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RUSSIA


  
   

 
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)

Books on Russia

REPUBLICAN REFERENCE

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

  

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

Update No: 280 - (29/04/04)

The Chechen imbroglio persists
The Russians are still bogged down in the Chechen conflict. So long as a country is at war it cannot be said to be at ease with itself, however well it is doing in other respects. The economy is booming and President Putin has been resoundingly re-elected. But the hostilities in the Caucasus continue.
On April 19th came news that a key figure, the leader of the Arabs in Chechnya, Abu al-Waleed al- Ghamdi, has been killed, a major breakthrough for the Russian-backed forces. He was accused of being behind the bombing of the Moscow underground in February, which came conveniently just ahead of the presidential elections, just as a suicide bomber killed 50 on a train in Southern Russia in December before the parliamentary elections. 
Indeed, Abu al-Waleed is an historic figure in that he has been accused of being the mastermind behind the spate of bombings in 1999, which triggered off the second Chechen War and catapulted Putin to his extraordinary ascendancy in Russian politics. 'The September massacres,' as they can be called in echo of the famous events of the French Revolution of the same name in which Danton shot to prominence, came exactly when they were needed by the regime. It is hardly surprising if many in Russia and elsewhere are sceptical of their provenance, deeming it well within the power of the former KGB to have 'arranged' them. To pin them on the likes of Abu al-Waheed is a bit too obvious. Why should the terrorist have played the Kremlin's game so faithfully, or so the suspicion runs.
He is now a martyr, naturally. The guerrilla leader Shamil Basayev, who lost four troops in the operation, remains defiant. He has lost a foot and many of his faithful henchmen, but Chechen rebels are made of stern fibre. That he will carry on the fight so long as he is able is certain. A few thousand resolute rebels can keep an army of hundreds of thousands pinned down indefinitely. 
The Kremlin' policy is to localise the conflict by having the counter-insurgency led by a local potentate, elected in a patently rigged contest last October. It is the same tactics the Soviet Union used in Afghanistan in the late 1980s, surprisingly successfully for a while. But in the end the Russian-backed figure is widely seen as a stooge and loses support. That seems the likely destiny for the current official strongman in Grozny

Car bomb just misses the president of Ingushetia
Why various conservatives eventually turned against the Vietnam War in the US and the UK in the late 1960s was that it was clearly promoting a culture of violence, in which very dubious elements, mafiosi and the like, such as Lee Harvey Oswald, began to thrive. Political assassination became the norm. One such convert to the idea of a withdrawal from Vietnam was poignantly Bobby Kennedy shortly before he was shot in 1968.
There are voices saying much the same about Chechnya. One does not have to be soft on Islamic fundamentalism, any more than Bobby Kennedy, or indeed Richard Nixon, was on communism, to realise that the war is not winnable in conventional military terms. It is poisoning the Russian body politic so long as it continues, playing into the hands of the already extensive mafia. The leader of the Southern republic of Ingushetia, that borders Chechnya, Murat Zyazikov, narrowly escaped an assassination attempt on April 6th, when a bomb exploded near to his motorcade. "This was another attempt to drag Ingushetia into the conflict zone, to expand the zone of hostilities and undermine stability in the North Caucasus as a whole" he said, nursing minor injuries. "It is difficult to imagine what would have happened if the car had not been armour-plated."
The force of the blast, estimated to be the equivalent of more than 90 kilograms, or 200 pounds of dynamite, obliterated the bomber's car, killing the driver, and damaged several cars in the motorcade, as well as houses hundreds of metres away. The exposion wounded four of Zyazikov's bodyguards, as well as two bystanders. Such a serious attempt was obviously well planned and organised. The complicity of the Chechen rebels is only too likely.
Zyazikov, a former officer in the KGB and its successor, the Federal Security Service, is a close ally of President Putin and fair game for the terrorists. Thousands of Chechen refugees have been interned in Ingushetia, causing deep resentment. The attempt, however dastardly, was perfectly logical to drum up support among the Chechens for the extremists. 

