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Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 346,520 310,000 259,600 16
         
GNI per capita
 US $ 2,140 1,750 1,690 100
Ranking is given out of 208 nations - (data from the World Bank)

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Area (sq.km)
17,075,400

Population
144,526,278

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

  

Update No: 287 - (26/11/04)

Vladimir the Great or Vlad the Impaler?
Some are calling it "a creeping coup d'etat" to re-establish the Soviet Union; others say the sweeping reforms decided by Russian President Vladimir Putin on the eve of the Sept. 1st Beslan school massacre in North Ossetia, and leaked to the news media by Kremlin-friendly political pundits in recent weeks, are long overdue. 
But most agree they will change modern Russia as profoundly as President Boris Yeltsin's reforms changed Soviet Russia. It is not surprising that Yeltsin in his retirement has expressed misgiving about the new course.
First, Mr. Putin wants to change the territorial-administrative structure of the Russian Federation, which currently consists of 89 federal entities -- a mishmash of krays (very large regions), oblasts (regions), republics and autonomous okrugs (districts). It is a multilayered system inherited by Russia from the Soviet Union. 
The heads of these federal entities are currently elected in direct popular elections. Mr. Putin wants to do away with elected governors and get the authority to appoint and sack them at will. He also wants to reduce the number of federal entities. In effect, he apparently wants to turn Russia into a unitary state in which every governor and maybe even mayors of major cities will be appointed by the Kremlin. Until now, the governors of Russia's 89 regions have been directly elected. From now on, they will be chosen by the president. The careers of Russia's politicians will now depend even more on the president himself.
Until now, half the members of the lower house, the Duma, have been elected in first-past-the-post contests. Going forward, the entire Duma will be composed of party lists, which will push aside independent legislators. Autocracy is on the march.
Ostensibly these reforms are aimed at strengthening Russia's hand in fighting terrorism, though none of the president's point men have been able to explain to the Russian people how the Kremlin appointing governors and mayors will help combat terrorism. 

Parliamentary, rather than presidential, republic
Moreover, Putin advisers have hinted that the Kremlin is considering a major overhaul of Russia's political system. Right now, Russia is a presidential republic with an incredibly powerful president, and a prime-minister who runs the day-to-day affairs of the government. As in the United States, the president is limited to two consecutive terms. 
In theory, the power of the executive branch is checked by the legislature and the judiciary. In practice, however, the Russian Duma and the Constitutional Court have never dared to challenge Mr. Putin. 
Kremlin-friendly political pundits have hinted recently that Mr. Putin wants to go further and turn Russia into a parliamentary republic, where the executive and the legislative power will be concentrated in the hands of the prime minister, who could stay in power as long as his party gets the majority of seats in parliament. 

Critics alas - galore
In a lively debate on the pages of Russian newspapers and Internet publications, critics inside and outside Russia have accused Mr. Putin of using the Beslan tragedy to grab more power and to tailor the country's political system to suit his insatiable thirst for power. Television, which is controlled by the Kremlin, is out of bounds for critics of the president. 
Mr. Putin's supporters argue that the reforms are needed to safeguard Russia's territorial integrity. Olga Oliker, a Moscow-based defence and international relations analyst with Rand Corp. who formerly worked for the Pentagon and the U.S. Department of Energy, said Mr. Putin's reforms might actually hamper Russia's ability to fight terrorism. 
"I'm really concerned about Russia's capacity to face terrorism," Ms. Oliker said. There is a misguided notion that greater control means greater capacity to fight terrorism, she said. "I don't think Russia today would be well served by more centralization," Ms. Oliker said. "I think it will be more capable of fighting terrorism if it is less centralized and local forces and authorities are given the resources and authority to develop appropriate skills." 
In fact, events in Beslan showed that handpicked regional leaders like North Ossetia's President Alexander Dzasokhov and Murad Zyazikov, his counterpart in Ingushetia, were incapable of dealing with the hostage crisis. 
To the Kremlin's chagrin, it was former Ingush President Ruslan Aushev, pushed out by Moscow two years ago, who proved the most capable leader during the three-day standoff that culminated in the killing at the school of at least 329 civilians, 115 of them children, according to official figures. 
Russian state structures are corrupt and inefficient, and nothing suggests that more centralization would do anything to change that, Ms. Oliker said. 
Without significant, far-reaching and comprehensive reform, Russian police will continue taking bribes -- as they did from the hijackers of two Russian passenger planes that crashed almost simultaneously on Aug. 24. 
Corruption throughout Russian society poses significant security risks, Ms. Oliker said. 
But instead of overhauling and strengthening its security forces, curbing the rampant corruption and increasing the capability of local authorities to deal with terrorism, the Putin administration has embarked on a process that in the best case scenario will only sap precious resources, she said. 
In the worst case, Mr. Putin's reforms, if done poorly or without much regard for local sensitivities, can lead to significant discontent, potentially further weakening the country, Ms. Oliker said. 
Peter Zeihan, a senior analyst with Stratfor, a private intelligence firm based in Austin, Texas, thinks that Mr. Putin is racing against the clock to modernize Russia and prepare it for the challenges to come -- just as Czar Peter the Great and Empress Catherine the Great tried in 18th century. 
"It's quite possible that autocracy is the only way do it," Mr. Zeihan said. But he said that just as with Peter and Catherine, Mr. Putin's reforms are unlikely to survive after he has passed from the scene. 
By then, the next president or prime minister -- whatever model of rule Mr. Putin chooses for himself now -- will have concentrated so much power that he would be able to undo Mr. Putin's reforms. 
"My concern is not with Putin," Mr. Zeihan said. "My concern is what happens when he is gone."

