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  RUSSIA

REPUBLICAN REFERENCE

Area (sq.km)
17,075,400

Population
148,100,000

Principal
ethnic groups

Russians 82%
Tatars 3.3%
Ukrainians 2.7%

Principal towns
Moscow (capital)
St Petersburg
Novosibirsk
Nizhni Novgorod
Yekaterinburg
Samara

Currency
Rouble

President
Vladimir Putin

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Background:
The defeat of the Russian Empire in World War I led to the seizure of power by the communists and the formation of the USSR. The brutal rule of Josef STALIN (1924-53) strengthened Russian dominance of the Soviet Union at a cost of tens of millions of lives. The Soviet economy and society stagnated in the following decades until General Secretary Mikhail GORBACHEV (1985-91) introduced glasnost (openness) and perestroika (restructuring) in an attempt to modernize communism, but his initiatives inadvertently released forces that by December 1991 splintered the USSR into 15 independent republics. Since then, Russia has struggled in its efforts to build a democratic political system and market economy to replace the strict social, political, and economic controls of the communist period.

Update No: 253

The Putin regime is a very different affair than its predecessors. The new president and his top ministers, including Premier Kasyanov are keen to purge the political system of sleaze and graft. One energy minister hangover from the Yeltsin years was purged last summer, after being in effect accused of graft by Putin in public.
The campaign against the independent media is not such an admirable trait of the new powers that be, but the two tycoons most affected, Berezovsky and Gusinsky, both now in exile, were being suspected of having acquired their billions illegally, the only way in the early 1990's in Russia to do so.
In another highly significant move the Russian general prosecutor is probing the business activities of Alexander Voloshin, Kremlin Chief of Staff, covering an earlier period when he was in the private sector. He is the highest ranking Kremlin official to have come under such scrutiny. He is one of the most powerful men in Russia and the last reminder of a team that has been accused of having had an undue influence on Yeltsin. The enquiry was demanded by members of parliament. It is a rare instance of parliament exerting real power vis-à-vis the executive.
The economy is the dominant theme of political life and is faring well. GDP is growing by 5% this year, after growing 5.5% in 2001, and 8% in 2000. The main reasons for the turnaround after the 1998 crisis were devaluation and rising global energy prices. These have fallen back of late and hurt company profits, a fact true of the world's energy industry, not just Russia's. The price of crude inside Russia is not so strongly determined by global prices and has fallen to US$5 per barrel due to a glut in supply, a very low figure for the time of year.
One key reason was a bottleneck in the shipment of crude oil from Novorossysk, the main Russian port on the Black Sea. Some oil has been just stock piled, some other has been redirected to the domestic market, depressing prices. The Russian oil companies are being squeezed and want a lessening of taxes which are clipping their profits.
The price of oil globally does matter of course for exporters, who account together with gas exporters, for over 40% of Russia's total exports in value terms. The level of world oil prices, therefore, is key to how the economy fares.
A price of US$18.5 per barrel of crude would suit Russia very well, says Premier Kasyanov. If OPEC makes its cuts of 1.5m barrels per day stick then this scenario might just happen. Budget forecasts are making allowances for a lower figure of US$16.5 per barrel or even lower. 
Buoyant prices in 2000 and early 2001 enabled the state to pay off US$10bn of national debt, Putin said in the New Year. Things then could still continue to go Russia's way in 2002.
The IMF is broadly optimistic. It forecasts GDP growth slowing down to 3.6% for the whole of 2000, down from more than 5% last year, but still respectable. Indeed if GDP can grow in that range for a decade it would transform Russia's economy.
The IMF predicts inflation coming in at 13% for the year, no mean achievement three years after a massive over 200% devaluation. The Russian economy is beginning to shape up.

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AUTOMOBILES

AvtoVAZ to test welding division for Chevy-Niva


AvtoVAZ said it plans in May 2002 to prepare for testing a welding division for Chevy-Niva production at the joint venture GM-AvtoVAZ, reports New Europe.
AvtoVAZ, General Motors and the European Bank for Reconstruction and Development sealed the joint venture deal in the summer of 2001. The new company plans to start production of the Chevy-Niva (the new Niva VAZ-2123) in September 2002. Investment in the joint venture, which should be able to produce around 75,000 vehicles when it reaches its projected capacity, totals around US$330m, AvtoVAZ produced about 765,000 vehicles in 2001, up 8.4% from 705,570 in 2000, preliminary figures show. The company said that it thus topped the production target for 2001 by more than 10,000 cars. 
Interfax News Agency quoted AvtoVAZ as saying earlier it planned to turn out 753,000 vehicles in 2001. In December, AvtoVAZ sold over 59,000 vehicles, exceeding its target by around 1,500 cars. The company's pilot production, mainly VAZ-2131 and VAZ-2120 models, is also taken into account in the figures. The pilot production division produced over 10,000 vehicles, topping its target for the year by around 1,000 cars. At the end of December 2001 AvtoVAZ prepared a stock of cars to provide for January orders, the press centre said. The first batch of cars has already been sent to dealers in accordance with their order portfolios for the month.