New regime much like the old?
Government goes on, as per usual, whatever the disturbances. Putin's new government is turning out to be not so very different from its predecessor, dominated as it is by reformers. Premier Mikhail Fradkov is a former head of the tax police and so it was natural that his debut should be a new tax package. It will raise taxes on the buoyant oil sector, benefiting from high global oil prices, while lowering payroll taxes. 
Hard sense has won out and the tax hike on the oil sector is much less than the market was fearing. The proposed tax overhaul assumes oil prices of $27 per barrel, and using that assumption, the government is estimating that it will raise extra export duties of $2bn-3.5bn and oil production duties of $600 million.
Specifically, the Russian government is proposing a graduated fiscal formula that depends on oil prices. If oil prices average more than $25 per barrel, the plan would charge oil export duties of 65%, up from 40%. If they were $20-25 per barrel, the rate would total 45%, up from 35%. The base tax rate for oil extraction is also to be raised from 347 roubles per ton to 400 roubles, or $1.91 per barrel.
At the moment the government sets export duties at $4.26 per exported barrel. The new tax regime would raise them to circa $6.80 per barrel at current prices.
Separately, the Finance Ministar Alexei Kudrin proposed raising the dividend tax to 9% from 6%, starting in 2005. The Finance Ministry estimates that Russia's oil comp[anies had almost doubled dividend payments in 2003, to $5.6bn from $3bn in 2002 because of the boom in output and high oil prices.
The new taxes will be easily passed through the Duma, which since December's landslide victory for the pro-government United Russia bloc, is even more of a rubberstamp for the Kremlin than formerly. Kudrin added that draft laws on a new land tax, a tax on the property of individuals, and heritage and gift taxes are also under consideration.
Economists are much relieved at the new programme's moderation. It bodes well for the new administration, which is winning applaudits for good sense and professional expertise all round.

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AUTOMOBILES

Foreign cars in Russia to exceed 440,000 by 2006

The market for new foreign motorcars in Russia is expected to exceed 440,000 by 2006 as against 196,000 in 2003, the President of Ford Russia, Henrik Nenzen, estimated during a press conference recently, Itar-TASS News Agency has reported. 
German automobile concern, DaimlerChrysler AG, is to invest €18.9m in developing its infrastructure in Russia, New Europe reported recently, quoting a source in the company's 100% subsidiary ZAO DaimlerChrysler Automobiles Rus.
The ZAO is a general importer for Mercedes, Mayback, Chrysler and Jeep.
Investment will mainly be made in training personnel and developing IT infrastructure, the source said. According to the company, shareholders have decided to increase the company's charter capital by placing 350 common shares with a par value of 199,780 roubles each. DaimlerChrysler AG will acquire all of these shares. The placement price is €54,000 per share.
Ford Motor Co plans to make 27,200 Focuses in Russia, up from 16,000 last year, Nenzen said recently. He told an automotive conference that of all new car sales in Russia, the Focus's popularity was outpaced only by domestic models.
The company has said annual Focus output in Russia is expected to reach 35,000 by 2007 and the US carmaker is aiming for 10% of the Russian car market by 2010.
Nenzen reportedly said Ford planned to sell 30,000 cars in Russia in 2004, import models included, and added: "It looks like we will do much better."
Speaking about the future of the Ford Motor Company's Vsevolzhsk works, which became operational in the Leningrad Region in 2002, Nenzen said the Vsevolzhsk works would function in three shifts starting this coming summer.
The design capacity of the works provides for the manufacturing of up to 100,000 vehicles a year, Itar-TASS reported.

January-February 2004 car production increases 39.1%

Russia increased car production by 39.1% to 158,408 in January-February 2004 against the same period in 2003, according to documents drawn up by ASM-Holding and circulated at a press conference recently, New Europe reported. 
The documents note that this seemingly encouraging result should be viewed objectively, taking into account that the beginning of 2003 saw "a significant drop in domestic car production due to the over-saturation of the Russian market with used foreign-made cars." Russia also produced 30,969 trucks in January-February 2004, which is 18.9% more than in January-February 2003.