Putin's Hammer and Nails 
A further concentration of power is no antidote for Russia's ills, Freedom House argues. "If the only tool you have is a hammer, you treat everything like a nail." In contemporary Russia, President Vladimir Putin is wielding a particularly active hammer, taking on just about any institution capable of holding him and his associates to account. 
Paradoxically, Putin has wilfully smothered the very institutions that are indispensable if Russia is to improve the quality of its public policy decision-making and meet the profound security and economic challenges his country faces. 
The Kremlin's most recent steps to exert greater control have focused on regional governors, the State Duma, and the judiciary.
Meanwhile, Putin has squeezed the judiciary. In October, Russia's upper house of parliament approved a bill that gives Putin effective control over the Supreme Qualification Collegium, the body that approves candidates for the country's higher courts and disciplines senior judges. 
But these efforts to rein in independent institutions and curb dissenting voices are part of a pattern of power consolidation that began far earlier in the Putin administration.
Independent media, especially television, have already been systematically pushed to the margins. The firing this summer of Leonid Parfyonov, the host of the popular news magazine Namedni, and the cancellation of the live political discussion program Svoboda Slova drained NTV, the most independent of the national channels, of the last of its programs with a political bent. Since that time there has been no meaningful critical broadcast voice in Russia. In September, Raf Shakirov, the editor in chief of Izvestiya, was forced to resign because of his paper's frank and critical reporting of the Beslan horror.
Likewise, the Kremlin has neutered independent policy and polling organizations, and has put independent academic research under surveillance.
A jury in Siberia recently found Valentin Danilov, director of a research centre at Krasnoyarsk State Technical University, guilty of illegally passing documents to China, the latest ruling in a lengthy case in which the defendant was first acquitted, then retried. Danilov argued that the information in question was in the public domain and therefore not a threat to national security. In April, Igor Sutyagin, a scholar at the USA-Canada Institute in Moscow, received a 15-year sentence for selling information to a British company. Sutyagin also argued that his information was in the public domain, but prosecutors maintained that the British firm was a front for the CIA. 
These cases were widely seen as part of an effort by Russian hardliners to assert greater control over academics, scientists, and environmentalists. Putin has also systematically eased out of the country international civil-society organizations, including the U.S. Peace Corps and the international offshoot of the AFL-CIO, the largest labour union in the United States.

Russia's No Singapore
President Putin has asserted that this range of controlling measures is necessary to enable reform of recalcitrant institutions and to curb corruption. But Putin's diagnosis of the problem is flawed and his prescription is doomed to fail. 
The "dictatorship of law" that Putin announced at the outset of his presidency has not materialized. Corruption remains rampant throughout Russian society. The Kremlin's anti-corruption campaign has been used to punish political opponents rather than to roll back the vast levels of corruption plaguing the country. 
In August, about 1,000 rubles ($35) was believed to have been enough to bribe an airline agent to put a Chechen woman on board a flight, without being searched, just before takeoff. Two airliners were brought down that month allegedly by Chechen terrorists, killing a total of 90 people. The terrorists who killed more than 300 innocent people in Beslan in September are also believed to have bribed Russian law enforcement officials in order to reach the town and the school.
Russia's vast and corrupt bureaucracy is not receptive to change, so administrative reform has stalled. Hopes for an Asian-tiger-style economic boom are therefore misplaced. Russia is a far cry from, say, Singapore, which emphasized the rule of law and curbed corruption in its successful effort to become an economic power.
Make no mistake: the resistance to reform is formidable. To overcome it, real leadership and vision is needed. The long list of Russia's deep structural needs-to make its management of state more efficient, to thin out the ranks of bureaucrats, to diversify the economy, and to reform the military and security services--cannot be met by decree. 
But diktat is what Putin increasingly relies on. In terms of political management, today's Russia looks more like the inept tyrannies of Central Asia than the consolidating democracies of Central Europe. The countries of Central Europe and the Baltics have enabled critical institutions--independent media, policy institutes, and legislatures and judiciaries-to succeed so that they serve as a check on executive power, offer valuable feedback to the authorities, and contribute a diversity of ideas to the policy debate.
Fresh ideas and broad cooperation are also urgently needed if Russia is to address its potentially catastrophic AIDS epidemic and other looming public-health challenges. Nongovernmental organizations must be involved and be allowed to help with public education and the delivery of urgent services and other relevant expertise if Russia is to avert a disaster that, according to the World Bank, might leave some 5 million Russians infected with HIV by 2020.

