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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: 268 - (25/04/03)

The Moscow-Berlin-Paris axis
Putin and Schroeder met in St Petersburg on April 11-12th for a regular meeting of the Russian-German Dialogue, at which political and business matters are discussed. President Chirac had expressed his desire to attend, and did so, turning the occasion into a summit of the three main opponents of the Iraq war, making it the chief topic for debate. Kofi Annan, UN Secretary-General had been invited, but wisely refused to be involved in such a heavily charged affair. 
This meeting is likely to have serious repercussions for the Russians down the road, affecting the status of their outstanding Iraqi debt to them, some US$8bn, and the fate of oil deals by LUKoil and other Russian firms. It is still too early to say by how much.
The alignment of Russia with France and Germany over such a vital matter risks a serious falling out with the US, although not with the UK, which has been more nuanced all along in its approach to the issue. Washington is clearly in a triumphalist mood, keen to reward its allies, the UK, Australia, Poland and Hungary, who all committed troops, and to cold-shoulder the arch-villain from its point of view, France, whose oil and construction companies can expect little but sub-contracts in rebuilding postwar Iraq. The Russians did not take the lead in organising the anti-war camp and their oil companies can hope to receive better treatment accordingly. But the pre-Iraq crisis days of rapprochement with the US are probably over.
A possible let-out for Russia, is that Condeleeza Rice, who, as National Security Adviser, has huge influence over Bush, has advocated a three-pronged response to the meeting in Moscow, which she visited shortly afterwards, being able to converse with Putin in his native tongue. That is 'punish; forgive; forget.' Translated into action that means 'punish France,' forgive Germany for its understandable penchant for pacifism and forget Russia. Subsequent to her visit, however, a story came out in the UK's Sunday Telegraph, taken up in a big way by US newspapers, that Russia's intelligence services had been giving Iraq all sorts of espionage information, names of assassins who could operate in Europe (in other words, terrorist agents), transcripts of a conversation Blair held with Berlosconi in Rome and other incriminating material. Putin has not helped matters by labelling America's role in Iraq that of "a colonial occupation force." As an old KGB hand, he is generally reckoned in Washington to know full well what his intelligence services are up to in their secret operations. All this is going to test the US Administration's capacity for selective oblivion rather sorely. 
In practical terms the US can now look to Iraq as the alternative producer to Saudi Arabia, possessing proven reserves of 112-115bn barrels, compared with Russia's 49bn and Azerbaijan's 31bn. Indeed, only 2,000 drillings have been made recently in Iraq, as opposed to about one million in Texas, according to the US Energy Department. Real reserves could be close to 300bn barrels of oil, greater even than Saudi's.
At the moment the sole companies pretty sure of a piece of the action on a regime change are Texaco, Exxon, BP and Royal Dutch Shell, all good Anglo-Saxon entities. But to restrict foreign participation to them would look unduly imperialistic. LUKoil has grounds to expect its deal made in 1997 to develop the giant West Qurna field to be honoured, despite being repudiated by Baghdad late last year, obviously because of Moscow complying with UN Resolution 1441, which the Iraqi regime hoped it would veto. Any attempt by a successor government to renege on the deal would be fought by legal means, says LUKoil vice-chairman Leonid Fedun. That would mean filing an international arbitration suit in Geneva. If the Geneva court gave in Lukoil's favour this would involve an impounding of Iraqi tankers carrying oil until the matter was settled, Fedun claims.
The US$6bn required as a minimum to develop the (estimated) 15bn barrel field, one of the world's largest oilfields, would require additional financing, probably from Western sources. If one of the Western majors was brought in, the deal would become more feasible and likely to succeed. BP or Shell, Texaco or Exxon would be obvious possibilities here. With lower production costs than Siberian or Russian Arctic fields, around US$2 per barrel, the Iraqi field is sure to tempt them, especially given where it is, close to the busiest oil sea lanes in the world.

'Regime change' in international rule of law?
The significance of the outcome of the Iraq war for Russia is far wider than just its economic implications. The Kremlin gained one undoubted advantage from backing the US after 9:11. It won the immediate support of Germany and a bit more guardedly the US for its stigmatisation of the Chechen rebels as terrorists. This was reconfirmed by the hostage crisis in the Moscow theatre late last year. 
By opposing US action in Iraq, however, Putin has now put the issue in question once again. Not that anyone in the West would ever think it possible to intervene in Chechnya, any more than in, say, Tibet. Russia and China are just too big and important. But the status of Russia in the world, its chances of joining various international bodies, such as the World Trade Organisation for instance, or of cooperating with NATO could be affected. The US and the UK have waged a war that could be, and has been, deemed as of doubtful legality in terms of international law, which upholds the inviolability of the sovereignty and so of the internal affairs of a state, in which other states are forbidden to interfere. 
This has in practice been honoured far more in the breach than in the observance. But it has been the bedrock of international law since the Treaty of Westphalia in 1648, ending the Thirty Years War which had seen the most intense interstate meddling and marauding known to that date.
The US is evidently on the way to seeking 'regime change', not just to Iraq, but also implicitly to international law, which, indeed, has evolved and adapted itself to new circumstances throughout its history. For international law has come to be judged itself by public opinion in the prominent powers of the time, particularly the Western powers and those affected by their behaviour on the world stage. Thus, in the aftermath of the 1991 Gulf War, Western public opinion was so outraged by the murderous chase of the Kurds by Baghdad that it insisted on the no-fly zones and the creation of 'safe havens' for them in their northern enclaves, clear breaches of Iraqi sovereignty though they were. These were deemed justified by Baghdad's violation of the terms of the ceasefire agreement of 1991 and of successive UN resolutions, notably of 1441 passed last November. That, in the eyes of the US, made the Iraqi war legitimate, even if only controversially legal. 
The prosecution of the Chechen conflict is a legal affair for Russia since Chechnya is under its sovereignty, but it is of doubtful legitimacy in the eyes of public opinion in the West, which, as with the Kurds, is coming to regard slow-motion genocide by a state of a people under its sovereign rule as unjustified. While the Chechen war may be legal, consonant with the letter of international law, it could be argued that it is illegitimate, violating its spirit, which is to minister to the well-being and comity of peoples, not just the security and convenience of the states ruling over them. This, it could be argued, is especially true when they are not genuine nation-states at all, but artificial constructs or residues of empire, to whit Iraq and the Russian Federation. Saddam massacring the Kurds and Moscow savaging the Chechens may be legal under existing international law, therefore, but scarcely legitimate, indicating the need for a new evolution of legal norms.
It is not at all likely of course that Schroeder and Chirac are going to draw any such parallel; quite the reverse. But one of their successors just might, or even the US if provoked enough by the new troika in the Moscow-Berlin-Paris axis. France has interfered recently in the Ivory Coast's civil war without UN sanction, just as the UK in Sierre Leone likewise. Mounting a legalist's hobby-horse, as Putin is now doing on the Iraq issue, is giving hostages to fortune. 

