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Update No: 255

The economy in Russia is quite overwhelmingly determined by the fortunes of its energy sector, which accounts for about one half of exports and by far the most volatile half at that. Since the massive over 200% devaluation of the rouble in late 1998 the economy has been caught up in an oil-export-led boom. It did not really catch on until 2000 when world oil prices soared and Russia's GDP went up by 8%. Last year, as global oil prices settled down, GDP rose by 5%, above the range of growth in 2002. 
The key sector then is the oil industry. Natural gas exports amount to as much as oil exports, around US$20bn, but are pretty stable. Oil exports, by contrast, fluctuate widely according to various factors, the global level of oil prices, the cycle of winter and summer in Russia and the dispositions of its multifarious oil companies. While gas is largely under the control of Gazprom, the natural gas monopoly, the oil industry is divided into many different concerns, the outcome of privatisation in the mid-1990s when many Russian tycoons made their fortunes out of oil.
Russia is undoubtedly trying to assert itself as the dominant player on the world energy scene. It has every reason to consider itself the pole nation energy-wise after 9:11, the natural hub of the Eurasian economy, providing Asia as well as Europe with oil, gas and many other basic mineral resources and commodities. It aims to be, as it were, the Saudi Arabia-cum-Australia of the coming century.
It own resource base in the energy field is certainly impressive. It has 49bn proven barrels of oil, with a possible 99bn barrels, while it has 48 trillion cubic metres of gas with a possible 98bn, easily the world's largest reserves, some one third of the global total. Moreover, Kazakstan's vast resources are coming to world markets across Russia. Kazakstan has 15bn proven barrels of oil, with a possible 65bn barrels. Currently, oil from the Tengiz fields is traversing Southern Russia to Novorossysk on the Black Sea whence dispatch is made to world markets. The Kashagan field in the Caspian Sea will add to the flow shortly, containing 10-15bn barrels of oil of its own. 
The Russians have decided to organise a parallel OPEC among former Soviet states prominent in the world's oil industry, namely Russia itself, Kazakstan, Turkmenistan, Azerbaijan and Georgia (as a vital transit corridor). Uzbekistan is also to be included as a key consuming nation, although with modest production potential as well. A coherent policy can then be concerted towards OPEC itself.
In December the Russians agreed to a reduction of 150,000 barrels daily in oil exports with OPEC. But they have not been able to stem exports permanently. In winter domestic consumption usually rises and curbs exports naturally, just as in spring, as summer approaches, it falls, releasing oil for export. In fact the 2001-02 winter was an exception with exports rising from 3.52m barrels per day (MBD) in the third quarter of 2001 to 3.74 mbd in January. The Russians are just returning as fast as they can to the 4 mbd of the 1980s, from which output fell to 2 mbd in the mid-1990s or even below. The aim is to become the world's clear number two oil exporter behind Saudi Arabia, which exports 7 mbd.
It is naïve of OPEC to expect the Russians to pull production in the energy field, given that it has been the decisive sector of their economy, literally and financially fuelling recent rapid growth. The disparate structure of the Russian oil industry makes it difficult to control and order around. Its tax payments are central to the government and keeping the budget in trim.
The largest Russian oil company, LUKoil, has a comparatively high cost base, as does Tatneft. But they both have subsidiary operations within Central Asia. As Moscow orders export cutbacks from Russia, they can switch to exports from Kazakstan. They benefit from high prices and so are prepared to this extent to cooperate with OPEC.
But other low-cost Russian producers are hell-bent on expansion at all events. Yukos, Surgutneftegas and Sibneft are highly dependent on their low-cost Russian operations and do not have this option. Mikhail Khodorkovsky, the CEO of Yukos, is adamant that his company, which has a stock-pile of around US$4bn and numerous investment plans under consideration, is going to increase output in the course of 2002, not decrease it as requested.
The main reason to doubt that Russia will comply with OPEC'S demand is that its oil majors such as Yukos, are on a roll. After years of contraction they now see their opportunity. They will not hold back their earnings potential just because of Moscow's cautionary tales. Russian oil production is likely to rise by 6% in 2002. Russia will continue to take a free ride on the restraint shown by OPEC itself and entrench its position as global oil exporter number two.
The Russians are reasonably happy with the prospect of global oil prices in the US$20-25 per barrel range, rather lower than OPEC wants. Relations with OPEC will remain cordial, as always, but not very cooperative. There is simply too much at stake.

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AGRICULTURE

Russian farms minister says sowing and funding up, machinery in short supply

Russia's crop area will be increased by 1m hectares this year, Deputy Prime Minister, Minister of Agriculture Aleksey Gordeyev, said on 27th February, addressing the Federation Council at a "government hour" session, Interfax News Agency has reported. 
The session was devoted to preparations for the spring sowing campaign. Gordeyev said that preparations for spring sowing had been completed in the southern regions of Russia and 60,000 hectares had been sown to farm crops already. A total area of ploughed-land will be 54.3m hectares this year; 33m hectares will be sown to grain crops and legumes.
According to the information from Gordeyev, R46bn will be spent on material and technical support for spring sowing. Allocations for agriculture in the 2002 federal budget have been increased by 20 per cent.
Five billion roubles will be channelled into the agricultural sector before May. Commercial banks will allocate for that purpose R13bn roubles and Rosselkhozbank (Russian Agricultural Bank) - R300m. Farms have enough seeds for spring sowing. Prices of fuel and lubricants are "on a normal level," Gordeyev said.
At the same time, he expressed concern over the situation with farm machinery, which, in his opinion, can be described as "critical." In this connection the government plans to allocate R9.3bn for the purchasing of farm machinery, to be used by agricultural enterprises on terms of leasing.