Good Teacher, Poor Pupil
Putin still enjoys considerable popularity in Russia, but one could argue that he has not yet earned a democratic mandate from his people for reform.
What Putin does have is Russians' acceptance of his leadership model--or, more broadly, acceptance of a model that produces stability. Today, there are no domestic challenges to Putin. That means there is no meaningful public discussion or serious debate that could serve as a catalyst for the policy innovation and economic diversification that Russia so sorely needs. 
In a speech to the nation in May, Putin himself identified the course his country needs to take in order to achieve real reform. "The success and prosperity of Russia cannot and must not depend on one person or one political party, one political force," he said. "We must have a broad base of support in order to continue transformations in the country."
If he is to meet Russia's multitude of serious challenges, the president needs to heed his own advice. 

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AVIATION & SPACE

New navy jet tested aboard Russian aircraft carrier

Tests of the new Su-27KUB multifunctional deck fighter (chief designer Konstantin Marbashev) have ended successfully at the Admiral Kuznetsov aircraft carrier in the Barents Sea, a spokesman for the Northern Fleet headquarters said. Takeoff and landing, as well as aerial manoeuvring, were practised during the tests, the spokesman said, Interfax-AVN Military News Agency web site reported. 
"Even though the Su-27KUB is not a new development of the domestic aircraft industry, it previously landed on airfields only. Landing on a deck in the northern seas was performed for the first time," the spokesman said. He stressed that unlike its predecessor, the Su-33 Flanker, which is intended for dogfight, the Su-27KUB is also capable of hitting ground and sea surface targets efficiently. In addition, the Su-27KUB is different from the Su-33 in having a two-seat cockpit with side-by-side positions of pilots. In addition to the Su-27KUB, flights were made by other fighters stationed aboard the aircraft carrier, as well as by deck helicopters. 

Russia, France agree on joint plane production at economic talks in Paris

The signing of a memorandum on the joint creation of a regional plane can be considered to be one of the main results of the 12th meeting of the Russian-French council for economic, financial, industrial and trade issues, ITAR-TASS News Agency reported. 
Sergey Naryshkin, the leader of the Russian Federation's government apparatus, who heads the Russian delegation at this forum, confirmed this. 
The meeting of the Russian-French council is devoted to various matters connected with the development of trade and economic cooperation between Russia and France. 
Sergey Naryshkin also noted the reaching of an accord on the certification of B-200 and Tu-204 planes on the European market. France, in his words, has pledged to offer assistance in this matter. 
A project for the production of Renault cars in Russia was also agreed at the meeting. In particular, the necessary share of involvement of the Renault company in a joint enterprise that will be set up in Russia was discussed.

Kazak site to remain crucial for space launches - Russian agency chief

The Baykonur space centre in Kazakstan will remain the major site for launching Russian spacecraft in the near future, the head of the Federal Space Agency, Roskosmos, Anatoliy Perminov, said, Interfax-AVN Military News Agency web site. 
"On the whole, the Baykonur space centre is one of the world's leading centres as far as its workload is concerned. And it will remain the major space centre for Russia. We are working on providing it with commercial projects," Perminov said during a web briefing posted on the official web site of the Federal Space Agency. 
According to him, Russian businessmen are for the first time investing their money in the commercial launch of the modified Zenit rocket from Baykonur. "We will be able to develop a launching system capable of launching both two- and three-stage Zenit carrier rockets," Perminov said. He noted that at a certain time Zenit was expected to have been employed for launching manned spacecraft into space. "We may return to this problem later on. We are conducting negotiations with Ukraine, Kazakstan and Belarus on establishing a space corporation," Perminov said. 
In addition to that, according to him, within the framework of the Bayterek project, the Baykonur space centre will launch Angara heavy carrier rockets, to be launched from the Plesetsk space centre in the future. 
According to Perminov, the Plesetsk space centre has to have a heavy carrier rocket launching system to become a full-fledged space centre, i.e., a capability to launch Angara heavy carrier rockets capable of taking payloads to geostationary orbits. 
At the moment the Plesetsk space centre is only capable of launching light carrier rockets such as Rokot and Kosmos, as well as medium Soyuz rockets. "At the moment the priority for the Plesetsk space centre is to complete construction of the Angara launch system, which is 50 per cent ready. Russia has to have a capability of launching heavy rockets both from Baykonur and [from] its own territory," Perminov said. 
He also noted that the layout of the Angara rocket had been adopted, while oxidant and fuel tanks had already been manufactured. The booster and the cruising-engine are being tested. According to Perminov, it is technically possible to employ the Plesetsk space centre for launching manned spacecraft. "It is technically possible, and we have already discussed a similar project. At the present time there is no necessity in realising such a project," he said.