Oil sector in turmoil
Russia's oil industry has driven its economy for the last three years, engendering a long boom that has lifted it out of the grave depression besetting it after the collapse of the rouble in late 1998. The devaluation was also a powerful instigator of growth, but is no longer so potent a force.
The oil sector is exporting over four million barrels per day, bringing in more than US$35bn per annum. Together with the sales of gas, it has put the trade account in a surplus of over US$40bn annually. An export-led boom is encouraging Russian capital that fled abroad in the 1990s to return. The opportunities opening up for investment are various and far-flung.
The government is trying to keep control of the key oil sector by insisting on maintaining its grip on the transport of the end-product via its monopoly, Transneft. It is making clear its intention that all new pipelines should be state-owned, indeed oil terminals too. Several are under consideration by the private majors, who are aware that oil production, already at over eight million barrels per day the highest in the world, is rising by 10% per year. The need for new outlets is urgent.
But Moscow is adamant about keeping control of the whole process. This is for two sets of reasons - political and geopolitical raison d'etre.
The political logic is quite simple. Putin and his government want to keep the oligarchs as supplicants, as also the members of the Duma whom they bankroll and "manage," a large number of deputies as it so happens. This is especially important in the run-up to the next Duma elections in December of this year. The Kremlin wants the composition of the Duma to remain as massively favourable to itself as it is now. 
Then larger geopolitical reasons count hugely. There are key far-flung governors in Siberia and the Far East, who depend on the oil tycoons for their re-election and survival or actually are tycoons themselves, such as Roman Abramovich head of Sibneft and governor of Chuckotka, next to Kamchatka, across the Bering Sea from Alaska. The territorial integrity of the Russian Federation is at stake, counteracting the natural pull of China on the Far East.
Indeed, this defensive geopolitical concern is coupled with a more outward-bound strategy to use the oil carrot to forge ties with foreign countries. The trouble is that this can conflict with a purely economic logic. Hence, why there is a tussle over a big new pipeline eastwards to Asia, which the market dictates should be to China directly, by far the largest likely market, but geopolitical considerations indicate should be open to sales to Korea and Japan and beyond from Nakhodka.
While Khodorkovsky is rooting for a pipeline to Northern China, Transneft is keen to build a longer, more expensive line to the Pacific that would allow Russia to export to all the countries of Asia. It is easy to see the advantages for the far-sighted geopoliticians of the Kremlin; but it is not clear that the proposed pipeline would be the most profitable. 
To the west of Siberia, the oil companies have a US$4.5bn plan to build an Arctic pipeline and port that could lead to Russia supplying 10% of the US's importation of oil products, especially of oil. Washington is naturally much in favour. But Premier Mikhail Kasyanov put a spanner in the works by saying that it should all - like the Asian project - be publicly owned.
The US$4.5bn project is arousing fear in the Kremlin for several reasons. It doesn't want the industry at home exporting so much oil that it leads to shortages at home, sold for one tenth of world price levels. It wants to be in charge of transport tariffs. It distrusts the free play of market forces.

Foreign companies at bay
Russia is tilting not just against its own oil companies, but foreign ones as well. It has decided not to grant special legal protection to dozens of energy projects in which Western majors had planned to invest billions.
Production-share agreements (PSAs) are no longer the order of the day, guaranteeing tax breaks and stable terms for investment. BP's decision to buy half of Tyumen Oil, now called TNK-Bp, for US$6.75bn seems to have delivered a death blow to PSAs, allowing Moscow to argue that it could attract big investments without offering the tax breaks and other perks of a PSA. 
Deputy Prime Minister Viktor Khristenko said the government would soon propose amending legislation to preserve five existing PSA projects, but scrap the majority of 33 additional projects still in the planning stages. "There will be a very limited list of fields which should be developed under PSAs.. because of existing intergovernmental agreements, or because of exceptionally tough conditions, in particular in offshore zones," Khristenko said.
Russia's soaring oil production, along with the BP deal, appears to have given the government the confidence to abandon PSAs. The contracts never enjoyed much support in the government or parliament but were tolerated in the mid-1990s, when Russia's oil production was falling because of a lack of investment. Seeking to attract foreign money, the state approved four PSAs for the oil and gas sector and one for a gold mine.
Thanks to the political stability that has set in since President Vladimir Putin came to power in 2000, Russia's own oil companies have dramatically boosted investment and sent output climbing. Some of the biggest companies, such as OAO Yukos and OAO Sibneft, have lobbied legislators to kill PSAs once and or all, arguing that foreigners shouldn't be given an edge.
But many foreigners argue that cancelling PSAs would be a mistake if Russia is to keep production growing over the long term. Most of the production growth over the past three years, they note, has come at relatively little cost and during a period of high oil prices.
"PSAs should play a role in the investment mix in Russia for . large, capital-intensive projects that require long lead time," said Peter Henshaw, a BP spokesman in Moscow. The company was confident enough in Russia's investment climate to buy into TNK-BP, but says it wants a PSA in hand before tapping a giant Siberian gas field. BP and its partners have "invested and carried out activities on the basis that any development would take place under PSA" and would be disappointed by the regime's cancellation, Mr Henshaw added.
Other companies likely to suffer include Conoco, which had been hoping to win a PSA to jointly develop Arctic oil reserves with Russia's OAO LUKoil, and Eni, which had planned to tap a southern gas field under the special legal regime. 
Existing PSAs that Khristenko said would be allowed to continue include two offshore projects off the coast of Sakhalin Island led by Exxon Mobil Corp and Royal Dutch/Shell Group; a Siberian oil project led by TotalFinaElf; and a Siberian oil field owned by TNK-BP.

Russia on a roll
The booming economy has altered international perceptions of Russia and enabled its leading firms to borrow abroad on a scale never seen since before 1914. Indeed, Russia is now deemed one of the best venues for financial investment outside the advanced world, even if outside the energy sector much foreign direct investment is still holding back.
A year ago, only a few Russian companies had regained access to international markets after the 1998 financial crisis. Now, many more companies are getting in on the act. Net borrowing by Russian companies abroad rose by more than four-fold in 2002 compared with the increase in 2001, according to figures released by Russia's Central Bank.
"The perception has changed," said Jerome Booth, head of research at London-based Ashmore Investment Management, which handles emerging market debt. "Russia is one of the safer assets in emerging markets now. The economic turnaround has been phenomenal."