GM-Avtovaz revises 2004 production target down

The GM-Avtovaz joint venture revised its 2004 production target down to 55,150 vehicles due to the large amount of work involved in putting new models and modifications of existing models on line, New Europe reported recently. 
The company, which is owned by Avtovaz, General Motors and the European Bank for Reconstruction and Development (EBRD), had planned to produce 60,000 Chevy-Niva jeeps this year. It does, though, intend to produce 456 cars based on the T-3000, designed by Opel, between September 23rd and January 31st. The joint venture will also start producing Chevy-Niva jeeps with Opel engines for export and local sales on July 5th. The car based on the T-3000 will retail at about US$10,000. Up to 43% of its components will be sourced locally after the first year. The car was to be officially named at the end of March. GM-Avtovaz produced 25,235 cars in 2003 compared with 456 in 2002, when it started up.

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AVIATION & SPACE

Aeroflot to join Sky Team

Aeroflot is considering the possibility of entering the international aviation alliance Sky Team, Aeroflot Deputy General Director, Lev Koshlyakov, declared at a news conference in St Petersburg recently, RBC reported. 
He remarked that Sky Team, which includes such world leaders AS Air France and Delta Airlines, Czech Airlines, etc, controlled over 20% of the global market of air transportation services. Aeroflot has made a decision to join this alliance during the first six months of 2004. Koshlyakov pointed out that the Russian government would discuss this issue. There are two global aviation alliances on the world market now: Star Alliance, led by Lufthansa, and an alliance led by British Airways. Participation in the international alliance will allow Aeroflot to extend its presence on the world market.

Russia's MiG developing new light frontline combat aircraft for export

The MiG aircraft-building corporation is developing a novel light frontline combat aircraft, MiG Chief Executive Officer and Designer-General Valeriy Toryanin said, Interfax-AVN Military News Agency web site reported. 
He said that the aircraft was not an alternative to the Sukhoi-designed fifth-generation fighter. 
"The developer of the Russian fifth-generation fighter has been defined. This is Sukhoi, and MiG has no intention to challenge the decision," he said. He emphasized that MiG "have never said we were making the fifth generation. But we do not want to be reduced to promoting various versions of the MiG-29 Fulcrum, since we have a unique design bureau. We have to move on." 
According to the designer, the concept of the new export-oriented aircraft has already been formed, and many potential customers have revealed great interest in the aircraft. "The MiG Corporation had previously collected plenty of fifth-generation data, and this experience will be used in the development of the new aircraft," he said.

Russia launches rocket carrying European satellite

Russian Space Forces command announced that recently Russia successfully launched the Proton-KM rocket carrying a European telecommunications satellite, "W-3A", einnews reported. 
The Proton-KM rocket lifted off from Russia's Baikonur Cosmodrome in Kazakstan and the telecommunications satellite settled into orbit. The W-3A satellite, manufactured by French company, Astrium, will cover Europe, the Middle East and northwestern and southern Africa.

NAPO aims to sell 20 AN-38 aircraft to SE Asia

The Chkalov Aircraft Manufacturing Association of Novosibirsk (NAPO), a member of the Sukhoi Aviation Military Complex, is negotiating the sale of 20 Antonov An-38-100 aircraft to Southeast Asia, NAPO's General Director, Alexander Bobryshev, stated recently, New Europe reported. "We expect by May 2004 to sign contracts or pre-contractual agreements to supply the An-38 to Vietnam, Indonesia, Singapore and Malaysia under leasing arrangements," Bobryshev said. 
The contract amounts are not yet being disclosed, but Vorobyov said around 20 aircraft were at issue. The planes will be fitted with American-made engines and not, as previously thought, with Russian TVD-20 engines.

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BONDS

MTS to sell US$600m in bonds

Mobile TeleSystems (MTS), Eastern Europe's largest cellular company, plans to sell about US$600m of bonds to replace maturing foreign currency debt, Andrei Braginsky, the company's head of investor relations, said recently. He would not comment on the likely maturity, currency or underwriters of the securities. 
MTS last sold Eurobonds in October, issuing US$400m of seven-year bonds at a yield of 8.375%. The bonds have since gained, pushing the yield down to 7.6%. The debt is rated Ba3 at Moody's Investors Service, three levels below investment grade, and B+ at Standard & Poor's, four short of investment grade, New Europe reported.