Russia supplying minibus assembly kits to Iran

During January, the Gorkiy Auto Plant (GAZ), a major Russian car and truck manufacturer, will deliver the first 500 assembly kits for Gazel and Sobol minibuses to Iran Khodro Diesel automotive company, GAZ head Dmitriy Strezhnev told a news conference in Nizhniy Novgorod, where GAZ is headquartered, Interfax News Agency has reported.
He said the deliveries are implied by the letter of intent GAZ and Iran Khodro Diesel signed in Moscow on 27 December 2001...

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AVIATION & SPACE

Full order book for Russian-US space launch venture


The Russian-American joint venture, International Launch Services (ILS), has concluded a contract with the international company Intelsat LLC on launching the Intelsat 10-01 communications satellite with the use of a Proton-M rocket in the second quarter of 2003, Interfax News Agency has reported.
Interfax obtained this information on 16th January from the Russian Khrunichev state space research and production centre, which is one of ILS's founders.
The spacecraft Intelsat of the 10th series was created by specialists from the European consortium Astrium on the basis of a Eurostar-3000 unit.
ILS has already put five spacecraft of the Intelsat type into orbit since 1995 and plans to launch the Intelsat-903 satellite from the Baykonur space centre in March this year.
ILS has secured about US$3bn worth of orders on the world space services market for the period up to 2004. In 2001, the company concluded 12 commercial contracts worth a total of some US$1bn to launch spacecraft with the use of Atlas and Proton boosters. ILS carried out six commercial launches last year.
The Russian-American joint venture was set up in 1995 to provide launch services with the use of Russian-made Proton rockets and the US Atlas [rocket]. The founders of ILS are Lockheed Martin (USA) and the Russian Khrunichev centre and the Space Rocket Corporation Energiya.

First Russo-Ukrainian An-70 aircraft to be manufactured in 2004

The Russian aerospace agency believes the first Russo-Ukrainian An-70 military transport aircraft will be manufactured in 2004, notwithstanding the financial problems of the aircraft manufacturers.
This statement was made by Valeri Voskoboinikov, the Deputy General Director of the Russian Rosaviakosmos company, during a two-day session of the Omsk regional administration, which involved aircraft designers, representatives of Russian aircraft factories, the Defence Ministry and other authorities.
According to the press centre of the regional administration, participants in the session have discussed the production schedule of the first aircraft of the class, which will be manufactured by the Polet production association.
At present, the main customers of the An-70 are the Russian and Ukrainian defence ministries, but a number of foreign countries have already expressed their readiness to buy this aircraft in the future. The price is currently US$40m.
Regional leaders who govern the territories where the factories involved in the joint production are located, are going to call on the governments and presidents of the two countries in order to secure government support for the project.


Russia to sell MiG, Sukhoi combat planes to Brazil

Russia is prepared to sell MiG and Sukhoi combat planes and other aircraft and defence hardware to Brazil, Russian Prime Minister, Mikhail Kasyanov, told a news conference in Brasilia following his talks with Brazilian Vice President, Marco Maciel. It is certainly up to Brazil to choose what planes to buy, but Russian aircraft have better specifications, he said.
Russia is prepared to bid for selling combat planes to Brazil, Kasyanov said. Russia is also interested in bidding for supplying other defence hardware, for construction of gas pipelines and the supply of energy equipment, he added.
Arms trade with Russia will be discussed in specific terms when the Brazilian defence minister visits Moscow in the spring, Maciel said. Russia and Brazil have already discussed specific kinds of cooperation in space exploration for peaceful purposes, Kasyanov said.
In particular, they can cooperate in developing a new launching rocket and in the joint use of a Brazilian launching centre, he said. In nuclear energy the two countries may cooperate in developing new kinds of fuel for nuclear power stations, Kasyanov said.

Russian helicopter passes ground tests

The K-226-50 helicopter successfully passed ground tests at the Kumertau aviation production enterprise in Bashkortostan, RIA-Novosti News Agency learnt from the general director of the enterprise, Boris Malyshev.
According to Malyshev, the helicopter was made in record time - only six months in all. The Bashkortostan government allocated interest-free credit of 75m roubles over a period of three years for the creation of the new helicopter.
According to the deputy director general of the KAMov design company, Leonid Shiryayev, the new helicopter is distinguished by its versatility and multiple functions. The enterprise already has orders to produce the helicopter from various ministries, including the Interior Ministry, Emergencies Ministry, Agriculture Ministry and Health Ministry.
The K-226-50 will soon be sent to Moscow to undergo further tests at the Central Institute of Aerodynamics.

