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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

  

Update No: 284 - (27/08/04)

Shake-up at the top, as terrorists strike
President Vladimir Putin dismissed the military's chief of general staff and other top military and law enforcement officials after a devastating assault by militants in southern Russia in June. Putin dismissed Gen. Anatoly Kvashnin as military chief of staff and Gen. Vyacheslav Tikhomirov, the head of the Interior Ministry forces. He also dismissed Anatoly Yezhkov, deputy director of the Federal Security Service or FSB, the main successor agency to the KGB. Also fired was commander of the North Caucasus military district, Mikhail Labunets. 
The Russian military, Interior Ministry and FSB all are obviously involved in Russia's campaign against separatist rebels in Chechnya. Yezhkov was the FSB's top official for the North Caucasus. 
The shake-up followed June's attack by militants on police facilities in Ingushetia, which borders Chechnya; 90 people were killed in the brazen, well co-ordinated assaults. 
The military's inability to block the massive assault by hundreds of fighters underlined the weakness of Russian forces in the region and undermined Kremlin claims that Chechnya and the North Caucasus region in general are stabilizing. 
Kvashnin has been replaced by Col.-Gen. Yuri Baluyevsky, formerly first deputy chief of the general staff. Kvashnin's dismissal also likely reflected his long-standing disputes with Defence Minister Sergei Ivanov over military reform. 
Baluyevsky is seen as well-inclined toward the West. In April, after NATO expanded its membership to include several ex-Soviet republics, Baluyevsky struck a conciliatory stance, saying that Moscow would closely watch the alliance's activities in the new Baltic member states, but wanted to avoid taking military countermeasures. 
Analysts said the assault on Ingushetia appeared to be only a pretext to dismiss Kvashnin, who was highly unpopular in the military circles and whom liberal politicians had alleged was undermining attempts to change Russia's army to a professional, non-conscript force. 
"He was the focus of everyone's discontent," said Pavel Felgenhauer, an independent military analyst in Moscow. Kvashnin was regarded as both incompetent and overly ambitious, often upsetting Russian top military officials, including Ivanov, he said. 
According to Felgenhauer, if Kvashnin were dismissed because of his failed policy in Ingushetia or Chechnya, "then he should have been fired a long time ago, or actually never appointed." 
A member of the defence committee in the lower house of the Russian parliament, Alexei Sigutkin, was quoted by the Interfax news agency as saying the Ingushetia events were "the last straw" for Kvashnin. 
Aleksander Golts, a military observer for the Ezhenedelny Zhurnal weekly magazine, said the move was also connected with the recently passed law that changed the functions of the military's general staff from operational to mostly analytical, for which Kvashnin wasn't ready. 
Golts said that the other dismissals were aimed at "finding scapegoats" to blame the unsuccessful policies in Chechnya, where Russian forces have been fighting rebels for most of the past decade. 
But Golts observed that replacing generals will not solve the problem in Chechnya, "where the campaign has reached a dead end." 
"The loud-voiced statements on suppressing resistance (in Chechnya) are not being confirmed, while the time for political negotiations has been missed," Golts said. 
"The general staff made serious mistakes regarding the military structures' actions in Chechnya," said another parliament defence committee member, Gennady Gudkov, 
Army to be given boost; while welfare for pensioners slashed
Putin has declared his real interests and priorities. Determined to restore the once mighty Red Army to some semblance of its former glory, Putin is pledging an extra $2bn for the armed forces, which are currently under-funded, poorly-equipped and seriously deficient in morale. The extra money will be spent on improving pay and conditions, although it will hardly restore super-power status.
The funds are also being allocated to shift the emphasis from conscription to professional forces, a move long opposed by the departing Kravshin. The number of contract soldiers, or kontractniki, will rise to 50,000, while two full-time professional divisions of 27,000 troops wil be created next year. Russia has 1.2 million men under arms at any given moment.
Thirty thousand officers who have served a minimum of three years will be given homes and 25,000 warrant officers will be given help with their mortgages.
The draft is to be reduced to one year, a probable prelude to its eventual elimination. But draft-dodging will be made more difficult.
What makes the boost in military spending particularly significant is that it comes just when the government is coming under heavy fire for scaling back the Soviet-era cradle-to-grave welfare system and for slashing social benefits for 30 million pensioners, war veterans and disabled people. Free bus and underground rail travel for pensioners and the like is to be ended. A redistribution of income and welfare from the war veterans, the aged and the infirm to the young, able-bodied warriors is to be under way.
Putin could never have done this before the vital Duma elections last December. The poor showing of the communists then, down to 12% of the vote, has clearly emboldened him to reckon that he will not suffer any serious political fall-out from this retrenchment at the expense of the old and the disabled. After all many of them will be dead by the time of the next elections in December 2007, when a protest vote for the communists will be futile. 
The soldiers will also lose their right to free public transport, but will be compensated with higher wages. Special allowances for serving in Chechnya and other trouble-spots are to be raised. 
Alexsei Kudrin, the finance minister, claims that the increase will raise the defence budget to 700bn roubles (around $20bn), but critics say that the true figure is much less, more like $412bn roubles ($12bn). Spending is going up by 20%, not the 40% claimed
It is doubtful that flinging money at the military will suffice to restore badly-battered morale, that elusive quality, which once lost, is so difficult to regain. The reverses of the last fifteen years, withdrawal from Afghanistan, the failure of the first Chechen War, the dicey ness of the second Chechen War and the humiliation of seeing the US encroach on the Red Army's old haunts in Central Asia and the Caucasus are all preying on the soldiers' minds. Things ain't what they used to be.

