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Area (


ethnic groups 
Russians 82%
Tatars 3.3%
Ukrainians 2.7%

Principal towns 
Moscow (capital)
St Petersburg
Nizhni Novgorod 


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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: 262 - (22/10/02)

The Russians are wondering how long the good times can last. Not that they are good for everyone. Indeed the majority are still very poor by Western standards. But instead of dire poverty being exacerbated by despair at the future, it is now alleviated by hope that things will happen.

Oil the key
The good times have been largely, although not wholly, due to one favourable factor, the pick-up in the global oil price. Every dollar extra on the oil price adds one billion dollars to the country's budget. The balance of payments is in massive US$50bn surplus and by now with oil prices topping US$30 per barrel, the oil sector contributes 40% of Russia's exports. With natural gas contributing another 20%, the energy sector is supreme.
Can it last? That is dependent on factors beyond the reach of Russia's control, as the Kremlin is only too well aware. The coming war with Iraq is obviously centre stage here. Russia is poised to pull its weight, but has little chance of averting a war if Washington is really decided upon it.

The Iraqi options
Iraq owes Russia some US$8bn in debt. Most of this can be written off as non-functioning. For how can a beleaguered country like Iraq honour its debts?
If Saddam was ousted, then it is possible that a successor regime would look to Russia for assistance in rehabilitating its economy, above all its oil industry. The supposition that US firms would always have the priority is not necessarily the case. Anti-US feeling is running very high in Iraq, natural in a country bombarded by American bombs for over a decade. A tilting of policy towards Moscow would make sense, if, as Washington avers, a genuinely independent and democratic government emerges in Baghdad.
Of course the Americans would call the shots in all sort of subtle ways, financial and other. But shutting out Russia entirely would not look subtle, indeed would be likely to be counter-productive eventually.
LUKoil has a huge US$6bn stake in the West Kurna field in Iraq, which would need further development. As LUKoil is Russia's largest oil firm, in reserves, with a capitalisation of US$13.4bn, it has the financial clout to remain integral to Iraqi oil developments. Its president, Vagit Alekperov, has said that the government has assured him that LUKoil would not lose out over West Kurna whatever happens.

Opening to the US
One reason for the US to respect Russia's interests in Iraq is that it is becoming increasingly reliant on Russian oil supplies at home. Even if 'regime change' comes to Iraq, the Americans would be nervous of being dependent on Middle Eastern oil as their main supply. Hence the eager desire to diversify their sources from the Middle East to Latin America, Africa - and Russia and Kazakstan.
Russia could never supplant Saudi Arabia with its huge 262bn barrels of reserves. But with 49bn proven reserves and perhaps as much as 98bn in all, Russia is no lightweight. Indeed, it is the world's number two exporter, on four and a bit million barrels of oil exports daily to Saudi's seven and a half.
Russian oil major, YUKOS, with Russia's second largest reserves (13.3bn barrels), is to play a vital role here. It has announced plans to triple its oil exports by 2010 to 100m tonnes per annum. Some 35 million tonnes will go to the US via the Murmansk terminal, now being refurbished. 
The remaining 65m tonnes exported will ease the supply situation for the US by satisfying Chinese and EU demand that would otherwise be competing with the US for scarce oil. Some 20m tonnes are to be supplied by YUKOS along the Angarsk-Daging (China) oil pipeline, currently under construction, while up to 45 million tonnes should be delivered via the Transneft network to Europe.
Then there would be LUKoil's contribution, not only from Russia, but from Iraq. And that of other Russian oil majors. By 2010 the Russians could be surpassing Saudi Arabia as the US's number one supplier, or at least be close behind.

US pioneer to re-invest
ChevronTexaco, the second largest US major, may invest some US$9bn to develop the Kirinsky block under the Sakhalin-3 project over a period of twenty years, David O'Reilly, its chairman, has said. The block needs further reconnaissance, but could hold 500m tonnes of crude equivalent.
A notable aspect of the project is that it is being undertaken as part of a production sharing agreement (PSA). But the Duma must first adapt an amendment to the Tax Code to introduce regulations for the PSA system. Delays in doing so have deterred other foreign investment.
O'Reilly was speaking ahead of the Russia-US energy forum in Houston, Texas on October 1st, at which his deputy, Peter Robertson, was to announce that Russia "is a country favourable for investment." This is hoping that the reform team of Premier Kasyanov and Economy Minister German Gref get their own way. BP and several other firms are coming in to Russia regardless. But a new PSA system would certainly give the green light to FDI, that at under US$10bn, has been much lower than would be appropriate for such a huge resource-rich place as Russia.