Upgraded Russian warplane to make maiden flight early next year

The local 121st aircraft repair plant of the Russian Defence Ministry is about to complete modernisation of the first Su-25 Frogfoot plane taken from a regular Air Force unit. The upgraded plane is to make its maiden flight in the first quarter of 2002, Mikhail Pogosyan, director-general of the Sukhoi aircraft corporation, told Interfax-Military News Agency.
"It is very important that both serial plants and repair facilities of the Defence Ministry are joining the programme at the modernisation stage," Pogosyan said. Vladimir Babak, head of the Shturmoviki Sukhogo [Sukhoi Attack Planes] research and production consortium, told Interfax-AVN that his enterprise had signed a contract with the air force on experimental modernisation of Su-25 attack planes that are in the inventory of regular units. "The modernisation will go alongside capital and restoration repairs and extension of the planes' service life, which will make it possible to save 30 to 35 per cent of funds," Babak said.
Most of the Su-25 attack planes (Russian designation Grach) that are still in operation in air force units were commissioned 10 or more years ago. As a result of modernisation they will be fitted with modern avionics and the latest armament. Designers are working on equipment that will allow the attack plane to accomplish combat missions at night, Babak said. The upgraded plane was designated Su-25SM. The 121st plant, led by Col Vyacheslav Artemyev, has prepared facilities for the upgrade of planes in the inventory of regular air force units to the Su-25SM variant.
Knowing that about 500 Su-25 planes are in operation in 16 foreign countries, Shturmoviki Sukhogo has drafted a modernisation programme for foreign customers. The attack plane can be fitted with the Kopye on-board radar, Pantera sighting and navigation system, Pastel radiotechnical intelligence system, SUO-39 armament control systems and new types of ammunition, including precision-guided bombs and missiles, at the request of the customer.

Vietnamese air company resumes regular flights to Russian capital

The Vietnam Airlines company will resume regular flights to Moscow starting from 20th January. Flights will be made by A-300-600 or Boeing-767 planes once a week, the RIA News Agency reported recently.

Russia, India agree on joint development of military transport plane

Russia's state-owned arms exporting company, Rosoboroneksport, will take part in a project for the Russian-Indian multi-functional military transport plane MTA, a conversion of an Ilyushin Il-214, the company's spokesman told ITAR-TASS News Agency on 21st January. The general director of Russia's Iluyshin aircraft company, Viktor Livanov, told ITAR-TASS that talks with India on the MTA project had been completed.
The project is part of a 10-year programme of military-technical co-operation signed by Russia and India in June 2001. According to a finalised business plan, making the MTA plane will cost US$350m. Funding of 53 per cent of the design work is to be taken up by Russia and 47 per cent by India.
Full-scale work on the plane is scheduled to start in the second quarter of this year and the plane's first flight for 2005. Initial models of MTA are to be manufactured and tested in 2006 and the plane is to come to the market in 2007. Serial production of the military transport plane on two assembly lines will be organised on a parity basis with broad cooperation between the sides. Production is to be based at the aircraft association in Russia's Irkutsk and at an air factory of India's HAL corporation, Karnataka state.
The plane's market price is expected to be US$12-15m. Indian partners in the project want to get orders for manufacturing 100 to 200 planes, mostly for the national air force. The planes are to replace Russian-made An-24s that are growing obsolete. Terms of manufacturing the new plane for third countries will be negotiated separately for each contract. A civilian version of the plane can be made on the basis of MTA.
These planes could carry 18 t of cargo or 70-100 passengers.

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ENERGY

Russian oil groups to raise production


Yukos, the second-biggest oil producer in Russia, said on 18th January that it planned to raise output by between 17 and 20 per cent this year to about 70m tonnes, despite recent pressure from Opec for export cuts, the Financial Times has reported.
Russia, though not a member of Opec, agreed a compromise with the cartel to cuts its exports by 150,000 barrels a day for at least the first quarter of 2002 as part of efforts to support the global oil price.
Sibneft, another Russian oil company, plans to lift production by 27 per cent in 2002 to about 26m tonnes. Yukos raised production by 17 per cent last year while Sibneft added 20 percent, above the industry average of 7.7 per cent. Last year, Yukos exported almost half its oil production.
The combination of production increases with the recent export cuts has sent the spot oil price plunging in Russia's domestic market. 
Leonid Fedun, vice-president of LUKoil, Russia's biggest oil producer, said that local crude oil prices had fallen by two-thirds in two weeks and were "heading towards US$5 a barrel."
"The circle cannot be squared," says James Henderson at Renaissance Capital. "If you look at the production plans of companies such as Yukos and Sibneft and at what is happening to domestic prices, then something has to give."
Yukos hopes it will be the export restraints that give way. "We hope the decision to cut exports will not be in force for the whole year," said Nikolai Bychkov, head of refining and sales.
LUKoil sees things differently. "We don't need oil production at any price," said Mr. Fedun. LUKoil plans to lift production by 2 per cent this year.
Mr Fedun said the Russian government should do more to regulate output, especially if it wanted to continue cooperating with Opec. "Government bodies in other countries intervene," he said. "Our government should also intervene."
Eric Kraus, chief strategist with Nikoil, an investment bank linked to LUKoil, said Russian oil companies would "hang together or hang separately" if they rejected production constraints in the face of weak oil prices.
Mr Kraus said there could be some benefits for Yukos, which has some of the industry's lowest production costs.
He said it could buy assets cheaply form rivals squeezed harder by a period of lower prices.

