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RUSSIA


  
   

REPUBLICAN REFERENCE

Area (sq.km)
17,075,400

Population
145,470,197

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

  

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: 271 - (24/07/03)

The pluses of Putin
Putin is being increasingly put into the spotlight as the subject of a gathering personality cult. His martial arts skills, his sober life-style, his close family relationships and his aura of efficiency and dispatch are all being lauded and likened to the bravura of the greater Tsars. He is virtually a Tsar himself, with the Duma in the pocket of the government and the Russian presidency having wide powers.
Two things that characterise the leaders of modern Russia that can be put to their credit is that they are not obviously corrupt, Gorbachev, Yeltsin, Putin, nor are they anti-semitic. They thereby escape the failings of many of their compatriots. That gives some hope for the future.
Putin has been pushing reforms, he has conquered inflation (down to 14% after ballooning into three figures after the 1998 rouble crash) and he has been exceedingly lucky, benefiting from a long energy boom in the aftermath of devaluation. The last quality, luck, has been the hallmark of his whole career.
He came from the right city, St Petersburg, the 'Window on the West' just as Russia was opening up to it again after 1991. He had had his KGB career abroad in East Germany, so no skeletons left in a domestic cupboard. He was brought to Moscow by Anatoly Chubais, who as a Jew and a redhead at that, knew that he could never succeed Yeltsin, just when the latter was looking for a successor, namely in 1998. Putin Became the head of the FSB, successor to the KGB. He was, therefore, privy to all the secrets. He was not too threatening to Yeltsin's self-esteem, having no great charisma, just as John Major was not to Thatcher's. The ideal successor, indeed, if he was proven to be discreet.
That is what he soon turned out to be, a born sleuth who can keep his mouth shut. He is now certain to be re-elected next year for a second term bar a miracle. The old Kremlin guard can breathe freely, at least until 2008, the end of his second term.

The minuses of Putin
But of course these advantages carry failings with them. The secrets of the Putin regime are potentially explosive of his whole reputation. Who was really responsible for the massacres of September 1999 in Moscow apartment blocks? The case was officially closed in May without a single Chechen suspect being charged. The Chechens gave the Kremlin a gift by the theatre hostage event in October, apparently totally vindicating them being described as 'terrorists' and making it just seem plausible that they carried out the September massacres after all, about which analysts of Russian affairs have been all profoundly sceptical.
Chechnya is a cancer in the Russian body politic. It is the second Chechen war, the basis of the Putin regime's legitimacy, that undoubtedly explains the tightening up of the media. The one independent TV station, TVS, was closed down in June, leaving three channels nation-wide slavishly following the pro-government line on Chechnya. No media are allowed there, except government mouthpieces. Russian democracy is in peril.
Corruption remains endemic, political assassinations still occur; where is Russia going?

The pluses of Russia
The economy is still growing, by 4-5% per year. The bourse is up by 40% this year, while it was the best performing stock market in the world in 2002. Russian funds abroad are coming back in droves. Land reform is still being advanced, foreigners as of June being allowed to rent farms under 49-year leases (probably renewable then).

Foreigners to help on the farm
For decades the worst - performing sector of the Soviet economy was agriculture. The end of the USSR did not improve things as the collective farms remained in tight control in league with Communist Party and Agrarian Party bosses. The Communist Party of Russia and the Agrarian Party opposed land reform.
Events in the late 1990s and early 2000s have created the opportunity for something like an agricultural revolution, even if only in certain regions and still in its early stages. The rouble crash of 1998 created a huge shift in the terms of trade, making imports of food much more expensive. Then in 2000 came the Putin presidency backed by the Unity and Fatherland blocs in the Duma. Legislation on land reform, which had been largely blocked in the 1990s, became possible, overriding objections by the communists and agrarians. Land can be leased for up to 49 years (when it is implied new leases would be easily obtainable). 
Many peasants and some outsiders, have been taken up the challenge, and by last year Russia was once again exporting grain as it had done in ample quantity before 1914. The 'Black Soil' belt, stretching form the Urals to the Carpathians across Southern Russia and Ukraine, was once the granary of Europe. Stalin's disastrous collectivisation and subsequent Soviet mismanagement (as with Khushchev's crazy virgin lands scheme in Kazakstan in the early 1960s) left the sector moribund. Being Secretary for Agriculture was usually a political graveyard, Gorbachev being the partial exception who turned the whole system into a graveyard. Now there is a chance for Russia (and Ukraine) to become the granary of Europe once again - and, indeed, its supplier of foodstuffs generally.
There is scope for massive improvements. Russia is still spending £9bn (US$15bn) a year importing basic foodstuffs, while only 47% of arable land is being farmed. Already those successful in the commodity and energy boom are investing in new farms on newly-leased land. But there needs to be an input from foreigners as well.
In early June Moscow changed the law allowing foreigners to set up farms and acquire land on 49-year leases. UK and Irish farmers have been the first to respond to the Russian challenge.
British farmers, fed up with red tape from Brussels, are aiming to break free by moving to Russia to cultivate land being offered to foreigners in a fertile region, Penza. Almost a million acres of prime arable land are lying idle in the Penza region, 400 miles south-eat of Moscow. Local farmers cannot raise sufficient money to buy the machinery, fertilisers and seeds needed to work it.
The prices of grain on the Russian market are often equal to those in the West; while the costs of machinery and other inputs are far far lower, and there is no EU red tape. Heartland Farms of the UK is buying up leases from shareholders of collective farms in Penza. Richard Willows, who runs the company with his partner Colin Hinchley, says: "There is a huge demand that is not being met domestically and that's a major opportunity for us." The rents on land leased in penza are about £10 per acre, about one tenth of average UK rents for farmland.
At first the British farmers will grow cereal crops on tracts of between 7,500 and 25,000 acres each. They will pool their produce and sell it together in Russia.
The one risk which everybody mentions is gangsterism. The countryside in Penza is remarkably free of the phenomenon. But if rich foreigners set up shop there, for how long? The local government needs to be on its toes here, with an inflow of FDI being a potential saviour for the region. 

