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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

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

Update No: 269 - (29/05/03)

Measure of growth
In statistical terms, the Russians are doing well; indeed, they have been for three years now. The growth of GDP has slowed down to 4%, with industrial growth up by 4% so far this year on an annual basis. GDP grew by over five per cent per annum earlier since 2000. Clearly it will not be so easy to sustain the boom if oil prices fall, as is widely expected, given slow EU growth and Japan still in grave trouble. The Chinese economy could easily suffer from the SARS epidemic. Growth is likely to decline.

Sound finance
The EBRD is predicting a 4.3% figure of growth for the year as a whole, with an inflation rate of 14.4%. This compares with economic growth in the CIS of 4.5% and average inflation of 11.9%. The EBRD is doubling its investments in Russia to 1.2bn Euro. This is out of total EBRD investments this year of 3.9bn Euro. The World Bank is also to raise its profile in the country. With a massive trade surplus of over US$40bn, Russia was able to repay debt of US$2.8bn in May. The finances are sound.

Political uncertainty
All this might head one to conclude that the government has little to fear from coming elections, those of the Duma or lower house of parliament in December and those for the presidency next year. But this is not so. There is still a lot of dire poverty in Russia and a lot of people, particularly older ones, are destitute. Putin gave his third annual address to lawmakers on May 16th when he admitted as much. He cited over-much bureaucracy. He advocated the need for reforms and for military modernisation including shortening conscription to one year by 2008 and developing new nuclear and other weapons.
Putin himself should romp home in the latter election, his opinion poll ratings being over 70%. But the pro-government United Russia, with 152 seats, could come unstuck. If the communists only elected a better leader than Gennady Zyuganov then they could benefit from being thought less corrupt than others in the Duma, whom many suspect of being there just to avail themselves of parliamentary immunity, which is an automatic privilege of elected members.
Even if the government bloc does suffer a drop in its support, the government can still obtain the backing of several reform parties and even on occasion the communists. Putin's popularity means that few in the Duma want to cross the government. Premier Mikhail Kasyanov is not very charismatic. But that probably suits Putin fine. And Kasyanov is an able economist, who has had luck on his side.

International high profile
Putin's standing in the wider world is part of his formula for success. Opposition to the Iraq war was more or less obligatory for a Kremlin leader, just as for any French president, or, indeed, a German chancellor. But everyone will want a piece of the postwar action. The troika of the unwilling does not look as if it is going to have staying power.
Colin Powell came to Moscow to mend fences in mid-May. He is of course the ideal mediator here, known as the least hawkish of US leaders. Putin and Powell can talk openly about points of dissension without disgruntlement, unlike when Putin talks to Blair, to whom he gave a public reprimand in early May. There is no doubt that the Russians resent their loss of status vis-à-vis the Americans, as do the French. But there is little they can do about it. Sour grapes do not make a foreign policy.

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AGRICULTURE

Ministry to ship 500,000 tonnes of grain to Iraq

Russia plans to supply 500,000 tonnes of grain to Iraq under the UN Oil for Food Programme in the first six months of the year, Agriculture Minister, Alexei Gordeyev said, Interfax News Agency reported.
A ship carrying 37,000 tonnes of grain supplied by a Russian company has been moored at an Iraqi port, Gordeyev noted.
"It is not yet known when the grain can by offloaded, but company executives maintain ongoing contacts with UN representatives," the news agency quoted him as saying. However, regular deliveries can only be resumed after military operations are concluded, he added.

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AUTOMOBILES

GM-Avtovaz plan Opel Astra T-300

The GM-Avtovaz joint venture may organise the manufacture of the Opel Astra T-300 car before the end of next year, Russia's Avtovaz said recently. Vladimir Kadannikov, chairman of the Avtovaz and GM-Avtovaz Boards of Directors, said the joint venture's board considered producing 15,000 Opel Astra T-300 cars a year. "It was decided to organise the manufacture of the vehicle before the end of 2004 in case the European Bank for Reconstruction and Development (EBRD) consents to the use of part of the loan provided to the joint venture under the general agreement (to set up the venture)," Kadannikov said. "The joint venture's Board of Directors had filed a request for the EBRD's consent," he added. Avtovaz, GM and the EBRD signed the general agreement in summer 2001.

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AVIATION & SPACE

New Russian amphibious plane passes first stage of flight tests

The SA-20P light multipurpose amphibian has passed the first stage of flight tests, Aleksandr Mazepin, deputy head of the research and production department of the Komsomolsk-na-Amure aircraft production association (KnAAPO), said recently, reports Interfax-Military News Agency.
"The first stage of flight tests performed by the factory that developed the SA-20P multipurpose amphibian confirmed the right choice of chemical solutions in designing hydroplanes of this class," Mazepin said. 
According to him, KnAAPO has set up a special design bureau to implement the SA-20P project. "We have obtained the consent of the design bureau of the Taganrog-based Beriyev aircraft research and production association to use the fuselage they designed for the BE-103 amphibian in our SA-20P," Mazepin said. The BE-130 had some problems with the position of the engines and water spray penetrating them. The SA-20P has no problems of this kind as it has only one more powerful engine mounted on a high pylon over the fuselage, the official said. Unlike the two-engine BE-103, the SA-20P has one domestic M-14H engine with a takeoff capacity of 360 hp. KnAAPO has fully mastered the SA-20P production technology and installed necessary equipment. 
According to Mazepin, the main specifications of the SA-20P are identical to those of the BE-103. "Tests have shown that the maximum takeoff weight of the SA-20P amphibian amounts to 2,270 kg, payload to 634 kg and flight altitude to 3,000 m. Operation range with full fuel tanks and emergency tank for 30 minutes in the air is fixed at 1.030 km. The plane is intended for transporting five passengers and can be used as a scout and rescuer on water," Mazepin added.

