Books on Russia
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: 279 - (16/03/04)
The Russian elections went according to expectations. Putin obtained his landslide, never in doubt, while a satisfactory turn-out was achieved. The latter point had been the only matter in contention that could have caused an upset. It is by far the most interesting aspect of the election and is worth dwelling on.
Constitutional conundrum overcome
One of the most curious, if not the most curious, clauses in the Russian constitution stipulates that in a presidential election, if the turn-out is not 50% or more, then a new round has to be held, with new candidates. The last sub-clause is the most telling part of the clause. If the turn-out had not reached 50%, Putin and the others would automatically have been eliminated and by the time of the next round he would no longer have been president!
Such a draconian condition does not exist in any Western constitution. It was introduced in 1993 at the time of December elections to the Duma, which were accompanied by a referendum on the constitution, which was won. The constitution presented to the people was a model of probity. Yeltsin had just indulged in behaviour that was far from immaculate in shelling the old Soviet-style parliament into submission. He wanted to show that his basic intentions were impeccably democratic, which curiously enough they more or less were. He may go down in the history books as the only truly democratic leader so far that Russia has ever had.
Gorbachev never trusted the people enough to vote the right way, ie for him, to hold proper elections. This was probably his biggest mistake, although he made plenty of others; he never had the popular legitimacy that Yeltsin enjoyed for a while in the early 1990s. It lingered on sufficiently for him to be re-elected in 1996, despite being highly unpopular, because the people did not trust the communist candidate, Zyuganov, as a true democrat, whereas they did Yeltsin.
Putin is as popular, if not more so, than Yeltsin in his prime in 1991. But there lay a snag. Expecting a foregone conclusion, people could have not bothered to turn up. That happened in Yugoslavia three times in a row, disqualifying the results, which were 'won' by the incumbent Vojislav Kostunica, the most popular candidate, who is now back as premier of Serbia.
The Kremlin was of course aware of the peril, the only really important issue at stake for them. Most observers would have said that it was no big deal. If the turn-out was looking likely to be poor, then any local chieftain would simply start stuffing the ballots. Easier said than done discreetly. Somehow these things always come out in pretend democracies that are not totalitarian states, as in Armenia and Azerbaijan recently. The victors remain in situ, but their legitimacy is highly tarnished all the same. Putin does not want to live under that cloud, since he knows that he is genuinely very popular. Orders were sent out to make sure enough people turned out to validate the election.
Massive campaign to obtain the 50% turn-out
It is worth dwelling on how success was achieved here, the only novelty of the campaign. In Yeltsin's time there was a lot of canvassing going on by the authorities for people to vote, but to vote for Yeltsin, not just anybody and certainly not for the communist, especially in 1996, when he started out the clear favourite.
This time Putin was certain to win a huge majority of the votes cast. The important thing was for the voters to go out and vote. Hence the curiosity of the Kremlin promoting candidates against their own man. There was a whole string of these, but they were so obviously Kremlin stooges that it was evident that they would hardly inspire people to vote for them. One even said that he was only standing to show solidarity with the president in his hour of need, rather overdoing the servility.
Someone, probably Anatoly Chubais, who masterminded Yeltsin's re-election in 1996 as a Kremlin insider, now thought up a bright idea to inject the campaign with more life. This time he was doing so as a Kremlin outsider, by now being head of the United Energy Systems. He is also a co-head of the Union of Right Forces with Boris Nemtsov and Irina Khakamada, a half-Japanese businesswoman who is a feminist admirer of Margaret Thatcher (a decided oxymoron because the Iron lady herself is anything but a feminist, witness her cabinet appointments). He or Nemtsov or both persuaded her to stand with the Kremlin footing the bill. She could liven up the campaign if given enough access to the media.
But this she was exactly what she was not allowed. The people in the Kremlin who decide these matters are always paranoid and doubtless were fearful that they would be building up a leader of the opposition if they gave her too much air time. She threatened to pull out, aware of the derisory ratings she was getting in the polls.
The Kremlin thought up other, less dangerous, ways of boosting the turn-out. The list of appointees preparing Putin's campaign included more than 200 heads of state-run enterprises and institutions. There is evidence that universities and manufacturers, among others, threatened to punish their members if they did not vote.
The Kremlin also made it abundantly clear to local potentates that their career prospects depended enormously on the size of their local turn-out. Murat Akhedzak, Deputy Governor of the Krasnodar Region in Southern Russia, said that his office had been told "66% minimum, or else the firing squad," according to the newspaper Izvestia. The attribution here is as interesting as the quote. The deputy governor can have done his chances of becoming the governor no good by spilling the beans. He may just have been blurting it out in an exasperated moment. The fact that Izvestia published it indicates their own distaste at the murky electoral process. As a newspaper, they can be more independent and it is inconceivable that they should be shut down. What marks one difference from the old days is that it is no longer true, as used to be said, that there is no news (izvestia) in Pravda; and no truth (pravda) in Izvestia.
Gennady Khodyrev, Governor of the City Of Nizhny Novgorod, had ordered his administration to ensure a turn-out of at least 70%, according to local media. More concerned about their careers than anything else, regional leaders have been bribing and threatening voters to make sure they turn out.
Some of these methods were comparatively innocuous. Radie Dinamit FM was offering free tickets to its annual pop concerts to voters aged between 18 and 35, In Kaliningrad officials set up grocery stalls offering 10% discounts at polling stations.
But others illustrate how Putin's efforts to rebuild a strong centralised state are undermining democracy and fostering corruption and negligence in the bureaucracy. In Khabarovsk hospitals posted notices saying that they would refuse treatment unless patients had filled out absentee ballots. "the doctors were asked to guaranteethe high turn-out rate," an anonymous source in the local administration told the Kommersant newspaper. The source was more careful of his position than the deputy governor of Krasnodar. Kommersant is one of the few independents in the media, owned by billionaire in exile Boris Berezovsky.
The advantages of a free press were shown in this instance. On Vladimir Lukin, Russia's human rights ombudsman, being informed of it, he blamed the order on local health officials. Local officials prosecutors repealed the order at his request.
Kommersant also reported that the authorities in Khabarovsk also ordered two local cellphone operators to send text messages to their clients, reminding them to vote. This is not such an abuse; it could easily happen in a local election in the West.
