding from the oil price of $75 per barrel,” a source in the government said on Wednesday. At the same time the growth of inflation and industrial production will be a bit lower that the Economic Development Ministry forecast earlier.

“A moderately optimistic forecast will be taken as a basis of the budget,” the official said.

He supposed that “in 2011 the country’s GDP will grow by 3.4 percent, in 2012 – by 3.5 percent and in 2013 – by 4.2 percent.”

“Next year the industrial production will increase by 3.2 percent (according to the earlier forecast the growth should have reached 3.3 percent), in 2012 – by 3.1 percent and in 2013 – by 4.2 percent,” he said.

The growth of consumer prices will be by 0.5-1 percent lower than previously forecast.

“The forecast for inflation was decreased – in 2011 it will reach 5-6 percent (the previous forecast was 6-7 percent), in 2012 – 5-6 percent (as against 5.5-6.5 percent) and in 2013 – 4.5-5.5 percent (as against 5-6 percent),” the official said.

The forecast for the growth of investments in fixed capital remained unchanged. Thus, next year an increase of investments will reach 8.8 percent, in 2012 – 6.3 percent and in 2013 – 8.1 percent.

“In compliance with the proposed variant of the forecast the oil price will approximately comprise $78-79 per barrel in 2012-2013 and $75 per barrel – in 2011,” he said.

In the upcoming three years the national currency will slightly strengthen against the U.S. dollar. The Economic Development Ministry forecasts that in 2011 one dollar will be equal to 29.3 roubles, in 2012 – 28.4 roubles and in 2013 – 27.9 roubles.

The governmental official noted that the economic development scenario and parameters of the macroeconomic forecast have been repeatedly discussed at the Cabinet’s meetings, including those with participation of Prime Minister Vladimir Putin.

The official believes that at Thursday’s meeting of the Cabinet the parameters that will create the basis for a new three-year budget will be approved.

Itar-Tass: Medvedev legalises amendments to Customs Code treaty

http://www.itar-tass.com/eng/level2.html?NewsID=15190614&PageNum=0

03.06.2010, 10.07

MOSCOW, June 3 (Itar-Tass) -- President Dmitry Medvedev has signed the federal law “On the ratification of the Protocol on changes and amendments to the Treaty on the Customs Code of the Customs Union, dated November 27, 2009.” The law was adopted by the State Duma on May 21, 2010, and was approved by the Federation Council on May 26, 2010, the Kremlin press service reported on Thursday.

The federal law ratified the protocol on changes and amendments to the Treaty on the Customs Code of the Customs Union, dated November 27, 2009, which was signed in Moscow on April 16, 2010.

The Protocol provides for changes in 152 articles of the Customs Code of the Customs Union, whose purpose is:

To improve working conditions of participants in foreign economic activities, including the reduction to 150,000 euros of the security sum given by the official economic operator, if the operator produces and/or exports commodities in accordance with the criteria of the Customs Union Commission;

To create opportunities for establishing risk areas, sensitive for all the countries integrated in the Customs Union;

To protect the market against unfair competition by expanding the list of conditionally produced commodities;

To facilitate the export of commodities with a high degree of processing, including the reduction to four hours of the time needed for the production of commodities exempted from import customs duties, which are put under the customs procedures of exports and temporary imports, as well as the making of a closed reduced list of documents for the customs declaration of such commodities.

RIA: Russia ratifies Customs Code http://en.rian.ru/exsoviet/20100603/159282071.html

09:59 03/06/2010

Russian President Dmitry Medvedev has signed a federal law ratifying the Customs Code, which paves the way for the creation of a Customs Union with Belarus and Kazakhstan, the Kremlin said on its website.

The Customs Union formally came into existence on January 1, but is unable to start working fully until all three ex-Soviet states iron out all their disagreements. The Customs Code is expected to come into effect from July 1.

Russian Prime Minister Vladimir Putin said in late May the premiers of the three countries had failed to agree on the basic parameters of economic cooperation within the Customs Union at their meeting in St. Petersburg.

The main areas of contention are the import of foreign cars and aircraft into the Union's customs territory and export duties on Russian oil and petroleum products to Belarus.

Moscow and Minsk faced off at the start of the year over tariffs on imports of Russian oil, which Belarus said should be completely duty-free in the Customs Union.

On Tuesday, Belarusian President Alexander Lukashenko said his country is ready to make concessions to push through the creation of the Customs Union "even if they are difficult and sensitive for us at some stage."

Russia, Belarus and Kazakhstan signed an agreement on the creation of the Customs Code in the Belarusian capital, Minsk, on November 27, 2009.

MOSCOW, June 3 (RIA Novosti)

RIA: Russia hosts international anti-terrorism forum http://en.rian.ru/russia/20100603/159281060.html

06:44 03/06/2010

Russia will host on June 3-5 an international forum on the ways to counter terrorist propaganda among the public.

The meeting under the patronage of the Russian President Dmitry Medvedev will bring together top security and law enforcement officials from 63 countries and the UN counter-terrorism bodies.

"The ideological expansion of terrorism, the radicalization of the public and continuous attempts to involve the population in extremist and terrorist activities pose the biggest threat at present," the Russian Federal Security Service (FSB) said in a statement prior to the meeting.

"The use of advanced information technologies, primarily the Internet, presents a challenge that demands an immediate and adequate response," the statement said.

The FSB called for further cooperation between national and international security bodies in a multilateral format to increase the effectiveness of the fight against global terrorism.

YEKATERINBURG (Urals), June 3 (RIA Novosti)

RIA: World to face growing terrorist threats - Russia security chief http://en.rian.ru/world/20100603/159283098.html

11:17 03/06/2010

Many countries may face growing global terrorism threats, the head of the Russian Federal Security Service (FSB) said on Thursday.

"An analysis of the current terrorism issue shows an increase in terrorism risk threats to most countries, regardless of their economic development, military potential or state structure," Alexander Bortnikov said.

Bortnikov said the most deadly terrorism attack threats are aimed at the United States, Russia, Great Britain, Spain, Israel, Afghanistan, Iraq and many other countries.

"Sometimes, entire regions are influenced by terrorists," the FSB chief said referring to Russia's volatile region of the North Caucasus.

Bortnikov said that already in 2010, Russian security forces prevented 23 terrorist attacks and detained more than 250 militants.

"From the beginning of the year, the FSB has prevented 23 terrorist attacks, over 250 militants and their accomplices were detained," Bortnikov said adding these figures are the result of information from foreign partners and well-timed joint investigative measures.

The FSB chief called for further cooperation between national and international security bodies in a multilateral format to increase the effectiveness of the fight against global terrorism.

Bortnikov expressed concern over possible terrorist strikes during the 2014 Winter Olympic Games in Sochi.

"A real threat from Al Qaeda caused the cancellation of the Dakar-2008 rally, the first time in the history of this prestigious race. In this regard, the intentions of several ringleaders playing the same scenario ahead of the 2014 Winter Olympics have been clearly heard," Bortnikov said.

Russia has been on high alert after recent terrorist attacks in Moscow and the North Caucasus republic of Dagestan.

The attack on the Moscow subway occurred on March 29 when two suicide bombers blew themselves up during the morning rush hour at the Lubyanka and Park Kultury metro stations, killing 40 people and injuring over 100.

On March 31, two bombs shook the town of Kizlyar in Dagestan, claiming 12 lives.

YEKATERINBURG, June 3 (RIA Novosti)

June 03, 2010 09:14

Interfax: Terrorists plan to foil 2014 Sochi Olympics – FSB (Part 2)http://www.interfax.com/newsinf.asp?id=168618

YEKATERINBURG. June 3 (Interfax) - The Federal Security Service has intelligence indicating that terrorists are planning to foil the 2014 Sochi Olympics, FSB Director Alexander Bortnikov has said.

"The threat of terror attacks is becoming a factor, seriously influencing political decision-making," Bortnikov said on Thursday, opening an international conference of the FSB's partner services.

A real threat from Al Qaeda led to the cancellation of the Dakar 2008 rally - the first such occurrence since this prestigious rally was held for the first time, he said.

"In this connection, the terrorists' plans to play a similar game ahead of the 2014 Winter Olympic Games are becoming increasingly explicit," Bortnikov also said.

"Resisting international terrorism requires a consolidated effort by the entire world community, as well as timely sanctions and a uniform approach to specific individuals and structures, involved in terrorist and extremist activities," Bortnikov said.

sd

Itar-Tass: Some 23 terror acts averted in RF 2010 - Bortnikov

http://www.itar-tass.com/eng/level2.html?NewsID=15190498&PageNum=0

03.06.2010, 09.57

YEKATERINBURG, June 3 (Itar-Tass) -- Some 23 terrorist acts were averted, over 250 bandits and their accomplices were detained in Russia from the beginning of the year, Federal Security Service Director Alexander Bortnikov said in his opening speech at the 9th meeting of the council of chiefs of security services and law enforcement agencies of the FSB foreign partner-countries here on Thursday.

“These figures resulted from the timely information from our foreign partners and joint search operations,” he noted.

“The drafting and harmonization of the legal basis makes integral part of a stronger international anti-terrorist coalition. The legal basis enables to set common approaches in the comprehension of terrorism and terrorist activities and to provide favorable conditions for an efficient solution to the problems in the struggle against this phenomenon in all world regions,” Bortnikov underlined.

RIA: Russian missile cruiser ready to visit San Francisco http://en.rian.ru/mlitary_news/20100603/159281353.html

07:46 03/06/2010

A task force from the Russian Pacific Fleet led by the missile cruiser Varyag will set sail on June 4 on a friendly visit to the United States, the fleet's spokesman said on Thursday.

The naval group, which also includes the Fotiy Krylov salvage tug and the Boris Butoma tanker, will make a port call in San Francisco during a month-long voyage.

"During a visit to San Francisco the Russian sailors will get acquainted with the city and its history...while San Francisco residents will be able to visit the ship, meet with the crew and listen to the music performed by the Pacific Fleet's orchestra," the official said.

The Varyag is a Slava class missile cruiser, designed as a surface strike ship with some anti-air and ASW capability. The sixteen SS-N-12 Sandbox nuclear-capable supersonic anti-ship missiles are mounted in four pairs on either side of the superstructure, giving the ship a distinctive appearance.

NATO experts had dubbed Russian combat ships of this class "the killer of aircraft carriers," as it can launch 1,000 kg of high-explosives or a tactical nuclear warhead out to a range of 300 nautical miles.

In April 2009 the Varyag led a group of 21 foreign naval vessels participating in a parade to mark the 60th anniversary of China's Navy off the coast of the eastern city of Qingdao.

In November last year the flagship of the Pacific Fleet visited Singapore.

VLADIVOSTOK, June 3 (RIA Novosti)

RIA: Russia-Vietnam submarine deal worth record $3.2 bln — magazine http://en.rian.ru/mlitary_news/20100603/159279455.html

01:38 03/06/2010

Last year's contract on the delivery of six Kilo class diesel submarines to Vietnam, worth a total of $3.2 billion, is the largest deal in the history of Russian exports of naval equipment, a Russian magazine says.

The contract was signed in December 2009 during the visit of Vietnamese Prime Minister Nguyen Tan Dung to Russia.

"The construction cost is $2.1 billion, but the building of all necessary coastal infrastructure and the delivery of armaments and other equipment may bring the total to $3.2 bln, which makes this deal the largest in the history of Russian exports of naval equipment," the Export of Arms magazine says in an editorial published in its June issue.

Admiralty Shipyards in St. Petersburg will build the submarines with the rate of one vessel per year.

State-run arms exporter Rosoboronexport previously said Russia could sell up to 40 fourth-generation diesel-electric submarines to foreign customers by 2015.

Kilo class submarines, nicknamed "Black Holes" for their ability to avoid detection, are considered to be among the quietest diesel-electric submarines in the world.

The submarine is designed for anti-submarine warfare and anti-surface-ship warfare, and also for general reconnaissance and patrol missions.

The vessel has a displacement of 2,300 tons, a maximum depth of 350 meters (1,200 feet), a range of 6,000 miles, and a crew of 57. It is equipped with six 533-mm torpedo tubes.

At least 29 Kilo class subs have been exported to China, India, Iran, Poland, Romania and Algeria.

Export of Arms is a specialized Moscow-based technical and analytical magazine, published bimonthly by Russia's Centre for Strategic and Technological Analysis.

MOSCOW, June 3 (RIA Novosti)

RIA: Russia to give Nicaragua $10 million in aid http://en.rian.ru/world/20100603/159282036.html

09:58 03/06/2010

Russia will provide Nicaragua with $10 million to help the Central American country tackle its budget deficit, Russian Deputy Foreign Minister Sergei Ryabkov said on Thursday.

The sides signed the agreement during a meeting of the Russian-Nicaraguan intergovernmental commission on trade, economic, scientific and technical cooperation in Managua, Ryabkov said.

Earlier, the negotiators agreed that Russia would sell 250 buses to Nicaragua and provide the country with 25 more buses at no expense for Managua. However, the relevant deal has not yet been signed for technical reasons, the Russian official said.

The Russian negotiators also met with Nicaraguan president Daniel Ortega.

"During talks with the Russian delegation, the Nicaraguan leader touched on a range of issues, which remain unsolved," the Ryabkov said.

The Russian-Nicaraguan intergovernmental commission has met for the first time in 18 years.

Russian officials earlier said the resumption of the commission's activity testified to the countries "reaching a new level of bilateral ties."

The negotiators will meet next in Moscow in summer 2011.

Besides Russia, Nicaragua is one of three countries that have recognized the independence of the former Georgian republics of Abkhazia and South Ossetia following the Russian-Georgian war over the latter in August 2008. The war began when Georgian forces attacked South Ossetia in an attempt to bring it back under central control.

The other two countries to recognize the republics are Venezuela and the tiny Pacific nation of Nauru.

MANAGUA, June 3 (RIA Novosti)

Itar-Tass: Russia to extend $10 mln to Nicaragua

http://www.itar-tass.com/eng/level2.html?NewsID=15190977&PageNum=0

03.06.2010, 03.20

MANAGUA, June 3 (Itar-Tass) - Russia will extend $10 million to Nicaragua to support the country’s budget.

On Wednesday, the first meeting of the two countries’ intergovernmental commission on trade, economic, scientific and technical cooperation completed in Managua.

Within the framework of the commission eight groups worked on different directions of bilateral cooperation.

Nicaragua’s co-chair of the commission, Deputy Foreign Minister Manuel Coronel Kautz, said the meeting focused on the projects in economy, trade, transport, energy, and education.

The countries signed two protocols, the agreement on a 10 million dollar financial assistance and the final act of the commission’s meeting.

Itar-Tass: Nicaragua presents ratified agreement on visa-free travel to Russia

http://www.itar-tass.com/eng/level2.html?NewsID=15190980&PageNum=0

02.06.2010, 23.47

MANAGUA, June 2 (Itar-Tass) -- The ratified agreement on visa-free travel to Nicaragua by Russian citizens was presented to Russian Deputy Foreign Minister Sergei Ryabkov in the capital of this Latin American country on Wednesday.