The reverberations from the Yukos affair
The Yukos case is still under way and attracting close attention. As it so happens, both Washington and Beijing have indicated their concern to Moscow at recent developments therein. Russia is losing the advantage of being seen as a secure source of energy supply, which the Middle East is assuredly not. 
Yukos is responsible for 2% of world oil supply - and 3.6% no less of China's consumption, a dependence which has been due to grow. Any interruption in oil supply could have devastating consequences for its booming economy. Economic growth is the basis of the Chinese regime's legitimacy these days so that Beijing's concern is very understandable.
There is paradoxically a foreign rush on to acquire Russian companies, despite Yukos. The Yukos case is being seen as a one-off, due to the foolish temerity of Mikhail Khordorkovsky in taking on the Kremlin. The new investors have not the slightest intention of doing any such thing.
A string of deals has been announced in the last few weeks. GE Consumer Finance, the consumer lending group of General Electric, has paid £81.5m to buy the Moscow-based Delta Bank, while France's BNP Paribas has paid £326m for half of Russian Standard, the leader in consumer lending in Russia.
Apart from banking, Interbrew, the Belgian brewing giant, has agreed to pay £357m India's Sun Group for its Russia-Ukraine jv, Sun Interbrew. The Dutch brewer, Heineken, has spent £47m on to Russian breweries in separate deals. The French-Spanish tobacco firm, Altadis, is spending £99m to buy control of Balkan Star, the leading independent cigarette maker in Russia.
More deals are in the making. Siemens, the German electronics giant, is hoping to buy a controlling stake in Power Machines, Russia's largest turbine maker. It is awaiting approval from the competition agency.
The movement extends well beyond these huge companies. Hermitage Capital Management, Russia's largest equity investment fund, has found that the last two years have been a big buying opportunity. New Central Bank data reveal that foreign direct investment (FDI) into Russia jumped to $8.6bn in the first half of the year from $6.4bn in the same period of last year.
Meanwhile, Yukos is looking more and more as if it will be dismembered. On August 13th, as the Olympic Games opened in Athens, Yukos faced its nemesis, another Greek idea, that duly flows from hubris, at which Khodorkovsky was an adept.
The Ministry of Justice appointed Dresdner Kleinwort Wasserstein (DKW) to value the unit that produces 60% of Yukos's 1.7m barrels of oil daily and will push for a sale, leaving Yukos a shadow of its former self.
The Moscow bourse is pricing companies at about six times their earnings, an attractive proposition in global comparisons, reflecting greater risks. For an investment fund to have a small proportion of its portfolio in Russia makes a lot of sense. But no-one should become over-exposed.