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AGRICULTURE

Russian grain harvest expected to be 70m tonnes this year

According to preliminary estimates, 70m tonnes of grain will be harvested in Russia in 2003, Russian Agriculture Minister, Aleksey Gordeyev, has said, ITAR-TASS News Agency has reported.
Over 86m tonnes of grain was harvested in 2002, while 65-67m tonnes was harvested annually between 1996 and 2000. Russia's minimal demand in fodder and ration grain is estimated at 53m tonnes a year.
Aleksey Gordeyev briefed Prime Minister Mikhail Kasyanov about the grain harvest forecast at a meeting between the prime minister, deputy prime ministers and key ministers. 
It was noted that the grain harvest in the forecast amount "makes one conclude that there will be enough grain in the country both this and next year."
The department of government information said that the meeting also discussed some other issues connected with the agricultural sector and harvesting.

Intervention fund collects 1.8m tonnes of grain

Russia's state intervention fund has received 1.8m tonnes of grain, Deputy Prime Minister and Agriculture Minister, Alexei Gordeyev said, Interfax News Agency reported. He said the government had signed contracts with domestic agricultural producers for 2.5m tonnes but they had the right to sell grain on the market without guarantees at a more advantageous price. "About 700,000 tonnes of grain were sold on the market in this way," he added.
The minister said that the growth in grain prices stopped in the middle of June and named the existence of the intervention fund as one of the reasons for it. The current price of one tonne of third class grain at an elevator is 3,200-3,400 roubles.
Gordeyev reported the completion of all spring work in Russian fields. Despite the grave financial position of the farming sector and poor weather conditions, farmers have carried out planned operations in full and in some crops (sugar beet, sunflower and grain corn) even exceeded target indicators, he said.
He said the ministry is planning a set of harvesting measures and reported the beginning of grain harvesting in the Krasnodar territory.

Rostelmash, EBRD discuss setting up leasing company

Rostelmash and a delegation of the European Bank for Reconstruction and Development have discussed the possibility of setting up a joint leasing company to work on the Russian farming machinery market, said Novoye Sodruzhestvo industrial association, which owns the controlling stake in Rostelmash. The bank's director for Russia, Victor Pastor, led the EBRD delegation, reported New Europe. Rostelmash presented its development strategy to 2005, envisaging investment of around US$70m. Rostelmash and the EBRD held consultations on raising EBRD loans to finance the plant's reform programme, Novoye Sodruzhestvo said.

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AUTOMOBILES

Russia's Kamaz to set up consortium in Kazakstan

Russia's largest heavy truck maker, Kamaz, is setting up an automobile consortium with a number of unspecified Kazakh companies to assemble up to 1,200 Kamaz vehicles a year in Kazakstan, Kamaz' press service said on 1st July, Prime-TASS News Agency has reported. 
Kamaz and the Kazak government have signed an agreement to this effect.
The consortium also plans to begin production of parts in Kazakhstan to be used by the assembly facilities and to set up maintenance and repair units capable of servicing up 1,000 vehicles a year, the press service said.

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AVIATION & SPACE

Russian aircraft company makes first independent overseas sale

The Sukhoi Military Aircraft Corporation has signed its first independent contract for supplying Algeria with training and auxiliary equipment, as well as spare parts for Su-24MK Fencer jets in the inventory of the Algerian Air Force, Interfax-AVN Military News Agency web site has reported. 
"This is the first contract signed within the framework of the right given to Sukhoi to conduct independent foreign economic activity concerning after-sale servicing and delivery of spare parts for Su combat aircraft," the Sukhoi press service stated. 
The press service noted that Sukhoi's experts completed all preliminary work before signing the contract in close interaction with the Russian Committee for Military-Technical Cooperation with Foreign States. The value of the contract and the list of equipment and spares to be supplied are not disclosed. According to the press service, the contract will provide work for the Novosibirsk Aircraft Production Enterprise, where Su-24MKs were mass-produced. This enterprise is a component part of the Sukhoi corporation.


Russia to supply US with three amphibian planes

Russia plans to supply three amphibian planes Beriyev-103 (Be-103) worth US$3m in total to the US in July, the Taganrog-based Beriyev aircraft plant's marketing department told Prime-TASS News Agency on 25th June.
The contract signed between Russian and unspecified US parties stipulates the supplied aircraft should be serviced by Russian specialists during the guarantee period.
The new generation of light amphibian plane Be-103 can be used for passenger transportation, forest tract patrolling, sea and land border observation, water areas ecological condition controlling, first aid service and minor freight delivery.