On 4th April, a holding company called Sistema issued a US$350m Eurobond. The sale came a month after a giant US$1.75bn issue by Russia's natural gas monopoly, Gazprom OAO. The Russian juice and dairy producer Wimm-Bill-Dann Foods OJSC, as well as Russia's largest carmaker, AO Avtovaz, and state-owned diamond producer, Alrosa, have all announced plans to sell bonds abroad.
The numbers tell the story. Russian government Eurobonds maturing in 2007 yielded 10.3 per cent in early 2002. In February it was yielding 5.2 per cent. The Russian oil company OAO Sibneft's bond maturing in the same year recently yielded 7.9 per cent, down from 11.5 per cent early last year.
Big Russian companies seek foreign financing for projects because capital markets at home are too small to accommodate them. Russia's banking system, with assets just under US$100bn, is smaller than many American banks. Pension and insurance funds that power Western markets are virtually nonexistent in Russia.
Most Russian companies have relatively little debt because until recently no one would lend to them. As a result, now they are able to borrow abroad at rates that have steadily become more affordable.
But there is a risk factor to be taken into account in this type of financial development. Assuming debt carries the problem of what happens in a downturn. If oil prices fall in the aftermath of the Iraq war, and if the boom times come to an end in Russia, then indebted companies may well find it difficult to honour their obligations. Foreigners have been eschewing equity in Russian companies, aware of the pitfalls in Russian corporate governance in the 1990s. Whereas dividend payments can be easily cut, repayments of principal and payments of interest on debt are inexorably required at the agreed pre-existing rates.
The risk is that Russian companies, with limited experience with debt repayment, are borrowing simply because they can. It was such a lack of strategy and contingency plans, that led to a string of foreign debt defaults by Russian banks in 1998, after a financial crisis flattened the rouble.
A recent reminder of unwise borrowing in an overheated market is the Russian region of Nizhny Novgorod. The region's government sold a foreign-currency bond during the market euphoria in 1997, only to default on it the following year. After months of negotiations, investors accepted new terms. Recently the region had to be bailed out by Russia's stated-owned savings bank.
For now, fears about payments are distant. Russian oil exports were up 15 per cent in the first two months of this year compared with a year ago. 

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AUTOMOBILES

GM-Avtovaz plan Opel Astra T-3000 assembly

Russia's biggest carmaker, Avtovaz, and General Motors have practically agreed to assemble the Opel Astra T-3000 at their joint venture facility in Russia, the head of the Avtovaz Board of Directors, Vladimir Kadannikov, said, New Europe reports. He said a general understanding on the issue had been reached but added that production of the model will not begin this year. 
The GM-Avtovaz joint venture is already making the Cheverolet Niva off road vehicle. Kadannikov said that in June the Ukrainian ZAZ carmaker is expected to launch the assembly of Avtovaz's Lada Samaras, some with engines from the Melitopol engine plant. 

Volvo Truck, Sistema open joint venture

Volvo Truck and Sistema were expected to open their joint Volvo truck-producing venture VTS-Zelenograd on March 20th, Lars Korneliussen, the director general of Volvo Truck Russia, told a press conference in Moscow, New Europe reported.
VTS-Zelenograd, where assembly has already begun, will produce 200 to 300 trucks a year depending on market demand. It has the capacity to turn out one truck a day. Production volumes can be raised if necessary. The plant assembles Volvo FH and Volvo FM trucks. Volvo Truck can play a large role in developing Russia's auto industry, Korneliussen said, noting that as well as the joint venture; the company is searching for parts suppliers to integrate in the global system of Volvo Truck supplies.
Russia imported 3,500 new and second hand Volvo trucks in 2002. Volvo Truck Corp, and Sistema signed a general agreement on joint production of Volvo trucks in March 2000. VTS-Zelenograd was created with Volvo holding 66% of charter capital and Sistema 34%. Under the terms of the agreement, Sistema provided the premises for construction and reconstructed these and Volvo provided equipment, trained personnel and is assisting with production.

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AVIATION & SPACE

Russia, Uzbekistan join forces to sell military aircraft


Russia and Uzbekistan have agreed on the terms of production and export of planes manufactured at the Chkalov aviation plant based in Tashkent, Interfax News Agency has reported.
"It has been decided that Russian enterprises will take part in the supply of Il-78 MKI aircraft to India, and the Chkalov plant will be the head enterprise in the deal," a source in the Russian defence industry told Interfax on 27th March.
In the future, sales of Il-76 cargo planes and Il-78 tanker aircraft will be conducted through the Rosoboroneksport system, he stressed.
Negotiations are under way "with a major Southeast Asian country on a large shipment of Il-76s. The negotiations are being held with some breaks in proceedings," the source said.

Russia opens its air space to foreign cargo aircraft

Foreign cargo planes started using Russian air space for the first time on 1st April. The move makes it possible to raise considerable funds for the Russian air transport system, Russia TV has reported. 
At present an agreement on the use of Russian air space has been signed with three airlines - Lufthansa, Air France and Korean Air. Swedish and Japanese airlines are expected to follow suit. 
The money that international carriers will pay for their aircraft to fly over Russia will be primarily used to raise air traffic controllers' wages and to upgrade air traffic control centres. In addition, the new source of funds will make it possible to postpone raising tariffs for air navigation services provided to Russian airlines.

Russia to upgrade main navy helicopter

The draft commission has approved the upgrade project for the KA-27 Helix helicopter, proposed by the Kamov company, a competent source in the Russian defence industry told Interfax-Military News Agency on 1st April. 
"The upgrade project for the main Russian naval helicopter was approved on the whole, with a number of corrections. The upgrade will not only mean eplacing the equipment, but also extending the service life for another 10 to 15 years," he said. 
According to the source, the upgrade programme is at the stage of R&D and first trials. The whole R&D cycle is to be funded by the Defence Ministry. The upgrade for the Helix family is included in the Russian armaments programme for up to 2010. The source would not elaborate on the scheduled terms of the beginning and end of flight trials, saying that "the terms depend on the funding by the customer but the trials will begin this year."
Within the upgrade project designed together by Kamov and St Petersburg-based Leninets holding company, the KA-27 is to be equipped with the Morskoy Zmey (Sea Snake) single-seated search-and-sight system integrated with the Strizh-3SD radar. It tenders the Kopye-A radar made by Russia's Fazotron and demonstrated at the Gelendzik-2002 air show. It was reported previously that the helicopters could be upgraded with the Lira anti-submarine defence system made by Leninets. An upgrade with the higher-power VK-2500 engines is another option. 
The KA-27 and its derivatives are serial-produced at the Kumertau aircraft production enterprise. All in all, 267 KA-27s in various versions, including more than 100 KA-27PLs and 33 KA-28s, have been made to date. The annual programme of production has been about 50 helicopters.

Irkut Corporation mulls Airbus components production

Russia's Irkut Corporation is negotiating a deal with the European Aeronautic Defence & Space Company (EADS) to make US$30-50m annually in components for Airbus planes, corporation President, Alexei Fyodorov, said. Airbus could get its components produced at low cost in Russia. "For Airbus, this is the determining factor in competition with Boeing," Fyodorov said, Interfax News Agency reported. 
No Russian company is yet ready to make the components, but Irkut is prepared to upgrade if it wins the contract. The main factory in Irkutsk is running at full capacity, so Irkut would have to make the components at one of its other plants, possibly in Taganrog, Samara or Saratov. "A final choice has yet to be made," Fyodorov said.
Fyodorov said Irkut was currently in talks with Russian aerospace agency Rosavia-kosmos and the Russian Property Ministry with a view to the state increasing its stake in the corporation to 25 per cent by transferring a state owned stake in one of the aircraft plants in European Russia, possibly the Taganrog plant, to Irkut.
The Irkut Scientific Production Corporation's share holders are ZAO Kompaniya FTK (19.97 per cent), the Forpost commercial bank (19.86 per cent), the state owned Sukhoi Aviation production Complex (14.7 per cent), ZAO Aerokom (10.18 per cent) and ZAO Brunswick UBS Warburg Nominees (nominal holder, 25.76 per cent).