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AUTOMOBILES

Car imports booming


New car imports may total 350,000 this year, up from 195,500 units in 2003, the head of General Motors in Russia said recently. GM CIS chief, Heidi McCormack, said she expected similar growth rates for the next 2 or 3 years, according to Prime-Tass News Agency. GM, the world's largest automobile manufacturer, sold 6,114 cars through its official dealerships in Russia in January-June, up from 3,150 cars in the same period last year, New Europe reported.

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AVIATION

Russian plant builds first two Su-80 aircraft for sale

The Gagarin Aviation Production Association (KNAAPO) in Komsomolsk-na-Amure has started to assemble the first two Su-80 cargo/passenger aircraft for sale, a source in the defence industry said, Interfax-AVN Military News Agency web site reported.
"There are six Su-80s in jigs [assembly stands] of the association now. Four of them are experimental aircraft designed to undergo tests, while the other two are for sale," he said. He maintained that of the four experimental planes three Su-80s will undertake flight and certification tests, and the fourth one is for ground service life tests. As for the first two Su-80s for sale, the source said they would be built by late 2005 and sold as soon as they obtain the airworthiness certificate. He added that the new batch of Su-80s is likely to be put into mass production later this year or early next year.
"Much will depend on the negotiations with potential clients to make solid orders for the aircraft," he said. He noted that the Sukhoi holding company is actively promoting the aircraft on the internal and international markets. Komsomolsk-na-Amure's manufacturing capabilities provide for 15-30 aircraft to be made annually.
The price of a passenger configuration will be US$4-5m, while that of the cargo version will be US$0.5-1m less. The patrol version will be the most expensive, its price mostly depending on the price of the avionics, weapons and weapons control systems installed.

MiG to be sent to Sudan sooner

Russia's MiG aircraft corporation announced it will supply 12 MIG-29 Fulcrum fighters and special-purpose material to Sudan ahead of schedule, Yury Chervakov, head of the MiG department for public relations, said recently, Interfax News Agency reported. 
The contract for the supply of 10 MIG-29SE fighters and two MiG-29UB trainers to Sudan was signed in 2001, reminded the news service. It is to be implemented before December 2004, but thanks to precise arrangement of work, most of which has been done in the past 10 months, the contract will be implemented half a year ahead of the deadline.

Airlines boost passenger carriage

Russian airlines flew 14.474m passengers in the first half of 2004, a 19.6% year-on-year increase, a spokesman for the Federal Air Transportation Agency (FAVT) said, Interfax News Agency reported.
Passenger carriage increased 26.3% year-on-year on international flights to 6.174m flyers, 15.1% to 8.3m on domestic flights. "Civilian aviation in Russia is showing record growth in carrying passengers this year," the source said. It had increased 11% in 2003, he added.