Russia ready to expand space collaboration with Brazil

The Russian Federal Space Agency is going to expand its cooperation with the Brazilian counterpart, AEB, in a whole bunch of large-scale projects, Vyacheslav Dyachenko, the agency's press secretary, said recently, Interfax-AVN Military News Agency web site reported. 
"Head of the Federal Space Agency, Anatoliy Perminov, will visit Brazil to discuss future cooperation between the two countries," he said. 
He recalled that the Russian-Brazilian partnership in space was declared in the 1997 intergovernmental agreement on cooperation in peaceful use of space. "According to Perminov, there are both objective and subjective prerequisites for such cooperation," he added. He said that it was Russia who came to help Brazil after the VLS [Virtual Launching System] accident at the Alcantara spaceport. Russian specialists worked in the accident zone and suggested a number of solutions to prevent such accidents in future, which were found very reasonable by the Brazilian side. The launch site is being reconstructed and the VLS launcher elaborated with these suggestions of Russians in mind. The Federal Space Agency spokesman referred to the joint development of a remote Earth probing satellite as the most important of the Russian-Brazilian programmes, as it is critical for the monitoring of woodcutting in Amazon forests. 
"These satellites also make it possible to monitor the harvest. Moreover, they can be employed for tracking objects moving in the country," he added. Also, he said that the two countries are going to develop interaction between their scientists, and jointly develop and operate a competitive launch vehicle, which the Brazilian spaceport suits best. According to the press secretary, the cooperation of Russia and Brazil will take into account the international obligations of the two, including those concerning nonproliferation of missile and rocket technologies.

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CREDIT RATINGS

Fitch assigns ratings to Severstal, Uralsvyazinform

Fitch Ratings assigned national senior unsecured ratings of A(rus) to steel producer, Severstal, and A+(rus) to Uralsvyazinform, New Europe reported.
The companies' national ratings reflect their relative creditworthiness to each other as well as to the Russian issuers in local currency in all sectors. Severstal's rating reflects the steel producer's increased control over raw materials suppliers via a common shareholding structure and its focus on a value-added product mix, which together with specialisation in flat-steel production, will underpin future cash generation.
Severstal has carved out strong domestic market positions. In contrast to its domestic peers, it is diversifying its operations outside Russia (eg acquisition of US-based Rouge Industries). Severstal's North America operations may benefit in the long-term from the buoyant US-steel market and retained Rouge customer base, which is mainly from the automotive sector.
The rating for Uralsvyazinform reflects the telecommunication company's strong market position in Urals and part of Western Siberia in both fixed-line services and mobile segments. Although tariffs on its key fixed-line services are regulated its exposure to regulatory risks is only modest, the rating agency said.

Fitch rates Vneshtorgbank

Fitch Ratings assigned VTB Capital SA's US$450m loan participation notes due October 2011 a long-term BB+ rating, the agency said, New Europe reported recently. Proceeds from the notes will be used to finance a deposit with Deutsche Bank Luxembourg SA for the purpose of financing a loan to Russia's Vneshtorgbank (VTB). The issue is the fourth under VTB's US$2bn loan participation note programme.

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ENERGY

Chechnya increases oil production by 11 per cent this year

The Grozneftegaz open joint-stock company, a subsidiary of Rosneft, has commissioned eight new wells in Chechnya since the beginning of this year, ITAR-TASS news agency reported.
As a result of this, the extraction of oil in the republic has increased to 1,720,000 tonnes in the past 10 months, which is 11 per cent more than in the similar period of last year, Grozneftegaz director-general, Musa Eskerkhanov, said recently. "We are currently developing another 17 wells, and when they are ready, oil production in the republic will be increased to 2,160,000 tonnes in 2005," Eskerkhanov emphasized.
Chechen oil is of the highest quality among those extracted in Russia, and what's more, deposits are located near the surface. However, because of the high level of crime in the republic, Grozneftegaz has to spend significant sums of money - about R300m a year - on the protection of wells and transported oil. This, naturally, affects the cost price of local petroleum products.
Over 6,000 specialists are currently working at Grozneftegaz. The forthcoming commissioning of the new wells will make it possible to create several hundreds more work places in Chechnya.

Construction of oil pipeline started in Russia's Sakhalin

The construction of an oil pipeline has started in Sakhalin. The pipeline is expected to pass from the north of the island to the village of De-Kastri in Khabarovsk Territory. The length of the pipeline is 221 km. Hydrocarbon fuel produced at the Chayvo field is to be transported to De-Kastri, ITAR-TASS News Agency reported.
The pipeline is being built under the Sakhalin-1 project. The US Exxon Neftegaz Ltd is the project's operator. The Japanese Sodeko consortium, the Indian Oil and Natural Gas Corporation and [Russian oil major] Rosneft's subsidiaries are involved in the Sakhalin-1 project. 
A total of 12m tonnes of oil will be transported annually to De-Kastri through the 221 km oil pipeline, constructed by LUKoil-Neftegazstroy, Exxon's office in Sakhalin has told ITAR-TASS. A terminal to receive and ship crude oil to large tankers is under construction in De-Kastri. 