Russia's population stabilises
The inexorable decline of Russia's population has been arrested, but not before it has fallen to 145 million. The drop in longevity for men to 57 years has been stalled, with signs of some rise recently. Rising living standards account for it in part, but also a greater awareness of the pitfalls of over-indulgence in alcohol and drugs.
Nevertheless, there is an alarming development. Some one million people are inflected in the CIS with HIV/Aids. The majority are in Russia and Ukraine. The figures are rising and are concentrated among the young. The figures are likely to rise, with sexual transmission taking over from drugs use as the main cause. The new freedoms of post-Soviet existence come at a price. The government needs to launch an awareness campaign about the perils of unprotected sex and drugs misuse urgently if Russia is not to have an epidemic, scarcely the setting for sustained economic recovery or a decent way of life.

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GM-Avtovaz makes first commercial SUV

The GM-Avtovaz car venture on September 24th produced its first serial, commercial Chevrolet-Niva sport utility vehicle (SUV), New Europe reported. The vehicle came off the assembly line during the plant's opening ceremony. The vehicle was set to go on sale on October 24th. It is made with 99% Russian components. 
The venture plans to assemble 456 Chevrolet-Nivas this year, 35,000 next year, 60,000 in 2004, and 75,000 in 2005, when it would reach full capacity. The plant plans to launch its own paint shop on March 30th next year. Until then, its vehicles will be painted at Avtovaz. Production of a Chevrolet-Niva export model is to begin by the end of September 2003. It will be fitted with an Opel engine and imported transmission. Exports are to begin in October 2003 to Europe, Asia, Latin America and the Middle East. Once it reaches capacity, the venture plans to export up to 40,000 vehicles per year. 
In the future, the venture plans to expand its model range. The general agreement to create the venture was signed in the summer of 2001 by Avtovaz, General Motors and the EBRD, which own respectively 41.5%, 41.5% and 17% of the company.

Russian joint venture car factory boosts production

The Kaliningrad-based Russian-German joint venture, the Avtotor car factory, assembled 3,740 vehicles in the first eight months of 2002, 2,292 Kia cars and 1,448 BMW cars among them. The Avtotor production output has grown 51 per cent compared with the same period of 2001, the factory's press service has said. Most of the cars were sold in Russia, BNS News Agency has reported.
Meanwhile, BMW sold 1,791 of its cars in Russia in January-June and took over from its main rival, Mercedes. Kia Motors sold 2,106 cars in the same period and joined the top 10 car sellers in Russia.

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British Airways may relocate to Moscow's Domodedovo airport

British Airways will, by the end of the year, make a final decision on the possibility of moving its Moscow flights from Sheremetyevo Airport to Domodedovo airport, Interfax News Agency reported. "It is not an easy decision for the company to make, but it is having problems with the low access capacity at Sheremetyevo," said Daniel Burkard, the airline's commercial director for Eastern Europe. If British Airways decided to change its base airport in Moscow, work on transferring the flights would take at least two months. 
Swiss Air, Sabena and Transaero moved from Sheremetyevo to Domodedovo last year, and Sibir, Russia's second largest airline transferred there earlier this year.

Russian airline to lease US-made planes

Fourth-largest Russian airline, Krasnoyarsk Airlines (KrasAir), plans to lease eight MD-83 medium-range jets produced by McDonnell Douglas of the US, a KrasAir source told Prime-TASS News Agency on 26th September.
KrasAir and Germany's Germania airline also plan to set up a joint company to carry out leasing operations for the MD-83 aircraft.
The company must modernize its air fleet in order to meet the European Union's new noise requirements, which take effect in 2006. The company said recently that it plans to lease eight DC-9 medium-range commercial aircraft in 2003, also produced by McDonnell Douglas.
KrasAir signed a contract in August with jet-leasing company, Ilyushin-Finance, with an option to lease six Tupolev-204 aircraft over the next two to three years. The airline already has two Tupolev-204s in its fleet.
A KrasAir source told Prime-TASS that it also expects to lease the first of two Boeing-767s it is adding to its fleet in October. The second Boeing-767 will be leased to the company in November or December this year.
KrasAir's fleet currently consists of 44 Russian-made jets and its passenger traffic increased 26 per cent on the year in January-August to 880,300 people.

Russia's Tatarstan inaugurates air link with China

A direct air route, the first in history, has been opened between Tatarstan and China. A Tu-154 airliner carrying businessmen and tourists from Russia, China and other countries flew out from Kazan international airport on 28th September, ITAR-TASS News Agency has reported.
The route has been opened in accordance with consolidating Sino-Russian relations, Tatarstan Airlines director-general Magomed Zakarzhayev has told ITAR-TASS. The foreign trade turnover between Tatarstan and China doubled over the last year and exceeded US$61m, according to Tatarstan's ministry of fuel and foreign economic cooperation.
A Tatar government delegation took the first flight to arrive in China to open a Tatar industrial fair in the Chinese city of Urumqi.
It is the fifth foreign air route from Kazan. Planes fly from there to Germany, Turkey, Azerbaijan and Ukraine. Regular flights will be carried out also from Kazan to Yerevan, beginning next October. Tatarstan Airlines has conveyed 150,000 passengers this year, 7,000 more than during the same period last year.