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BANKING

BNP Paribas picks up 50% of Russian Standard Bank

The French BNP Paribas bank has acquired a 50% stake in Russian Standard Bank from its main shareholder, Roustam Tariko, who owned 90% of Russian Standard Bank before the transaction, the press service of Russian Standard Bank reported recently. The transaction sum has not been officially announced.
BNP Paribas' subsidiary Cetelem is the purchaser of the stake. The International Finance Corp owns 6.42% of the shares in Russian Standard Bank. Tariko will remain the chairman of the board of directors of the bank. The transaction is to be approved by banking and antimonopoly agencies. The parties are planning to complete the deal by the end of 2004.
French bank BNP Paribas became the first foreign group to acquire a Russian retail bank when it announced plans recently to pay about US$300m for a stake in Russian Standard Bank, the country's leading consumer credit provider, The Financial Times reported. By buying into one of the pioneers of consumer credit in Russia, BNP is putting itself in a leading position in a sector that is expected to mushroom over the coming decade, the newspaper reported. RSB helped introduce Russians to the concept of in-store credit, which most Russian banks had considered laborious and risky.
The deal is part of BNP's search to invest more than US$6bn of excess capital and to expand its Cetelem consumer credit subsidiary, the European market leader already present in the Czech Republic, Slovakia, Hungary and Poland.
Jean Clamon, BNP's chief operating officer, said it was betting on Russia's relatively young consumer finance sector, which has grown on average 65% annually since 2001. "Russia has strong growth and fantastic potential," The Times quoted him as saying. RSB made net profits of US$59m in the first half of 2004 compared with US$58m last year. It already has an insurance joint venture with BNP's Cardiff life subsidiary.
BNP's move comes at a time of renewed worries about the stability of the Russian banking sector as a whole. Many Russian banks have been forced to seek capital injections to compensate for a sudden increase in rates on the interbank lending market and withdrawals of personal deposits by jittery Russians.
BNP could increase its stake through put and call options. But it said Roustam Tariko, RSB's founder, would remain chairman. "The team will stay in place as their knowledge of the Russian market is essential," Clamon told The Times.

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CREDIT RATINGS

Moody's assigns B3 senior implied rating to UTK

Moody's Investors Service recently assigned a B3 senior implied rating to OAO Southern Telecommunication Company (UTK), the largest fixed-line telecommunications operator in Russia's Southern Federal District. Moody's also assigned a Caa1 senior unsecured issuer rating to the company, Interfax News Agency reported. 
The ratings outlook is stable, the agency said. The ratings reflect UTK's aggressive capital expenditure plans, in line with network expansion and upgrade plans promoted by its majority shareholder, the state-run Svyazinvest.
The ratings also reflect the company's clear incumbent leadership position in Southern Russia's fixed-line telecommunications market and significant pent-up demand for telecommunications services. UTK was formed through the merger of 10 different regional operators in October 2002, as part of the re-organisation of the Russian telecommunications market. UTK is one of seven "mega-regional" telecommunications operators in which the 75% state-owned Svyazinvest holds a majority stake. Svyazinvest itself was created in the mid-1990s.

Standard & Poor's to down Alfa bank ratings

Standard & Poor's has downgraded Russia's ALFA Bank and Petrocommerce ratings outlook from positive to stable, the Russo-British Chamber of Commerce Weekly Observer reported recently. 
Alfa Bank rating remained unchanged with the long- term debt rating at B, short term at C and the national scale rating at ruA+. The changing outlook reflects the Russian banking sector's recent dubious situation and the resulting worsened possibility of upgrading Alfa bank's rating in the medium and long term, the agency said. As to Petrocommerce, the agency was dissatisfied with the bank's changing hands. In June, LUKoil sold about 65% of bank shares to a fellow company, the IFD Capital investment group. Petrocommerce credit ratings remained at previous levels: the long-term at B, the short-term at C and the national scale rating at ruA.

Fitch confirms Vneshtorgbank's ratings

The international rating agency Fitch Ratings confirmed Vneshtorgbank long-term rating at a level of BB+ with a stable outlook, short-term rating at B, individual rating at C/D and level of support at 3, Russo-British Chamber of Commerce reported recently. 
The ratings were confirmed after Fitch received information and explanations of the terms of acquisition of the Guta Bank by Vneshtorgbank. Previously, Vneshtorgbank had announced acquisition of an 86% stake in Guta Bank, one of Russia's 25 largest banks, for a symbolic sum of 1 million roubles (US$34,000).