The agreement was singed by Nicaraguan President Daniel Ortega and ratified by the national parliament.

When presenting the document to Ryabkov, his Nicaraguan colleague Manuel Coronel expressed hope that the ratification of this document would bring more Russian tourists to his country and facilitate further development of bilateral relations.

For the agreement to enter into force, Nicaraguan authorities will have to complete some formalities connected with their arrangements with neighbouring countries. Until then, Russians entering Nicaragua will have to pay five U.S. dollars for the so-called “tourist visa”.

VOR: Russians will travel to Nicaragua visa-freehttp://english.ruvr.ru/2010/06/03/8982982.html

Jun 3, 2010 10:05 Moscow TimeNicaragua has handed over to Russia the instrument of ratification of an agreement on visa-free travel. The document was signed by President Daniel Ortega and approved by parliament. It will take effect as soon as some formalities involving countries sharing border with Nicaragua are completed. In the meantime, Russians entering Nicaragua will have to pay the so-called tourist visa equivalent to $5.

RIA: Abkhazia, S. Ossetia may soon open embassies in Nicaragua http://en.rian.ru/world/20100603/159280095.html

03:39 03/06/2010

All formal procedures related to the opening of the Abkhazian and South Ossetian embassies in Nicaragua have been completed, the Latin American country's foreign minister said.

Nicaragua was the second country after Russia to recognize Abkhazia and S. Ossetia following a five-day war between Russia and Georgia in August 2008 that began when Georgian forces attacked South Ossetia in an attempt to bring it back under central control.

So far, only Nicaragua, Venezuela and a tiny island nation of Nauru have followed Russia's suit.

"The formal part of the process to open diplomatic missions of Abkhazia and S. Ossetia in Managua has been completed. It deals with the preparation of all necessary documentation and several other issues," Samuel Santos told RIA Novosti on Wednesday.

The minister said the actual opening of the embassies had been delayed "for a number of objective reasons," but refused to name them.

The recognition of the two former Georgian republics may well be a move to ensure Russia's help in reviving Nicaragua's ailing economy, which has been severely hit by the recent global economic crisis.

The Russian-Nicaraguan intergovernmental commission met on Tuesday in the Nicaraguan capital Managua for the first time in the past 18 years.

Russia's officials earlier said the resumption of the commission's activity testified to the countries "reaching a new level of bilateral ties."

The countries reportedly have a number of strategic projects in the energy sphere and state of the art technology, health care, transport, fishery and agriculture.

Russia supported the Sandinista movement in Nicaragua during the Soviet era, but relations between the two countries cooled after the Sandinistas left office in 1990. They started to improve again after Sandinista leader Daniel Ortega returned to power in 2006.

MANAGUA, June 3 (RIA Novosti)

Am.gov.lv: Fourth session of Latvian-Russian Inter-Governmental Commission to be held in Pskov http://www.am.gov.lv/en/news/press-releases/2010/june/06-03/

[03 Jun 2010]

On 4 June, the fourth session of the Latvian-Russian Inter-Governmental Commission (the Commission) on economic, scientific, technological, humanitarian and cultural co-operation is to be held in Pskov. During the meeting, it is expected to discuss the topics on the inter-governmental agenda, including the enhancement of the legal framework and the opportunities for regional co-operation.

Co-chairmen of the Latvian-Russian Inter-Governmental Commission, the minister of Economics of Latvia, Artis Kampars, and the Minister of Transport of Russia, Igor Levitin, agreed on this session when they met on 20 April in Moscow.

The Commission's Working Group on Regional Co-operation will meet for the first time this year, in order to discuss the possibilities for co-operation in various fields among the local authorities of Latvia and the regions of Russia.  The working group was set up following the decision of the Commission's third meeting in Riga on 7 July 2009.

On 3 June, Pskov will see the meeting of the experts from the Commission's Working Group on Transport. The Working Group on Humanitarian Co-operation convened on 21 May in Moscow, but the Working Group on Economic Co-operation was held its meeting on 28 April in Moscow. The working groups reviewed the topics on the agenda of the

Commission, and prepared draft decisions proposals for the fourth meeting of the Commission.

For their part, the Ministry of Economy of Latvia and the Latvian Investment and Development Agency in association with the Pskov Chamber of Commerce and Industry are organising on 3 June in Pskov a Business Forum "Pskov Oblast – Latvia" where 30 businessmen from Latvia are to take part.

AP: Russia plans 25 percent cut to US poultry importshttp://www.businessweek.com/ap/financialnews/D9G3A5P82.htmThe Associated Press June 2, 2010, 2:28PM ET

MOSCOW

Russia says it will cut U.S. poultry imports by 25 percent and that it will get other countries to fulfill the amount.

Russia, a major poultry importer, banned all chlorine-treated poultry imports starting Jan. 1, outlawing the 600,000 tons of poultry allowed from the U.S. under revised quotas. U.S. farmers accounted for 20 percent of the 3.5 million tons of poultry Russia consumed last year. Since the ban, talks on lifting it have been stop-start.

A statement posted on the Industry and Trade Ministry's website late Wednesday says suppliers from any other nation will be allowed to provide the 150,000 tons of poultry this year that the U.S would have supplied.

Last Updated: June 03. 2010 1:00AM

Detroit News: U.S., Russia partner to cut global road deathshttp://www.detnews.com/article/20100603/AUTO01/6030368/1148/AUTO01/U.S.--Russia-partner-to-cut-global-road-deaths

David Shepardson / Detroit News Washington Bureau

Washington -- U.S. and Russian officials joined forces Wednesday, vowing a joint effort to crack down on mounting road deaths worldwide -- now 1.3 million deaths annually.

While road deaths are falling in the United States and in other developed nations, they have soared elsewhere as the number of vehicles sharply rises.

At an event at the Russian Embassy in Washington on Wednesday night, both U.S. and Russian officials pledged to work to improve worldwide auto safety. That pledge follows a conference on auto safety in Moscow last November.

Traffic deaths -- and the estimated 50 million people injured worldwide in crashes -- now cost an estimated $518 billion annually, the World Health Organization says. Those road deaths account for 2.2 percent of all deaths worldwide -- ninth among all causes of death.

Of the 1.3 million road deaths each year, 90 percent are in low- and middle-income countries -- but they account for just 48 percent of the world's vehicles.

In March, the United Nations General Assembly proclaimed 2011-2020 a decade of action for road safety; more than 100 countries have backed the effort.

They have pledged to set speed limits, reduce drunken driving and increase the use of seat belts and motorcycle helmets. The World Health Organization predicted that by 2030, traffic crashes will climb to the fifth leading cause of death globally.

Without action, the WHO says 100 million could be injured and 2.4 million killed in road crashes by 2030.

And roads are becoming more crowded.

In 1922, there were 12.5 million vehicles worldwide. By 2000, there were 400 million; today, there are about 1 billion, a number some predict will double by 2050.

Behind the growing traffic fatalities and injuries is a lack of law enforcement and dangers to unprotected road users.

Less than half of the world's nations have tough drunken-driving laws and only 57 percent require front-seat occupants to wear seat belts. Less than half of all countries require child-safety seats for infants.

Most at risk are pedestrians, cyclists, and riders of motorized two-wheelers and their passengers, who account for 46 percent of global road traffic deaths.

National Highway Traffic Safety Administration Chief David Strickland said the agency is working with other governments to reduce road deaths.

"Working collectively with our government partners around the globe to reduce traffic fatalities will go a long way in addressing this significant health and safety issue," he said.

Georgian Daily: Beijing ‘Renting’ Russian Border Area for Chinese Farmershttp://georgiandaily.com/index.php?option=com_content&task=view&id=18804&Itemid=72

June 02, 2010

Paul Goble

Vienna, June 1 – Beijing has rented 426,600 hectares of Russian territory in the Jewish Autonomous Oblast and Khabarovsk Kray for agricultural use by Chinese farmers, the Xinhua News Agency Reports, a 42 percent increase in the size of such Chinese holdings inside Russia and one likely to infuriate many Russian nationalists.

In an article in “Svobodnaya pressa” today, Andrey Polunin points out that China has been renting land in Siberia and the Far East for some time. “Already at the end of 2009, President Dmitry Medvedev and Chinese President Hu Jintao approved [it within] a program of cooperation between the border regions [of the two countries] for 2009 to 2018.”

For an assessment of what Chinese farmers are doing in Russia, Polunin interviewed Valery Gurevich, the deputy head of the government of the Jewish Autonomous Oblast, and Aleksandr Aladin, a Moscow specialist on China, for their reactions to the Chinese who are now living and working inside the Russian Federation (svpressa.ru/politic/article/25865/).

Gurevich was upbeat about the program. He said Chinese farmers had been working in his oblast for almost two decades and that they current rent out about nine percent of its arable land on which they grow soy, grains, and rice and are making plans for developing animal husbandry as well.

“The Chinese,” he said, “both bring in their own technology and make use of ours.” Some of them are employed by Russian agricultural enterprises, and some work for themselves or for Chinese firs. “There hasn’t been any discussion, it goes without saying, about any handing over of land to the Chinese neighbors.”

There are currently “about 2500 Chinese” working in the Jewish Autonomous Oblast, roughly the same number as last year, Gurevich continued. And almost all of them are working on the basis of three to ten year contracts, an arrangement that ensures they are committed to developing the land and not just exploiting it.

Some of the production of the Chinese farmers is sent back to China, some is sold in the Jewish Autonomous District, and some is sent to neighboring Russian regions like Khabarovsk kray. Most Chinese farmers keep to themselves, Gurevich continued, and there is little assimilation: “At least, none of them has received [Russian] citizenship anytime recently.”

A different and more alarmist reading of this program was offered by Aladin, who extrapolated from the population imbalance between the Russian and Chinese sides of the border and from Chinese military doctrine to present the arrival of Chinese farmers as the first step toward the Chinese conquest of the Russian Far East.

All of the facts that Aladin pts forward – ranging from demographic statistics to military doctrine to Chinese shipbuilding and civil defense facilities – are true, but the interpretations he gives them prompt Polunin to suggest that his conclusions about Chinese plans verge on the “fantastic.”

This exchange is typical of the way this issue is discussed: Most officials in Siberia and the Far East are not unhappy with the presence of the Chinese. Given ethnic Russian outmigration and demographic decline, they are glad to have the labor force the Chinese provide and even the cross border relations they promote.

But a large number of commentators in Moscow and other cities in European Russia are inclined to make arguments like the one Aladin advances, extrapolating from what are very real Chinese statements and actions to often apocalyptic conclusions about a Chinese land grab in Russia.

Unfortunately, it is often the case that it is the comments of the latter rather than the experience of the former that define the way Russian officials at the center and especially Russian nationalist groups think about this issue, a pattern that seems likely to continue and one that makes the relatively rare comments of local officials like Gurevich especially useful.  

Itar-Tass: Medvedev to receive credentials of eight new ambassadors

http://www.itar-tass.com/eng/level2.html?NewsID=15190003&PageNum=0

03.06.2010, 05.46

MOSCOW, June 3 (Itar-Tass) - President Dmitry Medvedev will receive credentials of eight new ambassadors to Russia on Thursday.

The traditional ceremony will take place in the Alexander Hall of the Grand Kremlin Palace.

Envoys of Mauritania, Panama, South Korea, Egypt, Thailand, Sudan, Uzbekistan and Germany will present their credentials to the head of state.

Itar-Tass: Medvedev nominates incumbent Tambov governor for new term

http://www.itar-tass.com/eng/level2.html?NewsID=15190830

03.06.2010, 10.47

MOSCOW, June 3 (Itar-Tass) -- Russian President Dmitry Medvedev nominated incumbent Governor of the Tambov Region Oleg Betin as a candidate for a new term of governorship put up for voting in the Tambov regional legislative assembly, the Kremlin press service reported on Thursday.

Itar-Tass: Medvedev nominates incumbent Kaluga governor for new term

http://www.itar-tass.com/eng/level2.html?NewsID=15190771&PageNum=0

03.06.2010, 10.43

MOSCOW, June 3 (Itar-Tass) -- Russian President Dmitry Medvedev nominated incumbent Governor of the Kaluga Region Anatoly Artamonov as a candidate for a new term of governorship put up for voting in the Kaluga regional legislative assembly, the Kremlin press service reported on Thursday.

RFE/RL: KBR Supreme Court Again Calls For Abolition Of Balkar NGO http://www.rferl.org/content/KBR_Supreme_Court_Again_Calls_For_Abolition_Of_Balkar_NGO/2060184.html

June 02, 2010 The Kabardino-Balkaria Republic (KBR) Supreme Court ruled on May 31 that the unofficial Council of Elders of the Balkar People (SSBN) is an extremist organization and should be abolished.

That ruling was based on demands for a separate Balkar autonomous republic expressed at a meeting in Nalchik on March 8. The meeting participants' stated rationale for that demand for "self-determination" was that the republic's authorities "have done nothing" to address the Balkars' long-standing grievances.

The lands claimed by the Balkars as theirs constitute some 40 percent of the total territory of the KBR, but the Balkars account for only a little over 10 percent of the republic's total population of over 900,000.

The KBR Supreme Court demand for the liquidation of the SSBN was the second in just over two years. In November 2007, the republican prosecutor's office asked the court to ban the SSBN in light of allegedly extremist statements contained in an assessment of the socioeconomic situation addressed to then-Southern Federal District head Dmitry Kozak. The SSBN member who authored that document protested that the statements in question were all quotations from official government documents, but the KBR Supreme Court

nonetheless issued a ruling in January 2008 branding the SSBN extremist and calling for its closure.

The SSBN appealed the court's ruling to the Russian Federation Supreme Court, which in March 2008 ordered the KBR Supreme Court to reconsider it.

Since then, tensions between the Kabardian majority and the Balkar minority have intensified, despite a meeting in October 2008 between SSBN representatives and KBR President Arsen Kanokov. In July 2009, the Balkars convened a rally in Nalchik to protest years of perceived discrimination. The KBR leadership retaliated by staging a counterrally in early August at which participants criticized the Balkars for allegedly seeking to destabilize the political situation.

The SSBN sought to stage a further protest in Nalchik in late August, but was denied permission to do so. A separate group of Balkars then decided to organize a march from Nalchik to Moscow, where they hoped to obtain an audience with either Russian President Dmitry Medvedev or Prime Minister Vladimir Putin to discuss their demands. But they abandoned that undertaking in early October at the request of a member of Medvedev's staff.

Itar-Tass: Court convicts attempted killer of Isa Yamadayev

http://www.itar-tass.com/eng/level2.html?NewsID=15190920&PageNum=0

03.06.2010, 10.37

MOSCOW, June 3 (Itar-Tass) -- The Moscow Regional Court sentenced to 8.5 years in prison Chechen native Khavazh Yusupov for an attempted murder of Isa Yamadayev – the brother of the Hero of Russia and the former commander of the Vostok battalion, Sulim Yamadayev, on Thursday.