Russia to start mass production of Ka-226 helicopters

Mass production of the Ka-226 Hoodlum helicopter will begin after its certification tests are completed, director-general and general designer of the Kamov company, Sergey Mikheyev, said on 27th September, Interfax-AVN Military News Agency web site has reported.
"The mass production plant in Kumertau, the Republic of Bashkortostan, and the Strela production association in Orenburg have made one Ka-226 helicopter each. But these helicopters, as well as those made at the experimental plant of the Kamov joint-stock company, are engaged in certification tests," Mikheyev told Interfax-Military News Agency. This is done to issue a flight readiness certificate to the helicopter before its supplies to customers begin, he said.
The Ka-226 made by Strela is adjusted for accomplishment of search and rescue missions in line with requirements of the Russian Emergencies Ministry, Mikheyev noted. The Ka-226 is a derivative of the Ka-26 that has earned a solid reputation. Like the baseline model, the Ka-226 has a low vibration level, it is reliable and easy to maintain and control in the air. At the same time, it boasts improved engines, on-board equipment and main rotors.
The new helicopter has a modular design, Mikheyev said. Its cockpit is fixed, but the passenger cabin is removable and can be replaced quickly to meet the requirements of the flight mission. Kamov is the world's only company developing coaxial helicopters. Its aircraft are mass-produced by the Strela plant, the Progress aircraft plant in the town of Arsenyev in Maritime Territory, the Kumertau association and the Lukhovitsy machine-building plant in Moscow Region. The production process is certified for compliance with international standards and is monitored by Kamov's experts.

Russia proposes helicopter making deal to Turkey

Russia has suggested that Turkey launch serial production of Ka-115 light helicopters in Ankara, Sergey Mikheyev, general designer of the Kamov aircraft design bureau, told Interfax News Agency.
"Russia has suggested that Turkey manufacture combat and civilian helicopters under favourable conditions. We propose that Ankara join the development and serial production of Ka-50-2 Erdogan combat helicopters and Ka-115 light multi-purpose helicopters. We have handed over our proposals on an offset agreement to Turkey. This agreement provides for the recovery of money invested," Mikheyev said.

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Loans issued by Russian banks up 20.5 per cent January-July

The amount of loans in roubles and other currencies provided by Russian banks to companies, other banks and individuals in January-July was R1,769bn, up 20.5 per cent from the beginning of the year, Prime-TASS News Agency has reported, quoting the State Statistics Committee.
The data provided by the committee was based on figures given by the Central Bank of Russia.
Of the total, R1,391bn were loans to companies and enterprises, R198.9bn to other banks and R127.1bn to individuals. No comparative figures were provided. (R31.68 to the US dollar)

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Major Russian state bank considering US$500m Eurobond float

Russia's Vneshtorgbank [a major state-run foreign trade bank] is considering placement of US$500m in Eurobonds in 2003, the bank's president and chairman, Andrey Kostin, told the press on 24th September, Interfax News Agency has reported.
The bonds will mature in five to seven years, he noted.
The state of world capital markets will be taken into account when the final decision is made.
"We would find borrowing at, say, 9 per cent unacceptable. We hope that by that time rating agencies will have upgraded Russia's rating and borrowing terms will be better, including for us," he said.
Vneshtorgbank may raise a syndicated loan from various foreign banks of US$150m before the end of 2002.
"I think the rate on this loan will be rather low, enabling us to receive relatively inexpensive monetary resources," Kostin said.

Russian gas monopoly announces extra issue of Eurobonds

Russian gas giant, Gazprom, said it plans to offer an additional issue of Eurobonds totalling US$400m in September-October this year and a new bond issue no earlier than in January 2003 Interfax News Agency has reported.
"Continuing its collaboration on international markets with the banks Salomon Brothers International and Credit Suisse First Boston (Europe), Gazprom intends to carry out a second issue this year under the S rule in September-October of this year," the company said in a press release.
"As for bond issues under rule 144A with placement in the American market as well, Gazprom, while continuing to work on them, announces that it does not intend to offer them before January 2003."
The duration and size of the new Eurobond issue will be determined according to the situation on capital markets at the end of the year, and the company's actual needs for additional financing, Gazprom said.
As reported earlier, Gazprom had planned to offer US$750m in ten-year Eurobonds on the US market. The question of the bond issue was to be reviewed at the next board of directors meeting. Gazprom chief executive Aleksey Miller had said the company planned to hold a road show in the United States in October.
In April 2002, Gazprom successfully placed a debut issue of Eurobonds totalling US$500m. In May, the company's board approved plans to issue an additional US$400m in Eurobonds.
This decision was made in the light of strong demand for the Gazprom bonds. The board had intended to place the new issue at the end of the second or in the third quarter at an annual yield of 9 per cent.