Eurobonds from Railroads

Russian Railroads plans to issue Eurobonds on May-June, 2005, Vice President, Fyodor Andreyev said, RBC reported recently. 
According to him, the issue will be possible after a credit rating is assigned this June, but the company decided to publish its 2004 results according to RAS and IAS before the issue. The Eurobonds yield will total minimum 7-7.5%, according to Andreyev. As for Russian Railroads for this year, the company plans to get an investment category credit rating and to place the 10-12bn rouble (about US$350-US$420) bonds.

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CREDIT RATINGS

S&P raises Samara region rating to BB-

New Europe reported recently that Standard & Poor's Ratings Services has raised its foreign-currency issuer credit rating on Samara region (Oblast) in Russia to 'BB-' from 'B+', S&P said in a press release. The outlook is stable. At the same time, Standard & Poor's affirmed its 'ruAA-' Russia national scale rating on the Oblast. "The rating action reflects the region's continued economic expansion and diversification, better-than-expected financial performance, and reduction of foreign-exchange risks," said Standard & Poor's Public Finance credit analyst, Boris Kopeykin.
"High, albeit decreasing, dependence on the region's largest taxpayer, the car producer AvtoVAZ, federal control over revenues, and a relatively high level of guarantees, however, continue to constrain the rating." The region's comparative wealth and above-Russian-average management sophistication support the rating. Standard & Poor's expects continued economic diversification and economic expansion to further reduce the volatility of the Oblast's revenue base. These factors should also help the region withstand financial pressures stemming from growing public sector salaries and infrastructure needs without accumulating debt beyond a manageable 30% of revenues. The stabilisation of the Oblast's financial performance, with sound operating balances and small deficits after capital expenditure, is also expected.

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ENERGY

Russian Railways, Yukos sign deal on supplying oil to China

The Yukos joint-stock company and the Russian Railways joint-stock company have signed an agreement on volumes of oil shipments to China for the next three years, Gennadiy Fadeyev, Russian Railways president, said, after signing the agreement, RIA News Agency reported.
"Under the agreement, Yukos will ship 6.4m tonnes of oil using Russian railways in 2004, 8.5m tonnes in 2005 and 15m tonnes in 2005," Fadeyev said. He also said that after 2007 Yukos will increase its oil shipments. The volumes specified in the agreement will be shipped without let or hindrance, Fadeyev added.
In his turn, the head of Yukos, Semen Kukes, said: "The signed agreement is very important for the company. It is a real contribution to the development of east Siberia."
Of course, shipping oil by railway costs the company more than using the pipeline, Kukes added. "However oil produced in east Siberia is lighter (without deposit) and China is paying good money for it. Shipping oil by railway is more promising in many respects and the efficiency of shipments through Transsib [Trans-Siberian Railway] will allow us to have a good profit," Kukes said.
According to him, railway shipments of oil to China will make it possible to develop east Siberia. "The agreement with Russian Railways will help develop new oil deposits in east Siberia and, hence, an infrastructure and new jobs will be created. We hope that other companies such as Rosneft, Surgutneftegaz and Gazprom will join us," Kukes said. During the period between 2007 and 2011 Russian Railways and Yukos will additionally agree the annual volumes of railway oil shipments to China.
Fadeyev said not only big companies but the state as a whole would benefit from the project since it involves the development of east Siberia and the Far East. "The agreement with Yukos is just the first step towards cooperation between Russian Railways and major oil companies," Fadeyev said.
In the immediate future the Russian Railways management plans to hold talks with the Rosneft company on organizing shipments of oil and oil products by railway.

Russia's gas giant acquires shares in Lithuanian company

The acquisition of shares in the gas complex, Lietuvos Dujos (Lithuanian Gas), by Gazprom is a serious step towards the economic integration of Russia and Lithuania, Chairman of the State Duma Committee on Power Engineering, Transport and Communications and the president of the Russian Gas Society, Valeriy Yazyev, said recently, when commenting on an official conclusion of the deal on the transfer to the Russian gas concern [Gazprom] of 34 per cent of the shares in Lietuvos Dujos, ITAR-TASS News Agency reported.
According to Yazyev, the contract is an essential element in the revival of the economic interrelation between Russia and Lithuania. "It is a very important acquisition for Gazprom. As a result, Gazprom gets an opportunity to sell electricity as well as to distribute and sell gas on the territory of Lithuania," Yazyev said.
According to Yazyev, the Lithuanian economy is 100 per cent supplied by Russian gas. By signing the agreement Gazprom became the third owner of the Lithuanian gas sector along with the state property fund of Lithuania and German concern, Ruhrgaz.