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AVIATION & SPACE

Russia develops new materials for aircraft engines

The All-Russia Institute of Aviation Materials is developing materials for future gas-turbine aircraft engines, including those to be mounted on fifth-generation fighters, the institute's director general, and member of the Russian Academy of Sciences, Yevgeniy Kablov, told Interfax-Military News Agency on 5th March.
Kablov said that the engine would have the following composition: composite materials would account for 18 per cent, metal composite materials - 17 per cent, heat-proof nickel alloys - 15 per cent, polymeric composite materials - 20 per cent and nickel-titanium based intermetallic alloys - 30 per cent. The ratio will enable an increase of temperature up to 300 or 400 degrees, thus increasing the service life of the engine by two or three times.
Estimated calculations carried out by experts from the institute and specialists of the TsAGI [Central Aerohydrodynamics Institute] and TsIAM [Central Institute of Aviation Motors] show that in the 15 or 20 years time it will be necessary to cut the relative weight of the aircraft fuselage by 20 per cent and increase the fuel efficiency of the power plant, its thrust-to-weight ratio mounting up to 20 units. The thrust-to-weight ratio of modern aircraft is 8:1.
The institute specialises in developing aircraft materials and is unique in the scope and complexity of its projects... It is now engaged in developing the technology to manufacture gas-turbine engine blades from a Carborundum fibre for fifth- and sixth-generation engines.

Russian aircraft corporation and Boeing design a new jet

The Sukhoi Aircraft Corporation is conducting large-scale diversification of its products. Initially this concerns the design of a new Russian-American regional aircraft within the Russian Regional Jet (RRJ) project now being developed by the Sukhoi Design Bureau, Ilyushin aircraft-building enterprise and Boeing Company on the basis of a memorandum signed in July 2001, Deputy Director-General of the Sukhoi Corporation, Aleksandr Klementyev, said at a news conference on 28th February, AVN Military News Agency web site has reported. The news conference was organised by the Rosoboroneksport Federal State Unitary Enterprise and the Sukhoi Corporation at the Asian Aerospace 2002 Exhibition in Singapore.
Answering a question from Interfax-AVN Agency, Klementyev said that a Sukhoi corporation affiliate named Sukhoi Civil Aircraft was designing a regional jet. The project includes design and subsequent production of a series of 55-, 75- and 95-seat aircraft. The development of a business plan for the new-series aircraft was completed in December 2001, Klementyev added. 
Experts from the three companies believe the market for the new jets could be 500 or 600 aircraft. The Aeroflot Airlines has already announced its intention to buy 30 jets.
The first flight of the RRJ plane has been scheduled for 2005 and mass production is to begin in 2006. The largest part of the work on the development of the aircraft will be performed by the Sukhoi Civil Aircraft Company. The jet will be designed on the computer software using no hard copies. The Ilyushin aircraft-building enterprise will certify the RRJ in compliance with the corresponding international flight standards and the Boeing Company is to make a market-demand research of the new jets.
At present, regional 80-100-seat aircraft account for 7 per cent of the world's aircraft fleet but the index is expected to rise to 17 per cent by 2020. Experts say the cost of the jet will not exceed US$30-35m.
Three modifications of the Russian Regional Jet are being designed, these being the RRJ-55, RRJ-75 and RRJ-95 baseline aircraft, RRJ-55, RRJ-75 and RRJ-95ER extended-range aircraft and RRJ-55, RRJ-75 and RRJ-95LR maximum-range aircraft. All of the jets will be powered by two under-wing engines.
The takeoff weight of the aircraft will range from 31.64 to 43.8 tonnes depending on the modification, its maximum commercial payload varying from 6.05 to 10.45 tonnes. At present, the Sukhoi Corporation is also offering a transportation model of the S-80 aircraft, a new agricultural plane, the Su-49 trainer and other jets in the market.

Russian helicopter plant presents two new models at Singapore show

The Kazan Helicopter Plant is planning to consolidate its positions on the world market by exporting the latest models of its helicopters. Looking forward to new contracts, especially in Southeast Asia, the plant has put on view at the Asia Aerospace-2002 Show two of its latest models - Mi-172 and Ansat, marketing director of the Kazan plant, Valeriy Pashko, told ITAR-TASS News Agency on 28th February.
He said that the Mi-172 helicopter was a modification of the well known Mi-17. Three helicopters of this type were shipped to Vietnam this year. They are to be used to fly Vietnamese specialists to off-shore oil platforms.
The second novelty is the light multipurpose 10-seater Ansat helicopter. It is to be launched into serial production in 2003. Twelve orders have already been received for Ansat helicopters from five companies, including some foreign ones. At the outset, these machines will be provided with Pratt and Whitney Canada engines.
The Ansat helicopters, which in expert opinion have very good chances in the world market, will cost no more than US$2m each. This is 50 per cent cheaper then western helicopters of the same class, an official of the Kazan plant noted.