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Baker & McKenzie to advise on LUKoil Murmansk project

Russian oil major LUKoil plans to invite the consulting company, Baker & McKenzie, as a consultant in a project to build an oil export complex in Murmansk, company Vice President, Leonid Fedun, said.
YUKOS, Sibneft and Tyumen Oil Company, who agreed with LUKoil to jointly study this project, asked the company to choose a consultant to prepare technical documents for the project. "We have already met with Baker & McKenzie and, more than likely, this company will become our consultant for the project," Interfax News Agency quoted him as saying.
Fedun noted that the company has prepared three options for the project, the first of which involves exporting 15m tonnes of oil, provided by LUKoil, through a terminal in Vanandei (Nenets autonomous district). To implement the other options, which involve exports of 50m tonnes and 100m tonnes per year respectively, it is necessary to cooperate with oil companies and the state, Fedun said.
If we compare with the Baku-Tbilisi-Ceyhan pipeline, then the Murmansk project will be much more profitable for Russia, as it will be much shorter and cheaper and will take place in other climatic and seismic conditions, the vice president said.
He also added that the Murmansk oil complex would be one of the projects presented by the company at a summit in the United States at the start of October. It is planned that LUKoil President, Vagit Alekperov, will present a report on prospects for developing new markets for Russian oil. "This will be a new view on Russian oil in general and the company's role in this process, as LUKoil accounts for almost 25% of the market," the news agency qoted Fedun as saying.
He also noted that during the US summit, LUKoil plans to meet with leading drilling companies to present the upcoming sale of the drilling company LUKoil-Bureniye.

Russia's oil major signs loan deal

On 27th September Russia's major oil firm, LUKoil, signed an agreement with the US Ex-Im Bank and Commerzbank AG in New York on a US$26.4m mid-term loan for the oil company, Interfax News Agency has reported.
According to LUKoil's press release, Ex-Im Bank will guarantee the loan. The loan, to be repaid within three to five years, will be issued by Commerzbank AG, which will serve as a guaranteed creditor to finance drilling equipment supplies for a LUKoil subsidiary.
LUKoil president, Vagit Alekperov, is expected to visit the USA in early October to attend the US-Russia energy summit in Houston. During the visit, the sides are expected to sign a memorandum that would reflect the level of cooperation between the oil company and Ex-Im Bank in addition to providing an extension of the credit limit to US$100m under the same guarantees, the press release said.

Russian oil companies mull quality bank plan

Major Russian oil companies welcome state oil pipeline monopoly, Transneft's, idea of setting up an oil quality bank, a Transneft official told Prime-TASS News Agency on 26th September.
The heads of Russia's oil companies and Transneft President, Semen Vaynshtok, decided at a meeting to set up a working group to offer suggestions on submitting a plan for the establishment of an oil quality bank to the government.
Prime Minister Mikhail Kasyanov had previously recommended the creation of such a group, the official said.
Regional oil companies Bashneft and Tatneft, based in the constituent republics of Bashkortostan and Tatarstan, also supported the idea, even though they would certainly suffer losses from the creation of an oil quality bank.
Oil in Bashkortostan and neighbouring Tatarstan has a high sulphur content, which worsens the overall quality of Russian oil transported via Transneft pipelines.
Nearly every Russian oil company feeds its output to the Transneft national pipeline system, which results in the mixing of high, fair and inferior quality oils.

ChevronTexaco may invest up to US$9bn in Sakhalin-3

ChevronTexaco, the second largest US oil producer, may invest some US$9bn to develop Russia's Kirinsky block under the Sakhalin-3 project over a period of 20 years, Interfax News Agency quoted David O'Reilly, chairman of the corporation's board of directors and CEO, as saying. He underscored the need to conduct seismic reconnaissance and estimate the block's reserves. The Kirinsky block is currently estimated to hold 500m tonnes of crude equivalent.
The Caspian Sea region would provide up to 10 per cent of ChevronTexaco's global oil output in the near future.
The project will be implemented under a production-sharing agreement (PSA). Therefore, he noted, the Russian state Duma must first adopt an amendment to the Tax Code to introduce regulations for the PSA system. "The main thing is that the PSA legislation is competitive compared with similar regulations in other countries," the news agency quoted O'Reilly as saying. "Legislation is what may make Russia an attractive region for investment," he added.
O'Reilly noted that Russia "has made significant progress in reforming the economy and legislation" which will be the guarantee of new investment from the US. The company president said the ChevronTexaco is open to new possibilities in the oil and gas sphere in Russia. "Thanks to a significant improvement in the investment climate in the country, we are confident that we will manage to find these possibilities," he stressed.
O'Reilly also said that at the energy forum in Houston which was expected to open on October 1st, company Deputy CEO Peter Robertson was due to announce that Russia is "a country favourable for investment."
ChevronTexaco has put significant investment into the Caspian Sea region, where it is developing the giant Tengiz oilfield and participating in the Karachaganak field in the former Soviet state of Kazakstan. It is also leading an international consortium which since last year has been operating a 600,000 barrels-per-day pipeline from Tengiz to the Russian port of Novorossiisk - the first private oil pipeline build in either Kazakstan or Russia.
The ChevronTexaco chief stressed that experience of investment in the Russian economy during the construction of the Caspian Pipeline Consortium pipeline showed that "these investments were successful" and the company plans to continue its activity in Russia.
In Russia, ChevronTexaco inherited Texaco's 1993 deal with local state firm, Rosneft and ExxonMobil to develop the Kirininsk block of the Sakhalin-3 project. While neighbouring Sakhalin projects already produce oil or have completed the exploration state, Sakhalin-3 has been stuck for almost a decade awaiting more attractive production sharing terms, reported. O'Reilly said he expected work to speed up.