All these cases took place in the provinces, notoriously keen to keep in with the centre. . But the capital under Mayor Yuri Luzhkov is not above exerting pressure upon its own constituencies. He sent word to the electoral wards that he wanted them to ensure a good turn-out. They would be judged by results.
When Tatyana, a businesswoman in Moscow, asked the city council whether she could have a licence for her new restaurant, the official made a strange request. If she could get hold of 50 voters, the whole thing could be expedited. She was to get her family and staff-driver, cleaner, secretary and hair-stylist- to apply for absentee ballots and come to vote in the district where her restaurant was. He was a local official trying to steal voters from other constituencies to make sure they reached their target turn-out. Once she took her list of 50 names to the council, the licence would be forthcoming.
Her immediate reaction was: "I couldn't believe it. That's so totally, you know.. Soviet." She went on to contradict herself, however. She added: "It was very simple. You scratch my back and I'll scratch yours. But what was strange was that they usually want money, not votes. I guess it's a sign of the times."
Her afterthought is the interesting point. These officials were not engaging in any usual form of corruption. Nor were they in any usual form of vote-rigging. They were not stuffing ballots, just using unusual means to persuade certain people to persuade others to exercise their democratic rights. Democracy by the back door.
The authorities could avoid all this tortuous palaver by just making voting mandatory, as in Australia. But that would have long-term dangers of its own. Putin is very popular and under such a system would win hands down. But what if next time he or a successor was not. Then it would have to be back to the old Soviet system of ballot-stuffing. There has been some definite form of progress, even if certainly it is a case of democracy a la
Russia to harvest over 75m tonnes of grain in 2004
Russia may harvest 75-80m tonnes of grain in 2004, Acting Agriculture Minister, Alexei Gordeyev, said recently, Interfax News Agency reported.
In 2003 the country produced 67.7m tonnes of grain compared with 86.5m tonnes in 2002. Gordeyev told a meeting in Moscow that grain output could be increased if farmers enlarged the area under grain and leguminous crops by 3m hectares. He also said state purchase interventions would stimulate grain production. "The state has announced an intention to purchase grain from the new crop, thereby making clear that it will control and regulate the situation on the grain market in order to ensure profitable production," he said.
Russia minister urges changes in agriculture sector
The acting deputy prime minister and agriculture minister, Aleksey Gordeyev, has suggested the creation of a separate ministry on land [agricultural] relations, during the formation of the new Russian government, ITAR-TASS news agency reported.
The section on land issues is a weak area. Too many ministries and departments are currently dealing with land relations," Gordeyev said. According to Gordeyev, all issues in this sphere should be "coordinated and concentrated in just one ministry, which will be responsible for land policy".
AvtoVAZ eyeing net profit growth this year
AvtoVAZ, a major Russian car manufacturer, plans to boost its net profit to Russian accounting standards in 2004, the company's Vice President for corporate and Strategic management, Mikhail Moskalev, said, New Europe reported recently.
With respect to nuclear submarine dismantling, it will cost about 5bn rubles, he said. AvtoVAZ finished 2003 quite well, he added. The company produced 699,889 vehicles, down from 703,000 in 2002.
Russian car maker exports 421 four-wheel drive vehicles to Iraq
The Ulyanovsk Automobile Plant (UAZ), a Russian manufacturer of four-wheel drive cars and utility vehicles, has supplied 421 UAZ Hunter SUVs [sport utility vehicles] worth US$2.5m to Iraq, the company's press service said. The vehicles will be used by Iraq's National Defence Forces, Prime-TASS news agency reported.
This year, UAZ plans to supply several thousand vehicles to Iraq, while total exports are projected at 17,000, up from 16,000 in 2003. The company began negotiations on car sales to Iraq under the previous regime in 2003, but they were interrupted by the war. This year, the company plans to produce and sell about 82,000 vehicles, including 33,000 of its new UAZ Hunter SUVs. In 2003, UAZ sold 78,538 vehicles, up 8.3 per cent on the year.
Russia increased vehicle production by 36.8 per cent in January
Production of motor vehicles in Russia increased by 36.8 per cent in January 2004, compared with the same period last year, and reached 96,000 vehicles, the Avtoselkhozmash [vehicle and agricultural machinery] holding said. In January Russia produced over 15,000 lorries (compared with 12,500 a year earlier) and 76,000 cars (52,000 a year earlier), ITAR-TASS news agency reported.
In January 2004 the GAZ car factory at Nizhniy Novgorod, formerly Gorkiy manufactured over 9,000 lorries and over 4,500 cars. In January last year the car assembly line of the Gorkiy plant was at a complete standstill. For its part, Avtovaz car plant at Tolyatti in Samara Region increased production by 43.3 per cent, manufacturing almost 54,000 vehicles. Kamaz vehicle plant at Naberezhnyye Chelny in Tatarstan manufactured almost 2,000 lorries and 2,600 cars. This year ZIL Likhachev plant in Moscow passed the 1,000-mark in lorry production.
AVIATION & SPACE
Russia's Sokol aircraft plant joins MiG corporation
The Russian MiG aircraft-building corporation and the Nizhniy Novgorod-based Sokol aircraft plant signed a memorandum of understanding recently which allows Sokol to join MiG, Interfax-AVN Military News Agency reported.
"MiG and Sokol have been working on the project for 14 years. It is a pivotal event. It confirms stronger positions of both MiG and Sokol," MiG director-general, Valeriy Toryanin, said at the memorandum signing ceremony.
He noted that the MiG trademark was very respected throughout the world. "Our aircraft used to be exported to over 50 counties, at present we cooperate with 29 states," Toryanin said.
According to him, Sokol's joining MiG will allow the plant to be used for manufacturing MiG aircraft, in particular MiG-29 Fulcrum fighters, MiG-31 Foxhound interceptors and MiG-AT trainers.
Toryanin emphasized that it was very important that private ventures were joining a state corporation. "This testifies to the fact that the state's role in the aircraft-building industry is increasing," Toryanin said.