Russian aircraft builders hope to broaden trade with Europe

Broadening Russia's cooperation with the West European aircraft building industry was on the agenda of the talks at the 11th international aerospace exhibition "Asia Aerospace-2002" which ended its work in Singapore.
The Gidromash company from Nizhniy Novgorod was invited to take part in building The West European A-400M military transport aircraft, the Gidromash president, Vladimir Luzyanin, told an ITAR-TASS News Agency correspondent by telephone.
According to him, Gidromash is looking into the possibilities of delivering parts for the landing gear for this aircraft. In order to carry out this assignment, there are plans to technically upgrade the plant and to create new jobs, preventing highly-skilled workers from leaving the plant.
The Russian government is currently examining the issue of Gidromash's participation in developing and delivering individual units and parts of the A-400M landing gear.

Moscow plant starts production of AI-222 engine parts

The Moscow-based Salyut machine-building enterprise has started production of some units and assemblies for the new AI-222 aircraft engine, a spokesman for the enterprise told the Interfax-Military News Agency on 2nd March.
The Ukrainian Motor Sich plant will participate in the production of AI-222 engines developed at the Progress engine-building design bureau in Zaporizhzhya. The AI-222 engine is to be mounted on Yak-130 combat and training aircraft. In addition to that, Salyut has obtained an order for some units and assemblies for the D-436TP engine used on BE-200 and D-27 engines for An-70 military aircraft.

Far Eastern plant to make amphibious passenger planes

The Komsomolsk-on-Amur Aircraft Building Association will start serial production of Be-103 amphibious planes, the first civil aircraft in the association's history, in May 2002, Leonid Vorobyov, director of general purpose aircraft manufacturing programmes, said recently, New Europe reported.
The plane was seven years in development. Prototypes of the plane made over 600 test flights with landing on runways and water over the last two years. The range of the plane is 1,200 kilometres. Its speed is 300 kilometres an hour. It can carry five passengers and 400 kilograms of cargo. Talks with possible Russian, US and Asian-Pacific customers are underway, Vorobyov said.

Russia finds third space tourist for ISS

The name of the third space tourist, most probably a Polish citizen, who will travel to the International Space Station, may be announced in the near future, the press secretary to the head of the Russian Aerospace Agency, Sergei Gorbunov, said.
"We have a candidate for a flight in the autumn on commercial conditions," but no contract has been signed, which is why the name will not be made public for some time, Interfax News Agency quoted him as saying.
A Pole with a doctoral degree is expected to start training for the mission, a source in the management of the Cosmonaut Training Centre in Zvyozdnyi said.
The second space tourist, South African, Mark Shuttleworth, has been training in Zvyozdni jointly with Commander Yuri Gidzenko, of the second short-term ISS crew, and engineer, Roberto Vittori, and ESA astronaut. That crew is expected to take off for the ISS in a Soyuz TM-30 spacecraft. The first space tourist was US millionaire, Dennis Tito, who flew to the Russian spacecraft last April.

Preparation for launching Grace satellites enter final stage

The final stage of preparations to launch two Grace commercial satellites from Plesetsk Space Centre in Arkhangelsk region, in the north of Russia began on 18th February, the Russian Space Force press service said.
The satellites should be launched in mid-March with the converted Rokot launch vehicle.
The platforms for the satellites have been developed in Germany, and the instruments and measuring devices in the United States, Interfax News Agency reported.
Recently both satellites were flown from Germany to Plesetsk via Arkhangelsk.
German specialists have begun work on the satellites at assembly and testing grounds specially assigned for them. The Grace scientific satellites will be used for studying the Earth's gravitational field.
Russia is the third party to the international project along with Germany and the United States, and joined the others at the final stage. The Khrunichev Space Centre undertook the development of the Rokot launch vehicle and the launch pad, while the Space Force took care of preparations for the launch itself.

Preparations for Intelsat 903 launch begin at Baikonur

Preparations for the launch of a US-made Intelsat-903 satellite began at the Baikonur space centre. Experts at Baikonur said the satellite should be launched on March 30th aboard a Proton-K heavy launch vehicle propelled by a DM-3 booster. Interfax News Agency quoted them as saying the booster was brought to the assembly and test station of Energia Rocket and Space Corporation on February 15th, and Energia experts started checking its electrical circuits on February 19th. Representatives of the Khrunichev space centre were expected to start preparing the Proton-K for launch on February 20th. 
This launch was originally scheduled for early March, but the satellite customer, Intelsat Ltd., asked that the date be moved forward for technical reasons. The satellite is to be used for telecommunications purposes (Internet, telephone and radio broadcasts). 
It was designed and made by the US company, Space System Loral. The news agency quoted a source at Baikonur as saying Proton-K is slated for lift-off at the start of April, and should be carrying a US-made DirectTV satellite into orbit. The DirectTV launch was delayed more than once last year, and again put off to an undetermined date. The rocket and engines that will lift DirectTV into space are being stored at the space centre, while the satellite is still in the United States.

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BONDS

Russian Siberian oil company increases Eurobond issue

Sibneft has boosted its issue of Eurobonds by yet another US$25m, the company's press service has told Interfax News Agency.
It was earlier planned that the additional issue of Sibneft securities would total US$125m. However, company sources have said investors have shown immense interest in these securities, prompting the company to increase the additional issue of Eurobonds. The coupon on the entire additional issue will comprise 10.96 per cent.
The placement price comprised 100 per cent of the face value with a coupon revenue of 11.5 per cent annually. The coupon on bonds will be paid twice a year...
The oil company postponed the issue of securities in late November because of unfavourable market conditions.