Upgraded Soyuz rocket engine passes one more round of tests in Russia

The Energomash research and production association has held a new cycle of flight and design tests of the RD-107 liquid-propellant engine for the Soyuz carrier rocket, the head of Energomash's information department, Vladimir Sudakov, said, Interfax-AVN Military News Agency web site reported 
"We have modernized the RD-107's ignition system. The upgraded system will make the engine's preparations for launch easier and improve its reliability," Sudakov said. 
The traditional ignition system consisted of a stand with the ignition device - a sparkler-type charge - placed on the launch pad on the side of the nozzle. "When the first portion of the fuel and oxidizer was injected in the combustion chamber, the 'lighter' would turn on and ignite the fuel components." 
"After the upgrade, ignition is provided by a chemical mixture that sets itself on fire, which ensures stable burning of regular fuel components - liquid oxygen and kerosene," Sudakov explained. Chemical ignition is already used on Energiya and Zenit carrier rockets. It will also be used on Soyuz carrier rockets after tests are completed...

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BONDS

Alrosa Eurobonds oversubscribed by 250%

The recent Eurobond placement by Alrosa, Russia's Yakutia-based diamond monopoly, was oversubscribed by approximately 250%, the company said, quoting information from ING Barings, the issue organiser. The placement price increased from 98.996% to 99.375% of face-value and Alrosa ultimately issued US$500m in bonds instead of a planned US$300m, New Europe reported.
Alrosa is in the middle of a five-year development programme costing US$2.3bn. Alrosa plans to mine US$1.4bn in diamonds this year, 1.6% more than in 2002. It is targeting cut diamond sales of US$129.5m, or 11% more.

Moscow considers US$ issue plan

The Russian government may issue more than US$6bn of international bonds by the end of 2005, a finance ministry document has suggested, the Financial Times reported on 29th April.
A proposal due to be discussed at a cabinet meeting said the government could sell US$2.2bn of international bonds next year, followed by US$4bn in 2005. The sovereign has not sold any dollar bonds since its default on domestic debt in 1998. The lack of supply has helped Russian spreads tighten dramatically.
Demand for Russian debt has soared as the country's public finances have improved, thanks to a high oil price. Russian bonds have also benefited from globally low interest rates, which have driven investors from more mature markets to higher-yielding emerging bonds.
Spreads on Russia's 30-year bond are at about 300 basis points over US Treasuries, having tightened 900bp since late 2000. 
The government has no immediate financing needs, and future issuance will largely depend on oil prices and domestic politics.

Nizhny Novgorod meets April Eurobond payments

The Nizhny Novgorod regional Finance Ministry has transferred funds to its Eurobond payment agent Deutsche Bank to meet payments due in April, said Svetlana Bashmakova, a spokeswoman for the ministry. The ministry transferred 811.734 roubles for principal debt and 177.567m roubles for coupon payments, New Europe reported. 
To meet its April payments, the regional government raised 700m roubles from one of the big Russian banks at 13.5 per cent annually with payment due at the end of 2006, and an interest free federal budget loan of 200m roubles. The region also used its own funds in the payment. Nizhny Novgorod in October 1997 placed US$100m in Eurobonds at 8.75 per cent annually with coupon payments twice a year and maturing in 2002. In October 1999, the region was unable to meet coupon payments of US$4.375m so it signed a restructuring agreement with creditors, according to which it paid 50 per cent of the coupon that year, 35 per cent in 2000-2001 and 50 per cent in 2002.

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ENERGY

Caspian Pipeline Consortium enters commercial operation

The Caspian Pipeline Consortium (CPC) has gone into commercial operation. The CPC press-service has said Russian and Kazaks government commissions signed the last acceptance acts recently, ITAR-TASS News Agency reported. According to the documents, all safety and environmental protection requirements have been observed.
Now that the pipeline has gone into operation, there is the task of increasing the system's throughput, CPC General Director, Ian McDonald, said.
The CPC plans to build up its capacity in two phases. First and foremost, the pipeline's throughput will be increased to 38m tonnes by the end of 2006. Five oil pumps will be built - three in Russia, and two in Kazakstan - and four reservoirs near Novorossiysk. The CPC chief hopes this will increase the incomes of both co-founder states and private investors.
The biggest holder of CPC shares is the Russian government. It controls a 24 per cent stake. Kazakstan and Oman have 19 per cent and 7 per cent respectively.