He also said that these steps were caused by the general trend of increasing the role of the state in the aircraft-building industry. Sokol director-general, Mikhail Shibayev, said: "This decision is a strategic one for our plant. We have been cooperating with the MiG Corporation since 1948. The plant has manufactured 13,935 MiG-family aircraft since 1948." He also noted that Sokol had participated both in manufacturing and developing MiG-family aircraft. Sokol is expected to completely join MiG by the turn of the year.
At the present time MiG is the one of the largest aircraft-building ventures both in Russia and abroad. It comprises over 10 enterprises, employing a total of 13,000 people. When Sokol joins the corporation, the number of employees will increase to 20,000.
Russian Space Agency announces ISS flight programme
The Russian Aviation and Space Agency will make two launches of Souyz spacecraft and four launches of Progress cargo spacecraft within the framework of the programme of the International Space Station (ISS) in 2004, Yuri Koptev, the head of the agency, said recently, RBC reported.
According to him, the budget of the Aviation and Space Agency for 2004 allows for making these launches and supporting a minimal scientific programme at the ISS. However, the agency will be unable to support the development of the Russian segment of the station this year, Koptev remarked.
"It's unlikely that we'll change to Soyuz-2 with a manned craft within the next three to five years," he said. Koptev announced earlier that the budget for Russia's space programme for 2004 was US$526.5m. Of that amount, US$217.62m will be allocated for the implementation of the ISS programme (including design work and the creation of documentation). Additionally, according to Koptev, US$70.2m will be allocated for the development of Russia's satellite system.
For example, the satellite system of Russia will be fully renewed during 2004-2005.
As reported earlier, the Aviation and Space Agency made 21 launches within the framework of the civil, military and commercial programmes in 2003. Koptev also called for studying expediency of manned mission to Mars. "It is necessary to drop emotions in order to see what real benefit people can derive from visiting these planets," said Koptev.
A Mars mission will cost hundreds of billions of dollars, he said. It will not be easy for the United States to find money for it, given the country's huge budget deficit.
Moreover, the building by the United States of its national missile defence system also requires tremendous spending. "It makes sense to coordinate to the maximum degree the moon and Mars exploration projects with the help of automatic probes," Koptev said.
Aeroflot to continue investing in sheremetyevo-3 terminal
Aeroflot-Russian Airlines will continue to invest in the construction of the Sheremetyevo-3 terminal, Aeroflot Director General, Valery Okulov, said, Interfax News Agency reported recently. He said Aeroflot needed the infrastructure for development. Aeroflot investments will go on despite the fact that the consortium, in which Aeroflot was a member, was defeated in the tender for the managing company of Sheremetyevo Airport, Okulov said.
Russian space tug lifts ISS orbit
Experts at the Russian Mission Control Centre located in Korolev, Moscow Region, have successfully conducted the operation to lift the orbit of the International Space Station (ISS) in order to prepare it for a docking with the manned Soyuz TMA spacecraft which will blast off from Baykonur on 19 April bringing the crew of the next mission to the station, Interfax News Agency reported.
"The adjustment of the orbit has taken place. It was lifted with the help of the engines of the Russian Progress-M1-11 cargo ship," a spokesman for the Mission Control Centre said. The station's orbit has been raised by four km on average.
Air taxi service launch in Moscow
New Europe reported recently that overall, US$6m have been invested in an air taxi project, which will be launched soon, for passenger flights from Moscow to nearby cities, Mikhail Kolesnikov, director general of the Avialine company, said recently. Regular passenger routes from Myachikovo airfield outside Moscow will be opened early in the summer, said Kolesnikov. Small An-2 planes will operate on the Moscow-Yaroslavl-Kaluga-Bryansk and Moscow-Tula-Orel-Kursk-Belgorod routes. The planes will take on board up to 12 passengers and will make one flight a day. Later, the plane fleet will receive more up-to-date An-3 aircraft, which will be able to also take on board cargo. The new air routes will be opened in line with a programme of support for small aviation in central Russia, in which the Moscow government participates together with the Avialine company.
Russia's Aeroflot plans to upgrade cargo aircraft fleet by 2006
Russia's largest state-controlled airline Aeroflot plans to upgrade its cargo aircraft fleet by 2006, the company's deputy director, Igor Desyatnichenko, told a news conference recently, Prime-TASS news agency reported.
The company plans to have six long-haul MD-11 cargo aircraft by 2006, instead of the DC-10 aircraft currently used by Aeroflot, he said. DC-10 is an outdated aircraft, and cannot be upgraded to comply with engine noise standards which are to be introduced in 2006, he said.
Aeroflot expects to receive the first MD-11 in spring 2004, he said adding that Aeroflot is also ready to purchase six Il-96 and/or Tu-204. However, those planes may not be ready by 2006, he said. In 2003, Aeroflot cargo transportation rose 4 per cent on the year to 104,900
Norilsk Nickel to launch US$1bn Eurobond issue
The Interros industrial and banking group, which controls Norilsk Nickel, plans to launch a US$1bn Eurobond convertible into Norilsk's American depository receipts, Vedomosti reported recently.
Vedomosti quoted three unnamed sources at Norilsk as saying there was a plan to issue the bond but no further details were immediately available. The newspaper said Interros planned to use proceeds from the issue to acquire stakes in power generating companies. Norilsk CEO, Mikhail Prokhorov, and Interros President Vladimir Potanin are the largest shareholders in Norilsk, the world's top producer of nickel and palladium. Each has a stake of over 25%. Norilsk said it had asked the Russian
securities market watchdog to raise the limit on shares traded in the form of ADRs to 40% from 23.3% of its equity. It said the existing limit was nearly exhausted. Last December, UBS sold bonds exchangeable for Norilsk ADRs worth US$325m and US$300.5m on behalf of a minority Norilsk shareholder.
S&P downgrades Khanty Manyisk Autonomous Okrug
Standard & Poor's Ratings Services has placed its BB- foreign currency issuer credit rating on Khanty-Mansyisk Autonomous Okrug (KMAO) in Russia on CreditWatch with negative implications, the agency said in a recent press release, Interfax News Agency reported.
At the same time, Standard & Poor's revised the outlook on the Yamal-Nenets Autonomous Okrug (YNAO) to stable from positive. The ruAA Russia national scale rating on KNAO, and the B foreign currency issuer credit and ruA Russia national scale ratings on TNAO were affirmed.