Russian aircraft industry reform may lead to single aircraft-building company

A reform of the enterprises and organizations of the Russian aviation industry envisions the founding of a single national aircraft-building company, the Russian Aerospace Agency points out in materials prepared for a meeting of the Russian government, ITAR-TASS News Agency has reported.
The reform is to be effected in two stages. During the first stage, which is to be completed towards the end of 2004, it is planned to establish 19 amalgamated entities in the aircraft industry. These will include 138 aircraft industry enterprises, or 45 per cent of those existing on the domestic market now.
At the second stage (towards the end of 2006), it is planned to have five to seven large holding companies that would constitute the backbone of the aircraft industry. In prospect, those holding companies may be transformed into a single national aircraft building one.
The Russian Aerospace Agency points out the deplorable condition of the national aircraft fleet. At present, it comprises 1,500 aircraft, mostly those developed in the 1960-70s. The service life of about 50 per cent of the present-day aircraft fleet will be exhausted by 2010 and that of 83 per cent by 2015.

Russia and European Space Agency to make new booster rocket

Russia and the European Space Agency (ESA) will develop a booster rocket with a methane-fuelled engine to be launched from the Kourou cosmodrome in French Guiana, Alain Fournier-Sicre, the head of the ESA office in Russia, told ITAR-TASS News Agency on 30th June. 
"The development of new-generation boosters is a strategic direction in Russia-ESA cooperation in space exploration," he said.
Fournier-Sicre also said that the new boosters "are likely to be equipped with environmentally friendly engines using methane which have been created at the Energomash research and production association in Moscow Region." "Negotiations with the Russian side on this issue are under way," he added.
Before the new booster is created, Russian Soyuz rocket carriers will be launched from the cosmodrome located near the equator. The first launch under the Soyuz-Kourou project is scheduled for 2006, he said. Construction of the launching facility for Soyuz carriers will begin at the end of 2003.

Runway reconstruction begins at Russian space centre

Reconstruction of the runway has started at the Plesetsk cosmodrome in northern European Russia so that the facility can receive heavy and future aircraft, the press service of the Space Troops said on 14th July, Interfax-AVN Military News Agency web site has reported. 
"The first concrete slab for the airfield's runway under reconstruction has been laid at a solemn ceremony in Plesetsk. The event was observed by chief of the cosmodrome, Maj-Gen Anatoliy Bashlakov," a press service official said. The reconstruction is supposed to end in autumn 2003, he noted. After that the airfield will be able to accept all existing aircraft, including An-124 Condor (Russian designation Ruslan) heavy military transport planes. 
"In the future, the Baikal reusable booster of the first stage of the Angara universal carrier rocket will be able to land on the extended airstrip," the official said. 

Another Russian company joins international plane deal

KnAAPO, the Russian Komsomolsk-na-Amure-based major aircraft producer, is preparing for participation in the Russian Regional Jet [RRJ] Programme. "In accordance with preliminary RRJ production procedures, KnAAPO will produce the wing to deliver to a head producer in Novosibirsk," a competent source in the aircraft industry told Interfax-Military News Agency on 26th June.
KnAAPO was selected because it had duly fulfilled the Chinese order on the production of the Su-30MKK Flanker and arranged licensed production of the Su-27SK of the same family in China, the source said. 
"KnAAPO has modern equipment and technology, sufficient production facilities, and it can participate in the RRJ programme investing into it on equal terms," the source also said. "The head producer of the RRJ aircraft will be NAPO, Novosibirsk aircraft producer. Here the aircraft will be assembled, tested, and prepared for sales," he added. 
Sukhoi CEO Mikhail Pogosyan had previously told reporters that first serial RRJs were scheduled for 2007. The RRJ family includes six versions (basic and longer-range with passenger capacities of 60, 75, and 95) based on the same wing. 
The rated output of assembly will be about 60 aircraft per year. The RRJ programme includes Sukhoi, Ilyushin Aviation Complex, Yakovlev Design Bureau, NPO Saturn, as well as Boeing (US) and Snecma (France).

British Airways completes move to another Moscow airport

British Airways has moved all its freight and passenger flights from Sheremetyevo-2 to Domodedovo airport as of 1st July, ITAR-TASS News Agency has reported.
British Airways held a welcoming ceremony for its first flight performed by a Boeing-777 that landed at Domodedovo airport for the first time in the history of the British Airways service to Moscow.
British and Russian representatives told a press conference held at Domodedovo airport that the negotiations on the new location had been conducted for two years and that each of the parties concerned calculated the advantages offered by the project.
Domodedovo being the airport housing British Airways flights means upgrading the level of passenger services, that eventually might attract other foreign companies to the airport. The airport administration is planning to buy equipment for registering the so-called electronic tickets, using the latest computer technologies, the press conference was told.
For British Airways, the location means expanding the geography of its flights at the expense of routes serviced by other Russian companies. Negotiations to this effect have been conducted with Transaero, Urals Airlines, Siberia and Krasair Russian companies that have a vast network of air routes connecting cities within Russia and the CIS.

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BANKING

Russian banks provide nearly 10 per cent more loans in January-April

The value of loans in roubles and other currencies provided by Russian credit organizations to companies, other banks and individuals rose 8.9 per cent from the beginning of the year to the equivalent of R2,209bn as of 1st May, the State Statistics Committee reported on 30th June, citing the Central Bank of Russia (CBR), Prime-TASS News Agency has reported.
Of the total amount, R1,755bn were lent to companies, R200.1bn to banks and R187.5bn to individuals. 