Oil concerns in Russia affirm deal

Two Russian oil companies confirmed recently that they would merge in a deal worth about US$13bn, creating a company that would rival major international concerns as the fourth-largest private oil producer in the world, the International Herald Tribune reported on 23rd April.
Under the terms of the deal, Yukos Oil Co will buy 92% of Sibneft OAO, paying US$3bn in cash and the rest in shares of the combined company. That stake is the amount held by Sibneft's core owners, and they will get a 4% premium for their holding, according to United Financial Group, a Moscow-based brokerage.
The resulting company will produce 2.3m barrels of oil a day, roughly equal to the daily output of Kuwait, and hold oil and gas reserves of 19.4bn barrels, close to those of BP PLC.
"This becomes a stock that lots of fund managers in the world will want to own," Al Breach, chief economist at Brunswick UBS Warburg, an investment bank in Moscow, said. "It's one of the world's biggest private oil companies, and it is growing fast."
Mikhail Khodorkovsky, the principal owner of Yukos and the richest Russian, will manage the new company, to be called YukosSibneft. The principal owner of Sibneft, Roman Abramovich, and other core owners will retain about 29% of the company.
The merger is a landmark in Russia's economic development. For the first time, a Russian company is paying a premium to buy another Russian company. While that is a common practice in Western markets, in Russia, where property has typically been bought on the cheap, often from the state, locals rarely pay market prices for assets.
"Russia has grown up," Stephen O'Sullivan, head of research at United Financial Group, said. "The values are enormous. Thirteen billion dollar transactions don't happen every day."
The deal is also notable because it will leave Abramovich and other core Sibneft shareholders with a minority stake in the new company. There was little mutual trust in the 1990s asset grab, when Russians fought among themselves for choice state property.
The new, larger company will wield more financial might then Yukos and Sibneft separately. This will make it better able to compete against foreign rivals in Russia. BP invested more than US$6bn this year in Russian oil assets.
The company will have 2,500 gas stations across Russia, as well as six oil refineries in Russia, and stakes in two additional refineries, one in Belarus. Its foreign holdings are limited to Eastern Europe and Lithuania.

Tatarstan oil major set to expand retail sales network

The Tatneft oil company is set to invest over R2bn for the development of its filling stations' network in 2003, Tatar-Inform News Agency has reported.
At present, Tatneft owns 355 filling stations, 121 of them in Tatarstan. Moreover, talks are currently under way to purchase another 150 in various regions of Russia and the CIS. The network development project is financed by profits generated by petroleum product sales.
In 2002, Tatneft sold R7.65bn-worth of light petroleum products through its retail chain. The company's share exceeds 50 per cent of Tatarstan's fuel market now. Meanwhile, Tatneft says that it may meet the demand in full.

Russia's Sibneft sells oil production company to rival

Russian oil major, Sibneft, has completed the sale of its 38 per cent stake in Russia's Orenburgneft oil company and its 1 per cent stake in the Onako oil company to oil major Tyumen Oil Company (TNK) for US$825m, Sibneft said in a statement on 13th May, Prime-TASS News Agency has reported.
Orenburgneft, based in the city of Orenburg, is the major production unit of Onako... The statement said that the payment was made in two tranches in April.
"Sibneft received the full, fair-market value of its Onako assets," Sibneft President Yevgeniy Shvidler said in the statement. "With this deal completed, we now can turn our full attention to working with TNK on the division of Slavneft."

TotalFinaElf to decide on Val Shatskovo well

TotalFinaElf plans to reach a decision by the end of the year on drilling a first well at the Val Shatskovo field in the Black Sea, Interfax News Agency quoted TotalFinaElf E&P Director General, Francois Rafin, as saying in an interview. He said that at the moment seismic information from the field is being interpreted.
"The project is still at the initial stage and our spending is measured in millions of dollars," Rafin said. He noted that reserves at the Val Shatskovo field are located at a depth of 2-2.4km. "If our work results in the discovery of a new oil and gas field, then hundreds of millions of dollars will required to develop it, if not billions of dollars," he said. 
In April last year Russia's Rosneft and TotalFinaElf signed a framework agreement to study the Black Sea. The companies plan to carry out joint operations in the area of the Tuapse trench. Rafin noted that TotalFinaElf is also working within the framework of a production sharing agreement for the Kharyaga field in Timan-Pechora oil province.
"The Russian government, as one of the participants in this agreement, has assured us that the conditions of the production sharing agreement will be strictly adhered to," he said. In turn, TotalFinaElf will ensure that the state's interests under this agreement are upheld.
Rafin said that spending on the Kharyaga project last year was subject to an audit, carried out by a company investor. "All spending was checked and approved by the auditor," he said. The director general also said that the company considers its work at the Vankor field in Krasnoyarsk territory to be "very important, confirms its interest in it and hoped that it will be possible to resolve current problems in the near future."
Recoverable reserves at Vankor are estimated at 125 million tonnes of oil and 79 billion cubic metres of gas. The main investor in the project and a shareholder in Yeniseineft (the operator at the field) is Anglo-Siberian Oil Co (ASOC). Recently Rosneft made a proposal to acquire 100 per cent of ASOC shares at double their market value. The main condition for this deal is that ASOC should own controlling shares in Yeniseineft. In May 2002 ASOC reached an agreement with TotalFinaElf to sell the French company 52 per cent of shares in Yeniseineft, but the deal was never finalised. ASOC is currently considering the Rosneft proposal.