"The CreditWatch placement and outlook revision reflect Standard & Poor's concerns that the imminent redistribution of expenditure and revenue responsibilities between the Okrugs and the Tyumen Oblast, in which the Okrugs are situated, could lead to negative changes in KMAO's financial and debt position and offset positive economic and management developments in YNAO," said Standard & Poor's Public Finance credit analyst Boris Kopeykin. "In the worst-case scenario, the Okrugs may lose debt-management responsibilities."
Resolution of the CreditWatch on KMAO will depend on the essence and timing of a revenue-sharing agreement between the regions, and the response of the Okrug's management to the new conditions.
The rating on KMAO could be lowered to B+ or affirmed at BB-, depending on the severity of the agreement for the Okrug. The CreditWatch is expected to be resolved in May.
KMAO and YNAO have regional status under the Russian constitution.
The Okrugs form parts of the Tyumen Oblast, which is also a region. The federal law adopted in July 2003 indicates that budget responsibilities and revenues will be significantly redistributed.
The Okrugs and the Tyumen Oblast must sign a revenue and expenditure-sharing agreement.
The agreement should be reached by the end of April to provide continuity of the budget process in the regions.
If the agreement is not signed by the end of 2004, most of the Okrugs' revenue and expenditure responsibilities would be transferred to the Oblast from January 1st, 2005.
The stable outlook on YNAO reflects Standard &Poor's expectation that the Okrug's continuous economic growth and improving management will balance the expected revenue redistribution between the Okrug and the Tyumen Oblast at this rating level.
It also incorporates the expectation that YNAO's debt will be managed prudently.
TNK-BP, Sibneft to take over Megionneftegaz licences
The operating licences of Slavneft's core upstream unit Megionneftegaz will be transferred to two companies controlled by Slaveneft owners TNK-BP and Sibneft, German Khan, the executive director of TNK-BP, said at the London Oil Week recently, New Europe reported.
Khan said the licences would be split half and half, and that minority shareholders of Megionneftegaz would be able to receive either an interest in these companies proportionate to their stakes in Megionneftegaz or to sell their shares at a price determined by independent experts. Khan also said there was still a possibility that TNK-BP would buy Sibneft's interest in Slavneft but that this was not currently under discussion and the companies plan to run Slavneft on a parity basis.
Enel, ESN-Energo win Northwest power plant tender
A consortium of Italy's Enel and Russia's ESN-Energo has been declared the winner of a tender to manage Northwest Thermal Power Plant, Unified Energy Systems of Russia executive, Andrei Trapeznikov, said, Interfax News Agency reported.
Finnish company Fortum also participated in the tender.
In mid-2003 UES decided to invite an international energy company to manage Northwest Thermal Power Plant, which is one of the holding company's most modern plants. This was due to the need to attract funds to complete the plant and a power line connecting it with St Petersburg.
UES said that at the preliminary stage of the tender 10 intentional energy companies expressed an interest in managing the plant, including Germany's RWE and E.ON.Energie. However, most of these later withdrew over the conditions of the tender. UES plans to sign a contract with the winner in mid-2004.
The first power-producing unit at the plant, with a capacity of 450 megawatts, was launched in December 2000.
The plant's two units will have a capacity of 900 megawatts. UES of Russia owns 61.5% of shares in Northwest Thermal Power Plant, Lenenergo - 13.8%, Lentransgaz - 12.3%, the St Petersburg Municipal Property Management Committee - 7.5% and Tekhnopromexport - 3.7%, Interfax reported.
LUKoil to receive 1st oil from D-6 in summer
Russian oil major LUKoil plans to receive its first oil from the D-6 field in the Baltic Sea this summer, LUKoil President, Vagit Alekperov, said, New Europe reported recently.
"I hope that an act of acceptance for an Arctic-class stationary platform will be signed in the presence of the highest officials from our country," he said. Alekperov said that drilling will start immediately afterward. A state commission accepted recently the stationary platform at the Kravtsovskoye (D-6) field. The state commission's act of acceptance for the platform has been submitted to the Kaliningrad administration for
approval. The Kravtsovskoye (D-6) field was discovered in 1983 and is the largest in Kaliningrad region. The field is located in the Baltic Sea, 23km from the Curonian Spit and 5km from the state border with Lithuania. According to preliminary estimates, annual oil production at the field will amount to about 600,000 tonnes.
First section of Yamal-Europe gas pipeline to be built by mid-2005
Russia's gas giant Gazprom plans to finish construction of the first section of the Yamal-Europe gas pipeline by the middle of 2005, Gazprom's Deputy CEO, Aleksandr Ryazanov, told a news conference, Prime-TASS news agency reported
The annual capacity of the first section is estimated at 33 billion cubic meters of gas.
To reach this capacity, it will be necessary to build four compressor stations, Ryazanov said.
He also said that construction of the second stage of the Yamal-Europe pipeline will depend on the market demand.
It is unlikely that the decision on the second stage will be made in the next 5 or 6 years, he said.
Once the first section of the pipeline is completed, the issue of gas transit to the European Union through Belarus will be resolved, as the pipeline will be Russia's property despite the fact it runs through Belarus, Ryazanov said.
Russia's Tatarstan buys Turkish oil refinery sector
The purchase of Turkey's Tupras petroleum refinery by Tatarstan is the deal of the century. During a meeting with foreign journalists, Tatarstan President, Mintimer Shaymiyev, said that the deal was estimated to be worth US$1.3bn. Thus Tatarstan purchased the whole petroleum refining sector of the Republic of Turkey - four refineries. According to experts' estimates, this deal is profitable not only for Tatarstan's company [Tatneft], but for the republic [of Tatarstan] as a whole, and not only from an economic point of view. It will raise the image of Tatarstan and will make it more presentable on the Western market, Tatar-Inform news agency reported.
Tatarstan Trade and Foreign Economic Cooperation Minister, Khafiz Salikhov, who visited Turkey with a Tatarstan delegation led by Prime Minister, Rustam Minnikhanov, summed up the results of the visit at a briefing with journalists at the Cabinet of Ministers on 27th February.