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CONSTRUCTION

Joint Austrian-Russian firm to produce building and insulation materials

A joint Austrian-Russian enterprises for producing thermal insulation materials is being created in the Republic of Mordovia, Vladimir Ruzhenkov, chief of staff [head of administration] of the Mordovian government, told ITAR-TASS News Agency on 26th February. According to his information, a corresponding protocol on intentions was signed by the well-known Austrian firm, Austrotherm, the Russian Development Bank and the Mordovian government in Vienna.
Under the agreement, the production of expanded polystyrene will be organised in Saransk within two years. Expanded polystyrene is widely used in housing construction and the building of highways and railways. The planned capacity of the new enterprise will be 100,000 cu.m. of expanded polystyrene a year with a total value of US$12m. The enterprise will meet the needs of the whole of the Volga region for thermal insulation material.
According to the information of the State Statistics Committee, Mordovia's foreign trade turnover went up by one third during the past year to reach US$63.5m in 2001. The main business partners of Mordovia include the United States, Germany, Italy, Finland, Belgium and Denmark. Austria was put on that list for the first time, Ruzhenkov said.

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DEFENCE INDUSTRY

Russian firm develops homing devices for air-launched missiles

The Fazotron-NIIR corporation has launched development of active homing devices for air-to-surface missiles, director-general and designer-general of the enterprise, Anatoliy Kanashchenkov, told Interfax-Military News Agency on 28th February.
Kanashchenkov said that the development of active homers for air-to-surface missiles is a ground-breaking activity for both Fazotron-NIIR and the Russian defence industry. He noted that the corporation had already designed homers for air-to-air missiles fired by fighter aircraft. Virtually all homers now used in Russia have been designed at Fazotron-NIIR.
"Employment of air-to-surface missile homers will considerably increase combat efficiency of multifunctional aircraft systems enabling them to operate high-precision weapons, as well as to destroy various sea borne and ground targets, including small-size ones and mobile ones," the director said.
Kanashchenkov stressed that a great emphasis had been put on diversifying research and development projects of the corporation. Whereas Fazotron-NIIR was hitherto engaged in designing armament systems for fixed-wing planes, it is now making radars for Ka-27 [Helix], Ka-52, Ka-60 and other helicopters. Experts of the company have developed radar for the Pantsir air defence system which is coupled to aircraft assets. An order for the radar has already been placed by the UAE. The corporation is capable of developing the most sophisticated radioelectronic assets on the basis of in-service radar, including those to be fitted on fifth-generation fighters, Kanashchenkov said.
Fazotron-NIIR is Russia's leading developer of radars and armament control assets - 85 per cent of the Russian and CIS aircraft fleet operate the assets. The index mounts up to 33 per cent for the world's fighter aviation. The company is engaged in active cooperation with the Tupolev, Mikoyan, Sukhoi and Yakovlev design bureaus.

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ENERGY

Alfa-Eko spokesman outlines involvement in Russia's Sakhalin oilfields 

Alfa-Eko and Rosneft plans to jointly develop oil fields off the Sakhalin coast, Boris Kabak, head of the Alfa-Eko energy department, said at a press conference at the Interfax News Agency central office on 27th January.
He said that the companies signed "agreements of intent involving a range of joint work for the Sakhalin-2 project" in January this year. Participants in the agreements will include Alfa-Eko (through its subsidiary Petrosakh, which operates in Sakhalin), Rosneft and a number of potential partners, Kabak said. However, he did not name other possible participants, for reasons of commercial secrecy.
Kabak said that Petrosakh produced about 240,000 tonnes of oil last year, with refining of about 100,000 t. He recalled that in 2001 Petrosakh received a licence for three prospects in the Sakhalin-6 project, with forecast reserves of about 20m tonnes of oil "on a commercial risk basis." It is planned to carry out 3D seismic research in the area in the near future and to explore onshore structures.
It is planned to drill four wells in 2002, which will allow the company to increase production by about 25,000 t per annum, Kabak said, adding that the company also hopes to receive a licence for the remaining Sakhalin-6 fields, with total reserves estimated at about 890m tonnes of oil equivalent. 
Petrosakh plans to produce 290,000 t of oil in 2002.
Petrosakh is developing the Okruzhnoye field on the Sakhalin shore, is involved in refining and selling oil and oil products on the island and also owns an oil refinery which supplies over 45 per cent of Sakhalin requirements for high-octane fuel. Alfa-Eko owns 95 per cent of Petrosakh shares.
In addition, the company representative said that Alfa-Eko fuel sales in 2001 amounted to 12m tonnes.

New gas pipeline construction starts in Russia's Far East 

A ceremony marking the start of construction of the 502-kilometre-long Komsomolsk-na-Amure - Khabarovsk gas pipeline took place in the village of Oktyabrskiy near Komsomolsk-na-Amure on 6th March, RIA News Agency has reported.
This pipeline will allow gas to be supplied from the Sakhalin shelf to a number of power stations, industrial enterprises and to the population of Khabarovsk and other built-up areas in the southern part of the Russian Far East.
At the ceremony the governor of Khabarovsk territory, Victor Ishayev said, that according to estimates the pipeline will supply gas to the industry and population of Khabarovsk as early as 2006.
Igor Zakharov, the Khabarovsk territory government press-service official, told the correspondent that the cost of the pipeline is estimated at US$8bn.
Specialists are looking into future possibilities to extend the pipeline as far as Vladivostok and to build a branch pipeline to the Jewish Autonomous Region and Amur Region.