Russian gas giant eyes UK market

Gazprom plans to supply gas through the North Transgaz pipeline to Britain, Gazprom chief executive officer, Aleksey Miller, told journalists in St Petersburg, reports Interfax News Agency.
"We are involved in negotiations which, if they result in the signing of agreements to supply gas to Britain, will mean the capacity of the pipeline being doubled," he said.
It is necessary to research the British market, where Gazprom is currently present only in very insignificant volumes, Miller said.
Gazprom is not experiencing problems with financing the North Transgaz pipeline. The main task is exact marketing on the European markets, particularly in Germany, he said.
The total cost of the pipeline is estimated at US$6bn and the internal profitability of the project amounts to 12 per cent. Gas transportation volumes through the pipeline will be finally corrected in the near future and its capacity may be increased from the 19.7bn cubic metres planned at the moment to 30bn cubic metres per annum.
The raw material base for the pipeline at the initial stage will be fields in the Nadym-Pur-Tazovskiy region and, in the future, Yamal, the Ob-Tazovskaya bay and the Shtokmanovskoye field. It is planned to begin supplying gas through the pipeline in 2007 and to reach full capacity in 2009.

Gazprom to invest US$20bn in gas extraction by 2010

The Russian gas giant, Gazprom, plans to invest US$20bn by 2010 in natural gas extraction, the deputy head of Gazprom's natural gas, gas condensate and oil extraction department, Boris Nikitin, said at the World Gas Forum recently, Prime-TASS News Agency reported.
He said the company plans to spend about US$5bn on upgrading and maintaining developed natural gas fields and US$15bn on exploring and setting up new fields.
Nikitin said that, after 2010, Gazprom would annually invest US$3bn in the exploration and extraction of natural gas resources.
He said that this investment programme would only be successful if the government sets gas prices that are favourable for the company. He did not elaborate. Nikitin said that Gazprom had prepared a three-stage programme to set its annual natural gas output at a stable level of 530bn cubic metres.
The first stage of the programme envisages developing the Yubileynoye and Tarkosalinskoye natural gas fields and starting development of the giant Zapolyarnoye field. This stage will be finished in 2003, he said.
During the second stage, Gazprom will continue developing the Zapolyarnoye field as well as drilling 450 wells and building a 1,000 km gas pipeline network there. Gazprom plans Zapolyarnoye output at 100bn cubic metres a year by 2007.
During the third stage, starting in 2007, the company will tap the natural gas reserves of the Yamal Peninsula. The proven reserves of its 11 gas and 15 gas condensate fields stand at 10 trillion cubic metres of natural gas, while the estimated reserves are seen at about 50 trillion cubic metres.

Russian Far East region strikes liquefied-gas deal with Japan

The Sakhalin Energy Company has reached an important understanding on deliveries of liquefied gas to Japan from Sakhalin for 24 years. The company's chief executive director, Steve McVeigh, told a news conference in Yuzhno-Sakhalinsk that the main terms of the agreement on long-term gas deliveries with an annual volume of 1.1m tonnes were signed on 12th May with the management of the Japanese Tokyo Gas Corporation, ITAR-TASS News Agency has reported.
The company continues talks so as to conclude the main agreement in 2004. But it was pointed out that the first deliveries are planned to be started in 2007. McVeigh reported that it had been planned initially to start selling gas to Japan. Marketing activities are also conducted with China, South Korea, Taiwan and the US west coast.
Apart from the above, Sakhalin Energy shareholders - Royal Dutch Shell, Mitsui and Mitsubishi - are to approve, late in the second quarter, volumes of investments in the construction of Russia's first liquefied gas plant in Sakhalin and a gas pipeline from the island's north to the south.
The governor of the region, Igor Farkhutdinov, claimed that the agreement on gas deliveries "can give an impetus to the development of closer contacts between Russia and Japan."

Russia mulls construction of power grid line to North Korea

At the request of North Korea, Russian specialists are working on a project of a high-voltage power grid line from the Maritime Territory to North Korea, Maritime Territory deputy governor, Yuriy Likhoyda, said, ITAR-TASS News Agency has reported. North Korea is suffering from an energy deficit. Power generation in North Korea decreased by 50% in 1989-94, and by another 40% in 1994-2000, UN experts say.
The possible creation of a single energy system for the Russian Far East, northern China, Mongolia, Japan and North Korea is being discussed at a UN conference on energy cooperation in north-eastern Asia held in Vladivostok. Power could be re-distributed between countries with the help of such a system, experts say.

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ENVIRONMENT

Russia to spend nearly US$3bn on chemical disarmament by 2012

The total cost of the chemical disarmament programme for Russia for up to 2012 will amount to R90.2bn (US$2.9bn) reports Interfax-AVN military news agency web site.
Of this sum, R1.27bn (US$41.16m) will be spent on maintaining security during the storage and destruction of chemical weapons, R582.7m (US$18.74m) on medical and sanitary inspection of territories around the weapons' storehouses and destruction installations, and R1.95bn (US$63.03m) on the state environmental control and monitoring, the press service of Sergey Kiriyenko, chairman of the state chemical disarmament commission and presidential envoy to the Volga Federal District, reported recently.
According to the press service, some 70 per cent of the funding will be provided by the Global Partnership programme.

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FINANCIAL NEWS

IMF revises economic growth forecast

The International Monetary Fund has revised its economic growth forecast for Russia this year down from 4.9 per cent to 4 per cent, New Europe reported recently. The IMF said in its latest World Economic Outlook that its global economic growth forecast was down from 3.7 per cent to 3.2 per cent in 2003. The forecast for 2004 is 4.1 per cent. The IMF also lowered its forecast for the United States from 2.6 per cent to 2.2 per cent in 2003. The Fund expects the US economy to grow 3.6 per cent in 2004.