Russia, France set to develop cooperation in energy sector - official

Cooperation in the energy sector and export of Russian fuels were and remain among the main components of Russian-French trade and economic relations, the head of the Russian government apparatus, Sergey Naryshkin, said recently. He headed the Russian delegation at the 12th session of the Russian-French Economic, Financial, Industrial and Commercial Council (CEFIC), which took place in Russia, ITAR-TASS News Agency reported.
Russia's Gazprom and French Gaz de France have signed long-term contracts for the delivery of Russian gas and they cooperate fruitfully, the CEFIC co-chairman pointed out at a news conference. However, new factors have emerged in this sphere, according to Naryshkin. For example Gaz de France is showing an interest in building a north-European gas pipeline from Russia to West European countries. The Total group is penetrating Russian business ever more actively. It intends to buy 25 per cent of the shares in the Russian Novotek company and take part in the elaboration of Russian gas fields.
"The 12th session of CEFIC can be described as quite successful one," Sergey Naryshkin said. "French government representatives and businessmen, who took part in it, showed their sincere desire to develop comprehensive relations with Russia and, most importantly, they expressed belief that these relations will be developing successfully." State Minister, Nicolas Sarkozy, the minister of economy, finance and industry, led the French delegation at the session.

Russia's gas major intends to gain 10 per cent of British market

Gazprom [Russia's gas giant] intends to become one of the leading gas suppliers to Britain's gas market, the head of Gazprom Marketing and Trading, the company's new unit in the United Kingdom, Vitaliy Vasilyev, said in London, RIA News Agency reported.
The Gazprom Marketing and Trading has replaced the Gazprom UK Trading which was founded in 1999.
"We expect to occupy 10 per cent of the British gas market by 2010," Vasilyev said.
He also added that in Gazprom might build gas storage facilities in Britain in future.
Gazprom already has 19 large buyers of natural gas in Britain; among them are Centrica, Total, BP and Scottish Power.

Gazprom and BP agree on natural gas swap

Russian gas giant Gazprom and British energy group BP are to agree on an exchange of supplies of liquefied natural gas to North America and on the joint construction of re-gasification terminals in the United States and the United Kingdom, the Russian gas company said in a statement, following a meeting in London between Gazprom CEO, Alexei Miller, and BP chief, Lord Browne, recently, Interfax News Agency reported.
Miller and Browne agreed that "the development of the Kovkytinskoye field should be combined with the development of other fields in Eastern Siberia and the Far East, including marketing in the domestic and foreign markets."
Previously, TNK-BP, a Russian company where BP holds 50% interest, and Gazprom disagreed about Kovkytinskoye, which was conceived as an export project. Kovkytinskoye is a gas condensate field in the Russian region of Irkutsk. The field, which lies 450km northeast of Irkutsk city, is estimated to contain 1.9 trillion cubic metres of gas.
Miller and Browne also discussed chances for BP's participation in the planned Northern European Gas Pipeline project as a member of the pipeline consortium and for its purchases of gas for the British market.
In the light of the planned merger of Gazprom and Russian oil company Rosneft, Gazprom and BP reaffirmed that they were ready for an early and more detailed consideration of cooperation under the Sakhalin projects.
Miller said that, in view of an agreement with the China National Petroleum Corporation (CNPC), Gazprom had put Sakhalin oil and gas projects on its priority list.
BP, a world leader in liquefied natural gas trade ranks second in the world among private oil and gas companies for market capitalisation (182bn Euro as of December 2003) and the volume of controlled hydrocarbon reserves (more than 1.3bn tonnes of oil and 1.4 trillion cubic metres of gas).
BP's main lines of business include oil and gas production, wholesale and retail trade in oil products, gas sales, and petrochemistry. It operates in more than 100 countries and produces four million barrels of oil equivalent a day. It produces about 85 billion cubic metres of gas a year and supplied customers with 220 billion cubic metres of gas in 2003.

Gazprom inks deal to supply gas to China

An agreement on strategic cooperation had been signed between the Russian oil giant Gazprom and China National Oil Gas corporation, Chairman of the board of Gazprom, Aleksey Miller declared on October 14th. Miller described the cooperation agreement as "a new leaf" in its work with China. "The main areas of our joint work have been identified," he said, explaining that these were projects to supply Russian gas to China. Miller added that annually China's import requirements by 2010 would be 20 billion cubic metres, he stressed that currently Russia supplies no gas to China. The Gazprom press service in Moscow said "no specific timetable for the supply of Russian gas to China has been agreed." "The concern has not undertaken any specific obligations," a spokesman said. At the same time sources close to the gas monopoly have not ruled out the possibility that new agreements could be reached shortly. The chairman of the board of Gazprom himself explained that the timetable and the amount to be supplied would be determined within an agreed period. Furthermore, agreement had been reached to "hold meetings twice a year at the level of heads of the coordinating committee, which was also set up." 

LUKoil may bid for YUKOS unit Yuganskneftegaz

Russian oil major LUKoil said on October 25th that it could consider taking part in a sell-off of YUKOS main production unit, Yuganskneftegaz, if the sale was conducted via an open tender, Interfax News Agency reported.
"If the tender is open, then it is our duty to our shareholders to consider any possibilities, including this one," LUKoil Vice President, Leonid Fedun, said. He added that even though he was personally against it, other members for the LUKoil board could be considering a bid for Yugansk, which is being sold as part of the controversial legal onslaught against YUKOS to cover outstanding back tax debts, currently amounting about 3.73bn Euro.