Transaero plans to lease three Boeing-767s

The Russian airline Transearo plans to lease three Boeing 767 passenger jets for 5 years in 2003, the Chairman of the Transaero Board of Directors, Alexander Pleshakov, told journalists in Voronezh on March 15th. The planes will be used on international flights, particularly to Taiwan and North America. Starting May 26th, Transaero will begin regular flights to the Taiwanese capital city of Taipei, and in October or November this year, it will launch regular flights to Canada's Montreal, Pleshakov said, New Europe reported.
Transaero is also interested in buying Russian aircraft. At the present time, the airline needs three or four Tu-204 planes, and it will consider purchasing Il-96s in one or two years, Pleshakov said. At the present time, Transaero operates four Boeing-737s and two Boeing-767s.

Russian engine maker makes move into space sector

The Samara-based Kuznetsov research and technical corporation, previously making aircraft engines only, is taking on space rocket engine technology, Yevgeniy Gritsenko, Kuznetsov CEO, told Interfax-Military News Agency on 27 March.
"Kuznetsov is working on the NK-33 and NK-43/43M space rocket liquid propulsion engines. In particular, the corporation develops the NK-43M first-stage engine (based on highly reliable oxygen-kerosene engines) for the Air Launch programme. The programme is commercial and funded by its participants. We also keep on cooperating with the American Aerojet company," he said. He emphasized that the firm's unique laboratories received as little as two per cent of the state money required.
According to Gritsenko, the priorities for the firm will be the 18-t [refers to 18 t of thrust] NK-93 new-generation aircraft engine, the 550-hp NK-123, and the TRDD-2005 bypass turbojet for a future short-/medium-range airliner. The CEO added that Kuznetsov was also developing on-land engine-based gas turbines.
"We plan to launch GTU NK-37 25-MW engine-based gas-turbine power stations for the Unified Energy Systems of Russia corporation in 2003. A decision on the GTU NK-38 for the gas giant, Gazprom, will also be taken this year. We have developed the NK-94, a liquefied-gas NK-93 derivative," Gritsenko said. He added that Kuznetsov contracted with Motorostroitel, a Samara-based counterpart, for producing gas turbines due to the corporation's restricted output capability. "The Kuznetsov corporation receives a royalty for the aircraft engines and gas turbines produced," the CEO said.
Kuznetsov (founded 1946) has designed and serial-produced the NK-12 engines for the Tu-95 Bear, the NK-32 for the Tu-160 Blackjack, and NK-22/25 for the Tu-22/22M Blinder bombers. The firm currently employs over 4,000 personnel. The state holds 60 per cent of the stock.

Russian earth-probing satellite to carry Italian science gear

The Russian first civilian satellite designed for remote earth probing will carry Italian scientific equipment, the press service of the Progress Aerospace Design Bureau based in Samara has said, ITAR-TASS News Agency has reported. The decision was taken at a session of a scientific and technical commission called to discuss the building of the Resurs-DK1 satellite.
Representatives of the Russian Aerospace Agency, Progress and the Italian Space Agency are attending the session.
Progress is assembling the Resurs-DK1. The launch is scheduled for next year. Resurs-DK1 will be the first Russian civilian satellite capable of photographing the earth's service with a resolution of one metre. The satellite will be used for cartography, as well as monitoring farmland, forests, water and natural and man-made disasters.

European Space Agency to build spacecraft for ISS

The European Space Agency can offer its contribution to transporting cargoes to the International Space Station, which would be an alternative to American and Russian cargo vehicles. "For delivering cargoes to orbit, European designers have created an Automated Transfer Vehicle (ATV). Specialists have already begun constructing the first vehicle in this series called 'Jules Verne' after the prominent French Author," Interfax News Agency quoted the chief of the ESA representation office in Moscow, Alain Fournier-Sicre, as saying.
The European spacecraft is bigger than a Russian Progress. It is 10.3m long, has about 4.5m in diameter and weighs 20.5 tonnes. The vehicle is designed to deliver food, oxygen, water, nitrogen, laboratory equipment, air, and fuel to orbit. Specialists from several countries are involved in construction of the new spacecraft.
Fournier-Sicre said it is planned to build eight spacecraft of this series, although this figure could be revised depending on circumstances. "The first launch of the cargo vehicle from Kourou in French Guiana is scheduled for September 2004, but attempts have already been made to accelerate the launch. Then flights to the ISS will be carried out at regular intervals," he said.
The vehicle is separated into a technical segment, in which engines, control and power supply systems, and a cargo module will be located, and a living segment with a system capable of maintaining an artificial climate, which ISS crew-members can enter without spacesuits. "The ATV will be primarily designed to deliver cargoes to the ISS and to adjust the Station's orbit," Fournier-Sicre said.

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ENERGY

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 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 per cent in 1989-94, and by another 40 per cent 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 system, experts say.

Russian gas giant leads consortium in purchase of Lithuanian power plant

A consortium of Russian gas giant Gazprom, US-based Clement Power Venture and Lithuania's main gas importer, Dujotekana, has signed an agreement to purchase 100 per cent in the Kauno Energija power plant, the chairman of the plant's board, Ramunas Garbaravicius, told reporters 1st April, Prime-TASS News Agency has reported.
Kauno Energija, based in the city of Kaunas, is Lithuania's second largest power plant.
Gazprom will pay 116.5m litas (about US$36.7m) for a 99 per cent stake in the company, while Clement Power Venture and Dujotekana will purchase 0.5 per cent each.
However, it is planned that the two companies will increase their stakes in the plant by the end of the year by buying further shares from Gazprom, Garbaravicius said.
Clement Power Venture is expected to increase its stake to 25 per cent, while Dujotekana plans to increase its stake to 24 per cent, he said.
Gazprom will be responsible for gas supplies to the power plant, Dujotekana for the plant's management and Clement Power Venture for the modernization of the plant, he said.

Russia's Gazprom set to buy 10bn cubic metres of gas from Turkmenistan

Gazprom Chief Aleksey Miller and Turkmen President Saparmurat Niyyazov met in Turkmenistan on 1st April and agreed to sign a long-term contract on the purchase of Turkmen gas by Gazprom, Interfax News Agency has reported.
The contract will be signed in the near future, simultaneously with the long-term interstate agreement on cooperation in the gas sector between Russia and Turkmenistan, reads a Gazprom press release.
It is planned that Russia will import 10bn cubic metres of gas from Turkmenistan beginning in 2005.
The contract for the supply of Turkmen gas to Russia is expected to cover a period of 25 years.
The documents could be signed during President Niyazov's visit to Moscow, which is due to take place in April, a source in the presidential administration told Interfax.