Russia reports 33 per cent rise in foreign trade

Russia saw foreign trade turnover of US$41.2bn in the first quarter of 2003, up 32.8 per cent year on year, Interfax News Agency has reported.
The Russian State Customs Committee reported that exports totalled US$29.9bn, up 38.3 per cent, and imports came to US$11.3bn, up 20.1 per cent. This gave Russia a foreign trade surplus of US$18.6bn, up US$6.4bn on January-March 2002.

Russian firms' debt lures buyers despite concerns

Russia's corporate-bond market is on a roll, despite warnings about a lack of transparency and rising borrowing levels, the International Herald Tribune reported.
At about US$3.4bn (€2.99bn), Russian corporate-bond issuance during the first quarter was close to 2002's full year total of about US$3.7bn. Buoyed by BP PLCs decision to pump US$6.75bn into oil producer TNK International Ltd - the largest-ever foreign investment in Russia - the newly issued bonds have performed well.
As a result, dollar-denominated Russian corporate debt is relatively more expensive than similarly rated US high yield corporate debt, even though credit rating agency Standard & Poor's and the Russian Ministry of Finance have expressed concern about the market.
S&P recently said Russian companies' financial operations aren't transparent enough, and recently Russia's deputy finance minister, Sergei Kolotukhin, said the government is becoming concerned about the level of overseas borrowing by Russian companies, particularly large state-owned entities. He said the government may restrict international debt issuance, something it didn't do before the country's 1998 financial crisis.
But the finance ministry's warning and memories of the 1998 crisis haven't damped enthusiasm for Russian corporate bonds. Because the market if dominated by savvy professionals, transparency is less of an issue. And with high oil prices boosting the nation's foreign-currency reserves and economic growth expected to outstrip the euro zone by a wide margin this year, bulls are plentiful.
"I would rather put my money into a cash-cow, blue-chip Russian corporate than into a speculative US high-yield corporate in the current environment," said Robin Evans, head of emerging-markets debt trading of Commerzbank. "In Russia, nobody tries to pretend a company is transparent."
Eurobonds of major Russian companies trade in line with or outperform similarly rated US high-yield bonds, but analysts aren't concerned about the lower yields of Russian bonds. They say the credit ratings of Russian blue chips are restricted by the country's sovereign ratings, which are below investment grade. That doesn't apply to junk-rated US companies, as the US government enjoys triple-A ratings.
Companies in the lower-tier single-B ratings category, such as OAO Gazprom, the state-owned gas monopoly, and diamond monopoly, Alrosa, are pillars of the Russian economy, said Andrei Dobrynin, head of international capital markets at MDM Financial Group, one of Russia's largest privately owned banking groups. In the US however, junk-rated firms often play a less important role in the economy, he said. "A high-yield company in Russian terms is totally junk," he said. "It would probably be C-rated."
Gazprom, which some reckon accounts for as much as 20% of Russia's gross domestic product, is a particular favourite of both local and international investors. It popularity was apparent in the company's February offering of US$1.75bn of 10-year global bonds.

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FOOD & DRINK

Baltika to finish beer storage terminals in 5 cities

Russian brewing giant, Baltika, said it plans to complete the building of five storage terminals for its beer in a like number of Russian cities before the end of this summer, reports Interfax News Agency. These cost from US$2m to US$4m and are sited in Yekaterinburg, Novosibirsk, Ufa, Lermontov (Caucasus Mineral Waters) and Nizhny Novgorod. The company is using its own money for the construction.
Company plans also include building terminals in Moscow and Irkutsk. Construction subcontractors were selected on the basis of tenders. Atak Myukhendislik (Turkey) is building the one in Yekaterinburg, Evrociti of Novosibirsk the one in that city, Troi Kanada (Turkey) the one in Ufa, DTSK (Rostov) the one in Lermontov and Dekor (Bor, Nizhny Novgorod region) the one in Nizhny Novgorod.
The terminals will have premises ranging from 4,000 to 10,000 square metres. All of them will be linked to the company's corporate computer network, which will control product movement.
It takes from nine to eleven months to build one terminal. The construction is part of the company's programme for stiffening control over product quality, trimming production costs and developing sales infrastructure. 
Baltika, one of Russia's biggest brewers, produces in St Petersburg, Tula, Rostov-on-Don, Samara and Khabarovsk. Last year, the company increased overall product sales by 14.5%, from over 1.4bn litres in 2001 to 1.6bn litres. Sales in Russia increased more than 11%. Baltika boosted its command of the Russian beer market by 0.6% to 22% in 2002. The controlling stock interest (74.24%) in the company belongs to the Scandinavian concern Baltic Beverages Holding.