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FORESTRY

Canada's next grant keeps forest project in Russia's Far East going

Canada has resumed financial support to the Gassinskiy model forest in Nanayskiy District, Khabarovsk Territory. A grant to the tune of 40,000 Canadian dollars was allocated to continue the first project of sustainable forest use in the territory, Aleksandr Istigechev, spokesman for the Khabarovsk Territory directorate of natural resource use and environmental protection, told ITAR-TASS News Agency.
He said that "even a small sum from the grant of the secretariat of the International Model Forest Network will make it possible to continue testing the systems of inexhaustible use of the forest." In the last few years, Canada stopped financing, which was leading to "the termination of the project."
The implementation of the Gassinskiy model forest project started in Khabarovsk Territory 10 years ago. About 3m Canadian dollars has been invested in the programme. A technical centre was built and fitted out and a partnership comprising 28 participants in the project was set up. The main directions and programme of sustainable ecological and economic development for the Gassinskiy forest until 2010 were identified. What matters most is that the local population is developing forest conservation skills.

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FOOD & DRINK

Volga beer sales rise 47% in 2003

Russian brewer, Volga, saw its sales rise by some 47% in 2003 to 7m decalitres of beer compared to a year before, the company's press service was quoted as saying by einnews recently. 
Revenues were reported up 78% on the year to 846m roubles (US$28.7m), while the company's share of the Nizhny Novgorod Region beer market went up to 36.8% from 30.4%. Volga is controlled by the Central European Brewing company, the major shareholder of which is Wimm-Bill-Dann Foods. FSC registered the placement report for stocks of Avalon Distributor worth 111.291m roubles.

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FOREIGN INVESTMENT

IFC to invest up to US$600m in Russia

The International Finance Corporation (IFC) - the World Bank's investment arm - intends to invest US$500-US$600m in Russia this year, said Edward Nassim, the IFC's director for Central and Eastern Europe, Interfax News Agency reported recently. 
"There may be approximately 30 projects totalling US$500-600m," said Nassim. In 2003 the IFC established as priorities financial sector projects, but this year it will invest mostly in transport, particularly rail and air transport, plus agriculture, chemicals, mining and retail, Nassim said. The IFC will continue to invest in the financial industry, but to a lesser extent, working with provincial banks and specialising in leasing and home-loans. The IFC has contributed to 70 Russian projects costing more than US$1.3bn since Russia became a member in 1993. The IFC invested US$217m in Russia in the 2002 financial year from July 1st, 2001 to June 30th, 2002 and US$500m in the 2003 financial year.

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INFORMATION TECHNOLOGY

Hewlett Packard to open 15 offices in Russia

Hewlett Packard, the world's second largest computer manufacturer, plans to open up to 15 offices in Russia over the next three to four years, HP Russia Vice President and Director General, Owen Kemp, said, Interfax News Agency reported recently.
Kemp said the company wants to open offices in all seven federal districts and in one or two major cities in each district.
It is important for HP to open such offices because the company is oriented toward the end consumer, Kemp said. HP is considering the possibility of setting up assembly in Russia and will reach a decision in the mid-term, he said.
Sales in Russia already indicate that assembly could be set up in the country and HP is working on this issue, but it is a difficult matter, especially with regard customs, he said.

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MINERALS & METALS

Russia ups 2-month iron ore exports

Russia boosted iron ore exports 26% year-on-year to 3.24m tonnes in January-February, Interfax News Agency reported recently. 
Russia exported 1.55m tonnes of concrete, up 74.3%; 1.36m tonnes of pellets, up 4.9%; 141,000 tonnes of agglomerate, up 93.2%; and 180,000 tonnes of briquettes, an increase of 5.3%. Exports to non-CIS countries came to 2.37m tonnes, or 73.1% of total exports, including 1.04m tonnes of concrete, 1.25m tonnes of pellets and 80,000 tonnes of briquettes. Russia exported 868,000 tonnes of iron ore to Ukraine, or 26.8% of total exports. Russia produced 15.49m tonnes of commodity iron ore in January-February 2004, up 8.7% year-on-year.