The court announced the operative part of the verdict, as the case was tried behind closed doors. Yamadayev was put on the witness defense program and is under state protection.

11:52MILITANTS, KILLED IN MAKHACHKALA, BELONGED TO CRIMINAL ARMED GROUP, LED BY VAGABOV, A SUSPECTED ORGANIZER OF MOSCOW METRO BOMBINGS – DAGESTAN SECURITY DPT.http://www.interfax.com/news.asp

03.06.10 12:00

Interfax: In Makhachkala militants destroyed that belonged to Vagabov’s gang, who is considered the organizer of terrorist attacks in the Moscow metro

http://www.interfax-russia.ru/South/main.asp?id=150106

GOOGLE TRANSLATION

June 3. Interfax-Russia.ru - During a special operation in Makhachkala killed three militants from the gang Magomedali Vagabov, which is considered one of the organizers of the terrorist attacks in the Moscow metro, Interfax was told by the press service of Russian Federal Security Service of Dagestan. According to the interviewee, two of the three dead have been identified: one is a native of the city of Surgut Eldar Novruzov, an active member of NWF, was wanted for a series of terrorist crimes including the murder of police officers, recently went into hiding in the mountains , arrived in Makhachkala on behalf of Vagabov to coordinate local bandpodpolya. "The second dead man - a resident of Kaspiisk Moussa Davydov. According to intelligence data, he was involved in terrorist crimes, including the undermining of the police car in Kaspiisk, which killed the policeman," - said in the FSB. "Personality of the third set," - said the press service FSB. According to him, from the scene of battle seized a submachine gun and a pistol belonging to the militants. Special operation in Makhachkala began on Wednesday evening, the men of special units of the FSB and the Interior Ministry, blocked a private house number 26 on the street Salavatova. At 5:45 on adjacent streets to the house regime was introduced CTO. Around 6:00 am began the assault, which continued intermittently until 11:30.

June 03, 2010 11:33

Interfax: Militant arsenal found near scene of clash with militants in Dagestanhttp://www.interfax.com/newsinf.asp?id=168655

MOSCOW. June 3 (Interfax) - Police have discovered a militant base in a forest outside the village of Kakamakhi in Dagestan's Karabudakhkent district.

Nine VOG-25 grenades, an F-1 grenade and two uncased improvised pressure-operated bombs, each equivalent to 300 grams of TNT, have been discovered. The bombs were blown up at the scene, a source in law enforcement services told Interfax on Thursday.

A task force of FSB officers and their guides on a reconnaissance and search mission, came under fire in a forest near Kakamakhi on Wednesday. One officer and a guide were killed, and another officer and guide were seriously wounded. They were hospitalized.

In another search operation police discovered an 80-liter plastic barrel buried in a forest in the Kizlyar district. The barrel contained a 10-liter pail, filled with foam and 128 cartridges, with wires attached.

Two improvised bombs were found at the entrance to Tyrnauz in Kabardino-Balkaria on Wednesday, a spokesman for the Elbrus district police told Interfax.

"The bombs were planted 15 meters from the site, where another bomb went off a day earlier when a police vehicle was passing by. The bombs were defused," he said.

A search operation has started to track down the criminals.

A police officer was injured by a shockwave impact after a bomb went off near to the place where a traffic police vehicle was passing in the Elbrus district, earlier reports said.

sd dp

Moscow Times: Bortnikov Reports on Dagestan Operations http://www.themoscowtimes.com/news/article/bortnikov-reports-on-dagestan-operations/407426.html

03 June 2010The Moscow Times

A number of Federal Security Service officers were killed and wounded in Dagestan during an operation targeting the terrorist group responsible for twin blasts in the Moscow metro in March, FSB chief Alexander Bortnikov said Wednesday, Interfax reported.

Bortnikov said only that the group was “related” to the blasts. He refused to elaborate or give the number of casualties, saying the information would be made public later.

The FSB is probably targeting the 40-member gang of Magomedali Vagabov, who had close ties to Mariam Sharipova, identified as one of the two Moscow suicide bombers, a source in a North Caucasus law enforcement agency told Interfax.

Vagabov was either the common-law husband of Sharipova or a friend of her previous husband, known as Doctor Mukhammad, who was killed in Dagestan in August, the source said. Terrorists killed an FSB officer and a local mountain guide in Dagestan on Tuesday and wounded another officer and mountain guide, the source said.

Bortnikov also reported Wednesday that the FSB has detained a man suspected of planning 12 bombings in Moscow in 2009 using 15 kilograms of explosives intercepted by law enforcement officers. He gave no other details of the case.

Moscow Times: Special Forces Are Now 'Homeless' http://www.themoscowtimes.com/vedomosti/article/special-forces-are-now-homeless/407395.html

02 June 2010By Alexei Nikolsky / Vedomosti

The Interior Ministry is expected to reduce the number of staff in its central apparatus by withdrawing the Operative and Search Bureau, special forces and other police structures directly involved in the fight against crime. This follows from presidential decree N582, signed on May 13 and published on the Kremlin’s web site on May 28.

President Dmitry Medvedev set the task of reducing the central office of the Interior Ministry from 19,970 to 10,000 people back in February. This, together with a reduction in the total number of Interior Ministry staff by 20 percent, in accordance with a new law about the police and the elimination of unnecessary features, is one of the measures to reform the police department that Medvedev declared late last year on a wave of public criticism of how the Interior Ministry operates.

Jamestown: Russian Military Prepares for Vostok 2010http://georgiandaily.com/index.php?option=com_content&task=view&id=18811&Itemid=132

June 03, 2010

Roger McDermott

Preparations are intensifying ahead of the Russian operational-strategic military exercise, Vostok 2010, scheduled for June 29 to July 8 in the Siberian and Far East military districts involving more than 10,000 servicemen under the command of Army-General, Nikolai Makarov, the Chief of the General Staff.

This reveals the ways that the newly formed brigades will be tested, confirming the focus on developing network-centric warfare capabilities, and exposes critical problems facing the manning system. It is equally clear that Vostok represents a key test for the ongoing “new look” military reform initiated by Defense Minister, Anatoliy Serdyukov.

In mid-May, Colonel-General Aleksandr Postnikov, the Commander in Chief of the Ground Forces visited practice ranges in the Far East and Siberian military districts and finalized planning for the exercise. According to Postnikov, brigades will be moved across large distances from the European part of the country to the Russian Far East, including aviation and air defense units. This signals interest in whether the slowness in deploying brigades during similar exercises in 2009 has been adequately redressed. Postnikov also noted that commanders at all levels will be assessed in directing units using new automated command and control as well as “communication, navigation, reconnaissance, and radio electronic warfare” systems (Nezavisimoye Voyennoye

Obozreniye, May 18). It appears that the exercise is partly aimed at convincing the country’s leadership that the “new look” has achieved significant progress towards adopting network-centric approaches to warfare.

Nonetheless, there are some features of the preparations for this exercise that warrant closer inspection. On May 25, Valery Sheblanin, the Siberian Military District Spokesman, said that a mobilization exercise was underway within the district linked to the forthcoming Vostok 2010. Approximately 200 district, army and brigade level commanders participated, with the emphasis placed upon troop control, use of new technology, and training soldiers within the restructured brigades for modern warfare (Interfax, May 25).

An enlarged meeting in Ryazan of the elite airborne forces (Vozdushno Desantnye Voiska –VDV) military council recently summarized the results of the winter training period and set tasks for the summer period. Lieutenant-General Vladimir Shamanov, the Commander of the VDV, said that the airborne forces conducted two regimental tactical exercises last winter, and one divisional command staff exercise. Shamanov reported that the command staff exercise witnessed the 76th Airborne Assault Division using an automated command and control system for the first time. The VDV commander confirmed that subunits from the 31st Airborne Assault Brigade will play a key part in Vostok 2010, closely followed by a command staff exercise for the 98th Airborne Division (Nezavisimoye Voyennoye Obozreniye, May 28).

Moreover, the force elements participating in the exercise denotes the seriousness attached to it by the Russian military and government, in what is a very sensitive location due to its proximity to China. A defense ministry source stated that servicemen from the host military districts will be joined by others, reflecting the need to rehearse moving troops quickly across the country, and will involve the air force (Voyenno Vozdushnye Sily –VVS) and VDV, as well as the Northern and Pacific Fleets. Radiation, Chemical, and Biological Protection Troops will also participate (Krasnaya Zvezda, May 12). The same source added that offensive and defensive operations will be rehearsed. Meanwhile, a General Staff representative suggested that the exercise will examine the planned reduction of the six military districts to four and the forming of operational-strategic commands (ITAR-TASS, May 30).

Although defense officials stress the importance of the exercise, they are remarkably silent on the nature of the scenario. Given the location of the exercise, it is most likely to involve a scenario linked to a future crisis with China. Reporting on the force elements earmarked for the exercise suggests that Vostok’s scenario may center on a military intervention in the Russian Far East by the People’s Liberation Army (PLA), with an initial defensive response using units from the VVS and VDV as a holding motif while partial mobilization occurs, followed by offensive operations and the involvement of naval platforms drawn from two fleets. In a real crisis with China, the Russian conventional forces could not guarantee air superiority or use advanced cluster munitions to stop or delay advancing PLA divisions. The only military option in such circumstances would be early use of tactical nuclear missiles. The presence of the northern and Pacific

Fleets during Vostok raises the question as to whether the scenario will include rehearsing a nuclear attack on PLA divisions (ITAR-TASS, May 30).

Vostok 2010 will test the combat capability and combat readiness of the new formations in the ground forces. Yet, the timing of the exercise coincides with the summer discharge of conscripts reaching the end of their twelve month term of service. Such an unpleasant coincidence has not stood in the path of proceeding with the exercise. Vera Reshetkina, Head of the Khabarovsk Committee of Soldiers’ Mothers has reportedly received vast quantities of letters alleging that commanders of military units are blocking the discharge of drafted soldiers. The problem is that in February the top brass and defense ministry leadership finally admitted that the experiment with contract personnel had failed, and consequently their numbers would soon be reduced. As General Makarov noted, Moscow would like to have a professional army, but the state simply cannot afford it. Serdyukov’s reform, therefore, cannot be presented as an effort to form such a volunteer force structure. Instead, biannually the brigades face the upheaval of those completing their service being discharged: in other words half of the manning within these brigades becomes entangled with new recruits. Faced with this potential embarrassment, the General Staff appreciated that those conscripts due to be discharged are now desperately needed during Vostok 2010, despite retaining them involving an evident flagrant breach of the law on conscription (Ezhednevny Zhurnal, May 24).

Indeed, even before Vostok 2010 has been staged, these issues expose deeper underlying problems facing the “new look.” If it is necessary to temporarily flout the law on the term of service in order to boost combat readiness, it might foreshadow an increase to the length of service, possibly to eighteen months (Nezavisimoye Voyennoye Obozreniye, May 18). Moreover, the adoption of network-centric warfare, which remains in its very early stages and will likely require sustained funding over at least a decade, contradicts preserving a manning structure that is so obviously reliant upon conscripts.

Source: http://www.jamestown.org/programs/edm/

Vremya Novostei/Russia Today: The core of domestic navigation http://rt.com/Top_News/Press/eng.html

The first competitive chip set GLONASS/GPS will be manufactured in Japan

The 4th International Satellite Navigation Forum and the Navitech-Expo-2010 opened in Moscow yesterday. One of the hottest events at the Forum was the design firm Navis’ announcement of its introduction of the first nationally-designed dual-system chip set GLONASS/GPS, which is comparable in performance to GPS-analogues.

A wide-scale introduction of GLONASS, a nationally-produced alternative to the American GPS navigation system, is constrained by primarily two factors: an incomplete satellite constellation and the lack of client devices on the market that could compete with

GPS devices.

Both problems are gradually being resolved. Today, 21 out of the initially planned 30 satellites are orbiting the GLONASS orbital constellation (plus two spares). Head of the Federal Space Agency Anatoly Perminov stated at the Forum that seven more satellites will be launched by the end of this year, one of which is the new-generation GLONASS-K satellite, which will bring the orbital constellation a step closer to completion.

The problems with the GLONASS client devices are in many ways linked to the fact that they are created based on special application chips which are not optimized in terms of price, size parameters and energy consumption. Navis’ design should become the first alternative solution, which was initially planned for “civilian” use.

Nationally designed chip receiver NV08C will be manufactured in Japan by the Fujitsu factories with the topological norms of 90 micrometers. Valery Babakov, general director of Navis, said at a press conference that a wide-scale production (about 100,000 modules will be produced in the first phase) should begin sometime before the end of this year. The price of a module in a set of 50,000 units should amount to $15-17, and power consumption in a normal operation mode will not exceed 100 megawatts, which is comparable with the corresponding characteristics of the GSP chip sets. Meanwhile, the double-system GLONASS/GPS receiver is able to provide greater reliability of navigation in conditions of limited visibility of satellites, such as in dense urban areas.

In the first half of 2011 the domestic market should see the first wide-scale introduction of personal navigations devices (PND) supported by GLONASS. Navis’ partner, the Russian company Vobis, is currently holding negotiations with a number of Asian electronics manufacturers at the Computex Expo in Taiwan on launching the introduction of such client devices.

Read the article on the newspaper's site

Georgian Daily: Has Moscow Decided to Turn to a Businessman to Save Sochi Olympics?http://georgiandaily.com/index.php?option=com_content&task=view&id=18808&Itemid=72

June 02, 2010

Paul Goble

Vienna, June 2 – The engineering, ecological and ethnic problems now plaguing the construction of venues for the 2014 Olympics in Sochi are so great that the Kremlin, given the failures of the officials it has put in charge up to now, reportedly is planning to hand over responsibility for completing this high-priority project to a private businessman.

According to Aleksey Polukhin, the economics editor of “Novaya gazeta,” the Russian government will soon name Vladimir Potanin head of the Olympic Construction agency, Olimpstroy, in the hopes that he will solve the problems bedeviling a program in which Moscow has invested so much money and prestige (www.novayagazeta.ru/data/2010/058/00.html).

If this appointment happens, Potanin will replace another businessman, Taymuraz Boldoyev, the former head of “Baltika,” who in turn replaced ex-Transneft head Semyon Vaynshtok. But it seems likely that Potanin will have more independent authority than either of the others who had to coordinate on most issues with “Olympic” Vice Premier Dmitry Kozak.

Such “cadre experiments,” Polukhin writes, have carried with them a high price: “The project is gradually sinking into the Imereti bogs, and it is impossible to conceal this from journalists, society, from the International Olympic Committee and from [Prime Minister] Vladimir Putin.

“For Putin in particular,” the “Novaya gazeta” editor continues, Sochi “is the project which he wants to be his legacy.” And “it is in no way part of the premier’s plans to become the public face of the most public failure in the history of the country.” Consequently, he is prepared to do almost anything to make sure the Sochi Olympics succeeds.