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FOREIGN ECONOMIC RELATIONS

Russia keen to develop comprehensive ties with Turkey 

Russia is interested in developing comprehensive relations with Turkey, Russian Foreign Minister Igor Ivanov said at a meeting on 13th May with Ankara Mayor Melih Gokcek who arrived in Russia to take part in Days of Ankara in Moscow, ITAR-TASS News Agency has reported.
Russia and Turkey, the minister noted, "are engaged in an active and constructive political dialogue which is also being maintained at a high level." "Trade and economic cooperation is developing quite well on the whole. Such major projects as the Blue Stream [natural gas] project demonstrate possibilities in this sphere," Igor Ivanov believes. The foreign minister expressed the hope that the Ankara mayor's visit to Moscow "will help deepen ties not only between the capitals but also between our countries."
The Turkish guest said that: "Turkey attaches an important significance to the development of relations with Russia. In the 21st century Russian-Turkish relations will reach their highest level," he said.

Russian ministry reports flourishing trade with UK

Russian-British trade turnover increased by 20 per cent in 2002, reaching US$5.3bn, the Russian Economic Development and Trade Ministry reports. 
Russia's trade surplus reached US$1.9bn in 2002. Exports reached US$3.6bn (a 16 per cent increase) and imports US$1.7bn (a 31 per cent increase), Interfax News Agency reported.
Trade with the UK accounts for some 3.2 per cent of Russia's entire trade turnover. Most of Russia's exports to the UK are raw materials. Britain supplies Russia with products for the aerospace industry, electromechanical and electronic equipment, chemical products and other products.
Britain is one of Russia's main investment partners. As of 1st January 2003, the total value of accumulated investment in Russia from that country reached US$5.1bn and direct investment reached US$2.2bn.

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FOREIGN INVESTMENT

EBRD invests 1.2bn Euro in Russia in 2002

The EBRD doubled its investment in Russia in 2002 to €1.2bn, said Clare Short, chairing the Board of Governors meeting in Tashkent, New Europe reported. She said total EBRD investments last year stood at €3.9bn. EBRD business group chief, Hubert Pandza, said that in the future, the bank plans to keep investments in Russia to no less than €1bn a year. This is the figure planned for this year. 
Pandza stressed that the EBRD is not investing only in the raw materials sector of the Russian economy. He said that about 20% goes to the financial sector and 18% to production. The EBRD also invests heavily in infrastructure projects and extends loans to small- and medium-sized businesses. 

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INTER-REGIONAL COOPERATION

Russian premier calls for deeper integration of CIS nations

Prime Minister, Mikhail Kasyanov, is in favour of deeper integration among the countries of the Commonwealth of Independent States (CIS). He admitted this at a meeting of the council of the CIS heads of government, in Moscow, ITAR-TASS news agency reported.
Kasyanov has stressed the need to "make further efforts to achieve greater integration," noting at the same time that Russia "favours any initiatives to promote this integration and to guarantee more effective work" within the commonwealth. In the opinion of the Russian prime minister, the Commonwealth of Independent States "is a very important form of interaction on its entire territory."
The almost 30-item agenda of the meeting included a concept for the establishment of a joint CIS armed forces liaison system. Moreover, the meeting also expected to consider a concept for the joint military and scientific servicing of military aircraft and equipment in the CIS countries.
The prime ministers are planning to review the progress achieved in the fulfilment of the 1st June 2001 decision of the CIS council of presidents on functions linked with the 15th anniversary of the disaster at the Chernobyl nuclear power plant.

Putin highlights problem of illegal Tajik labour

A meeting between Russian President, Vladimir Putin, and Tajik President, Emomali Rahmonov, took place recently in Dushanbe, reports NTV Mir.
The presidents have discussed several important issues, including military cooperation and economic links between the two countries. In Putin's opinion, the migration of Tajik citizens to Russia is a particularly important issue.
Every year, hundreds of thousands of Tajik citizens come to Russia for seasonal work. Overall, this is a mutually beneficial process. Russia has enough economic niches where a serious shortage of labour is being felt, Putin said.
However, a certain section of them turn into illegal labour immigrants, by failing to fulfil certain conditions on registration and labour activity on Russian territory, as laid down in Russian law.