The Tatarstan government delegation visited Turkey with the aim of expanding trade, economic, scientific, technical and cultural cooperation between the two countries. Shafagat Takhautdinov, director-general of the Tatneft open joint-stock company, and Ravil Mavlyutov, envoy of the Republic of Tatarstan to the Republic of Turkey, were part of the delegation. During the visit, meetings were held with Turkish Prime Minister, Recep Tayyip Erdogan, Finance Minister, Kemal Unakitan, and the management of the Zorlu holding and Tupras. The sides discussed not only the immediate prospects of the development, but also the results of the privatization by Tatneft of the Turkish Tupras petroleum refinery.
According to the results of 2003, Turkey came second among Tatarstan's foreign trade partners. Trade turnover with it ran at US$750m, and it is planned to be increased up to 1bn dollars. According to the results of last year, as a whole Russian-Turkish trade turnover stood at over US$5bn.
Over the last 10 years the Tupras company received more than 75 per cent of its oil from Middle East countries - Iran, Iraq, Saudi Arabia, Syria, Lebanon and Algeria. No more than 5m tonnes of oil was supplied from Russia annually. According to last year's results, the Tatneft company supplied 2.8m tons of oil to Turkey. It is planned to increase supplies up to 4m tons this year.
Russian, Saudi oil companies sign agreement on joint company
LUKoil Overseas, the operator of the Russian LUKoil petroleum company's international projects, and the Saudi Aramco oil corporation have signed a shareholders agreement which regulates the operation of the joint Luksar enterprise, a LUKoil Overseas press release stated, ITAR-TASS news agency reported.
Luksar was established in keeping with LUKoil tender commitments to carry out prospecting for gas block A in Saudi Arabia. LUKoil holds 80 per cent of the joint enterprise's shares, and Aramco 20 per cent.
Russia's LUKoil signs contract to explore, develop gas field in Saudi Arabia
President of Russian oil company LUKoil, Vagit Alekperov, and Saudi Minister of Oil and Mineral Resources, Ali Bin- Ibrahim al-Nu'aymi, signed a 40-year contract to explore and develop a natural gas field known as Contract Area A in Riyadh, Interfax News Agency reported.
The gas field is located in the middle of the country next to the world's largest oil field Ghawar. LUKoil is to drill at least nine exploration wells and conduct seismic exploration during a prospecting period to last five years, and is expected to put 215m dollars in the geological prospecting programme.
A joint venture, LUKoil Saudi Arabia Energy Ltd. (Luksar), was set up with the state oil company Saudi Aramco, in which LUKoil holds an 80-per-cent stake. If commercial deposits of hydrocarbons are discovered, gas will be supplied to Saudi domestic customers. Gas condensate will be exported. When production volumes are brought to the target level, Saudi Aramco will build a pipeline to link the field to the nearest terminal of the Saudi trunk pipeline.
"The Saudi project meets all of LUKoil's effectiveness and competitiveness criteria, and is an important aspect of the company's strategy in which the Middle East is a strategic development region," Alekperov said. "Moreover, this gas project matches the policy of transforming LUKoil from an oil into an oil-and-gas company," he said.
Russian oil major signs cooperation memorandum with Iraqi ministry
Russian oil company LUKoil and the Iraqi Oil Ministry have signed a memorandum on understanding and cooperation, the company's president, Vagit Alekperov, said at a news conference in Baghdad on Thursday 11th March, RIA news agency reported.
The document was signed after his meeting with Iraqi Oil Minister, Ibrahim Muhammad Salih Bahr-al-Ulum.
"These talks are an important testament to LUKoil's strengthening positions in Iraq and yet another significant step in comprehensive efforts aimed at resuming the company's operations in Iraq," Alekperov said. He called the memorandum a positive step in developing the dialogue with the Iraqi side. "It is proof of how serious our intentions are in strengthening long-term cooperation with the Iraqi Oil Ministry." He went on to say that a joint working group had been set up to draft proposals for LUKoil's participation in Iraqi oil and gas projects.
The main difficulty that LUKoil has to deal with in Iraq is that the country's government and other agencies are still being formed. "We hope that this summer, after the power in Iraqi is handed over to the interim government, issues related to such large-scale projects as the development of oil fields will be resolved faster and in a more constructive way," Alekperov said.
Another report quoted Alekperov as saying that LUKoil and the Iraqi side had reached agreements on the joint training of Iraqi oil industry experts. In 2004 the company will provide six-year training for 40 Iraqi students at the universities in Moscow, Perm and Tyumen. In addition, LUKoil will offer internship for the staff of the Iraqi Oil Ministry in its training centres and operating facilities. LUKoil will also provide support for restoring the Iraqi ministry's facilities, Alekperov said.
Environmental monitoring centre opens in Russian Siberia
Russian scientists will receive more information from space. A satellite command and control centre for environmental monitoring has opened in Khanty-Mansiysk. Using the latest equipment, it will provide information on the environmental situation on the three quarters of the Russian territory in an on-line regime. Oil industry workers and environmental experts have displayed a special interest in the facility. Quick and overall monitoring will assist them in prospecting for oil, monitoring of forest fires and floods and timely detection of pollution hotbeds. The Russian Aerospace Agency highly evaluates the potential of the new centre, RTR Russia TV reported.
Finance ministry sees US$6bn investments in 2004
In 2004 the volume of domestic direct investments in the economy of Russia is expected to reach US$92bn, Deputy Finance Minister, Anton Siluanov, einnews reported recently.
For comparison's sake, in 2000 the volume of domestic direct investments stood at US$32bn, US$56bn in 2002.
"Investments keep going up: domestic funds are working and being invested in the Russian economy," he said. "The volume of foreign investments in Russia's economy is expected to stand at US$6bn in 2004," Siluanov said.
In 2003 the net outflow of capital from Russia equalled US$2.8bn, US$8bn in 2002 and US$25bn in 2000, the deputy finance minister recalled.
"The Russian economy is gaining more and more attraction for foreign investments," he stressed. This is very much due to the steps taken to cut inflation and the tax burden on the economy, noted the deputy finance minister.
The economy ministry expects a rise in foreign investments, Economy Minister German Gref estimated last week, adding that the annual volume of foreign investments in Russia will amount to US$9bn. He mentioned that currently foreign investments in the domestic economy were at as little as US$4bn a year. The official stressed that the accumulated volume of investments had doubled over the past three years.