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ENERGY

Another 1.4bn dollars to be invested in Kazakh-Russian oil pipeline

Another US$1.4bn will be spent on the development of the 1,000-plus-km intercontinental oil pipeline Tengiz (Kazakstan) - Novorossiysk. The announcement was made in Stavropol on August 10th by Ian McDonald, general director of the Caspian Pipeline Consortium, which brings together Russia, Kazakstan and Oman, ITAR-TASS News Agency reported.
Nearly a quarter of the pipeline runs through Stavropol Territory. It is planned that 48m tonnes of Kazak oil will be shipped from Novorossiysk to the West in 2004. By 2012, McDonald stressed, the pipeline will reach its designed capacity with an average annual throughput of 68m tonnes of oil.
According to McDonald, the construction of two oil-pumping stations in Stavropol Territory will help the pipeline reach the target capacity. The construction of the first is to begin in Ipatovskiy District in 2005, while the second will be built later in Izobilnenskiy District.

Tatarstan, Iran to set up joint oil venture

Iran's foundation for the disadvantaged [Oppressed and Disabled Veterans Foundation, Bonyad-e Mostazafan va Janbazan] and the Tatneft open joint-stock venture are to set up a joint venture to develop oilfields in Iran, Tatar-Inform News Agency.
A decision to this effect was taken during a visit of Tatarstan's government delegation led by Prime Minister, Rustam Minnikhanov, to Iran at the end of July. Tatarstan's minister for trade and foreign economic cooperation, Khafiz Salikhov, told journalists about the results of the visit at a briefing at the Cabinet of Ministers on August 3rd. 
The foundation which, according to Salikhov's definition, represents a solid partner for Tatarstan's petroleum specialists, owns shares in dozens of enterprises operating in various sectors of Iran's economy. The foundation's trade turnover exceeds US$5bn. The board of directors of Tatneft approved the decision to set up the joint venture. There are plans to work out concrete mechanisms for putting the project into practice within a month.
Tatarstan also intends to bid to build a tyre plant in Iran and to fit it out and also has plans to set up a plant to produce synthetic oil.
The issue of setting up a joint venture to assemble heavy-freight KamAZ lorries in Iran is also being studied. To implement the project, KamAZ will have to find a strategic partner. During the visit, an agreement was reached on supplying a wide range of models of KamAZ machinery to Iran.
Kazan's aircraft producers are also interested in Iran's market. The Gorbunov Kazan Aircraft Production Association (KAPO) is ready to sell Tu-214 aircraft to Iran on lease contracts. The association will be competing alongside the world's major aircraft producers. The bid, Salikhov said, will be announced next year. The Kazan Helicopter Plant has already signed a contract on supplying three Mi-17 helicopters to Iran.
In the protocol signed concerning the results of the visit of the Tatarstan government delegation, the sides designated cooperation in petrochemicals to be a priority. The protocol provides for supplies of petrochemicals, for housing construction, for exchanges of scientists and students, and for increased imports of Iranian consumer goods, including textiles, and of excellent Iranian fruit.

Russia increases oil output over 10 per cent in Jan-Jun 2004

Russia's oil output in January-June rose 10.3 per cent on the year to 223m tonnes, according to an Economic Development and Trade Ministry report on Russia's social and economic development in January-June, Prime-TASS News Agency reported.
Russia's oil output is expected to be 453m tonnes this year, up 7.5 per cent on the year.

Russia increases coal output 1.8 per cent in Jan-Jun 2004

Russia's coal output in January-June rose 1.8 per cent on the year to 139m tonnes, according to an Economic Development and Trade Ministry report on Russia's social and economic development in January-June, Prime-TASS News Agency reported.
Russia's coal output is expected to be 280m tonnes this year, up 1.8 per cent on the year.