Shell, Mitsubishi, Mitsui want Russian OK for Sakhalin-2

Royal Dutch/Shell and its Japanese partners are preparing to persuade Russia to approve their Sakhalin-2 project worth US$12bn, The Financial Times reported.
It said Sakhalin Energy, the partnership set up by Shell, Mitsubishi Corp and Mitsui & Co to develop oil and gas in an offshore field off Sakhalin Island, has prepared lobbying materials arguing that Russia would receive US$45bn in direct income over the next few years from the Sakhalin-2 project. The company said its operations would also create thousands of jobs for Russian national and award billions of Euro in contracts for Russian industry and businesses' over its planned 49-year life.

Largest power station in North Caucasus completed in Chechnya

Construction of the largest heat and power station in the region has been completed in the Chechen Republic. According to power engineers, it can generate sufficient output to supply half the North Caucasus with hot water, heating and electricity. However, it will only enter service next year. Not a single pipeline has been laid to it yet, as utility companies did not have enough time to repair the heating networks for the start of the winter season. Local people continue to use their gas stoves to heat their homes. 
The heat and power station, which is in Argun, will spend the entire winter heating just itself so that its equipment does not freeze up. 
"We acquired a special maintenance unit recently - we have to keep systems ticking over and maintain them in a proper condition so that the station can be put into operation at any time," Duda Dushanov, chief engineer, Argun heat and power station, said, Channel One TV reported.

Joint energy projects will boost Iraq, says Russian oilman

Joint energy projects will enable Russia and the Western countries to lead Iraq out of its dead-end situation. The chairman of the council of the Union of Russian Oil and Gas Industrialists, Yuriy Shafranik, said recently.
Speaking at an ITAR-TASS news conference, he described the development of partnership relations with the local authorities as one of the solutions to the problem. "Russia must cooperate with regional Iraqi leaders," as he put it.
Shafranik is confident that a move of this nature will make it possible to shift Russian-Iraqi economic relations "from a very bad to an optimistic phase of development." In addition to Iraq itself and its neighbours, he identified the principal partners as France, Great Britain and the USA. In this connection Shafranik said LUKoil had good chances of developing one of Iraq's biggest deposits, Western Qurnah-2, after the conclusion of a strategic alliance with the American company ConocoPhillips.
Shafranik also said that the Soyuzneftegaz company, which he heads, will start developing the Al-Rafidayn deposit in Iraq no earlier than the end of 2005. He noted that currently "the company is contacting foreign partners about this project, notably American and British ones." 
Soyuzneftegaz won the tender to develop the Al-Rafidayn deposit in Iraq a few months before hostilities started.

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FOREIGN TRADE

Russian-Chinese trade on rise, Hong Kong to play greater role - official

Hong Kong should play a more prominent role in the Russian-Chinese relations, Russian Deputy Prime Minister, Aleksandr Zhukov, said addressing an international conference, RIA News Agency reported. 
"As one of the world's largest financial hubs, Hong Kong should play a more prominent role in the Russian-Chinese relations, in stimulating the capital movement towards profitable projects in the Russian and Chinese markets," Zhukov said in his greeting address to the international conference "Expansion of capital: from national economies to a transnational economy."
Zhukov noted the importance of the Asian region for the Russian foreign policy. "Over the last years the development of the Russian-Chinese trade and economic relations has been characterized by a stable positive dynamic. In only the first seven months of 2004 the Russian-Chinese trade amounted to US$11.1bn, a 37 per cent increase over the same period in 2003," Zhukov said.
The international conference was held in Hong Kong from 8th to10th November. Viktor Gerashchenko, the chairman of the board of directors of the Yukos company, Andrey Illarionov, the Russian presidential adviser on economic issues, Tatyana Paramonova, the first deputy chairwoman of the Central Bank of Russia, and other state officials and company executives attended the event.

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INFORMATION TECHNOLOGY

RTComm.RU joins LINX

RTComm.RU, the basic operator of Russia's segment of the Internet, has become part of the London Internet Exchange, or LINX, one of the world's biggest, Interfax reported recently. The company's Web site said this was done "with the aim of further expanding volume, improving quality and increasing the efficiency of communications with the international segment of the Internet." First Deputy Director General Rostislav Gromov said: "Joining the LINX is an important step in RTComm.RU's technical development strategy. The expansion and optimisation of channel infrastructure for access for all growing traffic volume, the development of the companies international presence will raise the services offered to our clients to a new level of quality." 

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MINERALS & METALS

Russia's Norilsk Nickel sets up distribution company in Hong Kong

Russia's largest metals producer Norilsk Nickel has set up a distribution company in Hong Kong, Norilsk Nickel Asia Ltd, to sell its products in the Far East, South and Southeast Asia, the company said, Prime-TASS News Agency reported.
Norilsk Nickel's distribution network includes the UK-registered Norilsk Nickel Europe Ltd and Norilsk Nickel USA. Norimet Ltd, which used to be Norilsk Nickel's key distributor abroad, will focus on managing Norilsk Nickel's foreign strategic assets, a press release said.
Norilsk Nickel is one of the largest metals producers in the world. It accounts for 20 per cent of the nickel, 10 per cent of the cobalt, and 3 per cent of the copper produced in the world. In Russia, Norilsk Nickel accounts for 96 per cent of the nickel, 95 per cent of the cobalt, and 55 per cent of the copper produced. It also produces selenium, tellurium, gold, silver and platinum. Norilsk Nickel also accounts for more than 40 per cent of the world's palladium output. Asian countries account for 18 per cent of Norilsk Nickel's total sales.