Russian gas, oil giants agree to cooperate in developing Nakhodka gas field

Head of the Gazprom natural gas giant, Aleksey Miller, and LUKoil oil company President, Vagit Alekperov, signed a cooperation agreement on 31st March, Interfax News Agency has reported.
A joint press release says that, under the agreement, LUKoil will be selling gas to Gazprom from the Nakhodka gas field in the Bolshekhetskaya depression in the Yamalo-Nenets Autonomous Area which it is currently developing. In turn Gazprom pledged to transport the gas along the unified gas supply network in Russia.
Gas deliveries from Nakhodka to the Yamburg compressor station of the gas supply network will begin in the fourth quarter of 2005. In 2006 overall deliveries are expected to amount to 8bn cu. m.
Alekperov told reporters that LUKoil will be selling the gas at a price of no less than US$22 for 1,000 cu. m. without VAT.
Miller said the agreement names the basic principles of a contract which the two sides are expected to sign within two months.
The agreement allows LUKoil to begin actively investing in the development of the Nakhodka field, Alekperov said. By the end of 2005 investments are expected to run to US$400m, 140m of which will go to the construction of a pipeline to the Yamburg compressor station. Alekperov said the first 800m cu. m. of gas from the field are to be delivered in the fourth quarter of 2005.
"The agreement is a very important step because it may become a foundation for further cooperation between Gazprom and independent gas producers," Miller said.
The agreement is a supplement to the general agreement on strategic partnership for 2002-2005 between LUKoil and Gazprom...

Russia signs cooperation agreement with International Energy Agency

The Russian Energy Ministry and the International Energy Agency (IEA) on 31st March signed a three-year cooperation agreement, ITAR-TASS News Agency has reported. The document was signed by Energy Minister Igor Yusufov and IEA Executive Director Claude Mandil.
The IEA was created to protect commodity markets from new oil crises after the one in 1970 and it has been monitoring energy stocks in 26 member states.
In accordance with the agreement, the sides will consider Russia's participation in the IEA collective energy security system. An international conference on natural gas is to be held in Moscow this autumn.

Moscow chooses Angarsk-Nakhodka-Daqing pipeline

The Russian government has chosen a combined pipeline route - from Angarsk to Nakhodka, with a branch to Daqing in China - to transport oil from Eastern Siberia to the Asia-Pacific region, Russian Prime Minister, Mikhail Kasyanov, said recently, reports New Europe.
He noted that until May 1st ministries and departments should carefully study the effectiveness of this project and decide on the exact route of this pipeline. "There are many factors that should be considered," he said. Among these, he noted concern and uncertainty over the ability to fill this pipeline with the necessary amount of oil.
Kasyanov said that if there are changes in forecasts regarding the volume of production in Eastern Siberia, there should be the possibility of making changes in this project, so that it can remain economically effective. "There is still great uncertainty over explored and proven reserves (in Eastern Siberia)," Kasyanov said.
Kasyanov said that all the necessary calculations should be finished by May 1st. These should be made by ministry specialists and scientists, after which the government will reach a final decision.
Energy Minister, Igor Yusufov, said the volume of oil to be transported through this pipeline amounts to 80m tonnes, with 30m tonnes going to China and the rest to other Asia-Pacific countries via Nakhodka.

Russia in US$100m deal to upgrade Serbian power plant

Russian companies are beginning the modernization of Serbia's Djerdap-1 hydroelectric plant on the Danube, ITAR-TASS News Agency has reported.
The agreement signed by Russia's Energomash and Serbia's power company on 29th March is the biggest joint project in the last 15 years. Its cost is estimated at US$100.5m. It will be financed against the former Soviet Union's clearing debt to the former Yugoslavia. Serbia's share in this debt is about 490m "clearing" US dollars.
When the work is finished in 2010, the hydroelectric plant's capacity will increase by 10 per cent on average, enabling it to generate more than 100m kilowatt/hour annually in addition to its present output.
The Djerdap-1 hydropower plant was built in 1970 with the assistance of Soviet specialists. Turbines for the plant were supplied by Leningrad's Electrosila and LMZ plants. They will supply new turbines now too and will also modernise the hydropower plant's control systems.

Russian oil transporter agrees borrowing for new construction

Russian oil pipeline monopoly, Transneft, and major state-controlled bank, Sberbank, have agreed in principle that Sberbank will open a US$1bn credit line to Transneft, a Transneft official told Prime-TASS News Agency on 27th March. He did not disclose the terms of the deal. The credit line will be used to fund the construction of the third, US$1.1bn, section of the Baltic Pipeline System (BPS).
On 18th March, Russian Prime Minister Mikhail Kasyanov signed a ruling to increase the throughput capacity of the BPS. The first section of the BPS has an annual throughput capacity of 12m t while the second section's capacity is currently 18m t and is to increase to 30m t. The third section's annual throughput is projected at 30m t.
The third section of the BPS will involve laying 600 kilometres of pipe from the Russian city of Yaroslavl to the Baltic Sea oil terminal of Primorsk in the Leningrad Region, as well as expanding the capacity of the pipeline delivering oil to Yaroslavl from inland Russia.
The construction of the third section was approved by President Vladimir Putin in December.

BP, Rosneft to register JV for Sakhalin-5 by mid-2003

BP Sakhalin and Russian oil company Rosneft plan to register an operating company for the Sakhalin-5 project by the middle of this year. This issue was discussed at a meeting between Sakhalin regional legislature Chairman, Vladimir Yefremov, and BP Sakhalin president, Chris Einchomb, Interfax News Agency reported.
BP is expected to have a 49% stake in the operator, and Rosneft and Rosneft-Sakhalinmoreneftgaz will have 51%.
Yefremov suggested that the joint venture be registered and have its head office in Sakhalin region so that the region's residents could benefit from the development of local natural wealth in the form of new jobs and taxes. This year the alliance will continue engineering and geological exploration in several parts of the Kaigansko-Vasyugansky section that were pinpointed in the courts of seismic studies in 2002. The first exploration well will be drilled in the summer of 2004.
BP plans to invest US$20m in seismic exploration for the Sakhalin-5 project. At the exploration stage, BP is financing all operations including the shares of the Russian partners.

Transneft to pay off Raiffeisen bank loan soon

Transneft plans in April to pay off early a Raiffeisen Bank of Austria (RZB) loan of US$150m, which was allocated by for the Baltic Pipeline System (BPS) project, a Russian corporate journal quoted the company's President Semyon Vaynshtok, in an interview, reports New Europe. At the same time the company plans to almost entirely repay a Sberbank loan. "Amid billions in investment spending over the past few years, our credit burden does not exceed US$130m," he said. "We do not have any problem with raising loans to finance the BPC. " Vaynshtok said. 
Currently the most likely project is the launch of full capacity at the Kholmogory-Klin pipeline. With "virtually no additional funds," the company can increase access capability for western route exports by 10m tonnes a year, he said. "If US$30m is raised, it can be brought to 16m tonnes a year." An international syndicated loan, guaranteed by Transneft rouble earnings was allocated in September 2001 by RZB together with its Russian subsidiary, Raiffeisen Austria. Sberbank allocated US$192m for the Sukhodolnaya-Rodionovskaya pipeline. 
The Kholmogory-Klin pipeline transports sweet crude to the Volgograd and Tuapse refineries and exports through the Tuapse Port. Mixing flows of Kholmogory-Klin pipeline sweet crude and Surgut-Polotsk pipeline sulphurous oil ensures increased volumes of exports via the Druzhba pipeline to Poland, Germany, the Czech Republic, Slovakia, Hungary, Ukraine and Belarus.