Russian oil giant unveils plans for big boost in exports, new pipeline

Oil major, Yukos, has announced plans to increase its oil exports up to 100m tonnes by 2010, its vice-president, Mikhail Brudno, said at a session of the company's executive board in Vilnius, Interfax News Agency has reported. He said that in 2002, exports are expected to total 36.1m tonnes of oil.
Commenting on anticipated export increases by 2010, Brudno indicated that up to 45m tonnes of oil would be delivered via the Transneft network to Europe. Some 35m tonnes will go to the United States via the Murmansk terminal, and 20m tonnes will be carried by the Angarsk-Daqing (China) oil pipeline, currently under construction.
Brudno mentioned a project to build an oil pipeline from Nefteyugansk to Murmansk via Ukhta (Republic of Komi). It will have a capacity of 50m tonnes a year. The vice-president estimated the cost at US$4.1bn through 2007. Yukos may join oil major LUKoil to implement this project, Brudno said.

PM Kasyanov greets Russian-US oil summit, hopes for cooperation

Close energy contacts between Russia and the USA will contribute to the sustainability and predictability of the global energy market and will secure a balance between the interests of energy producers and consumers, Interfax News Agency has reported.
This statement is included in a greeting from Russian Prime Minister Mikhail Kasyanov to the Russian-US Energy Summit, which opened in Houston (Texas, USA) on 1st October.
"I believe that joint energy investment projects, including those in other countries, is a very promising area for our work together," the document said, as quoted by the Russian Energy Ministry's press service.
Kasyanov expressed the hope that the Houston forum "will yield new investment projects and major business agreements and help establish a climate of trust and mutual understanding in the new areas of our strategic cooperation."
Reports indicate that the heads of top Russian and US fuel and energy companies and representatives of the two countries' executive and legislative branches are expected to attend the forum.
Energy Minister, Igor Yusufov, and Economic Development and Trade Minister, German Gref, will lead the Russian delegation. They will meet their US counterparts to discuss the options for contacts in the energy and economic sectors. Yusufov is also due to meet US Secretary of Energy Spencer Abraham to discuss the possibility for direct deliveries of Russian oil to the United States.

Russian gas to reach Turkey via new Black Sea pipeline in December

The executive board of Russian gas giant, Gazprom, has decided that the company should start gas exports to Turkey via the Blue Stream underwater pipeline in December, Gazprom said in a statement on 26th September, Prime TASS News Agency has reported.
The Blue Stream project is aimed at delivering Russian natural gas to Turkey via the Black Sea.
The statement added that Gazprom planned to supply 12m cubic metres of gas per day from the start of December 2002 until the end of January 2003.
Gazprom said that construction of the onshore section of the pipeline is almost complete. The section, which was laid in a tunnel in the Kobyla ridge of the Caucasus mountains, is currently being tested.
The first underwater pipe has been tested and is now being dried, while the second underwater pipe has already been tested and dried.
Blue Stream will eventually allow exports of 16bn cubic metres of Russian natural gas to Turkey. The projected capacity is expected to be achieved in 2008.

Governor of Russia's Sakhalin goes cold on Japanese gas pipeline project

Russia would not benefit from a project for a gas pipeline between its Sakhalin island and Japan, regional governor, Igor Farkhutdinov, said. A regional administration spokesman told ITAR-TASS News Agency that Farkhutdinov was sceptical about the project, saying that it would divert funds and efforts from a federal programme of gas supply in the Russian Far East, in particular its Khabarovsk and Maritime regions.
In the opinion of Farkhutdinov, "Russia so far does not have the funds for the construction of gas pipelines, while investors could build them with reimbursable money.".= Western investors have a different stance on the Sakhalin-1 project of a gas pipeline to link Sakhalin, the Russian Far East, and neighbouring Japan.
Britain's Shell company, which has a 55 per cent stake in the consortium Sakhalin Energy, said the investor view of the gas pipeline project depended on whether Russia's legislation gave equal access to the pipeline.
In August, the Japan-Sakhalin Pipeline corporation announced that it had finished a feasibility study of the project of the gas pipeline from Sakhalin to Japan's northernmost island of Hokkaido.
The Exxon corporation, an operator of the Sakhalin-1 project which commissioned the feasibility study, has supported the project, but the Russian side has questioned the study, arguing that Sakhalin's gas should be transported to the Khabarovsk and Maritime regions. According to estimates of Exxon, which leads the consortium, the pipeline running from Sakhalin's offshore gas fields to Hokkaido and further along Honshu coasts could be launched in 2007.
Gas is to be transported from the Chayvo, Odoptu and Arkutun-Dagi fields, whose total gas store is estimated at 485bn cu.m. There are three other options for laying a gas pipeline from Sakhalin island: a 883-km sea-bed pipeline to Japan with compressor stations at the settlement of Prigorodnoye, a ground pipeline with a larger investment and a 950-km ground pipeline from Sakhalin to China.
Critical of the Sakhalin-Japan pipeline project, Farkhutdinov is as unenthusiastic about the Chinese option, saying that "there is no marketing of gas deliveries to China."