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MINERALS & METALS

Russia boosts non-ferrous metals output by 9.5% in Q1

Russia increased non-ferrous metals output 9.5% year-on-year in the first quarter of 2003, the Russian Ministry of Economic Development and Trade said in its latest economic review, New Europe reports. Figures rose 3.1% for primary aluminium, including Silumin, and 3.3% for alumina. The ministry said Russia exported something like 80-82% of its aluminium.
Nickel production grew 15.9%, thanks to good world market trends. But production of refined copper fell 0.8% due to a reduction in concentrate supplies from the Erdenet mine in Mongolia and lower stockpiles of scrap metal containing copper.
The ministry exported US$1.7m in non-ferrous metals, as much as in the first quarter of 2002. Exports of aluminium fell 7.5% and copper 15%, while nickel exports grew 3%.
Domestic aluminium consumption grew 18% year-on-year, as Russian smelters enhanced quality and the product range for the main consuming sectors.
In the first quarter of 2003, capital investment in the sector, including metals giant MMC Norlisk Nickel, grew 39% year-on-year to 11bn roubles. Capital investment in non-ferrous metallurgy grew 3.1% in 2002, compared with 3.2% in 2001.
Foreign direct investments in the sector were up considerably, from US$21m in 2001 to US$65m in 2002 and their share of total investment increased from 0.5% to 1.6%. The ministry estimates non-ferrous output this year as a whole could be 4% higher than in 2002, with figures up 1% for primary aluminium and 8% for nickel and down 7% for refined copper.
Russia's SUAL aluminium group plans to sign agreements with the World Bank and European Bank for Reconstruction and Development on loans to finance an alumina refining and aluminium smelting project in the Russian internal republic of Komi, New Europe has reported.
The project will cost an estimated US$2.1bn, 60 per cent of which SUAL plans to finance with credits and 40 per cent with funds provided by co-investors, Interfax News Agency quoted Vladimir Kremer, director general of the Komi Aluminium company, as telling a meeting of Komi government officials.
Eventually, the Komi aluminium complex should be producing 6.5m tons of alumina and 300,000-500,000 tonnes of aluminium. But future capacity depends on relations with the power utilities. More electricity will be needed to feed a plant that turns out 500,000 tonnes of the aluminium, Kremer said. SUAL is prepared to invest in the construction of a sixth generating unit at the Pechora GRES power plant. But a planned trilateral agreement between SUAL, Unified Energy System (the national electricity utility) and the Komi government has yet to be signed.
SUAL plans to form a joint venture with France's Pechiney to deliver the alumina-aluminium project in Komi. It is thought SUAL will control the venture and that Pechiney will own 35-40 per cent of the equity. In February, SUAL registered the wholly-owned ZAO Komi Aluminium to build and operate the complex. The new company will have charter capital of three million roubles initially, rising in time to 2 billion roubles. SUAL mines about 90 per cent of Russia's Bauxites, and produces about 70 per cent of the country's silicon, 60 per cent of its alumina and more than 20 per cent of its primary aluminium. The SUAL group includes 22 companies in Russia's aluminium sector that are managed by SUAL Holding. 

TMK to shop 5,000 tonnes of pipes to Spain

Russia's Pipe Metallurgical Company (TMK) plans this year to ship about 5,000 tonnes of pipes to Spain. TMK, which has an official distributor, Sinara-Spain, in Barcelona, has invested US$110m in upgrades at its pipe mills over the last couple of years and Spanish banks have been involved in this process, Interfax News Agency quoted TMK Director General, Dmitry Pumpyansky, as saying.
Pumpyansky said that back in 2002, Spain's Banco Bilbao Vizcaya Argentaria, SA (BBVA) lent TMK 4m Euro to buy a thermal treatment unit for pipes from Germany's Thyssen Mannesmann Handel AG. In 2001, Bankinter, SA lent TMK 5m Euro to buy equipment from SMS Meer to cut gas-tight threads for pumping and compressor pipes. Most recently, Bankinter has opened a credit facility for TMK's Artrom pipe mill, which is in Romania. The bank released about 2m Euro in finance for Artrom in 2002.
Pumpyansky also said TMK was interested in developing ties with leading Spanish pipe companies, among them Tubaseks and Tubos Reinidas. TMK management owns 67 per cent of shares and the MDM group owns 33 per cent of shares in TMK enterprises.

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NUCLEAR ENERGY

Russia, Iran discuss return of spent nuclear fuel from Bushehr 

Russia's Atomic Energy Ministry and the TVEL [nuclear] fuel-providing company are negotiating with Iran for the return of Russian spent nuclear fuel from the Bushehr nuclear power plant, which is currently under construction, Interfax News Agency has reported.
"The talks are expected to produce appropriate agreements," TVEL president Aleksandr Nyago told the press in Moscow on 13th May.
He said the Russian government later this year is expected to issue rules regulating the return of Russian spent nuclear fuel. He also said his corporation had not signed any contracts to re-import this fuel from foreign nuclear plants, pending the adoption of governmental resolutions regulating this issue.
Spent nuclear fuel will not be stored either by TVEL or by the Tekhsnabexport company, the state importer of spent nuclear fuel, he said. "The fuel will be stored by federal state enterprises, which may be privatised in the future," he said.
Nyago announced that TVEL is conducting talks with Slovakia, Bulgaria, Hungary and Lithuania on Russian nuclear fuel exports for power plants built with Soviet assistance. "We are prepared to take part in tenders to export nuclear fuel. TVEL does not want to lose this market," Nyago said.

Russia to join Chinese nuclear power projects

Russia is ready to help build new nuclear power-generating units in China, Deputy Atomic Power Minister, Andrei Malyshev said, Interfax News Agency reported. Malyshev said he made this announcement during talks in Beijing recently. "China is expected to draft a national strategy on the development of its nuclear power sector by June, providing more clarity to its plans to build nuclear power-generating units," he said. 
The deputy minister noted that it is still unknown where these construction efforts will take place. Malyshev said that during negotiations in Beijing, he told Chinese officials about Russia's power strategy, as well as Russia's ability to construct power units. At the same time, Russia is engaged in implementing a US$3bn contract at China's Taiwan nuclear power plant, which will have two power-generating units with VVER-1000 reactors. In addition, Russia is helping build a Chinese experimental fast reactor (CEFR) in Guangzhou province, which is similar to Russia's BN-600 fast neutron reactor. There are also plans to sign an agreement to build a floating low-capacity nuclear power plant with a KLT-40C reactor in China.