USA to help fund development of Russian gas condensate deposits 

The Itera company international group has signed an agreement with the US Trade and Development Agency on a grant to the value of US$868,000 to fund work on a feasibility study to develop the Achimov formations in a sector of the Urengoy gas condensate field (in the Yamal-Nenets Autonomous Area), a RIA-Novosti correspondent reports.
According to experts, it is only considered possible to maintain the falling extraction of natural gas and gas condensate in this deposit by developing the deep-seated Valanzhinskiy layers and the ultra-deep and even more inaccessible Achimov ones.
In order to solve the problem of extracting hydrocarbons from the ultra-deep Bolshoy Urengoy deposits, Itera is acting jointly with the UrengoyGazprom company by creating the Achimneftegaz joint enterprise. Itera's share in the joint enterprise is 49 per cent, while that of UrengoyGazprom is 51 per cent. The estimated total reserves of natural gas in the second experimental sector is over 350m cubic metres.
It is planned to use the grant funds to start developing the second experimental sector of the Urengoy deposit in accordance with international standards. The head of the Itera company group, Igor Makarov, believes this will make it easier to attract foreign investors to the project. The total cost of the project has been calculated at about US$680m.

UES to hold first tenders for investors in Q3 

Unified Energy Systems, Russia's electricity monopoly, intends to hold its first tenders for investment projects to create new generating capacity during the third quarter of 2002, reports New Europe. The company is currently holding preliminary talks with potential investors, who include AES Corp., EDF, E.ON and Italenergia SpA, UES head, Anatoly Chubais, said during a meeting with European Union and Russian business leaders in Turin recently. One of the projects is to build 450 megawatts of new generating capacity in Pskov at an estimated cost of US$120m. UES has drafted a programme entitled "5000 Megawatts" to introduce new capacity, with the emphasis on steam-gas generators.

Russian power giant signs deal with German partner for sector upgrade 

The Unified Energy System of Russia (UES), the power utility, and the German energy company E.ON AG, have signed a contract to jointly upgrade the Russian energy sector, a UES representative has told Interfax News Agency.
The parties will explore the possibility of building new energy capacities at old facilities and set up a joint venture, led by E.ON AG, to implement this project.
They will also analyse the possibility of establishing a consortium of investors to build and operate new energy capacities in Russia, with a total volume of up to 1,000 megawatts.
The protocol was signed by the head of UES, Anatoliy Chubais, during visit to Germany.

Russia, Finland to expand cooperation in energy sector 

Russia and Finland decided on 28th February to increase their cooperation in energy and start a continuous dialogue on energy, Russian Prime Minister Mikhail Kasyanov has said, Interfax News Agency has reported.
Kasyanov was talking to journalists after talks in Moscow with his Finnish counterpart, Paavo Lipponen...
He said Russia is satisfying all the needs of Finland's growing economy for energy - natural gas, oil, oil products and electricity.
He said Russia is also ready to put in a bid to build nuclear power facilities in Finland.

Japanese firm supplies more oil and gas industry equipment to Russia 

Russia's Stroytransgas Company has signed a contract with the Japanese Marubeni Corp. to receive new generation construction machinery for oil and gas building. The total cost of the contract is US$45m, Prime TASS News Agency reports with reference to a Stroytransgas press release.
For the first time ever the exports of Japanese machinery to Russia with a grace period of four years will be carried out with a guarantee from Vneshtorgbank commercial bank.
Stroytransgas will get 52 pieces of machinery, including Komatsu pipe-laying machines and Kato drilling machines. The supplies will start in late March and continue throughout the whole year.
Marubeni representative in Moscow, Kozi Yamaguchi, says that another contract with Stroytransgas, this time with a value of US$35m, will be signed in the near future. Thus, the total order will be near US$80m. That will be the largest contract for Marubeni for the supply of construction machinery since 1997, Yamaguchi said.
Marubeni made the first delivery of construction machinery to Stroytransgas in 1997. The deal's cost was US$130m. The machinery has been used in the development of the Zapolyarnoye oil and gas condensate field and the construction of gas pipelines from Yamal to Western Europe and from Russia to Turkey.

Russia and Ukraine to supply energy to Moldova and beyond 

Russian-Ukrainian exports of energy to Moldova may start on 1st April, the Unified Energy System of Russia public relations department reports, Interfax News Agency has reported.
An understanding on this was reached at talks held by UES CEO, Anatoliy Chubais, Ukrainian President Leonid Kuchma and Moldovan President Vladimir Voronin, at the end of February.
The Russian and Ukrainian power grids will share equally in supplying 80-250m kilowatt-hours a month, with the amount varying with the season. As a result, Moldova, which is short of its own sources of energy, will have its energy market stabilized and energy bills reduced.
UES will, for its part, obtain access to the Romanian, Bulgarian and Balkan markets. A joint Russian-Moldovan venture will attend to the export of energy to third countries.