Russian oil company begins exploitation of new deposit in western Siberia

The Sibneft oil company has extracted the first tonnes of oil from the Zapadno-Krapivinskoye deposit in the north of Omsk Region. "This is a new area for the oil company that traditionally worked in Khanty-Mansi and Yamal-Nenets Autonomous Areas," Sibneft's PR-department told ITAR-TASS News Agency .
The deposit contains 8m t of oil. Five wells have already been drilled and nine more will be drilled in 2002. The construction of a 58-km oil pipeline that will connect the new deposit with Sibneft's existing pipeline network is nearing completion.

LUKoil to supply oil directly to Polish refineries

LUKoil intends to supply its oil directly to Polish refineries, the press service of the company reported to RosBusinessConsulting.
According to press secretary of LUKoil, Dmitry Dolgov, the main aim of this project is to cut the company's expenses. LUKoil is ready to ensure oil supplies to Polish refineries, i.e. 5-6m tons of oil annually. At the same time, the company intends to establish a gas station network in Poland, and has already allocated US$10m for this purpose for the next two years. 70% of fuel supplies to Poland go through a middleman.

LUKoil targets Balkan expansion

LUKoil has together with local Latsis Group, registered a bid for a 15-30% stake in Greek refiner, Hellenic Petroleum, which accounts for over half of Greece's refining capacity and controls 56% of the domestic market for refined products. 
The company is a natural target for LUKoil, which has been looking to expand into the Balkans. The sale is expected to be completed in 2002. If LUKoil is successful, then it will gain a firm toehold in the South European energy sector, to go with its acquisitions in Eastern Europe. 
In a further attempt to affirm its presence in the Balkans, LUKoil recently proposed to extend the pipeline planned to run from Burgos (Bulgaria) to Alexandropolis (Greece), a promising route which will allow future Caspian oil to bypass the Turkish straits. LUKoil wants the pipeline to be extended to the refinery in Thessalonica, which significantly is run by Hellenic Petroleum. 
Meanwhile, LUKoil is still in talks over buying a refinery in the US. In 2001, LUKoil's three existing overseas refineries processed 4.5m tons of crude, or half that refined by the company in Russia. However, it should be remembered that LUKoil, along with other of its Russian peers, faces limitations in expansion overseas, most significantly financial. The company said that its investments abroad cannot exceed US$300m a year. This explains its opting out of the auction for Unipetrol, the Czech oil group. The company also faces political hurdles from ex-Soviet bloc countries, keen to keep Russian oil firms out of their markets. LUKoil was not, for instance, invited to take part in the privatisation of Polish refineries.

Yukos to purchase 49% of Slovak pipeline operator

The government of Slovakia have agreed to sell a 49% stake in the Transpetrol pipeline operator and all management rights to the Russian oil company, Yukos.
The relevant agreement will be signed shortly, the chief of the foreign information department of Yukos reported to RosBusinessConsulting. After that, the deal should be approved by the Board of Directors of the company.
On December 10th, Yukos Finance B.V., a Yukos subsidiary, won a tender for a 49% stake in Transpetrol. Yukos paid US$74m for it. According to the terms of an agreement reached after the tender, Yukos will have an advantage in further sale of Transpetrol's shares, in the event that the Slovak government agrees to further privatisation of the company. Transpetrol is a Slovak oil pipeline operator and manages a part of the Druzhba Friendship) oil pipeline.

Russian oil major signs Sudan oil agreement

The Russian-Belarusian oil and gas company, Slavneft, and the government of Sudan have signed a production sharing agreement (PSA) on the development of the Block 9 group of oil and gas fields in Khartoum Province, central Sudan, the Prime-TASS News Agency correspondent reported from Sudan.
The Slavneft president, Mikhail Gutseriyev, told a news conference that the company was prepared to start working at the fields in February or March 2002. Slavneft plans to invest a total of US$150-200m in geological exploration and development.
Under the agreement, a special consortium will be established to develop Block 9. Slavneft will hold a 93 per cent stake. Proven oil reserves in this area of Sudan total 30m tonnes, while forecast reserves are estimated at 200m tonnes.
Gutseriyev said the company hoped to start operating the oil fields at a profit in three years. In the first three years 60 per cent of Slavneft's income will go to compensate for investments and 40 per cent distributed among the consortium participants, depending on production volumes. If production exceeds 20,000 barrels a day, Sudan will receive 72.5 per cent of income. After the initial three-year period, incomes will be distributed solely on the basis of production volumes.
Sudan's proven oil reserves in 1999 stood at 160m tonnes. Its oil production went up from 3m tonnes in 1999 to 13.5m tonnes in 2000. The Sudanese oil export in 2000 totalled 7.5m tonnes.