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ENERGY

Russian construction company begins talks on return to Iraqi oil fields 

Russia's Stroyneftegaz has begun intensive talks with a new Iraqi leadership to return to Iraqi oil fields, company's board chairman Yuriy Shafranik told ITAR-TASS News Agency on 30th June.
He noted that in the last few weeks representatives of the company visited Baghdad twice and achieved good results during the talks with the Iraqi Oil Ministry.
"The Russian leadership is taking the correct steps towards Iraq. The country's policy will allow Russia to have equal rights in a dialogue with foreign partners. The military phase of events was over and now it is necessary to begin a dialogue," Shafranik said.
He stressed that Stroyneftegaz does not intend to deviate from the schedule. It will present a new feasibility study to Iraqi partners by September to develop one of the largest oil fields in southern Iraq - Rafidayn. An agreement to this effect had been signed before the beginning of military actions in Iraq.
At the same time, Shafranik did not rule out a possibility of creating a consortium with the participation of foreign companies. "This is one of the most effective ways of leading Iraq out of the dead end and it excludes obvious confrontation," he said.
The head of the Russian company stressed that Stroyneftegaz has the rights to developing the Rafidayn oil field. "But if Iraqi authorities adopt a political decision on a new tender, we will take part in it," he added.
Shafranik said projects with foreign partners will help Russian companies reinforce their positions on Iraq's market. "Russia should cooperate with foreign companies in restoring Iraq's economic, extraction and production base," he said. Shafranik believes that this will allow Russian companies to return to Iraq's market. "It is real for Russia to return to Iraq's market," Shafranik said.
"We have a good history of cooperation. Recently we have had serious projects there," he added.
At the same time, Shafranik stressed that Russian companies would have no political preferences any more. "We will have equal conditions with other countries and we have to work in fierce competition," he said.

Russian oil company invests to boost exports to Iran 

Iran intends to increase its imports of oil products from Russia and Kazakstan by 350 per cent to 4.5m tonnes this year, Iran's first deputy roads and transport minister announced during a meeting with Astrakhan Region Governor, Anatoliy Guzhvin, in Astrakhan on 15th July, Interfax News Agency has reported.
He said that the two countries had shipped around 1m tonnes of oil products to Iran last year.
"For transhipping Russian oil products to Iran, the company LUKoil is building its own oil port in the town of Ilinka in Astrakhan Region that will make possible annual handling of around 3.5m of oil products from the Volgograd oil refinery," the governor said.
Guzhvin noted that LUKoil is looking to invest around US$20m setting up an oil terminal, and the regional administration and the Russian Railways Ministry are planning to put a like amount of money into the building of an 11km spur that will link the oil terminal with the country's railway system.
A delegation from the Iranian roads and transport ministry is visiting Astrakhan Region for consultations with the regional administration on developing the international North-South transport corridor. The visit ended on 16th July.

Siberian oil companies signs deal with Britain's BP in London 

Alfa Group and Access/Renova (AAR), shareholders of the Tyumen Oil Company, signed an agreement with British Petroleum [BP] in London on 26th June in the presence of President Vladimir Putin and Prime Minister Tony Blair on the formation of TNK-BP, Interfax News Agency has reported. 
This is the biggest investment project Russia has ever seen, TNK Chairman Mikhail Fridman said.
BP will pay US$2.4bn for its share in TNK-BP, down from the initially-proposed US$3bn because of TNK-BP's increased debt commitments, especially after acquiring Slavneft.
Three annual payments of US$1.25bn each will be made in the form of BP common shares, estimated in accordance with market cost at the time of payment.
When the deal is complete, talks will continue on including Slavneft in TNK-BP. If such an agreement is reached, AAR will receive additional compensation.
The next step for TNK-BP will be to submit documents to the antimonopoly watchdogs in Russia, the EU and Ukraine. Shareholders expect the deal to be finalised by the end of the summer.
Goldman Sachs and Alfa Bank are the financial consultants for the deal and Jones Day is the legal adviser.
"We hope that the merger trend in the Russian and international fuel and energy complex is not limited to the TNK-BP deal," TNK Chairman Viktor Vekselberg said. "The deal is an international acknowledgement of growing political stability in Russia and its progress in economic development."
AAR and BP announced the formation of the new company on 11th February 2003. TNK-BP will include AAR oil assets in Russia and Ukraine and BP Russian assets. The deal's cost is US$6.75bn.

Russian oil companies want reverse use of Ukrainian oil pipe 

A number of Russian companies have appealed to the prime ministers of Russia and Ukraine with a request for support the reverse use of the Odessa-Brody pipeline to transport 9m tonnes of oil per annum, Interfax News Agency has reported.
This request was contained in a letter to Russian Prime Minister Mikhail Kasyanov and Ukrainian Prime Minister Viktor Yanukovych, the text of which was been made available to Interfax. The letter was signed by Transneft president Semyon Vaynshtok, Rosneft president Sergey Bogdanchikov, Tyumen Oil Company executive director German Khan, Yukos chief executive officer Mikhail Khodorkovskiy, Sibneft president Yevgeniy Shvidler and Slavneft president Yuriy Sukhanov.
"In our opinion the successful implementation of this project will make it possible to increase Russian exports to the international energy market, which, in favourable conditions, will ensure additional revenue for the Russian budget," the letter to Kasyanov said.
The authors of the letter cited experts as saying that an increase in oil exports of 9m tonnes per annum through the Black Sea "will not have a significant influence on the shipping and ecological situation in the region. As a result, the project will not have negative consequences for other participants in international trade."
On the other hand, current and forecast oil production levels will allow Russian companies "to guarantee stable and full utilization of the Odessa-Brody pipeline. This will positively influence the socio-economic situation in regions through which the pipeline passes, will provide additional revenue for the Ukrainian budget and will help further develop interstate relations," the letter to the Ukrainian prime minister said.
The oil company chiefs asked the prime ministers of both countries to "order interested ministries and departments to include this transit route for Russian oil through Ukrainian territory in a draft agreement between the Russian government and the Ukrainian Cabinet of Ministers."