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IMF upbeat on Russian banking reforms

The International Monetary Fund has hailed measures in Russia to reform the country's banking system, Interfax News Agency has reported.
Arne Petersen, head of the IMF department for financial organizations and markets, told Interfax that the fund supported a banking reform strategy by Russia's government and Central Bank approved in December 2001, and that the Central Bank has made progress in putting it into practice.
Petersen led an IMF mission to study Russia's finance sector that met Russian bankers, insurers, government members and Central Bank officials during a visit to Moscow from 11th-24th September.
One of the measures he mentioned is a draft law to guarantee the population's bank accounts. He also spoke about a plan to give equal terms to private and state banks.
But he complained that private banks in Russia owned far less capital than the biggest state banks, Sberbank [Savings Bank] and Vneshtorgbank [Foreign Trade Bank], and the capitalization of the Russian banking sector accounted for a very small proportion of the national economy.
Petersen said the IMF is currently working on a programme for a comprehensive assessment of the Russian finance sector, which will be ready before the next visit by a fund mission to Russia, scheduled for the end of January or the beginning of February. This programme will include an analysis of operations by banks that use international accounting standards, Petersen said.
He said the IMF is preparing such programmes for other countries, as well. Recently, the fund finished work on programmes for Britain and Japan, and next year it will start a programme for Germany.
Russia is receiving no financial assistance from the IMF and has no loan programme agreement with the fund. It receives only technical assistance and advice from the IMF.
Russia is to make a loan debt payment to the IMF of more than US$1.5bn, or 1.22bn in special drawing rights (SDR), for this year. More than US$1bn was remitted between January and August. Russia's total IMF debt was US$7.5bn (5.92bn SDR) on 1st January 2002.

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Investment in Russian economy

During the meeting held in Moscow in late September, the participants of the Consultative Council for Foreign Investments called on foreign investors to invest in the Russian economy, the Russo-British Chamber of Commerce Weekly Observer, has reported.
When speaking at the meeting, President of the Russian Union of Industrialists and Entrepreneurs, Arkady Volsky, said that according to the UN data, foreign investments in the Russian economy in the recent years had totalled US$40 per capita while in China they had totalled US$135 per capita. Foreign businessmen are still convinced that "in China there is order compared to Russia, " Volska stated. "I want you to understand that the climate in the country has changed," stressed the Union President and called on the foreign investors to invest in the Russian economy.
Vice President of the Ernst and Young company, Karl Johansson, in his turn, pointed to the fact that "Russia had made great progress in terms of creating a favourable investment climate." "Our objective is to inform other investors about it," stressed the businessman.
Russian Prime Minister Mikhail Kasyanov, said at a session of the Consultative Council that the Russian government was worried about the low investment rate in the Russian economy. According to Mr Kasyanov, the investment rate was 2.5% from April to August this year. He said he thought that this was not enough.
The Russian Prime Minister said that foreign investment volume has increased by a quarter in the first half of 2002. First of all, long-term and medium-term investment account for it. However, direct investment in Russia's economy has decreased, the Prime Minister pointed out. He said that the investment decrease was the result of global investment slump.
According to the prime minister, a low development level of the financial sector is one of the factors that is hampering investment in the Russian economy. The government intends to pay more attention to this issue and it will be discussed at one of the sessions of the Cabinet in the autumn.

EBRD heads for the Urals

The European Bank for Reconstruction and Development is considering investing over US$200m in the Urals region, according to the head of the EBRD representative office in Yekaterinburg, Tatyana Yembulayeva, following a meeting of the advisory council on foreign investment under Pyotr Latyshev, the presidential envoy to the Federal District, the RBCC Bulletin has reported.
About 28 investment projects are presently being developed in the region. The most notable of these is a credit agreement between the Surgut administration and the EBRD to invest about US$40m in the municipal economy. Latyshev pointed out that that the volume of investments in the Urals district in 2001 totalled US$12bn, US$4bn of which was the district's own investment.