Norlisk buys 20% of gold fields

OAO Norlisk Nickel took another step toward becoming one of the world's heavyweight gold producers, paying US$1.16bn (€957.5m) for London-based Anglo American PLC's 20% stake in Gold Fields Ltd of South Africa, the Wall Street Journal Europe reported recently.
The deal was the largest-ever foreign investment made by a Russian company, eclipsing OAO Severstal's US$285m purchase of Rouge Industries Inc last year. It makes Norlisk the world's sixth-largest gold producer at a time when prices for the metal are at US$420 a troy ounce, close to a 15-year high. Gold Fields is the world's fourth-largest gold producer, producing 4.3m troy ounces of gold last year. A pro-rata share of Gold Fields' output would nearly double Norlisk's own estimated production of about 900,000 ounces this year.
The deal continues Norlisk's diversification of its resource base outside Russia, following the acquisition of US-based palladium miner Stillwater Mining Co, completed last year. The price paid for the 20% Gold Fields stake - US$11.79 a share - was 5.2% below the closing price of Gold Fields American depositary receipts at US$12.44 in New York.
At the equivalent of roughly 71 cents per ounce of reserves, the deal is nearly twice as expensive as Norlisk's acquisition of ZAO Polyus two years ago.
"Its expensive if you compare it to Norlisk itself, but it's not bad for a gold company," said Fyodor Tregubenko, an analyst with Brunswick UBS in Moscow. He estimated Norlisk paid US$69 an ounce of reserves for its stake, cheaper than the current US$80-an-ounce valuation of Highland Gold Mining PLC.
For its part, Anglo American will use the money to pay off debt and finance capital expenditure in South Africa. The mining company will realise a capital gain of US$430m from the sale.
Anglo American said its debt in South Africa stands at US$3.4bn. 

Norilsk Nickel to meet global palladium demand

Norilsk Nickel is prepared to meet global demand for palladium in full, Leonid Rozhetskin, the arctic mining and smelting giant's deputy CEO, said at the 2004 Global Resources Services conference in Florida, US, New Europe reported recently.
Rozhetskin said Norilsk Nickel, the world's biggest palladium producer, had stopped stockpiling the metal. "We sold all the palladium we produced in 2003. Now we have contracts to supply all the palladium we produce in 2004 and by the end of the year we may have sold some of the metal we stockpiled in the past," Rozhetskin said.
Johnson Matthey estimates Norilsk Nickel sold 2.95m Troy ounces or about 91.7 tonnes of palladium in 2003. Norilsk Nickel itself has not disclosed data about its palladium sales, which were still subject to state secrecy laws at the time. Palladium prices hit a record US$1,100/oz in January 2001, after which the metal's biggest consumers stopped buying. This sent palladium down in price - to US$700/oz as early as April and US$330/oz in November that year.
Palladium bottomed out at US$190/oz at the start of 2004, since when it has started to climb, closing at US$236/oz in London on March 2nd. While palladium was falling, Norilsk Nickel said it had stopped selling the metal on the spot market in the hope of spurring a recovery. But, as prices fell, demand increased and with it supplies by Russia. Some market analysts have noticed a significant increase in supply of Russian palladium in recent months and believe palladium prices would have gone up more dramatically had it not been for these sales. Rozhetskin said Norilsk Nickel's acquisition of US. PGM producer Stillwater Mining - the biggest palladium producer outside Russia and South Africa - and other recent actions were designed to stabilise the world palladium market and rebuilt consumer confidence in the metal. "The message that we have been trying to get across to all market participants in the last two years and which we hoped to underline by acquiring Stillwater is that palladium supplies to the United States and other countries will never be disrupted again," Rozhetskin said.

Polymetal doubles gold production in 2003

St Petersburg-based precious metals corporation Polymetal more than doubled gold production from 4.5 tonnes in 2002 to 10.7 tonnes in gold equivalent in 2003, a Polymetal press release said, New Europe reported recently. 
The group achieved full projected capacity at the big Dukat silver field in the Magadan region in the fourth quarter of 2003. It also started a mining and milling plant at the Khakandzhe gold-silver field in the Khabarovsk territory. Polymetal, founded in 1998, is Russia's biggest silver producer and one of the country's top ten gold mining companies, with 17 licensed to precious metals deposits. It is a member of the Investment, Construction, Technologies (ICT) Group of companies.