Russian titanium producer signs partnership deal with Boeing

The USA's Boeing and Russia's Sverdlovsk Region-based Verkhnyaya Salda smelter (VSMPO), one of the world's major titanium producers, have signed a strategic partnership agreement, Russia's Industry and Energy Ministry said in a statement released on November 17th, Prime-TASS News Agency reported.
The agreement envisages a higher share for VSMPO's titanium products among Boeing's suppliers. It also envisages the two companies continuing to develop new titanium alloys and technologies. VSMPO reportedly supplies materials for the production of Boeing 777 planes. 
VSMPO produces 30 per cent of the world's titanium. The company sells about 70 per cent of its output under long-term contracts to Boeing, France's Airbus Industries, the USA's [GE Transportation] Aircraft Engines, and UK's Rolls-Royce. This year the company plans to increase titanium production 14 per cent on the year to 18,077 tonnes. Earlier in November VSMPO said that the company's titanium product output rose 46.9 per cent on the year to 14,873 tonnes in January-September.

EvrazHolding, Baosteel mull JVs

EvrazHolding, Russia's biggest steel producer, and Shanghai Baosteel Group are thinking of joining forces to carry out mining and metallurgical projects, EvrazHolding said in a statement following a meeting between the presidents for the two corporations, Alexander Abramov and Xie Qihua, in Moscow on October 14th, Interfax News Agency reported.
The two discussed cooperation with iron ore and coal mining and the joint production of steel goods, the statement read. EvrazHolding said it was the biggest Russian producer and exporter of semi-finished steel products to Southeast Asia. It plans in 2006 to raise slab output to five million tonnes annually and wants to use its export potential effectively, the statement said.

Iron ore exports surge 11%

Russia increased iron ore exports 11% year-on-year to 14.52 million tonnes in January-September, Rudprom, Interfax News Agency reported.
Russia exported 6.31 million tonnes of concentrate, up 18.3%; 7.09 million tonnes of pellets, an increase of 8.2%; 375,000 tonnes of sintering ore, down 19.2%; and 739,000 tonnes of briquettes, up 2.5%. Exports to non-CIS countries totalled 11.82 million tonnes or 81.4% of total exports, including 5.04 million tonnes of concentrate, 6.46 million tonnes of pellets and 322,000 tonnes of briquettes.

Severstal plans US purchases

Severstal, Russia's biggest steel producer, is looking to add to its portfolio of assets as the company seeks to become one of the world's 6 biggest steel producers by 2010, Interfax News Agency reported recently.
The Severstal steel group is offloading port-related assets in a move analysts think could be a prelude to the acquisition of a major new steel-producing asset, possibly abroad, in order to achieve ambitious plans for a 10-fold increase in roll output by 2010, the news agency said.
Severstaltrans, which is Severstal's freight arm, has now confirmed it is negotiating the sale of assets at the Vostochny port in Nakhodka to Kuzbassrazrezugol Coal company, one of Russia's biggest coal producers. Severstal said finished roll production is targeted to climb 3-4% this year from 8.81m tonnes in 2003.
Vyacheslav Smolyaninov, analyst at the Ural-Sib company, told Interfax the sale of Vostochny might indicate a change in strategy. He said Severstaltrans had earlier intended to create a major railway container company specialising in shipments from Southeast Asia and Europe. Those plans might have altered following the creation, by national railway operator Russian Railways (RZD) and Far East Shipping Company's of the Russkaya Troika container company, the analyst said. "Perhaps Severstaltrans has decided to concentrate in another field and is selling its more non-essential assets," Smolyaninsky said.
At the beginning of this year Severstal bought US steel producer Rouge Industries for US$286m. This takeover was one of the first sizeable acquisitions by a Russian company of a US industrial producer. The Russian company beat competition from other steel makers, including US Steel, to secure control of the plant, which is an important provider of steel for the automotive industry.
According to estimates by World Steel Dynamics, a US-based consultant firm, Severstal's earnings per tonne of steel shipped - before interest, taxation, depreciation and amortisation - will amount to US$140, according to MosNews. This places the Russian steel maker eighth in terms of profitability among leading steel companies.