According to the Moscow paper’s source in the Presidential Administration, “the last straw” was the December 2009 storm which destroyed the port through which construction materials of the Olympics were to pass. Now, no one can say exactly when that port will reopen and the wreckage cease being yet another obstacle to the construction of the Sochi venues.

Polukhin writes that as of today, “the entire Olympic project is under threat.” And Putin is increasingly finding out that the ruined port is only a symptom of bigger problems. Trucks carrying in building materials are now waiting in long lines because of the limited highway network, thus slowing up all construction.

Another problem, “one with which Putin is not accustomed to take into consideration,” is environmental protection and the opposition of the World Wildlife Fund, the UN Environmental Protection Program, and allied organizations and institutions to the often cavalier way the Russians have approached the issue of protecting the fragile ecology of the Sochi region.

The environmentalists may not seem important to Putin within Russia, but their opposition to a project which is international by definition is something neither he nor other Moscow officials can ignore. And their opposition to his plans calls into question Moscow’s ability to pull off the games.

And there have been social conflicts as well as a result of importation of “not less than 16,000” Gastarbeiters already, whose clashes with the local population are likely to increase still further if their number rises as predicted to 50,000 by the end of the year, a truly astronomical number in a place as small as Sochi.

(There are two other problems as well, although Polukhin does not mention them here: security of games not far from the unstable North Caucasus and the objections of Circassians to the holding of Olympics on the site of the expulsion of their ancestors from the Russian Empire in 1864, an action they argue is equivalent to a genocide.)

For all these reasons, the “Novaya gazeta” journalist continues, “the tone of the International Olympic Committee has even begun to change.” While it has up to now “supported Russia without qualification, closing its eyes to internal problems,” the IOC has done so on the assumption that “construction is proceeding apace.”

But now construction is moving forward “so slowly that even the IOC’s representative, Jean-Claude Killy was forced to publicly express doubts: where in fact will live the guests and participants of the Games if construction of the promised hotels with 42,000 rooms has not yet even begun?”

Moreover, and as a result, “even citizens of Russia have ceased to believe in the [Sochi] Olympics,” Polukhin says, noting that a recent VTsIOM poll found that “only 37 percent of Russians are ‘unqualifiedly certain’ that our country will be able to conduct the games in a worthy fashion,” an attitude that suggests many have questions about Putin as a manager.

“Of course,” the “Novaya gazeta” editor continues, “the third change in the leadership of Olimpstroy in three years will look somewhat unserious, but it is really necessary to save the project.” And it is quite likely that only someone who is “sufficient rich not to steal, loyal to the Kremlin and independent of local groups” could possibly do so.

That is what people at Staraya ploshchad, the headquarters of the Russian government, think, a source there has told the paper. Putin cares very much about the fate of this project, and Potanin appears to meet all the requirements, but even he faces an uphill battle to build the venues and overcome the objections of environmentalist and ethnic groups.

Georgian Daily: Reported Levels of Popular Support for Russian Leaders Don’t Mean what Most Commentators Thinkhttp://georgiandaily.com/index.php?option=com_content&task=view&id=18807&Itemid=72

June 02, 2010

Paul Goble

Vienna, June 2 – Commentators in Moscow and the West frequently cite poll results to suggest that Russia’s leaders, Dmitry Medvedev and Vladimir Putin, enjoy broad popular trust and support, but a Levada Center expert says they are misusing the data because what the polls show is “a completely different social phenomenon.”

That phenomenon, Levada’s Boris Dubin says in today’s “Yezhednevny zhurnal,” does not indicate support but rather is the result of a massive denial of initiative and a recognition that the majority (from three-fifths to three-quarters) of Russian adults cannot do or influence anything and have handed over initiative to the top leaders” (www.ej.ru/?a=note&id=10152).

“In Russian political culture,” the Levada Center expert says an examination of the poll results his organization has obtained over the years, “the right to take initiative in the minds of most belongs to those who stand above them [in one hierarchy or another] and as a limit to the very highest people” in the state.

When Russians say they “approve” the actions of such high-ranking people, he continues, they are expressing not trust or support but rather “the level of correspondence” between “the figure who from morning to night is shown on television” with the expectations, illusions, fears and habits which the majority of the population has.”

And consequently, what the 70 percent or more who give a positive answer are really saying is that “’Yes, we are accustomed to that image of power. It is normal, and we do not have any demands to it, in this sense.’” Indeed, he continues, this pattern reflects a special Russian understanding of “freedom.” 

“It turns out that [freedom] in the opinion of the majority of [Russians] is found much more where the state serves as the protector of the citizen, including in the economic sphere, when it controls prices, pay and pensions” and where it does so without showing or showing only rarely much “attention” to the population.

Underlying that, Dubin continues, freedom for Russians “is connected not only with social or political arrangements but with the nature of the individual himself, with his priorities and his understanding of both the other and of himself,” a set of views that help to explain why Russians show support for those who do not objectively serve their interests.

Such “negative freedom,” he says, has two major causes: the poverty of the Russian population, few of whom save and thus most of whom are dependent on having the powers that be provide for them, and what is more important, “the lack of the ability to stand on one’s own and be independent” and at the same time “the lack of solidarity and a deficit of [social] ties.”

As a result, “three quarters of the population” does not see itself as having any influence on the social and political “space beyond the walls of its own home.” And thus it is prepared to adapt to “hyper control from above even in the current softened form” and

thus not have the expectations or make the demands that some observers often say Russians should.

Importantly, Dubin points out, this is not just about control exercised from above but also a kind of control from below, “a habit at the level of the masses,” who simply accept it and are not interested in any change. But such attitudes are not held by the entire population, as recent events have shown.

From 20 to 30 percent of the Russian people, Dubin says, have a different view. They are not prepared to accept “passively” that order which 70 percent of the population does silently.” They want change and they could be mobilized on the basis of their interests, something that the majority probably cannot be.

Moscow’s calls for modernization provide evidence of this. Most people are for it. After all, Dubin says, “who could be against, but not with our efforts, not involving us, and not here.” And thus Russian politics becomes not about the present but about a past few want to take responsibility for and a future for which no one in fact yet has to. 

Summing up, Dubin notes that social scientists seldom pay much attention to situations like that in Russia where the system works badly but from which few intend to leave. Thus, they seldom ask why people feel that there is no reason to seek an escape in large measure because they do not see any alternative program to believe in or place to escape to.

But the Levada Center analyst says, the number of Russians is growing who in recent times say that “over the last two years in the country freedom, justice, legality, order, and solidarity have become less and that there is almost a complete lack of trust.” And “at the same time, for the first time in the last decade, there have been more manifestations of civic activity.”

Consequently, while most of those manifestations have been about immediate and local interests, they are spreading, something that may ultimately mean that ever more Russians are redefining by their own actions what they understand by freedom and democracy and what they see as their own rights with respect to the powers that be.  

Georgian Daily: Moscow City to Fight Appearance of Ethnic Neighborhoodshttp://georgiandaily.com/index.php?option=com_content&task=view&id=18805&Itemid=72

June 02, 2010

Paul Goble

Vienna, June 1 – Frustrated that the central Russian government has not been able to approve a nationality policy since 2004, the Moscow city government has come up with

its own, one that calls for blocking the rise of ethnic neighborhoods even while admitting the capital is likely to become ever more multi-ethnic.

Today, “Argumenty nedeli” reports, the Moscow city government is considering “a conception of the realization of state policy in the sphere of inter-ethnic relations in the city of Moscow,” a concept city leaders expect other Russian regions and cities to copy (www.argumenti.ru/gorodm/2010/05/62168/).

Indeed, as the weekly points out, “the capital as always is taking the lead in legislation,” although it does not make reference to the city’s most notorious post-Soviet intervention, Mayor Yuri Luzhkov’s October 1993 decree calling for the expulsion of “persons of Caucasus nationality” from the city.

Experts who have reviewed the new concept give it high marks, “Argumenty nedeli” says, and Mikhail Solomentsev, the head of the city’s Committee on Interregional Ties and Nationality Policy, suggests that such a document is necessary to guide future policy.

Moscow city has long had its own distinctive approach to this question, given that the non-Russian component of the capital’s population has risen from 10percent in 1989 to more than 15 percent now officially and to a far higher percentage according to independent experts.

Moreover, as the Concept document points out, “judging from the practice of several European countries, the prospect of the strengthening of the ethnic mosaic quality of Moscow appears to be completely real,” something likely to be accompanied by the growth of “xenophobia among the indigenous population.”

The city recently polled residents, the weekly reports. Three out of every four Muscovites said that interethnic relations there were “tense,” but at the same time, “only 10 percent of them had directly encountered [problematic] situations” and “more than 70 percent” had a negative attitude toward nationalist groups.

The Concept paper states that “the majority of participants in contemporary migration flows” seek to maintain their own way of life in new circumstances and thus to live in compact neighborhoods or enclaves. But it specifies that the city government views these as “impermissible” and will do what it can to fight them.

“The very term enclave,” Solomentsev argues, “presupposes the opposition of one people to another. The experience of European capitals shows this clearly.” But if Moscow is to avoid the problems of others, it must work to keep nationalities from forming such enclaves or in other ways living separate lives.

“The more nationalities unite around a common activity, the fewer conflicts will arise,” the concept suggests, and it points to the success the Union of Organizations of Students from the Same Region has had since its formation in December 2009.

Moscow city officials note that “the most active participants” of this organization are people from the Caucasus and points out that those who take part in the Union are far more able to adapt to Moscow styles and to integrate themselves into Russian culture.

That becomes obvious if one compares the Caucasians who take part in these groups with those who don’t. Many of the latter, the weekly notes, are in the Russian capital because their parents have influence or “blat” and thus are often neither good students or good residents of Moscow.

The solution to that problem, the Conception suggests, is tighter control over admissions to the capital’s universities. And it also calls for tighter restrictions over migration from non-Russian republics and a greater effort to attract more people from the provinces.

“It is necessary to create all necessary conditions for internal migration, Solomentsev argues, so that more Russians living in poor regions can come to “the more well-off subjects of the Federation.” And to that end, a number of steps need to be taken.

Among them, he suggested, is the need for developing “an effective cadres system” so that a specialist regardless of his ethnicity will find it easy to move from one region of the country to another. If that happens, Solomentsev concludes, then “we will come to the recognition that we are one command, ‘Rossiayane.’

Bloomberg: PineBridge’s Philipps Hired by Kremlin’s M&A Adviser Xenonhttp://www.businessweek.com/news/2010-06-02/pinebridge-s-philipps-hired-by-kremlin-s-m-a-adviser-xenon.html

June 02, 2010, 9:40 AM EDT

By Jason Corcoran and Alex Nicholson

June 2 (Bloomberg) -- Charlotte Philipps, the chief executive of Hong Kong billionaire Richard Li’s private equity business in Moscow, was hired by an investment firm that advises the Russian state on mergers and acquisitions in the energy sector.

Philipps will move at the start of July to Xenon Capital Partners from PineBridge Investments Russia Ltd., formerly AIG Investments, which was sold in March to Li. Philipps will oversee Xenon’s $2 billion state-owned power utilities fund, she said by telephone yesterday. Xenon also hired Damir Musin from JPMorgan Chase & Co.’s Russian team, said Kamil Burganov, who joined Xenon’s energy M&A business in February from JPMorgan.

Xenon was founded last year by Natalia Tsukanova, the former head of investment banking for JPMorgan in Russia, to advise Igor Sechin, Prime Minister Vladimir Putin’s deputy for energy and the chairman of OAO Rosneft, the country’s largest oil company. The Rusenergo utilities fund includes more than 20 stakes in Russian electricity

generation and distribution companies including OAO RusHydro, Russia’s largest hydropower producer, said Philipps, who has known Tsukanova for more than a decade.

“The Rusenergo Fund is a key project for Xenon, given the opportunities and the importance of the portfolio companies,” she said, without providing further details.

Anton Voronin left JPMorgan for Xenon in March. Stan Song and Hamid Gayibov quit the New York-based bank to join Xenon in April.

Xenon plans to hire a total of 20 employees to focus on consolidation in the domestic energy industry and later help state-owned companies with foreign acquisitions, Burganov said in April. Xenon has a London office which will eventually advise companies seeking to list on the London Stock Exchange.

--Editors: Linda Shen, Stephen Kirkland.

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

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

BBC: Struggle for Central Asian energy richeshttp://news.bbc.co.uk/2/hi/world/asia_pacific/10131641.stm

By Richard Galpin BBC News, Moscow

A year ago, the Kremlin issued a stark warning: that growing competition for control of global energy resources could spark wars on Russia's borders, including those in Central Asia.

"Problems that involve the use of military force cannot be excluded, that would destroy the balance of forces close to the borders of the Russian Federation and her allies," said a key Kremlin strategy document assessing the main security threats of the coming decade.

Just 20 years ago, Russia and the energy-rich countries of Central Asia, such as Kazakhstan and Turkmenistan, and Azerbaijan in the South Caucasus, were all united, as parts of the Soviet Union.

Moscow would have had unfettered access to their oil and gas reserves.

But the Central Asian states realise one of their greatest strategic strengths as independent countries is playing off the big global powers now scrambling to buy their precious energy supplies.

So, Moscow now finds itself in fierce competition with the big players: China, the US and Europe.

"Russia's overall position in Central Asia is shrinking," says Mikhail Kroutikhin, editor-in-chief of the Russian Energy Weekly.

"Russia is in retreat and the Chinese are jumping on the big opportunities."

New 'Great Game'?

Rivalry in the region is often compared with the 19th Century British-Russian imperial rivalry nicknamed the "Great Game".

The past year has seen some key moments in the new energy "Great Game" in Central Asia, with the first pipelines being commissioned that take oil and gas east to China, instead of north and west.

From Kazakhstan, 200,000 barrels of oil are now being pumped every day across the border into the western Chinese province of Xinjiang, and there are plans to double this pipeline's capacity.

From Turkmenistan, a pipeline carrying gas to China via Uzbekistan and Kazakhstan was opened last December by the Chinese President Hu Jintao. It could satisfy around half of China's current demand by the time it reaches full capacity in 2013.

Turkmenistan's President Kurbanguly Berdymukhamedov called the deal "political" as well as commercial and heaped praise on China's "wise policy", saying it had become "one of the key guarantors of global security".

Turkmen tensions

With this agreement, Russia's stranglehold on supplies from Turkmenistan, which has the fourth-largest reserves of gas in the world, was broken.

And while China and its new Central Asian energy partners were locking themselves in an ever-warmer embrace, Moscow found itself at loggerheads with its erstwhile client state.

Having agreed two years ago to pay a much higher price for Turkmen gas, to ensure it remained a loyal supplier, the Russians suddenly shut the taps 12 months ago, causing the pipeline to explode.

Analysts believe Moscow had decided it did not need the gas because of the downturn in global demand and prices during the economic crisis.

Even now it is only taking a third of what it was expected to buy, angering the Turkmen government and pushing it further into the arms of the Chinese.

Oil production - 2008

Gas production - 2008

Who will feed Nabucco?