FOOD & DRINK
Khaitan brew to enrich tea market in Russia
Williamson Magor, one of the leading tea companies in Asia, plans to enter Russia through a joint venture.
The company is in talks with a number of firms, including the Golden Elephant company - the largest in Russia. Others include Orimi Trade, Grand Tea House, May Tea company and Tea World company.
A Williamson Magor team will soon visit Russia and officials from Golden Elephant company are expected in May. Initially, a tea-packaging unit would be set up with the Russian partner, sources said. Williamson Magor will send tea to the unit.
Over the past few years, there has been a stable growth in bulk tea imports to Russia. After the tariffs for the import of bulk and packed tea were differentiated, it became more profitable to carry out the secondary processing and packing of bulk tea in Russia.
Russian tea drinkers have a distinct preference for black tea, which comprises 95% of the brew consumed. The rest is green variety, New Europe reported recently.
Wimm-Bill-Dann juice sales fall but dairy increase
The Moscow-based company Wimm-Bill-Dann announced recently that its 2003 combined sales of juice, dairy products and mineral water had risen 4.3% to 1.5m tonnes, The Moscow Times said in a report.
The country's largest juice and dairy producer sold 19% less juice in volume terms in the second half of 2003, the first half-year decline in at least three years.
Wimm-Bill-Dann sold 205,700 tonnes of juice in the period, down from 253,000 tonnes a year earlier, according to Bloomberg calculations using first-half and full-year data. Sales of dairy products rose 4% to 501,200 tonnes by volume. Full-year juice sales totalled 473,700 tonnes, a decrease of 0.6%. In the dairy segment, sales were 6.3% higher than in 2002, at one million tonnes. Mineral water sales, launched in the middle of 2003, amounted to 4,900 tonnes.
It raised US$207m when it sold shares on the New York Stock Exchange two years ago, as foreign investors sought access to Russia's consumer-goods industry, one of the fastest-growing segments of the former Soviet economy.
Wimm-Bill-Dann underperformed 61 of the 62 stocks in the benchmark Russian Trading System index last year because the company was unable to control increased costs and competition. The maker of dairy products and juices has warned of a loss in the fourth quarter of 2003 due to lower than anticipated sales in the dairy and juice segments as well as higher raw milk prices.
Also, Capital Group International, one of the world's largest institutional investors, said it had raised its stake in the company to 5.6% from 4%.
A spokeswoman said that Emerging Markets Growth Fund, part of the Capital Group International, had bought the 1.6% from Wimm-Bill-Dann's core shareholders. The fund also holds stakes in LUKoil and Golden Telecom. Capital Group International initially bought a 1.6% stake at Wimm-Bill-Dann's initial public offering in 2002.
MINERALS & METALS
Norilsk Nickel in search of gold mining assets listing
Soon after failed talks with Canada's gold mining company Barrick Gold, Norilsk Nickel, one of Russia's largest raw material companies, decided to restructure its gold producing assets.
Management of Norilsk Nickel approached Canadian Barrick Gold, one of the largest producers of gold in the world, offering it to set up a joint venture with the Polyus closed corporation, Norilsk Nickel's subsidiary. But Barrick Gold rejected the offer, RBC daily reported.
According to official reports, the Canadian company decided to buy a large stake in another gold mining company operating in Russia - Highland Gold.
Norilsk Nickel has already consolidated several gold mining companies. In addition to a 100% stake in Polyus, it owns a 50.6% stake in the company Rudnik Matrosova and a 65.87% stake in Lenzoloto JSC. Last year, Norilsk Nickel produced 40 tonnes of gold (25 tonnes was mined by Polyus, 9.6 tonnes - by Lenzoloto and 700kg - by Rudnik Matrosova). The company plans to increase its gold production to 100 tonnes a year by 2006-2008, said management. To achieve this goal, the company has been purchasing Russian gold mining assets recently.
Apart from Polyus, it acquired Rudnik Matrosova and Lenzoloto last year. Norilsk Nickel is also a likely buyer of Sukhoi Log, Russia's largest gold mine. The company's management said it was ready to participate in other gold projects as well. Norilsk Nickel is also ready to invite foreign investors to develop Russian gold mines, which is why it approached Barrick Gold, the world's third largest producer of gold.
Yevgeny Ivanov, the former president of Rosbank (part of Interros), will work to improve the corporate structure of Norilsk Nickel's gold mining assets. He will become the head of a new gold mining company, which will be built on the basis of Polyus. A single gold mining company will be formed from all gold mining assets of Norilsk Nickel, according to the company's managers. Analysts were quoted by RBC as saying that Norilsk Nickel wants its gold mining company to be listed on the New York Stock Exchange (NYSE).
According to analysts, the market capitalisation of the single gold mining company that will be built on the basis of Polyus is from US$1bn to US$3bn.
To achieve this goal, the company needs to switch to a single share structure.
New gold exploration work swells Hambro reserves
Peter Hambro Mining shares surged to a record high recently after the gold producer increased its total estimated reserves of the precious metal by almost one third following new exploration work at one of its mines in eastern Russia, news agencies reported. The shares jumped 8.7% in early trading and are now more than triple what they were a year ago, giving the London-based company a market value of almost US $603m, New Europe reported.
The Pokrovsky mine's reserves are about 6.9m ounces higher than the previous estimate of 807,400 ounces, Peter Hambro said in an e-mailed statement. The estimate covers ore above a grade of 1 gram per ton. Ecocenter, a Russian research company, based its new estimate on an analysis of 16,500 samples from the area. The figures have not yet been approved by the local government, the company added.
RZD and RusA1 to cooperate on Siberian titanium
Russian Aluminium, which makes one eighth of the world's aluminium, may join with state-owned rail monopoly Russian Railways Co, or RZD, to mine ferrous-titanium ore in Siberia, Bloomberg reported recently.
Oleg Deripaska, RusA1's board chairman, held talks with RZD President, Gennady Fadeyev, about tapping the Chineiskoye field in the Chita region, the rail company said in a statement.