Russian westernmost region, Danish firm build wind power stations

The installation of a unique power-generating station which will use wind energy is nearing completion in Kaliningrad Region. This is one of the most environmentally-friendly power generators which produces cheap electricity. So far, this can be regarded as an experiment - not only in the energy field, but also in international cooperation, Russia TV has reported.
Aleksandr Naumov from TV station gave the following details:
"This is the northern coast of the Semba peninsula. It is one of the windiest spots in Kaliningrad Region. This is why this spot was chosen as the venue for the first ever wind power station site in Russia . Altogether, there will be 20 installations here. Five of them are already producing electricity, and - judging by the pace of the construction - the remaining 20 will be commissioned by this spring."
Vadim Korolev, a specialist in nontraditional power generation said: "This is very advantageous for Yantarenergo [local power grid]. We do not have to worry about fuel. Nature itself gives us energy and is a source of energy."
Danish experts are assembling the stations and other equipment together with Kaliningrad builders. Both sides are hoping this cooperation will not end with the finish of the construction project.
Denis Gusarov, a Danish company representative, added: "We have signed a letter of intent with our partner, Yantarenergo, on building another 50-MW-wind- power-station site at sea. The best sites are marine ones, on the western coast, near the town of Baltiysk and Cape Taran, winds are strong there."
All the stations have on-board computers. This is state-of-the-art European technology. The wind station site can be managed from the office.
Korolev said: "If something goes wrong with a station, the on-board computer determines what went wrong, sends a signal to the dispatch centre about the cause and the faulty unit and what needs to be replaced."
Each of these stations will be paid off in eight years. Its maximum life span has no limit. The main thing is to carry out major maintenance and repair work every 20 years

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ENVIRONMENT

Russia proposes a Caspian ecology control centre

Russia has proposed setting up a Centre to Control the Ecology of the Caspian Sea. Deputy Russian Foreign Minister Viktor Kalyuzhnyy formally made the proposal on 26th February in a speech at the international conference in Moscow on the legal status of the Caspian, ITAR-TASS News Agency has reported.
The Centre would have representatives from all five Caspian littoral states.
Kalyuzhnyy said that Azerbaijan has supported the Russian proposal.

EBRD funding water supply upgrade in Russian exclave

Implementation of the project to reconstruct the water supply system and environmental protection in the city of Kaliningrad has begun, director of the EBRD Municipal and Environmental Infrastructure, Thomas Maier, has told the Kaliningrad authorities, BNS News Agency has reported.
A credit agreement between the Russian Federation and the EBRD and a draft agreement between the municipal [water-supply utility] Vodokanal and the bank have come into force. Vodokanal is granted a 15-year credit against guarantees from the region and town.
Together with the credit, the project will receive investment on the basis of an interest-free loan for a total of US$56.7m. The EBRD's share is US$18m (31.7 per cent)...

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FINANCIAL NEWS 

Russian government allocates R1bn for western exclave's development

About R1bn will be allocated from the budgets of all levels in 2002 for the economic development of Kaliningrad Region, Russian Minister of Economic Development and Trade, German Gref, said in Kaliningrad on 5th March, BNS News Agency has reported.
In his speech at a meeting on implementation of the federal development programme for Kaliningrad Region for the period until 2010, Gref said that the money would be mainly spent on the needs of the Region's energy and gas industry.
Gref announced a 12 per cent economic growth in Kaliningrad Region in 2001, though he said that it had been "a growth from zero". He also recalled that the Region had attracted over US$25m in foreign investments last year, one-third more than in 2000.

Restructuring brings big drop in Russian foreign debt

Russia's foreign state debt, not including government loan guarantees, shrank by more than US$13bn last year, from US$143.3bn as of 1st January 2001 to US$130.1bn at the beginning of 2002, Deputy Finance Minister Sergey Kolotukhin told Interfax News Agency.
These are revised figures that the Finance Ministry received at the beginning of this year, Kolotukhin said.
Russia paid foreign creditors US$14.1bn in 2001, including US$6.7bn in interest and US$7.4bn in principal, he said.
Kolotukhin said the dramatic reduction of the country's foreign debt last year was the result of a number of factors. First of all, Russia managed to hold successful negotiations on restructuring and writing off debt to a number of countries not part of the Paris Club of creditors, including the Czech Republic, Slovakia, Hungary and Bulgaria. The Finance Ministry also reached a debt restructuring agreement with the Central Bank of Russia, deferring repayment of this debt to 2008. And last year Russia paid debts ahead of schedule to a number of sovereign creditors in Eastern Europe and Asia, he said, without specifying which countries were paid. Russia also managed to reduce the debt through swap operations with Paris Club countries.
In compiling the revised data on the size of the debt, the Finance Ministry used the actual exchange rate of currencies against the US dollar on 1st January 2002.

Big increase in indirect foreign investment in Russia

Foreign investment in Russia rose 30.1 per cent last year to US$14.258bn, the Economic Development and Trade Ministry said in its socio-economic report, Interfax News Agency has reported.
Foreign direct investment fell 10.1 per cent to US$3.980bn, while portfolio investment surged 210 per cent to US$451m, and so-called other investment increased by 53.9 per cent to US$9.827bn.
The stock of foreign investment in the Russian economy was US$35.624bn at the end of 2001, including US$18.169bn in direct investment, US$1.230bn in portfolio and US$16.225bn in other investment.
Overall foreign investment in 2001 broke down into 27.9 per cent direct, 3.2 per cent portfolio and 68.9 per cent other. The ministry remarks that the proportion of direct investment has fallen from 44.6 per cent in 1999, which shows that the structure of foreign investment has worsened in the past three years.