Metalloinvest plumps US$70m into Kurk project

The Metalloinvest holding company plans to invest about US$700m in a hot-briquette iron (HBI) and smelting complex at the Mikhailovsky GOK(MGOK) iron ore mine in the Kursk region by 2012, New Europe reported recently. 
The first stage should see the "completion in 2007" of a plant to produce up to 2m tonnes of HBI per year, Vedomosti newspaper quoted Metalloinvest's Chairman, Dmitry Gindin, as saying. Then, the company will start to build a smelter. "This will be the final stage, and it will take quite a while - we estimate until 2012. We hope to get the steel smelter up and running in five to seven years," he said. Metalloinvest first announced plans to build a 2m tpy HBI plant at a cost of approximately US$500m at MGOK in August last year. The HBI plans sales will be at least US$200m a year, to enable MGOK to double sales of all types of commodities.

RusAl to bid for Jamaican bauxite mine shares

Russian aluminium giant RusAl will bid at an auction for shares in Aluminium Partners of Jamaica (Alpart), which controls a bauxite mine and concentrating plant, Vera Kurochkina, RusAl's chief press spokeswoman, said, New Europe reported recently.
The RusAl press spokeswoman did not disclose details of the group's bid. The bankrupt Kaiser Aluminium owns 65% of the shares in Alpart. Kaiser Aluminium earlier agreed to sell the Jamaican company to Swiss metals trader Glencore for at least US$160m, however all transactions by Kaiser are now subject to approval by US bankruptcy courts. Besides, Norway's ASA Norsk Hydro, another Alpart shareholder, has the right to acquire these shares. Kaiser filed for protection of the world's three biggest aluminium companies. It produces more than 70% of the world's primary aluminium and about 10% of Russia's primary aluminium.

Alrosa sells US$18m in diamonds at auction

Alrosa sold 18,500 carats of diamonds worth more than US$18m at a second international auction organised together with the Russian Diamond Chamber in the period from January 26th to March 4th, 2004, RBC reported recently. 
According to a statement, in total, 97 lots of diamonds were sold. The company sold large diamonds that were over 50 carats each. The finance ministry's expert commission did not evaluate the traded precious stones as "unique." The largest diamond traded on the auction weighed more than 649 carats. Among bidders that took part in auctions were 38 Russian and foreign companies.

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NUCLEAR ENERGY

Russia says to press on with Iranian nuclear plant

The Russian Foreign Ministry has stated that Russia does not plan to halt construction of a nuclear reactor in Bushehr. "No one is talking about stopping the project," Foreign Ministry spokesman, Aleksandr Yakovenko, said recently, RIA News Agency reported.
He said Russia intends to continue working with Iran "in the field of peaceful atomic energy, since there have been no decisions on this issue by the IAEA [International Atomic Energy Agency]."
Russia also hopes that Iran will, as before, work actively with the IAEA, which is an authoritative world body. There is one very clear condition for Russia to keep working with Iran in the field of nuclear energy: the spent fuel from the plant must be returned to Russia, Yakovenko said. He recalled that an agreement on this has to be signed.
"We don't know yet whether this will be a protocol, or some kind of treaty. But it will be signed," Yakovenko said. He was responding to a question about whether the relevant document would be signed during the upcoming visit to Iran by the head of Russia's Federal Atomic Energy Agency, Aleksandr Rumyantsev.