Formerly imported drilling pipes to be produced by Russian plant

The Russian oil and gas complex will be able to stop already this year the import of foreign-made pipes, needed to sink extra-deep boreholes. Their production was launched at the Sinarskiy pipe-rolling plant, where a new technological department was commissioned for this purpose, ITAR-TASS News Agency has reported.
Passing through it, the pipes become extra-resistant to aggressive media, corrosion and low temperatures. Only experimental lots have been produced so far. Assemblymen from the German Denteler firm are still busy adjusting their equipment. Its annual output capacity of 126,000 tonnes is to be reached already in February.
"The thermal processing shop of the Sinarskiy pipe-rolling plant is the first industrial project that is being implemented in Sverdlovsk Region in the past ten years," governor, Eduard Rossel, told ITAR-TASS. "This not only shows that Urals industry is perking up, but also that it is being switched over to new technologies and made to produce world-standard goods," he added.
According to Rossel, 2002 will be a year of large construction projects in the region. A plant to produce large-diameter pipes is going up in Nizhniy Tagil. Gazprom now annually spends up to US$2bn to buy such pipes abroad. A new power-generation unit of 800 MW is being built at the Beloyarsk nuclear power plant. Preparations are now under way to build new installations for the aluminium complex and to produce magnesium. All these projects are of national importance. They will produce goods that have to be imported today.

Gazprom to build US$1bn gas-processing plant
Gazprom is to start building a large gas-chemical plant in Novyy Urengoy this year, the company's deputy head, Aleksandr Ryazanov, said at a briefing in Moscow, Interfax News Agency has reported.
Equipment worth US$1bn has already been bought for this project and it is planned to start production within 2.½-3 years, he said.
Gazprom plans also include developing petrochemical production in Bashkortostan and Tatarstan, Ryazanov said...

Gazprom to launch extraction from new polar gas field

A new gas field in the Yamalo-Nenets Autonomous Area in Northern Siberia, has the fifth largest gas reserve ever discovered, that is 3.4m cu. m., The Russian Mirror reported recently
The estimated output of Zapolyarnoye (the gas field's name) by 2005 is expected to reach 100bn cu. m. per year. For comparison's sake: last year Gazprom extracted 523.3bn cu. m. in its entire operation.
Experts believe that last year Zapolyarnoye pumped a total of 6.7bn cu. m. of gas, estimations for this year rise to 35bn cu. m. Thanks to the new field, gas extraction, which has been decreasing over the last two years (a drop in the first nine months of 2001), will start increasing again. Nevertheless, it is not something the consumers will notice directly, as internal gas prices will remain roughly in line with today's price.

Investment programme of Russia's gas industry for 2002 promotes increase in gas production

The main aim of the investment programme of Russia's gas industry for 2002 is to increase the volume of annual gas production from 511bn cu.m to 520bn cu.m with a further increase to 530bn cu.m. The export gas price amounts to US$122 per 1,000 cu.m and gas supplied for internal consumption to US$12 per cu.m. 
This information is contained in documents prepared by Gazprom for a government session. According to the investment programme, capital investments will reach 161.2bn rouble and long-term strategic investments - 7.9bn roubles. Capital investments in gas production will amount to 57bn roubles in 2002, in the development of transportation services - 68bn roubles, in gas processing works - 2.2bn roubles, in the development of social infrastructure - 3.2bn roubles and in geological prospecting works and the development of new gas fields - 14.5bn roubles.

World Bank disburses last coal loan tranche to Russia

The World Bank is disbursing the last social tranche of its coal loan to Russia on 31st December, ITAR-TASS News Agency learned from reliable sources in Washington.
US$50m are to be disbursed to the Central Bank of Russia and another US$50m are to arrive from Japan, which co-sponsors the coal tranche.
The decision to disburse the funds was passed without any discussion by the World Bank directors thanks to the successful Russian implementation of the project...

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ENVIRONMENT

Management of natural resources and environmental protection discussed


The first regional session devoted to the state of and prospects for the management of natural resources and environmental protection in the Russian Far East was held in Khabarovsk on December 18th-19th. It was organised by the office of the plenipotentiary representative of the President in the Far Eastern federal district with the active participation of the natural resources ministry. 
Adviser at the office of the President's representative, Roman Sokolovksy, told Ria Novosti News Agency that "the wide-scale production of mineral resources, mass procurement of timber in taiga, fishing, which is on the one hand officially conducted in compliance with licences, and on the other hand by poachers, as well as taiga fires which occur every year, and catastrophic floods on the rivers, make ecologists and state bodies search for more efficient measure of nature protection, and elaborate scientifically substantiated methods of managing natural wealth." 
The session in Khabarovsk discussed all these problems. According to Sokolovsky, it is envisaged that proposals and recommendations from the region will be worked out to be included in the new project of the federal law on nature management.