Iran's largest company set to cooperate with Russia in energy sector

The industrial foundation, Mostazafan Iran, is ready to actively cooperate with Russian companies in the fuel and energy complex, Interfax News Agency has reported. The Russian Energy Ministry said in a press release that this was discussed at a meeting between Energy Ministe,r Igor Yusufov, and foundation Chairman, Mohammad Foruzandeh.
In particular, the Iranian side put forward concrete proposals for participation by Russian companies in large projects being implemented by the foundation to build and modernize regular-cycle thermal power plants, to build combined-cycle plants operating on gas, to drill at oil and gas fields (including at the large South Pars field) and also to supply Russian oil and oil products to Northern Iran.
During the meeting, the participants noted mutual interest in expanding Russian-Iranian cooperation, particularly in areas such as exploring, extracting and selling hydrocarbons and also building and modernizing power plants. The sides agreed to set up a special working group to hold talks on participation by Russian companies in these projects. The Mostazafan Iran foundation is currently the largest economic structure in Iran, controlling over 400 industrial and service companies in the country.

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ENVIRONMENT

British environmental experts helping Russian city cope with waste disposal


A group of ecologists from Great Britain have arrived in the Russian city of Omsk to help clean up the city and avert the threat of spontaneous garbage sites accumulating in the city with a population of 1.2 million, ITAR-TASS News Agency has reported.
The experts from the Oxford environmental centre, the British ecological council and international consulting agency, RCI, have been working on the problem of handling and scrapping the household waste.
Rinat Valitov, adviser on ecological matters under the Omsk city administration, said that more than 150 garbage sites exist in the city now, occupying overall territory of 25 hectares.
Thousands of tons of garbage left over from last year have accumulated on the city garbage sites, while garbage sites out of the city boundaries are full up and could not take in any more waste.
Omsk city mayor, Yevgeniy Belov, complained that a shortage of garbage collection trucks was one of the reasons why garbage heaps have accumulated all over the city. The mayor said they need funds to buy special machinery for garbage removal.
At a meeting with the city mayor the British experts recommended that the city authorities use the British experience of handling waste, asking the population to sort out the garbage and remove it on one's own to special filtration collectors where the garbage will be scrapped.
The British technologies were found interesting, but it was not immediately clear if the British method could be practically used in Omsk.

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FINANCIAL NEWS

Russian gold reserves expected to rise by nearly one-third in 2003 


The Central Bank of Russia expects its gold and foreign exchange reserves to grow by US$14bn to more than US$62bn in 2003, ITAR-TASS News Agency has reported.
As of 1st January 2003, the bank's international reserves stood at US$47,793m. "Now we expect the reserves to grow by US$14bn, given the new average annual oil price forecast of US$26 per barrel," Central Bank First Deputy Chairman Oleg Vyugin said on 31st March.
"The forecasts for reserves are revised as oil price dynamics becomes clear," he explained.
Vyugin said inflation also has a certain impact on the growth of reserves. In his view, inflation in Russia may be reduced in a short period of time, "if we give up a protectionist exchange rate policy, which encourages the export of natural resources and protests domestic manufacturers of uncompetitive products."
He stressed this policy "looks attractive for economic authorities, but in reality it leads to the reproduction of the raw material structure of the Russian economy."

World Bank says raw materials sector stimulating economy

The main driving force in Russia's economic growth last year was still the raw materials sector, the country's dependence on which grew rather decreased, the World Bank said in a report on the Russian economy, New Europe has reported. 
Russian GDP grew 4.3 per cent in 2002, according to data from the state statistics committee, putting aggregate growth in the post-crisis period at over 25 per cent. Average weighted growth of export sectors in 2002 increased to 5.5 per cent from 4.2 per cent in 2001, while growth among companies aimed at the domestic market slowed to 2.5 per cent from 6.3 per cent, the report said. 
The World Bank thinks that Russian economic growth is based on structural changes, with the raw materials sector growing faster than manufacturing, and the service sector growing faster than production of goods. The World Bank does not draw a clear conclusion as to whether this is a positive trend because it facilitated the survival of the fittest companies, or whether it is a negative phenomenon because it fosters unemployment and increases economic instability due to greater independence on the raw materials sector. This will depend on whether there is sufficient investment to sustain economic growth and create jobs, the report said.

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FOOD & DRINK

Private investor sells 7% of Wimm-Bill-Dann


A private investor in Wimm-Bill-Dann Foodstuffs, Latvian citizen, Alexander Timokhins, has sold his 6.9483% of shares in the company, according to a supplement in the Federal Securities Commission Bulletin, New Europe reported recently. The company's press service said the shares were sold to the European registered investment company United Burlington Limited for US$60m. This is the first deal with Wimm-Bill-Dann shares after the placement of ADS on the NYSE. 
This deal has made United Burlington Limited one of the largest portfolio investors in Wimm-Bill-Dann. France's Danone currently owns 6.7% of the company's shares, and the US fund Capital International - 4.5%.
Commenting on the deal, the company manager for working with investors, Andrei Bliznyuk, said the new investor would adhere to the overall shareholders agreement with determines the rules for running the company. "We are not concerned that this stock will be used to the company's detriment," Interfax News Agency quoted him as saying.
Wimm-Bill-Dann was founded in 1992. The company has 23 enterprises in 18 cities around Russia and the Commonwealth of Independent States, likewise 26 retail outlets in major cities. Company product also sells in Canada, Germany, Israel, The Netherlands, Britain and the United States.

Rusagro plans US$100m project in Voronezh region

The company group, Rusagro, one of Russia's leading food market operators, is planning an agribusiness project for the Voronezh region to cost around US$100m. A Rusagro press release said an agreement on this was signed on March 29th with the regional administration, reports Interfax New Agency. Of the overall investment, US$50m is destined for building an oil-extracting plant in the Anninsky region, the rest for developing a raw materials base.
General PR Director, Olga Dashevskaya, said that a detailed business plan will be confirmed in 6 months time. It is thought that the plant's production capacity will be 1,000 tonnes of sunflower seed per day, the recoupment period from three to five years.
Dashevskaya noted that raw material for the new enterprise will come from local producers, along with Rusagro farms in the neighbouring Belgorod region. Company marketers figure that sunflower planting has reached a maximum in the Voronezh region, but think that crop yield could be doubled. Current average crop yield is a tonne per hectare, where it is 20-22 tonnes/hectare at Rusagro farms in the Belgorod region.
Dashevskaya said the company has begun financing the production of sunflower seed at 32 farms in the Anninsky part of the region. The new plant will be the second Rusagro oil-extracting outfit in the Voronezh region. Its plant in the Anninsky region can process 350 tonnes of seed daily. The addition of the new plant will double Rusagro's output capacity.
Furthermore, Rusagro is the owner of Krasnodar territory-based Krasnodarsky, which processes 450 tonnes of sunflower seed per day. Interest in working in the Voronezh region has also been expressed by foreign companies.
In mid-March the US company Cargill signed an agreement with the regional administration on the building of a complex for the processing of sunflower costing US$80-90m. "Competition with Cargill does not scare us, we have more experience working in Russia in this sphere," Dashevskaya said. The Anninsky plant has already started preparing specialists for the future plant. Rusagro runs 12 food industry enterprises in the Central Black Earth region, Krasnodar territory and in Altai. Company turnover last year came to US$600m.