World Bank private business arm invests over US$200m in Russia in 2002

The World Bank's arm for the financing of private business, the International Finance Corporation (IFC) invested over US$217m in 18 unspecified projects in Russia during the 2002 financial year, IFC said in its financial report, Prime-TASS News Agency has reported.
According to the report, this year's investment figure is considerably higher than in previous years. However, no figures for earlier investments were made available. The World Bank's financial year starts on 1st July. "We have really had a very good year in Russia," IFC's Vice-President Assad Jabre was quoted by ITAR-TASS News Agency as saying. "In my opinion, this reflects progress in the development of the private sector in Russia," he said.
Over the 2002 financial year, IFC's investments rose worldwide 14 per cent on the year reaching US$3.1bn. Additionally, IFC attracted over US$700m in loans to finance its projects.

Foreign investors cool on Moscow small business

Moscow's small businesses are now the least attractive sector to foreign investors, according to Georgy Muradov, director of the international relations department in the Moscow city government, the RBCC Bulletin has reported.
Muradov cited the results of a recent public opinion poll on the Russian capital's investment climate. Commissioned by the municipal government, the poll surveyed the opinion of 40 Westerners working for embassies, financial institutions, commerce chambers, and corporations representing 13 countries. Investors say Moscow's small businesses are not yet developed enough to lure big investors. Small businesses account for 30 to 35% of all companies operating in Western European capitals, while in Moscow, the share of such companies is less that 10%. Most of Moscow's small businesses cannot ensure the security of investment, according to the poll. 
Last year, Moscow's economy received US$1.5bn in foreign investment, of which the city's small businesses got a mere 5-7% of the total. Foreigners tend to invest most heavily in Moscow's large private companies. Local public companies come second. Preference is given to businesses involved with the production of food and consumer goods.

Moscow mayor says Russian capital received US$20bn of foreign investments

A round table discussion titled "Russian diaspora as a part of Russian economic potential" was held in Moscow mayor's office. Businessmen of Russian descent from 30 countries are taking part in it, Centre TV in Moscow reports.
Representatives of Russian diaspora, which is the world's biggest as over 30m Russians live outside their homeland, gathered in response to an invitation by the Moscow administration for the second time...
The Moscow mayor, Yuriy Luzhkov, who was elected honorary chairman of the newly created council of compatriots, said that all necessary conditions for economic cooperation with Russia had been created, and investments in it would be more profitable than in other countries. As for Moscow, the city authorities are ready to give guarantees to investors.
Luzhkov said: "The policy of the Moscow city authorities is aimed at providing security to foreign investors. It's amatter of principle for us. Moscow has accumulated US$20bn of foreign investments, which accounts for 55 per cent of the total amount of foreign investments received by Russia."
Moscow is ready for business dialogue with representatives of the Russian diaspora, who are willing to work with Moscow and through Moscow, Luzhkov said.

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Potential Berezovskoye sale

Shares in Berezovskoye, a company that prospects for and mines gold in Russia's Khanty-Mansii autonomous district, could be offered for sale in the next few months, Interfax News Agency reported. "Berezovskoye is now owned by the Khanty-Mansii state property department," said Executive Director, Nikolai Bochkarev. "It is not necessary for the government to retain a big stake in the enterprise." He went on to add "the sale of a promising company is inevitable, and the district's governor shares this view." The company needs investment, including 2.781m roubles up to the year 2011 for the development of commercial gold production at the promising Khalmeryu and Ust-Manya gold lodes in the Berezovo district of Khanty-Mansii, Bochkarev said. The money will be spent on, among other things, construction of two mills with capacity of 0.5million to one million tonnes of ore per year.

Russian steel makers sign deal with US Commerce Department

Russia's three largest steel makers - Severstal, the Magnitorgorsk Metallurgical Plant and the Novolipetsk Metallurgical Plant - have signed an agreement with the US Department of Commerce on restricting cold-rolled steel supplies to the US market, Severstal said in a statement on 24th September, Prime-TASS News Agency has reported. 
The agreement also sets minimum prices for Russian steel exports to the United States, but the statement did not provide these figures. 
The three Russian companies were under investigation for violating anti-dumping laws in the US, but laws allow the investigation to be dropped if the US and alleged offenders come to an agreement. 
Although the agreement will set the minimum price of Russian cold-rolled steel, it envisages no restrictions on the volume of shipments within the quota set by the Comprehensive Steel Agreement signed in 1999 between Russian steel makers and US authorities. 
The cold-rolled steel quota for Russian companies stands at 370,000 tonnes a year. The new deal allows the big three Russian steel producers to resume cold-rolled steel exports to the US in the second quarter of 2003. 
"The agreement will allow us to maintain our share of the American market within the quota set by the Comprehensive Steel Agreement, as any decisions regarding the payment of any duties become null and void and are replaced by the new agreement," Dmitriy Goroshkov, Severstal sales director, said in the statement. 
"Under the new agreement, we will report the cost price of our products once every six months rather than quarterly, as the US side insisted," Goroshkov said. 
He noted that the US International Trade Commission (ITC), a quasi-judicial body for trade disputes, still must approve the agreement within 45 days of the signing date, after checking that Russian steel imports do not harm the American economy... 
"Now that we have this agreement we can expect the ITC to make a fair decision," Goroshkov said, adding that Russia's steel exports to the US, which stood at 268,000 tonnes in 2001, are comparable to those of Japan, with 357,000 tonnes, which obtained the export permission...