Gas pipeline to Europe only in long-term - Russian deputy premier 

Implementation of the North European gas pipeline project will take at least 7-8 years, Viktor Khristenko, a Russian deputy prime minister, has told RIA News Agency.
"Coming onto the Arctic seabed and constructing such a sophisticated system of pipelines, one should understand that it will take at least 7-8 years between making a decision and the completion of the project,'" he said. Moreover, the decision on construction could be taken only on the basis of a feasibility study that will also take time to be developed, Khristenko said.
Khristenko is "absolutely sure" that the North European route should be in "the portfolio of long-term possibilities". And only the feasibility study will tell when the time is ripe to start implementing the project.
The European Union will take part in financing the feasibility study. This has been confirmed at the recent summits, he said.
As for experts' warnings that the pipeline could turn out to be unprofitable in connection with the development of other European routes, Khristenko sees no contradiction here. The Central Asian gas is "a resource that should find its place in the joint pool that ensures European demands," he said. The agreements already in place and existing structures are aimed to ensure timely utilization of Central Asian resources in Europe.
"These things supplement each other and resolving their 'contradictions' means drafting a clear-cut implementation schedule," Khristenko added.

LUKoil, Gazprom forge venture to develop Caspian fields 

LUKoil President, Vagit Alekperov, and Gazprom CEO, Alexie Miller, signed documents in Moscow recently to set up the company TsentrCaspneftegaz. Interfax News Agency quoted a press release saying that the aim of the joint venture is to participate as the Russian authorised organisation for the development of the Tsentralny geological structure in the Caspian Sea, jointly with KazMunaiGaz, the authorised organisation from the Kazak side.
The Tsentralny structure is under Russian jurisdiction and is located 150 kilometres east of Makhachkala. The joint venture has charter capital of 10m roubles, and both participants have a 50% share.
According to the press release, LUKoil started to carry out major geological research in the Caspian in 1995. Based on seismic work, the company has established the most promising regions and has received four licences to carry out geological research at the Tsentralny, Yalama-Samur, Tsentralny-Kaspisky and Vostochno-Rakushechny sections. 
Seismic work was carried out at the Tsentralny structure in 2001, which confirmed the high economic potential of the project, the press release said. According to LUKoil specialists, recoverable reserves at the structure amount to 521 million tonnes of fuel equivalent

New hydropower station starts up in Russian Far East 

The first power unit at the Bureya hydroelectric power plant [GES] has officially been switched on in Amur Region, RTR Russia TV has reported. 
This is the biggest Russian hydropower engineering construction project for 15 years and will enable the power shortage in the Far East to be eliminated. It will generate 7bn kWh annually. With the launch of the power station it is anticipated that the cost of generating electricity will fall significantly, and at the same time the GES will help prevent flooding. Construction of the Bureya hydroelectric power station is scheduled to be completed in 2009.

Russian electricity monopoly signs up to Japanese supply project 

Unified Energy Systems of Russia [UES] and Japan's Sumitomo Corporation have signed a cooperation protocol for a project to build a Sakhalin-Japan energy bridge, Interfax News Agency has reported.
The UES press department said that the project involves the construction on Sakhalin of a steam-gas power plant with a capacity of 4,000 MW, transformer substations and also the construction of an underwater power cable to the Japanese islands of Hokkaido and Honshu.
The protocol of cooperation involves the preparation of a feasibility study for the project, the holding of talks with suppliers of gas and consumers of electricity and also the development of a financial structure for the project.
"Based on an analysis of the Japanese market, UES of Russia and Sumitomo Corporation consider that this project is economically attractive for its participants and for potential investors," the UES press release said.

Work begins to provide energy link between Russian Far East, North Korea 

Experts at Russia's Maritime Territory have begun designing an energy bridge between Vladivostok and North Korea, ITAR-TASS News agency has reported.
The region's deputy governor, Yuriy Likhoyda, said at a meeting of a Russian-Japanese intergovernmental commission on cooperation with the Russian Far East on 30th June that a basis of the "bridge" would be a power line. North Korea has commissioned the design work. 
Specialists say the construction of the line will largely contribute to the power supply of North Korea's cities and settlements that permanently encounter electricity shortage. North Korea's electricity production has dwindled 50 per cent from 1989 to 1994 and another 40 per cent between 1994 and 2000. To overcome the energy problems, North Korea recently signed a contract for electricity deliveries with Russia's Omsk Region.
An international energy conference recently held under UN auspices in Vladivostok has proposed the creation of the energy system linking the Russian Far East, North Korea, northern China, Mongolia and Japan, in which electricity deliveries between the region's countries could be made.
The Maritime Territory administration sees the Vladivostok-North Korea energy bridge project as the "first practical step in the implementation of this regional programme."