Russia plans to build five nuclear power generation units

The Rosenergoatom concern, which is in charge of Russia's nuclear power plants, plans to complete the construction of a third 1m kW power generating unit at the Kalinin nuclear plant this year, Interfax News Agency has reported.
Rosenergoatom plans to build five power generating units in the near future: the Kursk nuclear power plant's fifth unit (2006), the second unit at the Rostov nuclear power plant (2007), the fifth unit at the Balakovo nuclear plant (2008), the fourth unit at the Beloyarskaya plant (2009), and the sixth unit at the Balakovo nuclear power plant (2010), Rosenergoatom's director, Oleg Sarayev, told a session of the World Nuclear Association in Moscow on 13th May.
Another goal of the Russian nuclear energy industry is to prolong the use of first-generation power generating units and to enhance their safety standards. In 2003, this work will be done at the first power generating unit of the Kola plant and the first unit of the Leningrad nuclear plant.
Furthermore, Rosenergoatom will work to increase the basic power coefficient to between 85 and 87 per cent, Sarayev said. He added that in Russia, this index is lower than in the leading nuclear powers.
In the future, the main accent will be put on perfecting the fuel cycle, Sarayev said.

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SHIPPING

Russia's second frigate built for India completes naval part of tests

The naval part of the commissioning tests of the Trishul frigate has ended in the Baltic Sea, the press service of the Baltiyskiy Zavod shipyard said on 12th May. The Trishul is the second vessel of Project 11356 built by the shipyard for the Indian navy, a press service official told Interfax-Military News Agency. 
"All the firings that were included in the commissioning tests programme have been performed successfully. The frigate has returned from Baltiysk to St Petersburg," the official said. 
The Trishul was put up for commissioning tests after successful completion of the state tests in early April. The frigate was laid down at Baltiyskiy Zavod on 24th September 1999 and set afloat on 24th November 2000.
The vessel is intended for combat operations against surface ships and submarines in oceanic and naval districts, as well as for rebuffing attacks of aerial assault assets both independently and within a vessel unit acting as an escort ship. 
The Trishul's main strike weapon is the Club-N antiship missile system developed by the Novator design bureau in Yekaterinburg especially for export to India as part of warships' armament. In addition, the frigate is armed with a new 100-mm artillery system intended for firing at aerial and naval targets. The system consists of the A-190E single-barrel gun and the 5P-10E fire control device. It was designed by the Nizhniy Novgorod-based Burevestnik design bureau and produced by the Arsenal machine-building plant in St Petersburg. The gun has the highest rate of fire among shipborne artillery assets. It fires 80 shots per minute and provides for efficient target-hitting at a distance of about 20 km. 
The 5P-10E Puma fire control system ensures search, detection and tracking of targets in the automatic mode. The Trebovaniye-M combat information and control system collects and processes data on targets and feeds it to all armament and defence systems of the frigate. The vessel is fitted with the Shtil-1 medium-range multi-channel anti-aircraft missile system, the Kashtan shipborne anti-aircraft missile system, eight Igla shoulder-fired anti-aircraft missile systems, two DTA-53-11356 double-pipe torpedo tubes and the RBU-600 jet bombing system. The vessel has an airstrip and hangar for basing a KA-28 Helix or KA-31 helicopter.

Russia is building two fourth-generation submarines

The state-owned Admiralteiskiye Verfi shipbuilding plant is building two fourth-generation submarines. The plant's director general, Vladimir Aleksandrov, told the press in St Petersburg that the St Petersburg submarine will be set afloat in autumn 2003, Interfax-AVN military News Agency web site reported.
It will be tested in 2004, before it is turned over to the Russian navy. The submarine has over 100 pieces of new equipment aboard. The plant is also building a second submarine of the same type (the Amur class) at its own expense for export. This submarine is now 30 per cent ready. The shipyard intends to devote US$55m to scientific research before 2007, Aleksandrov said.
He added that the enterprise annually spends about US$32m on its development needs.

Russian shipyard completes new tanker for Maltese company

Nizhniy Novgorod's Krasnoye Sormovo shipyard launched a new-generation tanker recently, ITAR-TASS news agency reported.
The tanker, Rostov Velikiy, was made for the Maltese company KSS Shipping Ltd. This is the fourth out of 11 ships to be made in Nizhniy Novgorod for the company.
Officials at the shipyard's Engineering Centre told ITAR-TASS that the new "river-sea" type tanker has a double bottom and double hull to avoid oil spills in an accident. It is 141 metres long. 
The lead ship, Nizhniy Novgorod, was handed over to the Maltese company in October 2002 and has already received excellent evaluations. The tanker is now working in the Caspian Sea between the ports of Kazakstan, Turkmenistan, Iran and Russia.

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STOCKS & SHARES

European bank sells share in Russian mobile telecoms giant

The European Bank for Reconstruction and Development (EBRD) has sold 2.6 per cent in Russia's second largest mobile operator, Vympelkom, the bank said recently. In all, 1.415m American Depositary Shares (ADS) traded on the New York Stock Exchange were sold at a price of US$38 per share. Investment bank Merrill Lynch acted as a consultant in the deal, Prime-Tass News Agency reported.
The ADS were sold to an unnamed institutional investor that until now did not have any stake in Vympelkom.
Vympelkom operates in Russia under the Bee Line brand name. As of 27th March, Vympelkom's total number of subscribers was about 6.15m, with approximately 3.93m subscribers in the Moscow Licensed Area (MLA) and 2.22m outside Moscow.
Vympelkom now controls 52 per cent of the Moscow market, 28 per cent of the national market and 13 per cent of the regional market.

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