"As regards Russia's role in the region, it has taken a step back in energy," says Chris Weafer, chief strategist at Uralsib Bank in Moscow.

He believes it was not just the global economic crisis that prompted this.

It was also, he says, because Europeans searching for gas supplies for their planned Nabucco pipeline were offering much higher prices for Central Asian gas.

"The game changed because of Nabucco. Up to 2006, Russia could buy cheap gas from Turkmenistan, Uzbekistan and Kazakhstan - $50 for 1,000 cubic metres and then sell it to Europe for $250.

"But from the start of 2008, Russia had to agree to pay European prices - $300 per 1,000 cubic metres."

"Gazprom was not making any money out of it. So the political will to be involved has abated. Russia has let the Chinese into Central Asia."

And that is something Moscow may ultimately come to regret, because it also wants to be a major supplier of oil and gas to China.

With China already heavily investing in the two most important Central Asian energy suppliers, Turkmenistan and Kazakhstan, Russia may struggle to compete.

China flexes its muscles

Moscow has had agreements with Beijing to build a gas pipeline into China since 2002, but the two sides have been haggling ever since over the price of the gas supplies.

Analysts say a deal may finally have been done - on the condition that the gas comes from a field and pipeline that are exclusively for Chinese use.

Officials also hope the first oil pipeline between the two countries will be completed by the end of this year.

But some analysts question whether Russia will have sufficient reserves to supply the gas pipeline, given the expected decline in its production over the next 20 years and the lack of investment in new fields since the collapse of the Soviet Union in 1991.

"It [the pipeline to China] will have to tap reserves already going to Europe," says Mikhail Kroutikhin.

"It is not economic, but Prime Minister Putin wants it to be built."

South Stream

Another project which Mr Putin is determined should go ahead is Russia's South Stream gas pipeline, across the Black Sea and into the heart of the European Union.

The rivalry between this and Europe's alternative plan - the Nabucco pipeline - is one of the most intense in the Caspian Sea region.

The Europeans, who want to break free from their growing dependence on Russian energy supplies, desperately need supplies from the region to make the Nabucco pipeline viable.

And the Russians are trying to thwart this.

One key battleground is Azerbaijan, which has yet to declare whether it will feed Nabucco with its gas. Its decision is critical.

National Economic Trends

VOR: Russia taps Reserve Fund to cover budget deficithttp://english.ruvr.ru/2010/06/03/8984073.html

Jun 3, 2010 10:16 Moscow TimeReserve Fund intended as a cushion against economic downturns will be completely spent next year. Finance Minister Alexei Kudrin has said the government is planning to take 1 trillion 400 billion rubles from the fund to cover the current budget deficit and then there will only be 500 billion rubles left. The deficit is being forecast at 4% in 2011 and at 2% by 2013.

2010-06-02 19:37 Reuters: UPDATE 1-E.Siberian oil tax back from July 1-Russia's Kudrin http://www.iii.co.uk/news/?type=afxnews&articleid=7924168&action=article

By Gleb Bryanski

MOSCOW, June 2(Reuters) - Russian Finance Minister Alexei Kudrin said on Wednesday the export duty which currently exempts all 22 oil fields in East Siberia, may be reinstated on July 1.

Kudrin said the government is expected by June 15 to find a compromise on the export duty issue, which has been a major factor moving stocks of Russian oil majors such as state-controlled Rosneft.

"If we manage to (find a compromise) by June 15, the duty will be reinstated from July 1," Kudrin told reporters after the government's session, which discussed the 2011 budget. He said it would be a uniform levy but did not elaborate.

Kudrin said the new tax would also be levied on oil pumped at Rosneft's giant Vankor field. He said the lost budget revenues due to the zero export duty in 2010 would be less than the originally planned 150 billion roubles ($4.81 billion).

The zero export duty on East Siberia, whose beneficiaries also include TNK-BP and Surgutneftegaz as well as Rosneft, was designed to spur investment in hard-to-access regions.

East Siberia is key to Russia's drive to keep increasing oil production, especially as mature deposits further west run dry. JPMorgan forecasts East Siberia will account for 2.3 percent of Russia's oil output this year, from about 1.1 percent in 2009.

Kudrin said Russia's budget deficit is forecast to hover at over 5 percent of gross domestic product (GDP) this year but will slide down to 2 percent in 2013.

Russia's fiscal gap will be "above 5 percent of GDP but below 5.9 percent" in 2010, Kudrin told a news conference. He said the deficit would shrink to 4 percent next year, 3 percent in 2012 and 2 percent in 2013. (Writing by Gleb Bryanski, Editing by Sofina Mirza-Reid) ($1=31.18 Rouble) Keywords: RUSSIA BUDGET OIL/ (gleb.bryanski@reuters.com ; +7 495 775 1242; Reuters Messaging: gleb.bryanski.reuters.com@reuters.net )

Moscow Times: Government May Use Higher Oil Price Estimate for 2011 http://www.themoscowtimes.com/business/article/government-may-use-higher-oil-price-estimate-for-2011/407437.html

03 June 2010Reuters

The government will base its 2011 budget on an oil price forecast of $75 per barrel, up more than a quarter from initial plans, a government source said Wednesday, indicating fiscal hawks might be losing a battle to keep a lid on spending.

The forecast, which sees the economy growing 3.4 percent next year and inflation at 5 percent to 6 percent, is expected to receive final approval at a government meeting Thursday.

The source said the government reached a consensus on key parameters for next year's budget, after a long-running debate on the issue.

The consensus seems to give the upper hand to the growth-focused Economic Development Ministry over the fiscally prudent Finance Ministry. The Economic Development Ministry would benefit from a higher oil price forecast because that would enable a higher forecast for revenues, which would allow higher spending. The Finance Ministry had argued that the oil price forecast should not exceed $70.

Finance Minister Alexei Kudrin has said a higher oil price forecast should translate into a deficit below the 4 percent of gross domestic product originally penciled in for 2011, which was based on an oil price of $59 a barrel.

"It [the plan] was repeatedly discussed in the government, and … I think the Finance Ministry knows it and has seen it," the source said.

Rising oil prices have been a huge boon for Russia, smoothing the economy's slow recovery from its first recession in a decade. Urals oil export blend traded above $70 a barrel Wednesday, up from the $58 level on which this year's budget was planned.

But for Kudrin, the higher oil price means a fresh battle to keep a lid on spending and, if oil falls short of the $75 price forecast next year, it would reduce the forecast budget deficits.

"This seems to be the second time that the Finance Ministry has given up its positions," said Ilya Ilin, an analyst at Nomos Bank, referring to the Finance Ministry's difficulties in getting its way over tackling the deficit.

In April, Kudrin said he was "disappointed" when Prime Minister Vladimir Putin said Russia would press on with a hike in employer social security contributions, which the Finance Ministry had suggested could be delayed.

Putin, however, has also heralded a fall in inflation to post-Soviet Union lows as a major achievement for Moscow and thereby may still back restrained spending.

"We can move more actively on the path of solving our financial problems. First of all, reduce the budget deficit," Putin told officials Wednesday.

"Thus we will be able to use the means of the Reserve Fund more economically, in any case partly preserve it."

The latest forecast sees slightly lower economic and industrial output growth, as well as more benign inflation than forecast by the Economic Development Ministry in April.

Moscow Times: Government Looks to 3.4% GDP Growth in 2011 http://www.themoscowtimes.com/business/article/government-looks-to-34-gdp-growth-in-2011/407417.html

03 June 2010

Bloomberg

The Economic Development Ministry expects gross domestic product to expand 3.4 percent next year as the price of crude oil averages $75 a barrel, a ministry official said Wednesday.

The ministry sees growth accelerating to 3.5 percent in 2012 and 4.2 percent in 2013 as the average price of oil rises to $78 and $79, respectively, the official told reporters, declining to be identified before the Cabinet discusses the recommendations.

The ruble will probably average 29.3 per dollar next year and then strengthen to 28.4 and 27.9 in 2012 and 2013, under the ministry’s most likely scenario, the official said. Consumer prices will probably rise between 5 percent and 6 percent in each of the next two years and between 4.5 percent and 5.5 percent in 2013, according to the official.

Finance Minister Alexei Kudrin said last month that the budget for the next three years should be based on oil averaging $70 a barrel.

Prime-Tass: PMI shows Russian service sector recovery slows in Mayhttp://www.prime-tass.com/news/show.asp?topicid=68&id=479912

MOSCOW, Jun 3 (PRIME-TASS) -- The latest services PMI data from VTB Capital signaled a further robust improvement of operating conditions in the sector in May, with both activity and new business increasing at solid rates, but easing from April’s recent highs, the London-based bank said in its latest survey released Thursday.

Activity growth was slightly below the survey’s long-run trend, but sufficient to generate rising employment in the sector for the second month running, VTB Capital said. Meanwhile, input price inflation accelerated to a five-month high, while output prices were up only marginally on the month as intense competition for new work continued, the bank said.

The headline seasonally adjusted Russian Services Purchasing Managers Index (PMI), a single-figure composite indicator designed to give an overall measure of the service sector’s performance, remained above 50.0 for the 10th successive month in May, but dipped for the first time since February, posting 55.9. That was slightly weaker than the long-run trend level of 56.7, but still indicative of a solid overall improvement in business conditions.

Readings above 50.0 signal an increase on the previous month, while readings below 50.0 signal a contraction.

“In May, VTB Capital’s Russian Services PMI slightly declined to 55.9 from 56.9 in April, still pointing to robust growth in the service sector and a revival in demand. The

recovery’s deceleration came mainly from the lower rate of expansion in business activity and incoming new business,” Svetlana Aslanova, an analyst at VTB Capital, said commenting on the survey.

“Still, employment in the sector marginally increased supported by rising workloads. Input price inflation accelerated to its highest level in 2010 fuelled by increasing cost of utilities, rents, salaries, fuel and taxes. However, high competition did not allow companies to transfer the increasing cost on to consumers. As a result, the rate of output price increases eased to a marginal pace,” Aslanova also said.

Russian service providers remained strongly optimistic regarding the 12-month outlook for business activity growth in May. The degree of positive sentiment eased slightly since April, but remained above the long-run series average, VTB Capital said.

The Russian Services PMI is derived from a monthly survey of 300 purchasing executives in Russian services companies and has been conducted since October 2001.

VTB Capital plc is a London-based subsidiary of Russia's second largest bank, government-controlled VTB Bank. VTB Capital was previously known as VTB Bank Europe.

End

03.06.2010 08:00

Bloomberg: Russian Service Industries Grew for 10th Month in May, VTB Says http://www.bloomberg.com/apps/news?pid=newsarchive&sid=akDRUb57UXaM

By Maria Levitov

June 3 (Bloomberg) -- Russian service industries from banks to supermarkets expanded for a 10th month in May, signaling “a further robust improvement of operating conditions,” VTB Capital said.

The Purchasing Managers’ Index was at 55.9 last month, compared with 56.9 in April, VTB Capital said in an e-mailed statement today. The index, based on a survey of about 300 purchasing managers, shows expansion with a reading above 50.

The expansion points to “robust growth in the service sector and a revival in demand,” Svetlana Aslanova, an analyst at VTB Capital in Moscow, said in the statement. “Positive business sentiment remains strong, coming in line with our expectations of a continuing recovery in the Russian economy.”

Retail sales rose for a fourth month in April, jumping an annual 4.2 percent, fueled by higher wages and lower unemployment. Real wages gained 6 percent and unemployment declined to the lowest rate in four months, reaching 8.2 percent, the statistics office said.

Billionaire Aras Agalarov opened Vegas, Russia’s biggest mall, this week with a pledge to build two more shopping centers in Moscow in the next three years as retail spending picks up.

The economy is set to expand 4 percent this year after shrinking 7.9 percent in 2009, the biggest contraction on record, according to the Economy Ministry.

Employment in service industries increased for a second month, though the rate of job creation was “marginal,” VTB Capital’s statement said.

‘Conservative Habits’

Still, the slowdown from the previous month “came mainly from the lower rate of expansion in business activity and incoming new business,” Aslanova said in the statement.

“Consumers in Russia could retain conservative spending habits for a longer period, as the recovery trend in the global and local economies will likely be moderate and volatile,” Vladimir Tikhomirov, an economist at UralSib Financial Corp. in Moscow, wrote in an e-mailed report yesterday.

New service industry business registered a “weaker” rate of expansion in May, according to VTB Capital. “Activity growth was relatively strong in transport and storage and financial intermediation,” the bank said.

Input prices rose at the fastest rate in five months in May, fuelled by spending on utilities, fuel, rents, salaries and taxes, according to VTB Capital. Prices charged to consumers were “up only marginally on the month as intense competition for new work continued,” it said.

The seasonally adjusted services PMI, first compiled in October 2001, is a composite of five differently weighted indexes including business, employment and new, outstanding and future business, according to VTB Capital.

To contact the reporters on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net

Last Updated: June 3, 2010 00:00 EDT

Bloomberg: Russia Fights for World Wheat Dominance, Undercuts U.S. Grain http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aU4Lw0w3Wjf8

By Maria Kolesnikova and Tony C. Dreibus

June 3 (Bloomberg) -- On May 28, Egypt, the world’s biggest importer of wheat, bought 180,000 metric tons from Russia for $178.50 per ton, about $13 less than the U.S. price. The deal is one of many signs that Russia is challenging America’s supremacy in the global wheat market.

In the past 11 months, Russia has won 58 percent of Egypt’s regular purchases of wheat, compared with 40 percent the year before, Bloomberg Business Week will report in its June 7 issue. The U.S. share of Egypt sales fell to 8 percent from 13 percent over the same period, according to Egypt’s General Authority for Supply Commodities.

For Russia, it’s an extraordinary turnaround. As recently as the 1990s, it had to buy wheat from U.S. farmers to feed its people, so inefficient were its farms after decades of ruinous Soviet practices. Then, Russian investors slowly started buying land and introducing modern farming in the country’s fertile “black earth” region near Ukraine and the Black Sea.

In 2002, the country emerged as a major exporter for the first time in decades by selling 15.6 million tons abroad. “Exports suddenly became profitable,” says Arkady Zlochevsky, the president of Russia’s Grain Union, a lobby group.

By 2008, global grain prices were reaching record levels, and Swedish, British, Chinese and Korean investors were piling into Russian farmland. Today, Russia exports 14 percent of the world’s wheat, up from 0.5 percent in 2000. The U.S. share of wheat exports has slipped from 26 percent to 19 percent.

Wheat-Market Goal

Moscow is now making dominance of the wheat market a goal. The U.S. Department of Agriculture predicts that Russia will become the top wheat exporter by 2019.

President Dmitry Medvedev last year ordered the creation of a state company, United Grain, to modernize the storage and shipment of wheat in a $3.3 billion overhaul. United Grain will also pursue export deals in Southeast Asia and Latin America, says Chief Executive Officer Sergei Levin. Those regions are traditional strongholds for Australian and U.S. grain exporters.