Severstal, SUEK offer joint bid for Vorkutaugol shares 

The Severstal group bid on "partnership terms" with Siberian Coal and Energy Company (SUEK), a member of the MDM Group, for the state-owned 39.8% stake that it bought in coal producer Vorkutaugol from the Komi Republic at a June 26th auction. Interfax News Agency reported that a SUEK official said that Severstal acted on behalf of itself and of SUEK at the auction
Andrei Ovsharov, PR manager at Severstal Resource, confirmed that SUEK had partnered Severstal in the bid. He said Vorkutaugol Director General, Sergei Veinberg, represented SUEK, and other top managers, including Alexander Loginov, the first deputy director general, represented Severstal.
Ovcharov said that he did not anticipate any major changes at Vorkutaugol, which will have "the same consumers and owners." Severstal Group plans to rehabilitate the coal producer, rescheduling billions of roubles in debts and optimising production. The Russian Federal Property Fund offered 39.8% or 1,281,013 common shares, par value one rouble each, in Vorkutaugol, starting price per share 654 roubles. SUEK and the government of the Komi Republic decided to set up the coal company Pechorugol in November 2002 to bid for the Vorkutaugol shares. The republic contributed a 21.89% stake in Vorkutaugol to Pechorugol's charter capital. SUEK took a stake of 75% minus one share. Vorkutaugol is the biggest coal producer in the Pechora basin in Komi. It produces 45% of Russia's coking coal. Vorkutaugol's biggest shareholders are the Russian Ministry of State property (38.41%), the Komi Property Ministry (21.89%) and the Severstal steel works (14.46%). Vorkutaugol has charter capital of 3,215,676 roubles, split into 2,300,233 common, 762,869 preferred A-type shares and 152,574 preferred B shares with par value of one rouble. Vorkutaugol closed 2002 with a net loss of 831m roubles, against a net profit of 211.264m roubles in 2001. Coal production fell from 8.8m tonnes in 2001 to 6.2m tonnes in 2002.

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FINANCIAL NEWS

Introduction of Russian rouble in Belarus delayed

A technical delay has arisen in the introduction of Russian roubles in non-cash settlements in Belarus, due on 1st July. A spokesman for the National Bank of Belarus told ITAR-TASS News Agency that the measure required a respective decree of the Belarusian president, but the document has not been signed as yet.
Syarhey Dubkow, a senior official of the National Bank, said "at the present time, the draft decree is undergoing the procedure of interdepartmental review in the Republic of Belarus." "This is a purely technical work," Dubkow said.
Specialists see the parallel circulation of non-cash Belarusian and Russian roubles as a major step towards a single currency of the Russia-Belarus union state.
The next move, planned for 1st January of next year, is the pegging of the Belarusian rouble's rate to the Russian rouble.
The Russian rouble is to be used in Belarus as the sole tender from 1st January 2005.
Belarusian President Alexander Lukashenka said in an interview with the national television on 30th June that the adoption of the single currency in the Russian-Belarus union absolutely does not contradict "our notion of sovereignty and does not lead to its loss."

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FOREIGN INVESTMENT 

Brunswick readies US$500m investment plan 

Investment company, Brunswick Capital, is gearing up to invest up to US$500m in Russian joint ventures over the next five years, "The Moscow Times" reported on 10th July. The money will go toward class-A office space in Moscow, investment banking, leasing, and, somewhat unexpectedly, railway cars. Brunswick Capital Chairman and chief executive, Christopher Mackenzie, explained to the newspaper that impending railway industry reforms inspired the move: "We would not have done this a year ago, but the timing is dictated by the fact that the market is opening up." 
Aleksei Belyukov, who will direct Brunswick's railway project, told 'Vedomosti' on 11th July that the company has already purchased 1,000 used railway cars to transport oil, aluminium, and coal and will begin leasing them in October. Reaction was mixed, with a Yukos representative telling 'Vedomosti' that the oil company would be interested in leasing railway cars, a Rusal representative explaining that the aluminium producer did not need such railway cars, and an oil transport company representative describing the market as too crowded for Brunswick to make easy inroads. 

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FOREIGN LOANS

World Bank to offer Baikal loan for paper mill reconstruction

The Russian Federal Property fund has given the go-ahead to the signing of an agreement for a US$25m World Bank loan for the first phase of converting the Baikal pulp and paper mill, Irkutsk region Governor, Boris Govorin, announced at a press conference, New Europe reported.
The basic loan agreement was struck with the World Bank in the summer of last year. The Property Fund had earlier opposed the deal. The Russian government will guarantee the loan. The three-stage conversion programme is figured for the period up to 2010. The overall price tag is in the neighbourhood of US$300m. The end result will be minimising ecological damage by the mill and conserving jobs. 
The first stage is a changeover to a closed water-use cycle costing US$33.5m. The World Bank money will pay for this.

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MINERALS & METALS

Russian company plans to boost diamond sales

The value of diamonds which Alrosa Company sells will have increased to US$2bn by the year 2010. The company produces more than 95 per cent of all Russian diamonds, Prime Minister Mikhail Kasyanov declared on 9th July during a conference in Mirnyy on the state and prospects for the development of the Russian diamond-mining industry, ITAR-TASS News Agency has reported.
He said the value of the diamonds sold at present amounts to approximately US$1.4bn "Last year the diamond miners of Yakutia switched effectively to extracting diamonds from deep mines. It can be guaranteed that diamonds will be mined here for at least another 40 years," the prime minister stressed.
Mikhail Kasyanov said Russia had no plan to revise Alrosa's five-year agreement with De Beers. Alrosa had signed a new five-year agreement with the transnational corporation in December 2001. Under the agreement, the Russian company pledged to supply De Beers with diamonds worth US$800m a year.
At the conference in Mirnyy, its participants discussed a number of vital problems, among them a concept for liberalization of the diamond mining industry, including the lifting of a number of excessive restrictions that exist at present.
Mikhail Kasyanov told reporters that information about the stocks of diamonds, diamonds mined and cut, and the stocks of platinum and palladium in Russia will become more open in the immediate future. At present the commission in charge of confidential state information is finalizing work on measures that will make this information, which is currently classified and protected by law, more open.