MMK shares to be offered at open bid auction

The Russian government's 17.8 per cent of Magnitogorsk Metallurgical Combine (MMK), Russia's biggest steel mill, will be sold at an open bid auction, Deputy Economic Development and Trade Minister, Andrei Sharonov, said recently, Interfax News Agency reported.
"The basic hypothesis is an auction with an open form for submitting bids," Sharonov said. "It will definitely not be a special auction."
The Russian Federal Property Fund said that it would name the starting price at an auction for the 17.8 per cent pf MMK by the middle of November. "We have received an instruction from the Russian State Property Agency on the terms for privatising the government stake in MMK. The instruction states that the floor price will be 9.267bn roubles," the source said. "Now the fund is starting its own appraisal to determine the starting price, an independent appraiser will be brought in for this purpose," the source said. "The Property Fund will make an official announcement of the auction terms and hopes to sell the government stake in December 2004."
Both the Russian State Property Agency and the Russian Federal Property Fund want the government's stake in MMK to be sold in a single lot at a public auction, representatives of both agencies said. "A public auction could raise more for the budget, if the auction is hotly contested. We are inclined towards a public auction," a source at the Property Fund said. Russian Prime Minister, Mikhail Fradkov signed an order entering MMK in the government's 2004 privatisation plan. MMK was struck off the list of strategic enterprises in August as a precondition for its sale. The MMK stake may sell for about US$500m, said a source in the economy ministry. The money will come into the state treasury in January or February 2005 if the stake is sold in December, the source said. MMK had consolidated revenue of US$3.047bn to IAS in 2003.
The Russian Property Ministry owns 23.76 per cent of the MMK common stock (17.82 per cent of charter capital), while company management controls 58 per cent and the Mechel Steel Group's Yuzhny Kuzbass Coal Company has 16 per cent.

SUAL and VgAZ to vote on new charter in December

Shareholders of SUAL, Russia's second biggest aluminium company, and Volgograd Aluminium (VgAZ), which SUAL is in the process of taking over, will vote on a new version of the SUAL charter in absentia on December 15th, the companies said in a joint statement recently, Interfax News Agency reported.
Directors at both companies approved the agenda and date of the extraordinary meeting in mid-October. They also decided that the branch to be created would be called Siberian-Urals Aluminium Company Volgograd Aluminium Plant, and that Vladimir Yefimov, currently the executive director of VgAZ, would be its director general. 
SUAL's board of directors on September 26th approved plans to issue 196,922,712 new shares with par value of one rouble in exchange for shares in Volgograd Aluminium. Each share in Volgograd Aluminium, except treasury shares and shares held by the smelter itself or SUAL, will be exchanged for 22,614 common SUAL shares, par value of one rouble each.
At the December 15th meeting, SUAL's shareholders will have as many voting rights as their shares carry. Volgograd Aluminium's shareholders will have as many voting rights as their shares carry multiplied by 22,614. The shareholders of both companies approved SUAL's takeover of Volgograd Aluminium at extraordinary general meetings on August 31st. Volgograd Aluminium has charter capital of 750,604.80 roubles, or 8,885 common shares, each with par value of 84.48 roubles.

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TELECOMMUNICATIONS

Mobile phone user number doubles

The number of cell phone users in Russia has more than doubled over the past 12 months - from 18 million to 36.4m people, Itar-Tass News Agency reported.
The service operators have paid 80.2bn roubles towards the state. This information was unveiled at the regional expo-forum "InfoCom Northwest" that opened in the Popov communications museum in St Petersburg recently, within the frame of the federal programme "Electronic Russia."

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TRANSPORT

Russia's first monorail line commissioned in Moscow

A state commission has issued permission for the operation of Russia's first monorail line, which is situated in northeastern Moscow. The announcement was made to journalists by Moscow's first deputy mayor, Petr Aksenov, ITAR-TASS News Agency reported.
He said that the monorail line would initially be used for tours. "There will be several trains a day. Muscovites and visitors using the line will be able to get a view from several metres above, of the VVTs national exhibition centre, the Ostankino TV tower, the Ostankino park and the Sheremetyevskiy Dvorets palace," Aksenov said. One monorail tour trip will cost R100.
The monorail line management has said that the line is scheduled to change over to normal operation at the start of next year and will become part of the public transport system. "It is expected that one trip will cost about R50, and a monthly pass will cost about the same as a metro pass," Aksenov said.
Russia's first monorail line is 8.6 km long. It starts at the Timiryazevskaya metro station, goes through Fonvizina and Akademika Koroleva streets, and terminates near the main entrance to the VVTs exhibition centre. There are six stops on the line.
A trial carriage for the new line has been designed in Switzerland. But Russia has already begun producing its own monorail trains.

Russian company ships 50 buses to Cuba

Russia's leading bus manufacturing group Russian Buses (Russkiye Avtobusy) has shipped 50 PAZ-32053 buses to Cuba, the company said in a statement. Cuba's Transport Ministry planned to use them as school buses, according to the statement. Russian Buses has also signed a dealership agreement with Cuba's Rusia Automotriz SA to sell at least 100 buses a year in Cuba, Prime-TASS News Agency reported.
Russian Buses comprises Russia's leading manufacturer of small and medium-sized buses Pavlovskiy Avtobus (PAZ), the Likino Bus Plant (Liaz), the Golitsyno bus plant (Golaz) and the Kurgan Bus Plant (Kavz). In 2004 Russian Buses plans to produce 14,650 buses compared with 14,679 buses in 2003. In 2003 the group's share of the Russian bus market increased to 79 per cent from 53 per cent in 2002. It exported buses to Romania, Vietnam, Tajikistan and other countries. Exports accounted for 17 per cent of sales.

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