U.S. farmers are worried. “The Black Sea region is becoming a bigger competitor for us,” said Dean Stoskopf, 54, a wheat grower near Hoisington, Kansas.

Up to now, U.S. farmers have commanded premium prices for higher quality, Stoskopf said. U.S. wheat generally has higher protein content than Russian grain and suffers less from insect infestations. That may change as the Russians improve their growing practices and storage facilities, he said.

Free-Trade Agreements

Some members of Congress want Washington to do more.

“I would not rest on the attitude that we have a great product,” said Nebraska Republican Senator Mike Johanns, who was the Secretary of Agriculture from 2005 to 2007. “Price is a factor. We should be working on free-trade agreements or very quickly we’ll find ourselves behind.”

Free-trade agreements in certain parts of Latin America and Asia would open up new markets for U.S. wheat. Russia is part of a bigger problem, says Jason Britt, the president of Central States Commodities in Kansas City, Missouri. Wheat futures on the Chicago Board of Trade have fallen 34 percent in the past year as stockpiles have grown.

“We are completely opportunistic,” said Kirill Podolsky, 39, the chief executive officer at Valars Group, Russia’s No. 3 wheat exporter. “We ship anywhere there is demand,” he said at his headquarters in Taganrog, by the Sea of Azov, which connects to the Black Sea.

Valars will supply a third of the shipment in the Egypt deal. Podolsky founded Valars in 2006 and has spent $250 million on farmland and $108 million on equipment.

Improved Yields

Vasily Pechersky, 64, who runs Valars’ 41,230-hectare (101,880-acre) Sarmat farm, north of Taganrog, says his winter- wheat yield was 4.4 tons per hectare, on a par with U.S. yields. He credits his U.S.-made New Holland tractors and harvesters as well as higher use of fertilizers and new technologies.

“One New Holland harvester stands in for two Russian-made ones,” Pechersky said. Russian-made tractors sit to one side, covered in rust.

The Russians still have challenges to overcome. Investors such as Podolsky bought land at top prices right before the global financial crisis and are struggling to pay off debts. Valars may sell shares on the market to repay $500 million of debt before investing anymore in farming.

Wheat-growing brought “zero” profit in the last marketing year after a plunge in prices, Podolsky said. The Grain Union is asking Moscow for $320 million in subsidies to improve the profitability of exports. Such state aid could help Russia’s growers compete even more ferociously with the U.S. on price.

To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net; Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.

Last Updated: June 3, 2010 00:00 EDT

Bne: COMMENT: Russia must modernise or die http://www.businessneweurope.eu/storyf2133/COMMENT_Russia_must_modernise_or_die

Ben Aris in Moscow June 3, 2010

In what amounts to a call to arms, Russian President Dmitry Medvedev at the end of May issued a dire warning to top officials of United Russia, the party which dominates the government: Russia will fail unless its social structure and economy are modernized. "We have no other alternative," he told the Duma deputies. "If we fail to modernize, the country will collapse and the economy will degrade."

The global crisis has been a game changer for Russia. Over the last decade, the country grew fat on record high oil prices. But with the international capital that paid for much of this growth unlikely to return anytime soon, for the first time Russia will have to reform or else it could face another bust as soon as 2013, according to two reports released in May.

Unlike its Bric peers of China, India and Brazil, Russia had a terrible crisis. After five years of ballistic growth, the Russian economy contracted by 7.9% in 2009. Analysts believe the economy will bounce back strongly in the second half of this year thanks to higher-than-expected oil prices and a gradual recovery in consumption, but the respite will only be temporary. Two papers released in May warn that after good years in 2011 and 2012, the economy could slump again, contracting by about 1.4% in 2013, unless the modernisation campaign launched by Medvedev this spring bears fruit.

An unexpected recovery in oil prices at the start of this year has temporarily taken the pressure off the Kremlin. Oil has risen from $42 per barrel at its nadir in 2009 to hover at over $70 for most of this year - a "comfortable" level for Russia, according to Prime Minister Vladimir Putin. However, the Organisation for Economic Co-operation and Development (OECD) warned in its May economic outlook that the commodity-fuelled recovery will falter and die if oil prices and capital inflows continue to rise, as the return of easy money will sap the Kremlin's political will to push through the deep and painful reforms necessary to put the economy on a sustainable growth path. "If oil prices and capital inflows continue to increase, avoiding excesses will be the main policy challenge," the OECD said.

The high oil prices have already greatly improved the country's finances and given the Kremlin some wiggle room. Russia's GDP growth reached 5.5% in April on year (albeit from a low base) and the state expects total growth in 2010 to be 3.4%. Both the OECD and the World Bank have revised Russia's GDP forecast upwards for this year to 5.5%. However, leading Russian investment bank Renaissance Capital warned in another paper that if the government fails to implement the sweeping reform agenda introduced by Medvedev, growth could falter as soon as 2013.

No return to good old days

The noughties was a decade of easy living, but that's all over now. The crisis has fundamentally changed the game. Russia has grown rapidly by borrowing heavily to pay for investment; now that such capital has dried up and is unlikely to come back for many years, Russian companies will to have to work a lot harder to maintain growth.

Russia's government has ramped up its spending to see the economy through the crisis. Currently, it needs oil prices of between $100 and $110 per barrel for the budget to break even, up from the $70 break-even price for oil before the crisis. Clearly, even the lower price isn't sustainable and Russia is now even more vulnerable to oil prices than prior to the crisis. The government desperately needs to find an alternative way to finance the economy's makeover.

With the international credit markets largely closed, the Kremlin has turned to the only alternative source of capital available: foreign investment. But things here are not going well. "The investment slump has been the key factor behind GDP decline," says Vladimir Tikhomirov, chief economist with Uralsib. "The total 2009 investment volumes have fallen to 2007 levels."

Foreign funding was the largest driver for investment growth, reaching a record high of $82.3bn in 2007, but the turnaround was so fast because during the pre-crisis period the bulk of funding for fixed investment was from foreign credits, which had a short maturity. Over the course of just one year, between spring 2008 and spring 2009, fixed investment in Russia went from 20% annual growth to a decline of more than 23%.

So far this year, total foreign investment (which includes credits) has recovered a bit, up by 9.3% in the first quarter on year to $13.1bn, but the much more significant foreign direct investment (FDI) plummeted by 17.6% over the same period. High oil prices will keep the boat afloat for the meantime, but it won't last. "Global monetary and fiscal easing is likely to keep commodity prices up, resulting in a current account surplus and a return of capital inflows," says Alexei Moisseev, chief economist for Renaissance Capital. "That means for Russia more of the same: cheap money resulting in a quick recovery, including inventory build-up, the utilisation of existing capacity and a return of cheap credit. However, this will end and, since we do not expect structural changes to the economy until after the 2012 presidential election at the earliest, we think a bust similar to that of in the first half of 2009 will follow."

Renaissance are predicting that after a good year in 2010, growth will peak in 2011 at 8.1% - one of the strongest years on record – before collapsing again; by 2013 the economy will contract again by 1.4% and Russia will be in real trouble.

Hence Medvedev's call to arms. Russia could grow by 6-8% a year - faster than in the boom years - if it successfully implemented Medvedev's modernisation programme, reckons World Bank Vice President for Europe and Central Asia Philippe Le Houerou. And the International Monetary Fund recently published figures that suggest Russia could be the fastest growing Bric nation on a purchasing power parity basis. But the clock is ticking. The Kremlin has roughly three years to make these reforms work and Medvedev is warning that that's not an exaggeration: this time the Kremlin has to make the reforms stick.

Business, Energy or Environmental regulations or discussions

2010-06-03 07:39 Reuters: Russian markets -- Factors to Watch on June 3http://www.iii.co.uk/news/?type=afxnews&articleid=7924831&action=article

MOSCOW, June 3 (Reuters) - Here are events and news stories that could move Russian markets on Thursday.

You can reach us on: +7 495 775 1242

STOCKS CALL (Contributions to moscow.newsroom@reuters.com):

Troika: We are opening our prices this morning up 2.0 pct

VTB: We believe that the trading bottom that we called for last week has been validated. If history is any guidance, the path of least resistance for the next week or two is still up. The overnight behaviour of global markets agrees with this assessment: S&P500 closed

+2.6 percent, Asian equities are up 1.5-3 percent up as we type, while crude oil continues to consolidate in the $73-74/bbl range.

EVENTS (All times GMT):

MOSCOW-President Medvedev meets central bank chief

MOSCOW-President Medvedev gives foreign policy speech

MOSCOW-International Space Station crew leave for the Baikonur Cosmodrome

MOSCOW-Rights activist Lyudmila Alexeyeva holds briefing on protests broken up by police

IN THE PAPERS:

Russia's state-run Vnesheconombank (VEB) will keep on supporting the country's banking and corporate sector through the recovery from the crisis, VEB chief executive Vladimir Dmitriyev told business daily Vedomosti in an interview.

Russia's tourism industry has begun its recovery from the crisis, with the approaching summer expected to bring a 15 percent increase in Russians travelling abroad, daily Kommersant reports.

TOP STORIES IN RUSSIA AND THE CIS:

TOP NEWS:

TNK-BP's Kovykta files bankruptcy

COMPANIES/MARKETS:

KazMunaiGas wants to sell refinery stake

Russia's LUKOIL tops Q1 forecasts

ECONOMY/POLITICS:

Russian govt to base 2011 budget on $75 oil

Russian MPs play truant in Kremlin's parliament

Russia says terrorists seek nuclear materials

Russia 20-year population fall may be turning

Weekly CPI up 0.1 pct, May estimate 0.4 pct

Putin, eyeing election, burnishes image

ENERGY: Russia May oil output edges down; May gas output falls 11.7 pct m/m; Oil output falls in May m/m, exports rise; Seaborne oil exports rise in May m/m LDE6510KU

COMMODITIES: Russian sugar refining up vs year-earlier

MARKETS CLOSE/LATEST:

RTS 1,393.0 +0.7 pctMSCI Russia 739.7 +1.2 pctMSCI Emerging Markets 924.4 +1.8 pct

Russia 30-year Eurobond yield: 5.642/5.593 pct

EMBI+ Russia 257 basis points over

Rouble/dollar 31.2560

Rouble/euro 38.0500

NYMEX crude $73.68 +$0.83ICE Brent crude $74.56 +$0.81

Bloomberg: Rosneft, Gazprom Neft, Norilsk: Russian Stock Market Previewhttp://www.businessweek.com/news/2010-06-03/rosneft-gazprom-neft-norilsk-russian-stock-market-preview.html

June 03, 2010, 1:52 AM EDT

By Maria Kolesnikova

June 3 (Bloomberg) -- The following shares may have unusual price changes in Russian trading. Stock symbols are in parentheses and prices are from the previous close unless otherwise noted.

The 30-stock Micex Index rose 1.2 percent to 1,341.24, the highest level since May 18. The dollar-denominated RTS Index climbed 0.7 percent to 1,383.87.

OAO Rosneft (ROSN RX): Russia plans to impose a common export tax on East Siberian oil starting on July 1, Finance Minister Alexei Kudrin said. Russia’s largest oil producer climbed 0.7 percent to 226.94 rubles in Moscow.

OAO Gazprom Neft (SIBN RX): The oil arm of Russia’s state- run gas producer said last week’s fire at its largest refinery in Omsk damaged a crude distillation unit, potentially reducing its ability to make fuels like diesel. Gazprom Neft rose 2.3 percent to 121.53 rubles.

OAO GMK Norilsk Nickel (GMKN RX): Copper fell to the lowest price in more than a week on concern that global growth will slow, curbing demand for metals. Nickel also fell. Russia’s largest mining company rose 0.2 percent to 5,170.75 rubles.

--Editor: Glenn J. Kalinoski

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

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

Reuters: Ex-Goldman exec Gupta quits Sberbank's boardhttp://www.reuters.com/article/idUSLDE65206E20100603

2:14am EDT

MOSCOW, June 3 (Reuters) - Rajat Gupta, a former director at Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz), quit the supervisory board at Sberbank (SBER03.MM: Quote, Profile, Research, Stock Buzz), Russia's biggest lender, but remains a strategic adviser to the board, Sberbank said on Thursday.

Gupta, a former worldwide managing director at McKinsey & Co, was first elected to Sberbank's supervisory board in 2008 and has been so far the highest-paid director with a 429,000 euros ($524,700) paycheck proposed for 2009. [ID:nNLDE6442E]

Gupta has withdrawn his name from the ballot for the election to Sberbank's supervisory board that will take place at the annual general shareholders meeting June 4.

"Both sides have come to the conclusion that direct involvement of Mr. Gupta in Sberbank's strategic tasks and projects as a strategic adviser will maximise the positive results of our joint efforts," Sberbank said in a statement.

Gupta came into the public eye in April after the Wall Street Journal said he told hedge fund founder Raj Rajaratnam about Berkshire Hathaway's $5 billion investment in Goldman before the deal became public. Gupta said he had done nothing improper. [ID:nN23198525]

State-controlled Sberbank has submitted Gupta's remuneration to its annual shareholders meeting for approval.

Remuneration for the other directors on the supervisory board ranged from 1 million roubles to 3.5 million roubles ($112,200)

(Reporting by Dmitry Sergeyev; Editing by Michael Shields)

DJ: Sberbank Reveals Shake-Up Among Shareholders –Vedomostihttp://www.easybourse.com/bourse/financieres/news/842388/sberbank-reveals-shake-up-among-shareholders-vedomosti.html

Publié le 03 Juin 2010 Copyright © 2010 Dowjones

- DOW JONES NEWSWIRES Russia's leading retail lender, state-controlled OAO Sberbank (SBER.RS), disclosed shareholder changes including the exit of two high-profile investors, business daily Vedomosti reports Thursday. Disposing of their Sberbank shares were Inteko, a real estate developer owned by Yelena Baturina, a powerful businesswoman who is married to Moscow's mayor, and Eurocement Group, headed by Filaret Galchev, No. 400 on Forbes magazine's list of the world's richest people. Sberbank's deputy chief executive, Bella Zlatkis, said Eurocement sold all of its shares this year. In addition to Russia's central bank, Sberbank has six domestic shareholders with a stake of more than 0.1%, Zlatkis said Wednesday, after registrations for the company's annual meeting were completed. The largest is held by Oksana Ozorina, described by Vedomosti as the partner of Nikolai Maximov, founder of scrap metal processor Maxi-Group. She increased her stake to 0.9% from 0.4%. State-owned Vnesheconombank, meanwhile, slashed its holding to 0.46% from 4%. Sugar producer Rusagro and oil and gas company Negusneft, both controlled by Vadim Moshkovich, collectively own a 0.17% stake, having reduced it on four occasions over the past year. Moshkovich is a senator in the Federation Council, the upper house of Russia's parliament. OAO Magnitogorsk Iron & Steel Works (MAGN.RS), or MMK, and an entity named OMK-Invest each own 0.1%, Zlatkis said. Neither could be reached Wednesday, Vedomosti says. But a representative of pipe maker OMK -- its initials reflect the Russian equivalent of "United Metallurgical Company" -- said it has no connection to the Sberbank investor. Zlatkis identified foreign shareholders, which now own 35.7% of Sberbank, as New Zealand businessman Richard Chandler; HSBC Holdings PLC (HSBA.LN) and Deutsche Bank AG (DB); and funds managed by Baring Emerging Europe PLC (BEE.LN), JPMorgan Chase & Co. (JPM) and BlackRock Inc. (BLK). Newspaper website: www.vedomosti.ru -Dow Jones Newswires; 212-416-2900

Bloomberg: Aeroflot Airlines Says 2009 Net Income Tripled to $86 Million http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aH01KClxziug

By Ekaterina Shatalova

June 3 (Bloomberg) -- OAO Aeroflot, Russia’s biggest airline, said net income more than tripled last year to $86 million, according to a statement distributed to reporters before a briefing in Moscow today.