Irkutsk authorities to auction gold-mining company shares

Irkutsk Region authorities have announced a tender to sell state-owned shares in the Lenzoloto company, one of Russia's major gold mining enterprises, ITAR-TASS News Agency has reported.
The regional property fund will put 83,500 shares on sale. This is 5.6 per cent of the company's authorized capital. The starting price of the shares will be R80,567,000.
Their sale is provided for in the regional property privatisation programme. In 2002, Lenzoloto mined 9.3 tonnes of gold and plans to bring its output in 2003 to more than 10 tonnes.
Lenzoloto's main shareholder is the Russian Federal Property Fund.

Chinese company to mine gold in Russian Far East

China's Silin mining company from the Heilongjiang Province was issued with a licence on 10th July to produce placer gold at one of the fields in the Jewish Autonomous Region located on the Mandzhurka river.
Estimated reserves at the gold field are 700 kg, the regional natural resources department told ITAR-TASS News Agency. Chinese businessmen plan to produce 100 kg of gold each season. All of it will be handed over to a Russian gold refining plant.
The tax and insurance payments that the Chinese company makes to the regional budget will be some 20 per cent of the value of the gold produced, Aleksandr Kuzin, head of geological service of the natural resources department, said.

Russia's major aluminium producer gets US$90m World Bank loan

The Sual [Siberian-Urals Aluminium] Group has signed a mandate agreement with the International Finance Corporation (IFC), a component of the World Bank Group, and the European Bank for Reconstruction and Development (EBRD) to finance the first phase of the Komi Aluminium project, Interfax News Agency has reported.
It is planned to enlarge the bauxite yield of the Sredne-Timanskoye deposit in the Republic of Komi from the current 1m tonnes a year to 6.5m tonnes, the Sual press service reports. A loan of up to US$90m will be used to finance the project's first phase.
The EBRD and the IFC will analyse a bank feasibility study and consider financing of the second and third phases of the project, which stipulate the construction of an alumina plant and an aluminium plant. Their construction will be launched after the feasibility study has been completed.
The Sual will build the alumina and aluminium plants on the basis of the Sredne-Timanskoye bauxite deposit. The plants will produce 1.4m tonnes of alumina and 300,000-500,000 tonnes of aluminium a year.

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NUCLEAR ENERGY

Russia, UK sign agreement on cooperation in peaceful use of nuclear power

An additional agreement to the bilateral document on cooperation in the peaceful use of atomic energy, has been signed within the framework of the state visit by Russian President Vladimir Putin to Great Britain, ITAR-TASS News Agency has reported.
The document was signed by the leaders of the two countries' energy departments at the energy forum which was taking place in London.

Iran set to create nuclear crisis centre using Russian model 

Iran is planning to set up a nuclear crisis centre based on the Russian model, an anonymous source in the Russian Atomic Energy Ministry told ITAR-TASS News Agency, citing Iranian vice-president and head of the Iranian nuclear energy organization, Gholamreza Aqazadeh.
"The interaction and cooperation between Russia and Iran in the nuclear field has broad prospects and horizons," he said while visiting the Russian state nuclear industry agency, Rosenergoatom's crisis centre.
The same source, who participated in the talks with the Iranian delegation on the premises of the crisis centre, quoted Aqazadeh as saying that "as soon as the nuclear programme announced by Iran to the IAEA last year is implemented stage after stage, Iran will have to create a crisis centre like the one we saw today."
The Iranian guests were shown "Rosenergoatom's crisis centre, the most updated one in the world, which was established in the east of Moscow in the early 1990s," the source said. "It is designed for monitoring all the safety parameters of all 10 Russian nuclear power plants online using satellite communications and for coordinating actions of the unit for providing urgent assistance to nuclear power plants in the event of an emergency," he said.
The Iranian vice president will also visit the Nuclear Energy Research Institute's training simulators, Rosenergoatom official told ITAR-TASS. He specified that "such simulators exist at all Russian nuclear power plants, and only those people who received the necessary training are permitted to operate control systems."

Russia, Iran agree to sign nuclear protocol

Moscow and Tehran will sign a protocol in the near future requiring Iran to return spent nuclear fuel used at the Bushehr nuclear power plant to Russia, Foreign Ministry spokesman Aleksandr Yakovenko said, Interfax News Agency has reported.
"There are plans to sign this protocol in the near future. This has been agreed upon with Iran," Yakovenko told a briefing in Moscow on 1st July.

Russia to sell more plutonium to USA

Russia will supply non-weapons-grade plutonium-238 to the USA for its spacecraft under a new contract, Minister of Atomic Energy, Aleksandr Rumyantsev, told Russian President Vladimir Putin at a meeting on 15th July, ITAR-TASS News Agency has reported. 
"Although the agreement between Russia and the USA on the peaceful use of nuclear energy expired some years ago, cooperation is picking up," Rumyantsev said. Cooperation within the contract under which Russia provides processed former weapons-grade uranium for US nuclear power stations is being carried on actively. "The contract is being met strictly according to schedule," Rumyantsev said. "Both the Russian and US sides are showing a high level of discipline."
In addition, he said, the possibility of contacts with the USA on the recycling of nuclear submarines is being looked into. Russia is already cooperating with Japan, Norway and the UK in this area. "Germany is prepared to allocate US$25m for the recycling of Northern Fleet submarines," Rumyantsev said.