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FISHING INDUSTRY

Russia to build 209 new fishing vessels by 2015

Russia plans to build 209 trawlers by 2015, a minister said on 26th February, Interfax News Agency has reported.
Fisheries minister [chairman of the State Fisheries Committee] Yevgeniy Nazdratenko, announced the figure during a meeting at his ministry. The meeting was told that Russia's fish and seafood output diminished by 9.1 per cent last year and that the main cause was intensive fishing in the country's economic zone. This depleted the reserves of crab and fish such as Alaska pollack, cod, sturgeon and herring.
Today, 2,500 vessels are fishing in Russia's economic zone. This is 50 per cent more than the number considered as the maximum.


Japan offers to buy capelin from Russia's Murmansk Region

Japan has offered to buy capelin fish from Murmansk fisheries, the Russian Region's administration said on 23rd February, Interfax News Agency has reported .
At talks in Murmansk with governor of Murmansk Region, Yuriy Yevdokimov, the general director of the Japanese National Federation of Fisheries, Yasuhiro Sasaki, said his country would like to buy "unlimited quantities" of capelin at prices higher than those on the Russian home market, the administration told Interfax.
Until now, Japan has been buying roe capelin from Russia via Norwegian brokers.
Yevdokimov said direct sales of capelin to Japan would immediately enable Murmansk Region to create jobs and would bolster the Russian fish industry.

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FOOD & DRINK

PIT to start beer-making in Ufa

The company Ivan Taranov Brewers (PIT), intends to start producing beer at the Ufa plant Amstar in March and bottling beer in Kaliningrad, Novotroitsk, Khabarovsk, Omsk and Kaluga. reports New Europe. 
PIT belongs to the US fund Detroit Brewing Amstar's main shareholder is the venture fund EBRD Eagle. "Demand for the products of Ivan Taranov Brewers exceed the capacity of the plants where they are made, so a search is underway for enterprises where, with a little investment, beer that meets quality requirements can be brewed," PIT press secretary Olga Bida said. PIT and Amstar are engaged in talks not only on the subject of bottling PIT beers at the Ufa plant, but also on a possible merger. The companies are looking to join so as to be able to stand up to such major market players as Sun Interbrew, South African Breweries, Bravo International and others Brunswick UBS Warburg analysts reckon that taking Amstar on board could cost PIT US$50-60m. 
In addition, PIT aims to start building new brewing facilities outside Moscow that can turn out 500 million litres of beer per year. Overall investment in this project this year will come to around US$40m.

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FOREIGN LOANS

EBRD backs leasing for small Russian businesses

The European Bank for Reconstruction and Development is lending US$10m to Russia's leading provider of leasing services to small and medium-sized enterprises, DeltaLeasing, which operates in 17 Russian cities and is a wholly-owned subsidiary of the US-Russia Investment Fund.
The aim of the four-year loan is to help DeltaLeasing broaden its regional reach and given Russian small businesses a wider choice of financial options in a country where bank finance is still not fully developed and where longer-term funding is in short supply, Jonathan Woollet, director for non-bank financial institutions at the EBRD, said at a signing ceremony in Moscow.
Helping SMEs is a major pillar of the EBRD's strategy in Russia, where more than 70,000 loans worth over US$750m have been advanced under a separate EBRD programme launched in 1994 and known as the Russian Small Business Fund, which is funded largely by the G7 countries and Switzerland.
Mr Woollet added that while leasing in Russia still accounts for a negligible proportion of a capital investment compared with most industrialised countries, it has in recent years begun to develop as a viable financing instrument for local enterprises requiring medium to long-term funding to replace or upgrade their production facilities.
DeltaLeasing typically provided US dollar-indexed leases of US$5,000-US$500,000 in local currency for a maximum of five years. The company has developed close relationships with vendors of western equipment and the printing and packaging industries accounting for 42 per cent of the outstanding leases in its US$20m portfolio.
For more information contact Richard Wallis of the EBRD in Moscow, tel: +7 095 787 1111; e-mail: WallisR@mos.ebrd.com.

EBRD takes stake in Russia's largest refrigerator plant

The European Bank for Reconstruction and Development has acquired a 10 per cent stake in ZAO Stinol, the largest refrigerator plant in Russia, from Italy's Merloni Elettrodomestici S.p.A. The €13.6m investment will be used to improve the plant, increase its efficiency and help it produce appliances that are more environmentally friendly, a press release at the end of February has stated.
Noreen Doyle, the EBRD's First Vice President, said the Bank expects that the deal will promote greater competition by setting new standards for the rest of the appliance industry in Russia.
The EBRD will be represented on the board of directors of Stinol, underlining its support for a strategic investor committed to introducing best industry practices throughout the Russian company's operations. The Merloni group, Europe's third largest maker of home appliances, will hold 85 per cent of the shares. The rest are held by the Italian development bank, Simest.
Over the next four years, the company plans to make further investments to upgrade the plant, which at present can produce up to 1 million refrigerators a year. Merloni is also considering building a washing machine facility at Stinol with an annual capacity of 300,000 units The CIS market for home appliances is expected to grow by 10 per cent a year over the next four or five years.
Merloni bought Stinol for €136m in October 2000, nearly a decade after its engineers had helped build the plant at Lipetsk, some 400 kilometres south of Moscow. Stinol, which employs 6,000 people, has a 35 per cent share of the local market.