RZD has invested 8.5bn rubles (US$298m) to build a rail link to the field. The deposit holds 1.5bn tonnes of ore, Geography newspaper said.
Fadeyev also approached Chita Governor Ravil Geniatulin about setting up a company to mine ore at the Udokanskoye copper deposit in the Far East and build a rail link to the site. Udokanskoye has estimated reserves of 20m tonnes of copper, or 58% of Russia's total.
"Developing these fields requires a composite solution," Fadeyev said about the Chineiskoye and Udokanskoye fields in the statement.
"We are ready to enter this project, including in it the link we already built to Chineiskoye."
The Chineiskoye field is able to produce 3.3m tonnes of ferrous ore a year and 600,000 tonnes of titanium concentrate, or about 10% of the world's output, Geography newspaper said.
The site also is capable of producing 24,000 tonnes a year of copper ore, as well as unspecified amounts of gold, silver, platinum and palladium.
Ural Mining eyes copper market competition
The Ural Mining company, which is being formed now, will become the third largest copper producer in Russia after MMC Norilsk Nickel and Urals Mining and Metallurgical company (UGMK), Sverdlovsk First Deputy Governor and regional Industry minister, Vladimir Molchanov, said recently, Interfax News Agency reported.
The new holding will include the Kyshtym Copper-Electrolyte Works (KMEZ) with annual capacity to produce 75,000 tonnes of cathode copper; the Novgorod Metallurgical Plant with capacity of 60,000 tonnes; and an oxidised ore processing plant in the Sverdlovsk city of Polevskoi, Molchanov said. There are plans to build another smelter for 10,000 tonnes of cathode copper per year at the Gumeshevskoye copper deposit. The combined capacity of the new holding's three smelters, at about 145,000 tonnes of cathode copper per year, is approximately equivalent to that of one electrolysis division at UGMK.
The new holding will be headed by Igor Altushkin, the chairman of KMEZ and director general of the Yekaterinburg Trade-Industrial company. The holding will become "a fairly strong player on the copper market" and create "healthy competition" that will improve produce quality, Molchanov said. The holding also has plans, "outside the borders of the Russian Federation," concerning raw materials.
"I do not want to make them public without the agreement of Altushkin. They have already begun implementing these plans," Molchanov was quoted as saying.
NLMK to raise capital through new share issue
Major Russian iron and steel producer OAO Novolipetsk Metallurgy Combine (NLMK) is to issue additional shares, which will increase the company's charter capital 1,000-fold, the company said in a press release. The NLMK board of directors decided to issue 5.98bn common shares with a par value of 1 ruble at a meeting on February 2nd, Interfax News Agency reported.
The NLMK charter capital currently amounts to 5,987,240 rubles in common shares with a par value of 1 ruble. The additional issue will be placed by closed subscription among existing shareholders.
Mechel Steel boosts production in 2003
The Mechel Steel Group increased steel roll output 16% to 4.2m tonnes in 2003, a spokesman for Mechel said recently, Interfax News Agency reported.
The group tripled metalware output to 389,000 tonnes. Coal production grew 7.6% to 14.2m tonnes and commodity nickel production increased 6.4% to 13,500 tonnes. Mechel Steel Group includes the Mechel steel works of Chelyabinsk, Mechel Trading House, coal producer Yuzhny Kuzbass, nickel producer Yuzhuranikel and metalware producers Beloretsk Metallurgical Combine and Vyarstilya Metalware Plant. The group in October 2003 acquired assets of Romania's COST and S C Industria Sarmei SA steel mills, and the Mechel Zeljezara pipe mill in Croatia. The group's Korshunovsky GOK mine in Russia's Irkutsk region produced 3.5m tonnes of iron ore concentrate in 2003.
Russian gold, currency reserves up 12.2 per cent in first two months of 2004
The gold and currency reserves of Russia grew by US$9.38bn or 12.2 per cent in January-February 2004 - from US$76.938bn on 1 January to US$86.318bn on 1 March, according to the Russian Central Bank's information, ITAR-TASS News Agency reported.
At the same time the foreign currency reserves increased by 12.8 per cent in the first two months of the current year - from US$73.175bn to US$82.558bn while gold reserves fell 0.08 per cent - from US$3.763bn to US$3.76bn. In the structure of gold and currency reserves the share of foreign currency grew from 95.1 per cent to 95.7 per cent and the share of gold respectively fell from 4.9 per cent to 4.3 per cent.
Nuclear storage facility in Leningrad Region to cost 20m dollars
The cost of the project for building in the port of Ust-Luga (Leningrad Region) a facility for storing and dispatching nuclear materials (low enriched uranium hexafluoride) will come to US$20m, ITAR-TASS News Agency reported.
It will take 2 years to build the export-import terminal, deputy director of the Tekhsnabeksport company, Sergey Grishin, said.
The project for building in the ports of Ust-Luga and Bolshoy Kamen (Maritime Territory) facilities for storing radioactive waste and grade 7 nuclear materials, was proposed by the Russian Atomic Energy Ministry and the Transport Ministry. At present they are exported via the port of St Petersburg and a storage facility belonging to the Isotope state company (Leningrad Region).
Tekhsnabeksport was set up 40 years ago. Its only shareholder is the state. The current volume of export of radioactive materials exceeds 2bn dollars (about 40 per cent of the world market), Grishin said.
Mobile TeleSystems to spend US$1.2bn for expansion
Russia's top cellular operator Mobile TeleSystems will spend US$1.2bn to expand its cellular networks this year, with new licences in hand to cover more Russian territory, its chief executive, Vassily Sidorov said recently, New Europe reported.
Sidorov said MTS has received licences to operate in 11 new regions, adding just under 10% of Russia's 145m population to its territory. It is now free to operate in all but two of Russia's 89 regions. "We have always been geared at creating a national network. By virtue of not being able to get licences for key regions we had to purchase controlling stakes in certain independent operators," Sidorov told reporters. He said the client base would increase by about 50% this year from the end of 2003, when it had 16.73m subscribers on its networks in Russia and the former Soviet Union. MTS has said it had 17.44m at the end of January.
Mobile TeleSystems has received GSM-licences to operate in 11 new regions, reaching a total of 87 licences to provide cellular communication services of the GSM standard. With the subsidiaries taken into account. MTS licence area covers all Russia except Penza Region and Chechnya.