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FOREIGN INVESTMENT

British investments in Russia double


According to the Russian Ministry of Economic Development, economic cooperation has grown at a quicker tempo than during Boris Yeltsin's rule. In the first half of 2001, Britain invested into the Russian economy double the amount for January-June 2000, moving up to become one of the three largest investors in Russia, The Russian Mirror reported recently. Its share in accumulated foreign investments has jumped from 8% to 10% in the past year.
The Russo-British Chamber of Commerce reports that in 2000 bilateral trade grew 16% on 1999 and Russian exports skyrocketed to a record £1.5bn. For the first time in recent years, imports from Britain grew by 25%.
Results for January-September last year were even more impressive, with bilateral trade up 43% to reach £2.2bn. The figure includes surging Russian exports also recorded a healthy upward trend, increasing by nearly 28%.
The informal atmosphere surrounding meetings between the two leaders, Blair and Putin, has provided good chemistry and only added to the official status of the visits. Observers in Moscow recently noted how Tony Blair pulled the chair out for Lyudmila Putin and how Vladimir Putin hovered attentively over Cherie Blair during the performance of Prokofyev's 'War and Peace,' which the Putins and the Blairs attended in the Mariinsky Theatre in St. Petersburg.
No doubt the leaders' mutual empathy is positively influencing bilateral cooperation. Maybe one reason, which is the age gulf that, perhaps, prevented Boris Yeltsin from becoming close with the British Premier, is no longer there. For sure, a combination of these favourable trends is facilitating the progress of both countries.

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FOREIGN LOANS

Government okays two World Bank loans of US$208m


The Russian government has approved the reception of two World Bank loans worth US$207.5m; Interfax News Agency quoted the chief Russian finance ministry department for contacts with international financial institutions, Grigory Gladkov, as telling a press conference on interaction between the World Bank and Russia on December 19th.
Gladkov said US$122.5m of this sum would be earmarked for improving water supply and sanitation systems and US$85m will be used on reconstructing municipal heating systems, New Europe reported recently.
The two projects underwent lengthy coordination, as the payment for consulting services within the framework of the project took a long time to agree upon, Gladkov said.
Payments to consultants and teams in charge of implementation of World Bank, 18% falls on consulting service costs, Gladkov said. World Bank Manager for Russia, Julian Schweitzer, said in turn that the Russian government was expected to discuss the approval of another Bank loan on December 20th.

Russia gets IBRD loan to improve water, sanitation systems

Prime Minister Mikhail Kasyanov recently signed a government resolution approving an agreement with the International Bank for Reconstruction and Development (IBRD) for a loan of US$122.5m to finance a project to modernize municipal water supply and sanitation systems, Interfax News Agency has reported.
The government information department said the loan is being extended for 17 years with a five-year grace period.
Under the agreement, US$115,275,000 of the loan money will be lent out to municipal water supply and sanitation companies under guarantees from local and region governments. This part of the loan will be serviced and repaid with funds from these enterprises.

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MINERALS & METALS

De Beers and Alrosa strike new deal


Alrosa, the Russian diamond monopoly, and De Beers, the world's leading diamond producer, have signed a new five-year sales contract in Yakutsk. Alrosa was represented by its president, Vyacheslav Shtyrov, and De Beers - by its chairman, Nicolas Oppeheimer, and managing director, Gary Ralfe. 
Under this agreement, Alrosa's guaranteed supplies to De Beers will be cut, and more diamonds will be sold on the Russian market. Alrosa's press service reported that the new contract envisaged an annual supply of US$800m worth of Russian diamonds. According to the source, sales on the Russian market will be rising, and they might reach US$1bn a year. 
At the same time, the sales contract provides for government control over Alrosa's sales. De Beers guarantees annual payments of US$4bn to Alrosa, which will allow the Russian diamond giant to fulfill its obligations to the government and ensure steady payments into budgets of all levels, the source stressed. 
Alrosa is the largest diamond producer in Russia and one of the leading producers and sellers of rough diamonds on the world market. It accounts for 98 per cent of Russia's diamond market and about a quarter of the world's diamond production. 
Russia's Finance Minister, Alexei Kudrin, went to Yakutia to inspect the work of Alrosa and said that Alrosa produced diamonds worth US$1.623bn in 2000, while the company's net profits reached 10bn roubles (about US$330m). Capital investment amounted to 8bn roubles (about US$264m) last year, which is 68 per cent more than in 1999. The Finance Minister noted that Alrosa did not owe taxes to the federal and republican budgets, and also to non-budget funds. "The preliminary results for this year are also quite satisfactory," he said. 
Sales of rough diamonds reached US$909.32m at the first half of 2001, which is 22.3 per cent more than in the same period last year. Now major traders on the diamond market show more independence, and they invest heavily to find consumers, according to Kudrin. At the same time, both Alrosa and De Beers are interested in maintaining order on the diamond market. 