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Russia to receive 107m euros of EU aid to shore up nuclear safety

The European Commission plans to extend to Russia 107m euros under the TACIS programme to enhance the safety of nuclear power plants, Russia's Rosenergoatom state atomic energy company has announced, Interfax News Agency reported.
From 1991 to 2002, the Russian atomic industry has implemented 145 safety-enhancing projects under the TACIS programme worth a total of 124m euros. Among the 77 foreign participants in the projects are major European companies, including EDF (France), British Energy, Tractebel (Belgium) and RWE (Germany).
International cooperation programmes, including TACIS projects, are being implemented within the framework of the Russian national programme to enhance the safety of nuclear power plants. Foreign aid constitutes not more than 10 to 15 per cent of Rosenergoatom's spending on enhancing the safety of nuclear power plants, the company said in a press release.

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Anti-gravity device interests Boeings

Boeing, the world's largest aircraft-building company, is taking a serious interest in Russian scientist, Tevgeny Podkletnov's work on an anti-gravity device, or "gravity reduction" as the scientists terms it. It is ten years since Polkletnov first made his research public, and he has continued to study the mysterious weight loss of particles above a super-conducting magnet, the Russian Mirror has reported. 
Now, at a classified department within the Seattle-based firm, Phantom Works, headed by George Muellner, research is continuing under a project entitled Gravity Reduction for Advanced Space Propulsion (GRASP). Muellner told Jane's Defence Weekly, that the science behind the project "appeared to be valid and plausible."
According to reports in 'Izvestia' newspaper, in 1988 Podkletnov was invited to work on his dissertation in Tampere University, Finland. With a background at the Mendeleyev Chemical and Technological Institute, and 15 years of work in the Academy of Sciences' High Temperatures Institute, Podkletnov brought to Tampere a 30cm disc made as a result of fusion of oxides of copper, yttrium and barium. This was his know-how calling card. If the disc is cooled to a superconductivity temperature and spun by electric magnets, then the scientist discovered, all objects placed above the disc (be they made from iron, paper or glass) become lighter by two per cent.
The discovery turns accepted scientific theory of general relativity literally on its head, which has it that it is impossible to block the force of gravity. Such a device, if shown to work, would revolutionise transport and the manufacturing process. The stakes and interest are high.
Podkletnov, as a scientist from a serious scientific background, understood that he risked being labelled a pseudo-scientist. But experiments continued to confirm his results. He experienced in full the problems and pressures that unrecognised geniuses have suffered throughout the ages. Official science closed the pages of magazines, co-authors refused his approaches. The inventor was forced to resign from Tampere University and the was shut out of the laboratories.
The wealthy military and industrial complex eventually became interested in the research and provided some ad hoc grants to keep the scientists going. Superconductive Systems received US$70,00 from NASA for an experiment with eight satellites. True the anti-gravity effect was not registered but, according to the author of the invention who visited the research centre, the disc had been manufactured improperly and its rotation velocity was too low. Furthermore, Podkletnov has made clear he will only support peaceful applications, so any long-term collaboration with Boeing seems unlikely.
A number of US and West European universities went on to confirm the results of Podkletnov's experiments, and the military department of BAE Systems is continuing its own active work. It has funded small projects through Project Greenglow, mainly at UK universities. After all, any reduction in the weight of an aircraft and the amount of fuel it has to carry would bring huge improvements in speed and big cost savings.
Russian Academician, Vialy Ginzburg, however, states categorically that it is all "gibberish." Interaction between electromagnetic and gravitation fields," he says, "is possible but it is extremely weak. Though I do not know for sure what he measured and what his mistake was, I am sure it's all complete nonsense; a typical example of pseudo-science."
Genrikh Bogomolov, Deputy Directory of the Academy of Sciences' Institute of Physical Problems observed that in the West grants were provided for studying telepathy, "but it did not mean that it existed."

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North Russian yard to benefit from reallocation of Chinese submarine project

The Severnoye machine-building plant (Sevmash), based in Severodvinsk in Russia's Arkhangelsk Region, is getting ready to build two diesel-and-electric-powered submarines of the Kilo class for the Chinese navy, Interfax News Agency has reported.
"An order obtained via military and technical ties is a major chance for the plant to earn money and improve its financial position," a representative of the plant's administration told Interfax on 26th September.
The Russian press reported that Rosoboroneksport distributed orders for the construction of eight submarines for the Chinese navy between Russian docks on 3rd June 2002. Five submarines were due to be built at the Admiralteyskiye Verfi dock in St Petersburg, two at the Amur ship-building plant in Komsomolsk-na-Amure and one at the Krasnoye Sormovo dock in Nizhniy Novgorod.
There is unofficial information that the decision has been changed, and two submarines initially placed with the Amur plant will now be built at Sevmash.

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