To contact the reporter on this story: Ekaterina Shatalova in Moscow at eshatalova@bloomberg.net

Last Updated: June 3, 2010 02:01 EDT

Reuters: Aeroflot profit triples but misses target-UPDATE 1http://www.forexyard.com/en/news/Aeroflot-profit-triples-but-misses-target-2010-06-03T072727Z-UPDATE-1

AEROFLOT-RESULTS/ (UPDATE 1)

* 2009 net profit $86 million vs own forecast of $100 million

* Revenue fell 27 percent to $3.3 billion

* EBITDA down 11 percent, debt up 34 percent

* Shares rise 4 percent

(Adds detail, background, shares)

MOSCOW, June 3 (Reuters) - Russian flagship airline Aeroflot said 2009 net profit more than tripled but came in some way below a target set just two months ago while full year revenue slumped 27 percent on lower passenger numbers.

The company, about half owned by the Russian government, said net profit for the 12 months to end December was $86 million, below the $100 million forecast by Chief Executive Vitaly Savelyev in April.

The result was still vastly improved on 2008.

Aeroflot shares were up 4.2 percent by 0700 GMT, having climbed nearly 6 percent in the two previous sessions.

Full year revenue fell 27 percent to $3.3 billion as passenger numbers fell amid the global economic downturn.

Aeroflot also said Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) fell 11 percent to $461 million, while group debt rose 34 percent to $1.7 billion.

Aeroflot is currently involved in long-running discussions over the future of a 25.8 percent stake owned by media tycoon and former KGB agent Alexander Lebedev. Lebedev agreed to sell the stake back to the airline for a discounted price of $400 million in January, but has since threatened to back out of the deal due to the holding's improved value. (Reporting by John Bowker; Editing by Hans Peters)

RBC: MegaFon about to purchase Synterra

http://www.rbcnews.com/free/20100603105003.shtml

      RBC, 03.06.2010, Moscow 10:50:03.MegaFon is set to purchase 100 percent of Synterra's shares from Promsvyazcapital group (Synterra Cyprus Limited owns a 99.99-percent stake in Synterra) and Burnham Advisor Limited (owns 0.01 percent of Synterra's shares), the Russian mobile operator announced on Wednesday. The amount of the deal is $745m, including Synterra's debts, and MegaFon is poised to make the payment for the company in several tranches. Renaissance Capital and Linklaters CIS are acting as financial and legal advisors for the deal, respectively.

      Meanwhile, MegaFon's management plans to present to the board of directors a plan for Synterra and its subsidiaries' integration in the operator's business in late June.

      According to MegaFon, the deal will allow the company to strengthen its positions on the long-distance communication market, as well as in the fixed-line and broadband mobile Internet connection sections.

CIOL: Sistema Shyam to invest $1 bn in Indiahttp://www.ciol.com/News/News/News-Reports/Sistema-Shyam-to-invest-1-bn-in-India/137127/0/

PANAJI, INDIA: Sistema Shyam Teleservices, promoter of the MTS mobile service brand, will invest around $1 billion in its India operations over the next one year, a company official said Wednesday.

"We have already invested $1.5 billion in India and will be investing $2.5 billion in all within the next one year," V.K. Cherian, director, corporate communications, told reporters here.

Sistema Shyam, a joint venture between Russia-based Sistema and India's Shyam group, has a license to provide mobile telephony services in 22 circles across the country.

Cherian, who was here to announce the launch of MTS telecom services in Goa, said the company would soon cover all the major telecom circles.

"MTS has a subscriber base of nearly 4.5 million in India as of May 2010, despite being a late entrant into the sector," he said.

Stating that MTS was aiming at a 20 per cent market share as far as data service was concerned, the firm's chief information officer Rajeev Batra said the services now provided by MTS matched those which would be offered on the 3G platform and that the CDMA-oriented MTS had no intention of switching over to GSM technology.

"We are already offering high quality services like live TV streaming. At the current bandwidth we are providing, we are comfortable with CDMA. We do not see the need to switch to GSM," Batra said.

Posted: June 3, 2010

Nanowerk: RUSNANO invests in a major preclinical studies center near Moscow http://www.nanowerk.com/news/newsid=16558.php

(Nanowerk News) The Supervisory Council of the Russian Corporation of Nanotechnologies (RUSNANO) has approved the corporation's participation in a project to create a center for preclinical studies. The project's budget will total 1.6 billion rubles, from which RUSNANO will invest 228 million rubles in equity and extend a loan of 580 million rubles (19.3 million dollars). A project applicant, Investment Advisory Group (IAG), will contribute 52 million rubles in equity. A financial coinvestor will contribute 180 million rubles in equity and extend a loan of 19.3 million dollars.

This project's annual revenue is expected to reach 1.3 billion rubles by 2015. Approximately half of this revenue will come from conducting preclinical tests under foreign contracts.

After passing an external audit the center will be Russia's first Contract Research Organization (CRO) to offer a full range of preclinical tests that conform to Good Laboratory Practice (GLP).

Academician Mikhail Kirpichnikov of the Lomonosov Moscow State University (MSU) Biology Department will head scientific oversight for this project. He will be working with leading chemico-biological institutes of the Russian Academy of Sciences (RAS), such as: Institute of Physiologically-Active Materials (IPAM RAS), Zelinsky Institute of Organic Chemistry RAS, Nesmeyanov Institute of Organoelemental Compounds RAS, Shemyakin-Ovchinnikov Institute of Bioorganic Chemistry RAS, etc.

The Lovelace Respiratory Research Institute (LRRI) from New Mexico, USA, will provide technical expertise for this project. With more than 23 years of experience in preclinical

studies according to GLP standards, LRRI will outsource some of its own contract work to the new center. In order to create a quality control system, LRRI will train the new center's personnel, ensure conformance with GLP, as well as prepare the center for an audit by the US Food and Drug Administration (FDA) and by Organization for Economic Cooperation and Development (OECD) regulatory agencies.

The center will be built in Dubna, a city near Moscow with high concentration of research and development facilities. The center's construction project is being designed by Henningson, Durham & Richardson, International, one of the world's leading firms specializing in the design and construction of high-technology academic laboratory complexes. Over it's 90-plus year history this company has completed projects in nearly every state in the USA and in 60 other countries. The complex's total area, including testing laboratories, logistical and other auxiliary facilities, will be about 10,000 sq.m.

The center will focus in nanotoxicology studies, including nanoparticle safety testing, certification and preclinical testing of nanosubstances, nanomedical preparations and nanovaccines for safety, efficacy and adherence to technological parameters. For this purpose, the center will be equipped with additional laboratories and instruments to work with cell cultures, perform electron microscopy studies and specialized chemical analysis of nanomaterials.

"This project should play an important role in the development of domestic innovative pharmaceuticals," Olga Shpichko, RUSNANO Managing Director says. "According to the Russian pharmaceutical sector development strategy Pharma-2020, more than 1,000 preclinical studies should be conducted annually in Russia by 2015. About one-quarter of these tests will require the new center's full cycle of high-quality services."

"The preclinical studies center will specialize in safety of innovative nanoproducts. It will serve as a springboard for world market entry of prospective new Russian products, and at the same time attract foreign product innovations to Russia," states Yoanna Gouchtchina, General Director of IAG. "While developing modern industrial projects in Russia, IAG has long eyed the commercial potential of Russia's preclinical testing market. Even conservative estimates of this project's economic feasibility left no room for doubt that such a high-technology enterprise could be profitable. Attracting RUSNANO as a strategic partner, and the use of RUSNANO's financial and organizational resources, will undoubtedly help to overcome any possible barriers to the new center's establishment on the Russian market."

"The Lovelace Respiratory Research (LRRI) Institute is pleased to learn that such an important project as the creation of the first in Russia Preclinical Nanotoxicology Research Center is moving forward," says LRRI's President, Robert Rubin. "LRRI is one of the leading research institutes in the study of the physicochemical properties and toxicology of nanomaterials of all types under Good Laboratory Practice and other international standards. We are honored to collaborate with IAG, RUSNANO, and leading Russian Scientific Institutions such as the Lomonosov Moscow State University Biology Department in the development of this new exciting high technology scientific center."

UralSib: RusHydro looking to acquire additional hydro assets http://www.businessneweurope.eu/dispatch_text11840

UralSibJune 3, 2010

RusHydro could receive an additional 10.5GW of hydro capacity from InterRAO. Today Kommersant released some information on the expected asset swap between RusHydro (HYDR RX - Buy) and InterRAO (IRAO RX - Hold). According to Kommersant, InterRAO will receive con- trolling stakes in electricity retail companies currently owned by RusHy- dro (Mosenergosbyt and Petersburg Retail Company), while RusHydro expects to receive all of InterRAO's hydro assets located in the CIS (788 MW of capacity), the Sangtudinskaya HPP-1 (670 MW) and IrkutskEn- ergo's hydro power plants (Bratskaya, Ust-Ilimskaya and Irkutskaya HPPs with a total capacity of 9GW). With this deal RusHydro could in- crease its total capacity by 41% to 35.9GW.

Likely to be a non-cash deal. InterRAO is currently in the process of consolidating utilities assets that were not sold prior to UES's reorganization. These assets were inherited by RusHydro and the Federal Grid Company (FGC; FEES - Hold), and included OGK-1, TGK-6, TGK-7 and TGK-11. InterRAO is also seeking a 25% stake in TGK-5 and 40% in IrkutskEnergo, which are currently controlled by the state. To acquire all these assets, InterRAO will issue additional shares that will be swapped for the assets held by RusHydro, FGC and the state. At the same time, RusHydro ac- quired the controlling stakes in Mosenergosbyt and Petersburg Retailer from Eastern Energy Systems. With the current market environment, we value the combined stakes in the retailers at $320 mln, which is far below the expected valuation of the hydro assets ($1.1-1.2 bln). Despite this, we expect this to be a non-cash deal, as RusHydro could pay for hydro assets with InterRAO shares, which will be received instead of stake in OGK-1 and other utilities names currently valued at $730 mln.

Focus on the potential valuation of assets. Currently, we view the news as rather neutral for all of the deal's participants. We stress that potential benefits either for RusHydro or InterRAO will depend on the valuation of the assets involved in the deal. An- other point of uncertainty is the potential spin-off of HPPs from IrkutskEnergo. The company's current controlling shareholder is EvrosibEnergo, which is expected to execute an IPO this year and is likely to be opposed to the deal. With no exact details regard- ing the valuation of these assets, we reiterate our Buy recommendation on RusHydro and target price of $0.065/share.

Matvey Taits

Activity in the Oil and Gas sector (including regulatory)

Prime-Tass: Kudrin: Russia to abolish zero oil duty for East Siberia Jul 1http://www.prime-tass.com/news/show.asp?topicid=0&id=479951

MOSCOW, Jun 3 (PRIME-TASS) -- The Russian government plans to replace the current zero oil export duty for some East Siberian oil fields with a discounted rate of the

country’s standard oil export duty on July 1, Deputy Prime Minister and Finance Minister Alexei Kudrin said at a news briefing late Wednesday.

Kudrin said a final decision on the duties would be made by June 15.

Currently, some East Siberian fields are exempt from the export duty, while other fields are subject to the standard duty. Under the new system, a discounted rate of the standard duty would be levied on all East Siberian fields.

End

03.06.2010 12:08

03.06.2010

Oil and Gas Eurasia: Unified Scale for Russian Crude Export Duties To Come July 1http://www.oilandgaseurasia.com/news/p/0/news/7514

A new, unified scale of duties for crude exported from all East Siberian fields which is not zero-rated, will come into effect on July 1, Russian Finance Minister Aleksey Kudrin said, according to RIA-Novosti."We are now drafting the formula for various oil prices; there will be a single rate for all fields, for every ton. That is, if the price changes, the export duty will also change. This is a scale, but it will be the same for all fields in East Siberia", Kudrin said.He clarified that the scale would be applied to all 22 fields in East Siberia which are now using the zero-rate duty. He said it will be used from July 1, if all the necessary calculations can be finished by July 15. Copyright 2010, Oil and Gas Information Agency. All rights reserved.

TNK-BP: RUSIA Petroleum Filed a Bankruptcy Petition after TNK-BP Served Early Repayment Notice http://www.tnk-bp.com/press/releases/2010/6/149/

June 03, 2010, Thursday

TNK-BP announced that the General Director of OJSC RUSIA Petroleum, of which TNK-BP is the major shareholder, presented a petition to the Arbitration Court of Irkutsk region to initiate bankruptcy proceedings of RUSIA Petroleum. These actions followed the submittal by TNK-BP, on May 14 2010, of an early repayment notice for a part of the loans issued to RUSIA Petroleum to finance development of the Kovykta gas condensate field.

The current financial situation precludes RUSIA Petroleum from timely repayment of its loans to TNK-BP Group. In accordance with current legislation the General Director was obligated to file a bankruptcy petition with the court.       

TNK-BP announced its original decision to withdraw from the Kovykta project back in 2007. As the major shareholder and creditor of RUSIA Petroleum, TNK-BP is determined to recover its investments and minimize its financial losses. For this purpose, the company is determined to resort to the procedures prescribed by the current legislation.

Notes to editors:

RUSIA Petroleum was established in April 1992 to develop major hydrocarbon fields in the Irkutsk region. RUSIA Petroleum is the operator of the Kovykta gas condensate field. Since the beginning of its operations RUSIA Petroleum has conducted additional exploration at Kovykta, which generated reserve growth from 346 billion to more than 2,000 billion cubic meters of gas. In 2000—2007, the company executed an exploration drilling program, built surface infrastructure, infield pipelines, prepared and approved project documentation. The pilot development of the field started in 2001. In 2009, production reached 41.7 million cubic meters of gas and 2,100 tons of condensate.  

At present, 62.9% of RUSIA Petroleum shares are owned by TNK-BP structures, 24.99% by OJSC OGK-3, and 10.78% by the Irkutsk regional administration.   