Russian nickel giant calls two-month halt to exports

Russia's nonferrous metallurgical giant GMK Norilsk Nickel plans no nickel exports in January 2002 and probably in February, sources from the company told Prime-TASS News Agency.
According to the Norilsk Nickel press-service, the company in 2001 exported 177,400 tonnes of nickel, exceeding the 155,000 tonne target. The company increased nickel exports in the outgoing year, because it has had to suspend them in the first two months of 2002.
GMK Norilsk Nickel First Deputy General Director, Johnson Khagazheev, earlier told Prime-TASS that the continuing bad weather had forced the company to cut production to the minimum required to preserve the fixed assets and keep smelters and converters going.
"All of the company's efforts are aimed at servicing the city and its population. The Norilsk Combine is in a very grave position. Mother nature is stronger than us. We will fail to meet December's production targets. If nothing changes, the January plan will be a failure, too," he said.
Snowstorms, bad visibility and high snows have stopped heavy-duty trucks that deliver ore to the smelter. Shortages of ore and other materials have forced Norilsk Nickel to reduce production. 
The Norilsk industrial region accounts for 72 per cent of all metal produced by GMK Norilsk Nickel. The region includes five mines, two ore dressing plants, an agglomeration plant, the Nadezhda combine, nickel and copper smelters, a shop producing platinum concentrates and the Dudinka seaport.
According to analysts, GMK Norilsk Nickel last year produced 200,000 tonnes of nickel and 400,000 tonnes of copper. The company exports 90 per cent of its metal output.

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NUCLEAR ENERGY

Russia to supply uranium for Dutch research reactor


The Russian government has approved a draft agreement with the European Atomic Energy Community on supplying highly enriched uranium for a research nuclear reactor in the city of Petten in the Netherlands. Russian Prime Minister, Mikhail Kasyanov, has signed the corresponding ordinance, Interfax News Agency reported recently.
According to the draft agreement, the Russian side will supply up to 600kg of enriched uranium to 93 per cent in the U-235 isotope. This material will be used to produce fuel elements for the reactor in Petten.
The document states that Russia will not object if the European Atomic Energy Community produces these elements from the supplied uranium in France or Britain. Spent nuclear fuel that will be left after using the materials supplied by Russia can be processed in European Union member-states, in Russia, or in a third country with the mutual consent of the parties.
If an agreement on processing spent nuclear fuel in Russia is achieved, the sides will conclude a separate agreement to define the conditions of this processing.

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SCIENCE & TECHNOLOGY

Russian defence plant develops bombs to fight forest fires


Special equipment, so-called civilian aircraft bombs, to be used in combating technical and environmental disasters are being developed in Russia. The Federal State Unitary Enterprise, the Bazalt State Research and Production Enterprise, which is working on the development of new-generation weapons, told ITAR-TASS News Agency that Russian defence engineers are the first in the world to have designed a 500-kg bomb equipped with a fire-extinguishing compound and explosive spraying system to extinguish a forest fire four to six metres high and up to 30m in diameter.
Another Bazalt product, a large vacuum bomb, creates a foliage-free fire-protection area up to 50m in diameter. "We have also found a way to deliver rescue equipment to those in distress at sea or in remote areas. We are using a special rescue package that combines the latest scientific and technological achievements," engineers said.
Bazalt is the oldest defence enterprise in Russia and its military products are known all over the world. Its engineering and industrial potential has enabled Bazalt to start developing civilian products.

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SHIPPING

Shipping companies order 33 vessels in 2001


The Russian transport ministry's sea fleet service, Rosmorflo,t said shipping companies have ordered the construction of 33 new vessels in 2001, New Europe reported recently. 
Over half the orders went to Russian shipyards, in particular to the Northern, Admiralteyskie and Baltic shipyards. The North-West Shipping Company launched construction of 10 Valday project bulk carriers at the Northern Shipyard with a loan from Sberbank. 
The Novorossisk Shipping Company is building a series of tankers in Croatia, where the Primorye Shipping Company has also ordered construction of three tankers. The Far Eastern Shipping Company has signed a contract for construction of three dry-cargo vessels in China. Foreign banks have opened credit lines for the new construction. Rosmorflot notes that major oil companies have started building their own fleets. LUKoil-Arctic-Tanker is building a series of 10 ice-reinforced tankers. The overall cost of projects to renew Russian shipping company fleets is estimated at over US$1bn, Rosmorflot reported.

Russian Pacific port to increase throughput

The deep-water port of Vostochnyy, Russia's highest-capacity one on the Pacific coast, handled 12,862,000 tonnes of cargo in 2001, as against 13,090,000 tonnes in 2000, and is planning to handle more than 14m tonnes of cargo this year, ITAR-TASS News Agency has reported.
Vladimir Dudko, acting General Director of port Vostochnyy, has told ITAR-TASS that the finalisation of the construction of a methanol processing complex will enable the port to reach the planned targets. The port will annually transship one million tonnes of methanol - wood spirit used in the chemical industry.
In 2002, the harbour is also to set about completing work under a project for the transshipment of crude oil. A pier for a bulk-oil handling complex was built at the port earlier and foundations were prepared for accumulation storage]facilities.
The harbour is planning to ship six million tonnes of crude oil to the Asia-Pacific Region countries every year. Dudko said that other projects are also being worked out to enable the port to considerably increase its cargo handling capacity.
Coal was the major cargo handled at the port in 2001. The port delivered 9,890,000 tonnes of coal to Pacific Rim countries, with Yakutia, Irkutsk and Kemerovo Regions being the main suppliers of coal to the international market.