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FOREIGN LOANS 

World Bank grants Russia US$150m loan to fight AIDS, TB

The World Bank granted a new US$150m loan to Russia to fight AIDS and tuberculosis. Funds will be appropriated to the Russian health and justice ministries over six years. If the project is successfully implemented, it can be a basis for a new loan for the same purpose, ITAR-TASS News Agency learnt on 3rd April from World Bank executive director from Russia, Aleksey Kvasov.
The project will be a component part of an already operating Russian state programme, planned for 2002-2006. The Russian government is investing over US$130m in the programme. Also, the UN, the World Health Organization and "bilateral donors,, including the USA and Britain, are participating in financing and implementing the entire programme or its component parts.
The loan has been in a state of preparation for many years mostly due to the fact that there were staunch advocates and resolute adversaries of the programme. Disputes raged mostly around preventive measures and treatment of TB.
A compromise was reached thanks to Russia's agreement to adopt modern Western methods of fighting this disease, but taking into account the rich experience of the Russian medical school and without mandatory use of imported medicines.
Moreover, a provision has been made for rendering assistance in international certification of Russian factories, producing appropriate medicines.

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MINERALS & METALS

Alrosa monopoly kick-starts diamond shipments to De Beers


Alrosa, Russia's Yakutia-based diamond monopoly, on March 12th shipped its first four rough diamond consignments of the year to De Beers. Alrosa told Interfax News Agency that it shipped the diamonds under contracts signed on the basis of the five-year export quota allocated by the government at the beginning of March.
Each consignment is accompanied by a certificate in compliance with the Kimberly Process, which sets out to halt trade in so-called "blood diamonds." Alrosa acknowledged the efforts of the Russian Ministry of Finance, the Gokhran (state precious metals and gemstones repository) and the state customs committee to ensure that state control, certification and customs procedures are ready and in place to meet the new international requirements. 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. Alrosa mines about a quarter of the world's diamonds. Alrosa's biggest shareholders are the Russian Property Ministry with 37% and the Yakutia State Property Ministry with 32%.

Alrosa to confine Africa operations to Angola for now

Alrosa, Russia's Yakutia-based diamond monopoly, has no immediate plans to extend its activity in Africa beyond Angola, where it has been operating for a number of years. "We have received invitations from several African countries to mine diamonds, but we have not accepted any of them for the time being and we have decided to continue to develop diamond lodes in Angola," Interfax News Agency quoted Alrosa President, Vladimir Kalitin, as telling a press conference in Moscow.
Alrosa has, for example, received an offer to mine diamond placers of the River Congo, close to the border between Angola and the Republic of Congo. "But the situation is like this. The war is over and instead of fighting, the locals have gone to look for diamonds in those very places. We have decided not to risk the lives of our own people and have not accepted that offer," Kalitin said. Alrosa has also received offers from Namibia to mine marine placers on a joint basis. "But we have never done this sort of work before. We specialise in diamond lodes, and we have said no." Alrosa will, though, be expanding in Angola. "Our first branch will open in Luanda soon. A director has already been appointed and our specialist have arrived," Kalitin said.
Efforts continue to establish the Luo Mining company, a joint venture in which Alrosa will own 20 per cent of the equity and which will develop the Camachia and Camajicu diamond fields. Alroa will own 20 per cent of the equity in the Luo joint venture. Its partners will be Angola's Endiama E.P, Hipergesta and Angodiam, and Escom Mining, a division of the Portuguese financial group Espirito Santo.
This would be Alrosa's second project in Angola. The first is being delivered by Catoca Mining company, set up in 1997, in which Alrosa and Endiama each own 32.8 per cent of the equity, Odebrecht Mining Sevices 16.4 per cent, and Daumonty Financing company, a member of the Leviev Group, own 18 per cent.

Plutonium licence issued to Russian export agency

The Russian government has empowered the Ministry of Economic Development and Trade to issue plutonium export licences to the Tekhsnabeksport company. The instruction was issued on 25 March, Prime-TASS News Agency reports.
The general licence will be effective till 8 October 2004...

Severstal says no ADR issue in next 2 years

Severstal, one of Russia's biggest steel mills is not planning to issue ADR in the next two years, said the senior manager at the company's finance and economics department, Dmitry Druzhinin, reports New Europe. "There are no specific plans to issue ADR this year or in 2004. The board has not specifically considered or studied this," he said. The situation could change at any time and "interesting proposals might arise."
The company's main shareholders believe that to raise capitalisation it is necessary to increase the number of shares on the market. This can be dome issuing more shares on the domestic market or through an ADR programme. But so far no decisions regarding this have been made. "The issue will be studied and this will last quite a long time, because in adopting any decisions shareholders will have to take many factors into consideration."
"The first factor - perhaps not the main factor - is that the market, in our view, undervalued Severstal. So there would be no point selling our own shares to our biggest shareholders and hoping to improve our capitalisation that way," Druzhinin said.
The second factor is the cyclic nature of the metals sector. "We are currently approaching the peak of that cycle, in other words prices (for metal) are at their highest. But the laws of the cycle state that price drops are inevitable. So if we set about issuing ADR and boosting share liquidity now, we might find ourselves at the trough of the cycle by the time we make a final decision."

SUAL gears up to build Komi alumina refinery

The SUAL aluminium group will start building a refining and smelting complex for alumina and aluminium at the Sredne-Timan bauxite field in the Komi Republic at the end of this year. SUAL said in a news release that the complex capacity 1.4m tonnes of alumina and 300,000-500,000 tonnes of aluminium per year would cost approximately US$2.1bn. The SUAL Board of Directors approved the feasibility study in October last year, New Europe reported.
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 two billion roubles. Vladimir Kremer, a director at ZAO Renova, which partly owns SUAL, has been appointed director general.
The Sredne-Timan field holds a proven 250m tonnes of bauxites, 30% of Russia's entire total. Alumina yield from ore is 50%, and the reserves are shallow, making them amenable to a low cost open pit operation. SUAL mines about 90% of Russia's bauxites, and produces about 70% of the country's silicon, 60% of its alumina and more than 20% of its primary aluminium. The SUAL group includes 22 companies in Russia's aluminium sector that are managed by SUAL Holding, including the Bogoslovsky, Uralsky, Irkutsk and Kandalaksha aluminium smelters. The group mines bauxite, and produces alumina, primary aluminium, silicon and aluminium products. The controlling stake in SUAL is held by Renova and affiliated companies.