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MINERALS & METALS

Russian monopoly plans drop in rough diamonds output

The supervisory board of Russian diamond monopoly, Alrosa, on 1st March approved the company's business plan for 2002, the Alrosa press service reported, Interfax News Agency has reported.
"This year the company plans to cut production of rough diamonds somewhat," the press service said without adding any specific figures. Alrosa produced US$1.63bn worth of rough diamonds in 2001.
Earlier the company management had announced that the company would sustain production at last year's level. The board also approved the company's results for 2001. However financial results will be published later, the company told Interfax.
The company went on to say there were several reasons behind the decision to reduce diamond mine output this year. One is the general decline of the world diamond market which began with the turn of the new millennium. "Mining companies are having to scale down core business at times when consumer demand is unsteady," Alrosa said.
But Alrosa will not scale down general mining-related operations this year as it has long-term investment programmes...
Alrosa plans this year to put more emphasis on geological work. In European Russia, much of the geological work will be done in the Arkhangelsk Region. Overall, the geological budget is R1.16bn.
Financing for R&D will increase by R110m to R268m this year...

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SCIENCE & TECHNOLOGY

New generator will use space power to heat frozen Russian regions

A new heat generator has been invented in Ulyanovsk Region. Local authorities expect that it will resolve heating problems in municipal houses once and for all NTV Presenter Olga Belova said
A TV Correspondent explained: A hydraulic pump takes water to a medium-size cylinder where the water twists into a spiral like in a bath tub. Then water runs to radiators where by some miracle it heats up to 63 C.
Schools, hospitals and residential homes can get their heating in this manner. But this is not all, a gravity generator made by military engineer Kotelnikov produces more energy than it consumes. Its efficiency is 200 per cent. 
What is impossible for any teacher of physics is obvious to Valeriy Kotelnikov, a military engineer, who explained: "We get power along the way the water runs. And I can confidently say that the efficiency is 200 per cent because I do not take power from the generator. The generator is not the hottest device in this system like a hot oven. This is not a closed-type system but an open one. An interaction with the space is underway. I take power from there."
For 25 years already the retired colonel has been creating the time-and-exchange picture of the world. He thinks that the work of a gravity generator brilliantly confirms the main assertions of his new theory - Kotelnikov sees all natural phenomena through the gravity interaction. 
Gravity generators envisage unlimited and very cheap power. Kotelnikov has assumed that around his device the time slows down. An independent commission has confirmed this.
Because of the way the Maritime Territory is freezing, Kotelnikov has made a mobile heating station for the needs of the Emergencies Ministry. The unit can be connected to a residential home and provide heating for it until workers repair the broken heating system.
The authorities of the freezing city of Ulyanovsk are also interested in alternative sources of power. Soon one of Ulyanovsk schools will get a gravity unit and according to Kotelnikov will be getting energy right from the space.

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SHIPPING

Russian supertanker succeeds in ice-breaking experiment

An experiment to pilot the huge tanker Primorye across heavy ice in winter was completed in the Tatar Strait, which separates Sakhalin island from the mainland, ITAR-TASS News Agency has reported.
The ice-breakers Krasin and Magadan succeeded in piloting the 105,000-tonne 245m-long ocean-going tanker to the port of De-Kastri, Khabarovsk Territory. The convoy covered about 280 miles across one-metre-thick ice. All three ships have returned to the ice-free Sea of Japan.
Until this winter, tankers had never entered De-Kastri, from which Sakhalin-produced oil is shipped to Pacific Rim countries...

New tanker being built for BP at Russian shipyard

The Yantar shipyards in Russia's western enclave of Kaliningrad are to build a new tanker for British Petroleum, the Baltic News Service reported on 5th March, quoting the marketing director of the Dutch Shipbuilding service, Willem Dalmulder. 
The state-of-the-art tanker will be 135m long and 17.2m wide. A special multi-million-euro loading quay is being built for the tanker in Dormagen outside Regensburg in Germany.
Dalmulder told BNS that a contract was about to be signed with Yantar on building a river-sea-going vessel and another tanker. Two more vessels are being completed at Yantar, and one is being fitted out in Holland. A further six vessels are already plying seas and rivers.
Founded in 1945 from a German shipyard, 51 per cent of Yantar's authorised capital belongs to the state. The enterprise has a workforce of 3,100, and in 2001 it launched 25 vessels. Foreign companies place 75 per cent of its orders.

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TELECOMMUNICATIONS

Rise in telecom investment cuts phone waiting lists in Russia

Total investments in the Russian communications industry exceeded R61bn in 2001, Minister of Communication and Information Technology Leonid Reyman said at a meeting of his ministry board on 4th March.
Russian investments amounted to R37.5bn, a 50 per cent year-on-year rise, he said. Investments in telecommunications made it possible to install 1.4m telephones and cut the wait for telephone installation by 400,000 in 2001. There are 5.6m people in Russia waiting for telephones.

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