For further information please contact: 

media@tnk-bp.com

Dow Jones: TNK-BP: Kovykta Field Operator Files For Bankruptcyhttp://www.easybourse.com/bourse/international/news/842478/tnk-bp-kovykta-field-operator-files-for-bankruptcy.html

Publié le 03 Juin 2010 Copyright © 2010 Dowjones

- MOSCOW -(Dow Jones)- BP PLC's (BP) Russian oil joint venture TNK-BP Ltd. said Thursday the company operating the huge Kovykta gas condensate project in Siberia has filed for bankruptcy because it was unable to repay loans to TNK-BP. In a statement, TNK-BP said it is determined to recover its investments in Kovykta and had therefore "resorted to procedures prescribed by the current legislation." TNK-BP has a 62.9% stake in Russia Petroleum - the field operator and licence holder.

However, TNK-BP agreed in 2007 to sell the stake to state-controlled OAO Gazprom (GAZP.RS) for between $700 million and $900 million, but talks between the two companies broke down. The Natural Resources Ministry is currently considering whether to revoke Russia Petroleum's Kovykta license as the company allegedly is not complying with the terms. -By Will Bland, Dow Jones Newswires; +7 495 232 9198; william.bland@dowjones.com

Dowjones

Reuters: Russia TNK-BP’s Kovykta licence holder files bankruptcy

http://www.lse.co.uk/FinanceNews.asp?ArticleCode=5q38jv82927rl35&ArticleHeadline=Russia_TNKBPs_Kovykta_licence_holder_files_bankruptcy

Thu, 3rd Jun 2010 06:38MOSCOW, June 3 (Reuters ) - Russia's TNK-BP, half-owned by BP, said on Thursday that the subsidiary which holds the licence to the huge Kovykta gas field has filed a petition to initiate bankruptcy proceedings.

TNK-BP said the RUSIA Petroleum subsidiary is unable to repay loans it granted earlier.

'TNK-BP announced its original decision to withdraw from the Kovykta project back in 2007,' it said in a statement. 'As the major shareholder and creditor of RUSIA Petroleum, TNK-BP is determined to recover its investments and minimize its financial losses.'

TNK-BP also said it 'will resort to the procedures prescribed by the current legislation' to recover its losses.

(Reporting by Alfred Kueppers; editing by Steve Gutterman) Keywords: TNK BP/KOVYKTA

(alfred.kueppers@thomsonreuters.com; Tel +7 495 775 1242; Reuters Messaging: alfred.kueppers@thomsonreuters.com@reuters.net)

June 03, 2010 10:13

Interfax: Kovykta license holder RUSIA Petroleum files for bankruptcyhttp://www.interfax.com/newsinf.asp?id=168631

MOSCOW. June 3 (Interfax) - The General Director of OJSC RUSIA Petroleum (RTS: PTRL), which holds the license to the giant Kovykta gas condensate field in Russia's Irkutsk region, has filed a bankruptcy petition with the region's arbitration court, TNK-BP (RTS: TNBP), the company's major shareholder, said in a press release.

These actions followed the submittal by TNK-BP, on May 14, 2010, of an early repayment notice for a part of the loans issued to RUSIA Petroleum to finance development of the Kovykta gas condensate field.

The current financial situation precludes RUSIA Petroleum from timely repayment of its loans to TNK-BP Group, the press release said. In accordance with current legislation the General Director was obligated to file a bankruptcy petition with the court, it said.

TNK-BP announced its original decision to withdraw from the Kovykta project back in 2007. As the major shareholder and creditor of RUSIA Petroleum, TNK-BP is determined to recover its investments and minimize its financial losses. For this purpose, the company is determined to resort to the procedures prescribed by the current legislation, the company said.

RUSIA Petroleum was established in April 1992 to develop major hydrocarbon fields in the Irkutsk region. RUSIA Petroleum is the operator of the Kovykta gas condensate field. Since the beginning of its operations RUSIA Petroleum has conducted additional exploration at Kovykta, which generated reserve growth from 346 billion to more than 2 trillion cubic meters of gas.

In 2000-2007, the company carried out an exploration drilling program, built surface infrastructure, infield pipelines, prepared and approved project documentation. The pilot development of the field started in 2001. In 2009, production reached 41.7 million cubic meters of gas and 2,100 tonnes of condensate.

At present, 62.9% of RUSIA Petroleum shares are owned by TNK-BP structures, 24.99% by OJSC OGK-3 (RTS: OGKC), and 10.78% by the Irkutsk regional administration.

Pr

Bloomberg: TNK-BP Unit Seeks Bankruptcy Amid Gazprom Feud Over Gas Fieldhttp://www.businessweek.com/news/2010-06-03/tnk-bp-unit-seeks-bankruptcy-amid-gazprom-feud-over-gas-field.html

June 03, 2010, 2:02 AM EDT

By Ilya Khrennikov and Maria Ermakova

June 3 (Bloomberg) -- TNK-BP, BP Plc’s Russian venture with a group of billionaires, said its Rusia Petroleum unit filed for bankruptcy amid a dispute with OAO Gazprom over a field with enough natural gas to supply Asia for four years.

Rusia Petroleum filed for bankruptcy in the Irkutsk region of Siberia after TNK-BP on May 14 demanded repayment for the loans it made to the unit to fund the development of the Kovykta deposit, TNK-BP said in an e-mailed statement today.

TNK-BP agreed in June 2007 to sell its 63 percent stake in Rusia to state-run OAO Gazprom, the world’s largest gas company. That accord, which allowed TNK-BP to later buy back a 25 percent stake, has been delayed by disputes including over price. In February, Russia threatened to revoke Rusia’s license to Kovykta for failing to meet production targets.

“It’s a rather unexpected move from TNK-BP,” said Lev Snykov, an oil and gas analyst at VTB Capital in Moscow. “It looks like TNK-BP’s exit strategy from Kovykta after three years of fruitless negotiations with Gazprom,” Snykov said. “Now TNK-BP will have more flexibility to sell Kovykta’s assets and recoup its investments.”

Kovykta, nearer to China than other fields targeted by Gazprom for exports, holds 1.9 trillion cubic meters of gas, enough to meet current Asia demand for almost four years. While Gazprom said earlier this year it won’t need the field for exports, TNK-BP has said the local market in Irkutsk can’t absorb the volumes that the company is required to produce.

“As the major shareholder and creditor of Rusia Petroleum, TNK-BP is determined to recover its investments and minimize its financial losses,” TNK-BP said in today’s statement. “For this purpose, the company is determined to resort to the procedures prescribed by the current legislation.”

--Editors: Brad Cook, Torrey Clark.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Brad Cook at bcook7@bloomberg.net GAZP RX <EQUITY> BP/ LN <Equity> TNBP RU <Equity>

Moscow Times: Slavneft to Sell Service Units http://www.themoscowtimes.com/business/article/slavneft-to-sell-service-units/407446.html

03 June 2010

Slavneft, owned equally by TNK-BP and Gazprom, said Wednesday that it plans to sell some oil field service units this month.

The sales of four units are in the closing stages, while Slavneft didn’t receive satisfactory bids for two other units, the company said.

(Bloomberg)

Gazprom

Steel Guru: Government lowers forecast for Gazprom exportshttp://www.steelguru.com/news/index/MTQ4NzA0/Government_lowers_forecast_for_Gazprom_exports.html

Wednesday, 02 Jun 2010It is reported that the Economic Development Ministry recently downsized by 5% its forecast for how much gas Gazprom would export this year, apparently reflecting the competition it faces from Qatari and Norwegian fuel.

The ministry said in a revised economic outlook for this year the company will export 205.7 billion cubic meters of gas. Updated from December, the predictions will be reviewed during a Cabinet meeting Thursday.

Gazprom's foreign sales took a heavy battering last year from competing suppliers to the European market, including Qatar and Norway, which offered lower prices.

Compared with past export data on Gazprom web site, this year may wreak more havoc on the company foreign business, despite signs of a global economic upturn. Gazprom sold 209 billion cubic meters outside Russia last year.

Alfa Bank analyst Mr Pavel Sorokin said Gazprom could still post a moderate increase in exports in 2010. After unusual cold snaps last winter, the gas producer reported an increase of 78% for sales to the former Soviet Union and 35% to the rest of its foreign customers which include most of the European Union and Turkey, in its first quarter results under Russian accounting standards.

The Economic Development Ministry was more optimistic about industry wide gas production, increasing its estimate for the year by 3 billion cubic meters to 646 billion cubic meters.

The ministry said the oil industry will also outperform the December predictions by pumping 6 million tonnes more or 499 million tonnes. Russia produced 494.2 million tons last year.

(Sourced from The Moscow Times)

Upstreamonline: Kirinsky takes on Shtokman newbuilds http://www.upstreamonline.com/live/article216582.ece

Two newbuild semi-submersible drilling rigs intended for use on Gazprom's giant but slow-moving Shtokman project are to be reassigned initially to the Kirinsky block off Sakhalin Island upon delivery from Vyborg Shipyard.

Upstream staff  03 June 2010 02:00 GMT

2010-06-02 10:33 Reuters: RLPC-Gazprom Neft's $1 bln loan pays LIB+240 bps margin-bankershttp://www.iii.co.uk/news/?type=afxnews&articleid=7922854&subject=markets&action=article

LONDON, June 2 (Reuters) - Gazprom Neft's $1 billion, five-year pre-export loan pays a margin of 240 basis points (bps) over LIBOR, bankers close to the deal said. The arranging banks announced on Tuesday they had launched senior syndication of the loan and that lenders are being invited to join as mandated lead arrangers with commitments of $100 million each.The company appointed Bank of Tokyo-Mitsubishi-UFJ, Natixis and Societe Generale as initial mandated lead arrangers and bookrunners in February.The loan, which has been fully underwritten by the initial mandated lead arrangers, will be used for general corporate purposes and refinancing of existing indebtedness.Gazprom Neft's previous loan was an unsecured $500 million facility agreed in October 2009 via a club of banks organised by agent Bank of Tokyo-Mitsubishi UFJ.The margin was 5 percent.Gazprom Neft, the oil arm of gas export monopoly Gazprom , is Russia's fifth largest oil producer. It is rated BBB- rating by Standard & Poor's and Baa3 by Moody's.

(Reporting by Christopher Mangham) Keywords: GAZPROM NEFT/LOAN (christopher.mangham@reuters.com; +44 20 7542 3582; Reuters Messaging: christopher.mangham.reuters.com@reuters.net)

PRweek: Russian oil producer Gazprom Neft appoints Hudson Sandler for PR boosthttp://www.prweek.com/uk/news/1007169/Russian-oil-producer-Gazprom-Neft-appoints-Hudson-Sandler-PR-boost/

Alec Mattinson, prweek.com, 02 June 2010, 09:24am Gazprom Neft, the oil producing arm of Russian energy giant Gazprom, has brought in City shop Hudson Sandler as part of plans to step up its international communications efforts.

The agency will have responsibility for coordinating Gazprom Neft's international corporate and financial communications from its London hub. Hudson Sandler picked up

the global media relations brief after a ten-agency pitch that pitted it primarily against other London-based City rivals.

Hudson Sandler has an existing relationship with the firm, having been brought in on a project basis in July last year to advise Gazprom Neft on its online strategy for corporate comms.

The agency will start work on the account this week.

The appointment forms part of the company's attempts to expand its business internationally. It has already established itself as a top-five player in the Russian market. Gazprom Neft has outlined ambitious plans to become a global player, as well as a two million barrel per day producer by 2020.

Industry analysts suggest this expansion is likely to be underpinned by bidding for international oil exploration licences and a number of strategic acquisitions. These assets and licences are likely to focus around the Middle East, North Africa and South America.

Press reports have linked the firm with plans to sell off its oilfield service units or possibly float the assets via an initial public offering as part of its strategy to double its output in the next decade.

It is thought that communications centred around capital markets and mergers and acquisitions activity falls under the remit of Hudson Sandler's brief.

The Hudson Sandler team will be led by Andrew Hayes CEO, with Maria Ignatova (head of CIS) and Claire Barry (head of corporate communications).

Hayes commented: ‘This further addition to our CIS practice is testament to our team. We look forward to working closely with Gazprom Neft as it builds its presence outside Russia.'

Gazprom Neft was created under the name Sibneft before Gazprom brought a majority stake in the firm in 2005. Last month, it revealed it had survived the recession in robust health, doubling its first-quarter net profit underpinned by stronger oil prices.

Aviationweek: Thales Alenia Gets Green Light For Yamal 400http://www.aviationweek.com/aw/generic/story_channel.jsp?channel=space&id=news/asd/2010/06/02/03.xml&headline=Thales%20Alenia%20Gets%20Green%20Light%20For%20Yamal%20400

Jun 2, 2010 By Michael A. Taverna

PARIS — Thales Alenia Space (TAS) has concluded a compromise deal that will enable it to proceed with the supply of two Yamal 400 satellites for Russia’s Gazprom Space Systems.

To be deployed to 90 deg. E. Long., Yamal 401 will be equipped with 36 Ku- and 17 C-band transponders and will be intended to reinforce coverage in Russia and polar regions. Yamal 402 will carry 46 Ku-band transponders and will be positioned at 55 deg. E., where it will serve Russia, Europe, Africa and the polar regions. Yamal 402 will also provide mobile coverage.

TAS was selected by Gazprom in February 2009 to supply the two spacecraft, and Arianespace was picked to launch them. However, the sale, barely a year after Russian Satellite Communications Co. (RSCC) had turned to Astrium for its Express AM4, caused Russian contractors to cry foul.

Political pressure eventually forced Gazprom to cancel the Arianespace launch contract, which would have been its first ever in Russia. Instead, the two spacecraft will be orbited by International Launch Services (ILS), the Russian-U.S. launch provider announced June 1. Ironically, they will be the first Russian payloads ever orbited by ILS, and only the second, after KazSat-2, from the ex-Soviet bloc.

TAS will remain prime contractor for Yamal 402, which will utilize the Franco-Italian manufacturer’s Spacebus 4000 C3 bus. But it will have to cede prime contract responsibility for Yamal 401 to its longtime Russian partner, ISS Reshetnev (formerly NPO PM), reverting to its traditional role as payload supplier. Moreover, TAS agreed to supply certain critical bus components and allow ISS to participate in payload development — a key item on Russia’s technology transfer wish list that TAS had been reluctant to share.

ISS will supply the bus for Yamal 401, based on its new Express 2000 platform, together with onboard and ground telemetry, tracking and control equipment, and bear responsibility for satellite integration and testing.

The compromise permits TAS to retain its strong position in the Russian satellite market and reinforces the company’s partnership with ISS. The two companies are jointly developing a large bus for the Russian market based on TAS’ Spacebus 4000, and shared an award last year from Spacecom of Israel for Telkom 3, featuring ISS’s Express 1000 bus.

However, the settlement also increases ISS’s stature on the international market. The Russian manufacturer landed four satellite awards last year, including Gazprom’s Yamal 300 (transferred from Energia) and a pair of spacecraft for RSCC that will use payload items from Russia’s Scientific Research Institute of Radio (NIIR) as well as TAS.

Artist's concept of Yamal 400: TAS