Tele2 makes presence known in Nizhny with network deal
Tele2, Sweden's second largest phone company, started operating a cell phone network in Nizhny Novgorod, Russia's third largest city, to life sales in the country, New Europe reported recently.
The network is Stockholm-based Tele2's eighth network in Russia, it said in a statement on Waymaker. Its service in Nizhny Novgorod covers 3.5m people and the region's mobile penetration is approximately 24%. Tele2, founded in 1993, has grown faster than bigger competitors such as TeliaSonera by expanding in Europe and undercutting rivals' prices. Its sales growth is slowing in the Nordic market, which is nearing saturation.
Russia to launch three communication satellites in 2004 - official
Russia plans to launch three new communication satellites of the Ekspress-M series in 2004, Director-General of the Russian Aerospace Agency, Yuriy Koptev, has told an expanded meeting of the Russian Communications and Information Technology Ministry board, RIA news agency reported.
"We intend to launch three spacecraft into orbit this year, and one more in 2005," the agency chief said. This will help ease "a certain tightness regarding communication satellites, and replace the orbiting spacecraft that are gradually nearing the end of their useful life," Koptev noted.
The Russian Aerospace Agency chief also said that the Russian space group of communication and broadcasting satellites had been upgraded substantially since 1999, with the addition of nine spacecraft, including an Ekspress-AM 22, three Ekspress-A craft, two Yamal-200 satellites, one Yamal-100 as well as one Gorizont-45 and one Ekran-18þ. Last year, about 1,500 central receiving stations for digital rebroadcasting of Channel One, Russia TV channel and Kultura channel TV broadcasts were set up in European Russia and the Urals region.
MegaFon doubles sales
New Europe reported recently that Sergei Soldatenov, chief executive at cell phone operator MegaFon, said recently that preliminary results show revenue more than doubled to US$820m in 2003, and he expected US$1.3bn for 2004. Soldatenkov also said the Alfa Group consortium's surprise attempt to purchase a stake in TeliaSonera-backed MegaFon was "not helping," but the company will continue its business plan for this year. Alfa owns a stake in MegaFon rival Vimpelcom. Preliminary earnings before interest, tax, depreciation and amortisation rose to about US$380m, with a margin of 46%, from US$143.8m in 2002 and a 36% margin. MegaFon's 2004 plans include US$650m in capex to develop its pan-Russian network, of which US$250m would be out of cash flow.
AKOSto triple GSM capacity
Russian-US cellular communications operator AKOS (Vladivostok) plans to triple the GSM-1800 network switching capacity to 60,000 numbers this year, AKOS Director General, Olga Shkarupina, announced recently. "We initially planned to expand switcher capacity from 20,000 to 40,000 numbers this year, but increasing applications prompted the decision to take capacity to 60,000 numbers," Shkarupina said, Interfax News Agency reported.
The number capacity of the currently-operating Huawei Technologies (China) switcher has virtually reached its limit and needs to be expanded soon, she noted. AKOS, one of the territory's three cellular providers, offers GSM-1800 service coverage to Vladivostok, Nakhodka, Ussuriisk and Bolshoi Kamen. The company plans to cover the areas of Slavyanka, Posyet and Zarubino this year, and subsequently northern Primorye. AKOS has been offering D-AMPS cellular services in the Primorye territory since 1996. It was licensed to provide GSM-1800 standard services from February 28th, 2002, to the same date in 2012. RTK Leasing owns some 90% of the AKOS stock.
Russian Air Force to get upgraded and new helicopters this year
The Russian army aviation will keep on procuring day/night Mi-24PN Hind and Mi-8MTKO helicopters in 2004, the air force commander-in-chief, Vladimir Mikhaylov, said recently, Interfax-Military News Agency reported.
"Lately army aviation has received the upgraded Mi-24PN and Mi-8MTKO helicopters. This year we plan further supplies of these helicopters to the air force," he said. "We also would like to procure several Mi-8MTV-5 derivatives," he added.
Mikhaylov emphasized that the new helicopters, like the KA-50 Hokum, KA-52 Alligator, and Mi-28 Havoc, have some parameters superior to their world peers. "However shortage of money makes it impossible to conduct mass rearmament. Under such circumstances, the stress is laid on the upgrade of helicopters in order to boost their combat potential and flight security. At the moment we are supplying day/night helicopters, including Mi-8MTKO and Mi-24PN to regular units," he said. The air force command works on the upgrade in close cooperation with developers and producers of aircraft, Mikhaylov added. According to Mikhaylov, the reliability of aircraft meets all international requirements.
Russians put hovercraft into ferry service on major Siberian river
A hovercraft has begun operating on the Krasnoyarsk reservoir [on the Yenisey river south of Krasnoyarsk in central Siberia], providing a ferry service between remote districts. The new vessel can be used on the thinnest ice. The journey round the reservoir from the right bank to the left bank used to take several hours. Now it can be done in a matter of minutes. The hovercraft is an alternative to the air route. Using a helicopter was too expensive for the territory's budget, RTR Russia TV reported.
Russian railways allocate R70m to boost capacity of major Far Eastern sea port
The Russian Railways company is allocating R70m this year to modernize Vladivostok railway station, ITAR-TASS News Agency reported.
These funds will be used to build two railway tracks, which will carry trains consisting of 70 carriages. Currently, the station that services the trade port of Vladivostok is unable to accept such a number of carriages, which makes the dispatch of cargo more difficult. The upgrade of the station is to promote the growth of goods traffic via the port of Vladivostok, the press centre of the Far Eastern branch of the Russian Railways company said.
Seven million tonnes of cargo was transported via Vladivostok in 2003, which is the best performance of the port so far. However, a substantial increase in goods traffic of 5.8m tonnes is expected this year. The Magnitogorsk Metallurgical Combine has already started delivering its output to the countries of Asia Pacific region via the port of Vladivostok, which will increase goods traffic by 2.3m tonnes.
The construction of a grain transfer facility with a capacity of 1.5m tonnes has been started. The construction of a new deep-water mooring has been completed, which will make it possible to dispatch an extra 2m tonnes of cargo.
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