Britain gives Russia US$30m for nuclear fuel disposal in 2004

Great Britain is allocating US$30m for programmes to reprocess and store spent nuclear fuel in Russia in 2004, first secretary at the British embassy in Moscow, Simon Evans, has told RIA-Novosti News Agency.
"The funds will mostly be spent on implementing our joint programmes with the Russian side in the northwestern region of Russia," Evans added. He said these included above all joint projects for scrapping nuclear submarines at the naval base in Severodvinsk, the construction of a new building to store spent nuclear fuel near Murmansk, and the implementation of a project to build protective shelters over the sites where spent nuclear fuel is stored at the naval base in Andreyevskaya Guba [bay].
"The funds are allocated as part of the programme of cooperation between Russia and Great Britain in chemical and nuclear weapons disposal. Over 10 years, Great Britain intends to disburse some US$750m for this purpose," Evans said.
The diplomat recalled that at the summit in Kananaskis (Canada) in 2002, G8 leaders pledged to disburse US$20bn over 10 years for the elimination of nuclear, bacteriological and chemical weapons of mass destruction of the former USSR located both in Russia and in [other] CIS states.

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TELECOMMUNICATIONS

OAO Vimpelcom to up market presence via stake buy

OAO Vimpelcom, the second largest cellular operator in Russia in terms of subscribers, is holding talks to buy 85% of shares in the mobile operator OSO Dal Telecom International, New Europe reported recently.
According to experts, the deal to acquire the shares in DTI, which provides AMPS and GSM-1800 services in Amur region, Kamchatka and Khabarovsk territory, may amount to US$85m. ASM-Consulting analyst, Anton Pogrebinsky, was quoted in the report as saying that "given that the subscriber base of the operator amounts to about 240,000 subscribers, of which 60,000 are AMPS users, and 180,000 - GSM, each DTI subscriber will cost Vimpelcom US$423." "This is fully compatible with the price paid by MTS for Primtelephone subscribers," Pogrebinsky said.
DTI shareholders currently include private individuals. At the same time, OAO Vimpelcom has started preparations to merge with its 100% subsidiary KB Impuls, which has a licence to provide GSM services in Moscow region, company press secretary, Mikhail Umarov, was quoted as saying.
"This reorganisation would be a fundamental way of resolving disputes," he said.
The telecommunication ministry's watchdog, Gossvyaznadzor, has carried out an unplanned audit of the activities of companies in the Vimpelcom group in Moscow region, which uncovered a number of violations. In particular, the holder of the GSM-900/1800 licence for Moscow region is OAO KB Impuls, which does not have contracts to supply cellular communications services.
Services to connect subscribers to the GSM network are provided by Vimpelcom.
In a general agreement signed in May 1997, between Vimpelcom and KB Impuls, there is no section dealing directly with Vimpelcom signing agreements to provide GSM cellular services on behalf of KM Impuls, which "contradicts the requirements of point 1, article 184 of the Russian Civil Code," according to Gossvyaznadzor.
In addition, "the existing legislative base, including the law "On Communications" does not clearly define the issue of providing frequencies, licences and other permits by an operator during the reorganisation process," Umarov said. As a result, Vimpelcom is worried about being "outside the law," he said. Vimpelcom has over 5.7m subscribers in the Moscow licence zone.

MTS ups stake in SSS-900…

Mobile TeleSystems (MTS), Russia's biggest cellular provider, upped its stake in ZAO Siberian cellular Systems-900 (SSS-900) of Novosibirsk to 99.5% after buying another 11% of the company's shares for US$8.5m, Interfax News Agency reported recently. 
MTS said in a press release that it bought the shares in keeping with its strategy to consolidate minority stakes in its subsidiaries. SSS-900 provides services under the MTS trademark in Novosibirsk, with a population of 2.7m, and the Altai republic with 202,000. It has 512,800 subscribers. Revenues for the first nine months of 2003 were US$47.7m, operating earnings US$23m and net profits US$16.6m.

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TRANSPORT

Russian Railroads ready to construct tracks for YUKOS

The joint stock company Russian Railroads has submitted a feasibility study of the project of constructing a railroad to an oil terminal in the Ulis bay (Vladivostock) to YUKOS, RBC reported recently. 
The oil company is going to build this terminal, Russian Railroads Vice President Salman Babayev told RBC. According to him, the final decision on laying this railroad will be adopted after YUKOS provides a programme and a general plan of constructing this oil terminal. The total amount of resources that may be allocated for the construction of the railroad is not large.
According to Babayev, there is a railroad to the site where the oil terminal is to be constructed and this railroad just needs to be upgraded.
According to YUKOS, the volume of oil products to be transferred through this terminal may be up to 5m per year. The terminal will enable the company to supply oil to China.

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