Russian aluminium giant borrows US$190m from international banks

Russian Aluminium [Rusal - Russia's largest and the world's second-largest aluminium maker] has raised a three-year syndicated loan totalling US$190m, Interfax News Agency has reported quoting the company's press service.
The loan was organized by a consortium of banks, including BNP Paribas, Glencore International and Natexis Banques Populaires.
The pre-export financing loan was increased from the initial US$150m "due to the significant interest among investors."
The loan "demonstrates the growing interest of foreign banks in the Rusal business. Thanks to the deal the number of international institutes financing Rusal grew to 30", the company's press service quotes financial director Oleg Mukhamedshin as saying.
The consortium also includes Bayerische Landesbank as co-organizer, Commerzbank, Donau-Bank, Erste Bank, GarantiBank International, Moscow Narodny Bank and UFJ Bank as lead managers, and Landesbank Rheinland-Pfalz Girozentrale as a participant.

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NUCLEAR ENERGY

Russia says Iraq war not to affect Iranian nuclear plant project


The war in Iraq will not influence the deadline for the completion of the first power-producing unit at the Bushehr nuclear power plant in neighbouring Iran, which is being built by Russian specialists, the Atomstroyeksport general director, Viktor Kozlov, told Interfax News Agency. 
"There will be no pushing back of the deadline for this project," he said. At the moment Atomstroyeksport is building the first power-producing unit at the Bushehr nuclear power plant under a contract worth US$800m.
According to the Russian Atomic [Energy] Ministry, the launch of the first power-producing unit is planned for 2004. Kozlov noted that the construction would be completed on schedule.
In response to a question about the timetable for supplies of nuclear fuel for the plant, Kozlov said that the fuel would be supplied based on technological requirements. He also noted that this would take place in 2003.
As reported earlier, Atomstroyeksport will supply the first installation of fresh nuclear fuel, amounting to about 40 t, as the cost of the first consignment of nuclear fuel is included in the cost of building the nuclear reactor. 
In the future this fuel will be supplied by TVEL, a world leader in the production of nuclear fuel. It was also reported earlier that Atomstroyeksport has already started to evaluate the technical possibilities for the construction of a second power-producing unit at the Bushehr plant. "This work will be completed in full by the time Iran reaches a final decision on the need to build a second unit at Bushehr," a source in Atomstroyeksport said.

Nuclear fuel factory starts operating in Moscow Region

The machine-building plant based in Elektrostal, Moscow Region, which is a component of the TVEL Corporation, has started industrial operation of a dry conversion installation of the German Siemens company. The installation to make nuclear fuel tablets has cost more than US$15m, TVEL sources told Interfax News Agency.
The installation processes enriched uranium hexafluoride into ceramic uranium dioxide, the sources said. It is a technological system made up of blocks, each of which is located in autonomous isolated chambers with a controllable microclimate.
The main technological equipment is made of corrosion-proof materials capable of working in an aggressive environment in temperatures of up to 800 degrees Celsius.
"The installation is economical and meets the world's highest standards of nuclear and radiation safety," the sources said. "The industrial operation of the new installation will enlarge the output of nuclear fuel tablets by 400 tonnes a year."
TVEL is one of the world's leading producers of nuclear fuel for power plants. Its annual nuclear fuel supply is estimated at approximately US$600m.

Russia to export fuel for Indian nuclear power plant

Russia's corporation TVEL is going to export US$400m worth of fuel for India's nuclear power plant in Kudankulam, the TVEL press service said.
It told ITAR-TASS News Agency on 31st March that a contract "has been already signed between TVEL and India's nuclear energy corporation NPCIL" for deliveries of nuclear fuel in the years to 2010.
"The deliveries of Russian nuclear fuel to India will be accomplished under an inter-governmental accord on the construction of the nuclear power plant in this country", the press service said. TVEL president Aleksandr Nyago said "IAEA (International Atomic Energy Agency) specialists will control the deliveries, storage and loading of nuclear fuel."
"Details of this control mechanism at the present time are being agreed directly by IAEA and the Indian government," Nyago said.
Russia is building two energy units at the Kudankulam plant, and Russian specialists have finished "installation of heavy equipment" at one of them, as a spokesman for the Atomic Energy Ministry told ITAR-TASS.

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RETAIL INDUSTRY

Ramstore opens three new supermarkets in Moscow


Ramenka, the Turkish company that owns the Ramstore chain of supermarkets in Russia, opened three new outlets in Moscow on March 21st, Interfax News Agency reported. The supermarkets are in the Zhulebino district (1,811 square metres overall, 1,616 square metres of it trading space), close to the Sokol metro station (468 square metres, of which 302 square metres trading space) and close to the Sportivnya metro station (974 square metres and 693 square metres). Each outlet will have a range of about 30,000 goods. Each of them cost about US$25m to build. Ramenka said it opened a supermarket in Krasnoyarsk (4,800 square metres) with more than 40,000 goods on offer on March 6th. Deliveries will be via warehouses in Moscow and the provinces. 
The Turkish company will invest US$100m in its Moscow chain in 2003. It already has 15 stores in the capital itself and one in Zelenograd, just outside Moscow. Turnover was US$300m in 2002, and could hit US$400m in 2003. Ramenka was set up in 1997 to create the chain of retail stores in Moscow. It is owned by Ram Holding and Enka Holding. Investments are US$250m to date.

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TELECOMMUNICATIONS

Russia needs to replace all communication satellites by 2005
 

All of Russia's communication satellites should be replaced by 2005, Rosaviakosmos (Russian Aerospace Agency) chief Yuriy Koptev, told journalists on 9th April, Interfax News Agency has reported.
"Our satellite group must be fully replaced by 2005. It is vital to understand the importance and necessity of this space information system," Koptev noted.
At present, 20 countries are able to build satellites, while 180 countries use satellite services, he said.
"Russia must continue working in this sphere. We have research and technological potential. Unless we continue working in the area, the need to use foreign satellites will arise," he said.

Russia-Ukraine rocket to launch US telecom satellite

A US telecom satellite, Telsat-13/Ecostar-9, will be launched from the Sea Launch floating platform on May 8th onboard a Ukrainian Zenith rocket, said Vasily Makarychev, Interfax News Agency reported. Makarychev is the chief designer of the Sea Launch Project at the Transportation and Machine Design Bureau. 
"Preparations for this year's first sea launch are in progress. The Zenith rocket has been delivered to the Long Beach port in California, and the satellite will be delivered in the near future," Makarychev said. An entire crew of Russian specialists who will conduct the launch will meet soon after and begin preparations for the launch on site.
The Sea Launch consortium, which was set up in 1995, is comprised of Boeing (40%), Energia Corporation (25%), Ukraine's Yuzhnoye Design Bureau and Yuzhmash plant (15%), and the British-Norwegian Kvaerner Group (20%). The Transportation Machine Design Bureau is a launching contractor. The launching zone is situated near Christmas Island in the Pacific Ocean.

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TRANSPORT

Russian railways to boost infrastructure investment in 2003


Russia's Railways Ministry plans to spend R45bn on capital repair works in 2003, up 20 per cent on the year, Deputy Railways Minister Vladimir Sazonov told a briefing on 27th March, Prime-TASS News Agency has reported. Sazonov said that additional funds have been raised due to the unification of tariffs.
The unification of tariffs suggests introduction of common tariffs for all export-import railway traffic, excluding transit cargo traffic.
The ministry plans to spend the money on repairing 16,000 kilometres of railway lines, prolonging their operating lives by 20-25 years.

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