Two new cargo ports open in northwest Russia

Russian President,Vladimir Putin, was due to attend the opening ceremony at two new ports in Leningrad Region recently, reported Radio Mayak, Moscow. The first phase of the construction project at the Ust-Luga port, located 150 km from St Petersburg, is the completion of a coal terminal, Radio Mayak has reported. 
The idea of building a high-capacity cargo port in the Ust-Luga bay in the Gulf of Finland first appeared about 10 years ago. However, practical work there started only 18 months ago. And recently its first result, the very first cargo ship awaiting loading in the first coal terminal with a transhipment capacity of 1m tonnes of coal.
In two years time, another terminal is expected to be put into operation for transhipping 5.5m tonnes of mineral fertilizers. Some five more terminals will be built in Ust-Luga, including one for a ferry service.
The only factor that is slowing down the project is a certain inefficiency of the local railway network: not all the railway approaches to the port are ready. And yet construction workers are saying that this can be rectified and by the end of this decade, the major transport complex in Ust-Luga with an annual turnover capacity of 35m tonnes will become an integral part of the international freight traffic system. The new multipurpose port is located within the transport corridor on cargo routes from Europe to Asia.
All these are plans for the future. At present the port is ready to report the results of its work and its further plans to Russian President, Vladimir Putin, who was expected to visit there.
RIA News Agency, Moscow, said that the other new port to be opened, the specialised oil transhipment port of Primorsk, is the final destination of the Baltic Pipeline System which will export crude from the Timano-Pechera and West Siberian oil fields. An oil storage facility with a capacity of 500,000 tonnes, as well as purification and mooring facilities and office buildings have been constructed. The first phase of the Baltic Pipeline System with an annual capacity of 12m tonnes of oil has been completed. The cost of the project was US$580m. A 270-km-long trunk pipeline from Kirishi to Primorsk has been built as part of the overall pipeline network. In accordance with a resolution of the Russian government of 2nd November 2001, the construction of the second phase of the Baltic Pipeline System has begun near the new port. The cost of the second phase of the project is US$400m. Upon its completion, the cargo turnover of the port will be increased to 18m tonnes of crude a year. After the third phase of the pipeline is completed, the port's capacity is expected to reach 30m tonnes.

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TRANSPORT

High-speed rail link to connect Moscow's airports


Within two years, the capital city's airport will be served by high-speed rail links, the Russian Mirror reported.
The first phase of the project to link the airports with the city envisages connecting the new Sheremetyevo-3 terminal, currently under construction, to Moscow's Leningrad train station. Two sets of tracks, each 5.2 kilometres in length, will be laid.
The planning stages should now be complete, with railroad construction to be completed in 2003. That part of the project will cost US$57m and will need to be financed by credits raised by the city.
The second phase concerns the Moscow Regional Railroad, which will connect Oktyabrskaya Railroad with the Moscow International Business Centre, Moscow-City and the capital's other airports - Vnukovo and Domodedovo.
Work to construct a rail link to Vnukovo and Zelenograd, initiated by the Moscow city government, has already been completed, although the project linking Moscow regional Railroad to Domodedovo is still under development.

New fertilizer terminal opens in Russian Far East

The construction of a new terminal was completed in Nakhodka (the Russian Far East) on 16th January. It is designed to transship 1.5m tonnes of chemical sylvinite fertilizers from Perm Region in the European part of Russia to the countries of the Asia-Pacific Region [APR], ITAR-TASS News Agency has reported. The terminal has a mooring line of 215 m. A storehouse for 100,000 t of fertilizer, various loading machines and a system of transportation lines to load the fertilizer on ships. Ocean-going transport ships with deadweights of up to 40,000 t are able to moor at the terminal. The transshipment of fertilizer is to be done by the East-Urals Terminal Society Ltd.
The director-general of the East-Urals Terminal, Yuriy Pankov, said that his enterprise was founded in 1998. As many as 556,000 t of fertilizer were carried to Japan, China, Australia, New Zealand and other Pacific countries from this terminal on board 77 motor ships in 2001. The complete commissioning of the enterprise was hampered by the absence of facilities to store large quantities of fertilizer, which can be loaded on ships only in dry weather. Such a storehouse worth US$1.5m was bought in Finland and assembled near the moorage line. It is possible to build one more storehouse there. This will allow the East-Urals Terminal to transship 2.5m tonnes of sylvinite.
The APR countries are now getting from Russia 1.5m tonnes of chemical fertilizers a year. Most of them were shipped from the port of Ventspils on the Baltic Sea. Now, Russia will be able to considerably increase the delivery of fertilizers to APR countries via Nakhodka.

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