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SCIENCE & TECHNOLOGY

Russian researchers experiment on effect of weightlessness in space

The Russian Institute of Medical and Biological Problems have completed an experiment that had researched the effects of weightlessness on the human body and how to get the body working again after a flight in space. In conditions close to weightlessness, volunteers tested new methods for offsetting the effects of lack of movement. It will now be easier for cosmonauts to get re-accustomed to life on Earth, Channel One TV has reported.
The two volunteers, both called Kirill, are the last of 10 space testers. Their partnership brings the experiment to an end. Everyone is equal within the team but to avoid confusion the doctors call them by their name and patronymic - Kirill Alekseyevich [Melnik] is himself a staff researcher at the Institute of Medical and Biological Problems, while Kirill Yuryevich [Selivanov] is a technician. They are both volunteers. They floated for a week under the sleepless eye of the doctors and a video camera. They had every creature comfort - breakfast, lunch, dinner and a bed. The only terrestrial entertainment they were allowed was a video, television and radio. 
Kirill [Selivanov] wore experimental boots for a week. A special device inside them imitates the pressure of walking. The doctors are working on the assumption that this kind of artificial stimulation of the sole of the foot might trick the sense of balance so that the nervous system believes the body is on the ground. Should this work, the boots will be sent to cosmonauts on the International Space Station. The special boots complemented daily exercises.
Dmitriy Sayenko, experiment leader, said: "In the end, I think, we'll cut the overall number of physical exercises on board, that is active physical exercises, to the bare minimum but, at the same time, our people will be just as fit as any cosmonaut."
When the experiment is over, the testers aren't allowed to move independently. During the week, their bodies began to forget how to walk. Altogether the experiment lasted more than a month. Even now, however, the doctors are saying the space boots are viable although they couldn't fully replace physical activity. The land record for limited mobility or, to put it simply, staying in bed, was long since beaten by the space record and this is of concern to the scientists.
Inesa Kozlovskaya, department chief at the Medical and Biological Problems Institute, said: "Unfortunately, there's no feedback, no signal to say 'That's enough. You've been sitting on a soft sofa enough today - something's starting to happen.' It all happens very slowly, although it's inevitable that something will develop."
It turns out that the effect of excessive relaxation begins to show in the body after a mere three hours. Scientists believe that an hour of lying on a soft sofa is quite enough to rest the muscles.

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SHIPPING

Russia to boost warship exports

The Russian Shipbuilding Agency plans to double ship sales by 2004 in the overall military exports of the country. So far naval products make up 20 per cent of the total military exports, ITAR-TASS News Agency has reported.
It is possible to increase the selling of ships, submarines, and armament and radar systems, agency director general Vladimir Pospelov told ITAR-TASS. Southeast Asia is the most promising market, he said. The agency is also holding negotiations with other countries, among them NATO member states.

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TELECOMMUNICATIONS

Russia's telecommunications expected to be upgraded by 2008

Russia's Telecommunications and Information Ministry is expecting "a qualitative growth of telecommunications systems" within the period until 2008.
"The future of the domestic television and radio broadcasting belongs to satellite systems and digital technologies. They will improve dramatically within the next five years," Deputy Telecommunications and Information Minister, Vladimir Avdeyev, said on 1st July, ITAR-TASS News Agency has reported.
Avdeyev took part in a conference sponsored by the ministry that addressed problems of the domestic telecommunications sector.
Taking part in the conference were representatives of companies operating cable networks and satellite communications, and manufacturers of telecommunication equipment.
The participants were discussing ways of implementing the state programme to upgrade Russia's broadcasting networks. According to Avdeyev, cable broadcasting has not become standard in Russia yet, due to its vast territory and low population density. He emphasized that the state will not drop the traditional radio-relay system, which will co-exist with satellite broadcasting for years, and will be used for television signal distribution within the country.
Avdeyev said the privatisation of federal television and radio networks will attract investments for powerful technological modernization. The privatisation of telephone communications companies can serve as a positive example, he said.

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TRANSPORT

Russia eyes new rail project with China

Russian and Chinese railway experts are studying a construction project for a new transport corridor which will connect the town of Ussuriysk in Russia's Maritime Territory and the Chinese town of Dongning, the press service of the Far East Railway told ITAR-TASS News Agency.
Such a branch railway line is needed because China's northern province of Heilongjiang has no access to the sea, while Ussuriysk is located only 100 km from the seaports of Vladivostok and Nakhodka and is linked to them by branch lines of the Transsiberian railway.
There are four large mining companies located in Dongning and they extract up to 37m tonnes of coal a year. Only 1.4 per cent of this is exported. The Chinese side believes that the Dongning-Ussuriysk branch line will enable the export of up to 20m tonnes of coal a year, and will also enable the export of other goods to Asia-Pacific countries.
Viktor Popov, head of Russia's Far Eastern Railway, said that the Railway's management is already considering the project. He believes that the future railway should become a Russian-Chinese joint project.
Russia and China are linked by three rail corridors at present, one in Chita Region and two in Maritime Territory. A new rail link opened on 14th July, connecting the Russian Kamyshovaya station in Maritime Territory with China's Hunchun.
The press centre of the Maritime railway company told TASS the new link's capacity would reach about 3m tonnes of cargo annually. The figure could double in the next few years, the source added.

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