LUKoil-Kaliningradmorneft starts D-6 production

LUKoil-Kaliningradmorneft, a 100% subsidiary of Russian oil major LUKoil, has started commercial production at the Kravtsovskoye (D-6) field in the Baltic Sea off Kaliningrad region, the company said in a press release, Interfax News Agency reported.
The Kravtsovskoye oilfield was discovered in 1983. It is located in the Baltic Sea, 22.5km from the coastline of Kaliningrad region. The sea depth at the oilfield averages 25-35 metres.
LUKOIL-Kaliningradmorneft conducted a geological survey that confirmed C1+C2 oil reserves at the field at 21.5m tonnes, with recoverable reserves of 9.1m tonnes. Investments in the field construction totalled 7.7bn roubles. The drilling is carried out from an offshore Arctic-class stationary platform manufactured at Kaliningradmorneft.
A total of 27 wells are to be drilled at the field. The average depth of production wells will be 2,160m. The company plans to produce 70,000 tonnes before the end of the year. By 2007 crude production will reach 600,000 tonnes.
The volume of transhipped crude in 2003 reached 3.3m tonnes. After The Kravtsovskoye field becomes operational it is planned to increase the terminal's capacity up to 4m tonnes. In future the terminal may boost its annual capacity up to 6m tonnes of oil and oil products. The water depth at the terminal makes it possible to receive tankers with a deadweight of up to 20,000 tonnes.

LUKoil-Neftekhim buying 87.4% of Russian polymeric factory

OAO Lukoil-Neftekhim, a downstream subsidiary of Russia's major oil producer OAO Lukoil, is buying an 87.42% stake in the OAO Stavropolpolimerprodukt, a manufacturer of polymeric materials located in the southern Stavropol territory, Itar-Tass News Agency reported recently. 
On July 27th LUKoil-Neftekhim signed a purchase agreement with the Moscow Industrial & Commercial Centre for Integration and Development. LUKoil-Neftekhim's Director General Alexei Smirnov said the deal was worth US$32m. Moscow City Mayor Yury Luzhkov said in this connection: "This multimillion deal crowns long and extensive work to take the only correct solution that could breathe new life in the manufacturing of polymeric products in the Stavropol territory." Moscow City government purchased Stavropolpolimerprodukt in 1997. The government of the Stavropol territory also sold its stake in the company to Moscow. The city authorities are now selling it to LUKoil so that the latter could complete construction of the factory.

Russia increases natural gas output by over 3 per cent in January-June 2004

Russia's natural gas output in January-June rose 3.1 per cent on the year to 321bn cubic metres, according to an Economic Development and Trade Ministry report on Russia's social and economic development in January-June, Prime-TASS News Agency reported
Russia's natural gas output is expected at 633bn cubic metres this year, up 2.1 per cent on the year.

TNK-BP buys controlling stake in Russian gas firm from Yukos

Russian-British oil major TNK-BP has concluded an agreement with Russia's oil major, Yukos, to buy a 56-per-cent stake in the Rospan gas producer from Yukos, an official with TNK-BP said, Prime-TASS news agency reported. 
The deal does not violate Russian law because the stake in Rospan is not a part of Yukos's Russia-based assets, the official said. Rospan produces natural gas in Russia's Yamal-Nenets Autonomous Area.

Rosneft increases oil output

The Rosneft company increased oil output by 14.4 per cent to 10.4m tonnes over the first six months of 2004, compared to that in the corresponding period of 2003, Russo-British Chamber of Commerce Weekly Observer reported recently. 
The preliminary results of Rosneft's operations over the first six months of 2004 were discussed at a meeting of the Board of Directors of the company. Additionally, the Board of Directors has made a decision to decrease the business plan for oil output for 2004 by 600,000 tonnes because of a decrease in the amount of oil transported via the Transneft pipeline system in the Timano-Pechorskaya area. Earlier Rosneft announced plans to increase the oil output by 11.9 per cent to 21.9 tonnes in 2004. The company also planned to raise the gas output by 16 per cent to 8.1bn cubic metres over the first six months of this year. Specifically, the oil gas output grew by 26.1 per cent to 2.1bn cubic metres. The natural gas output grew by 25.9 per cent over that period.
The company's press office pointed out that Rosneft had continued its efforts to increase the oil output at the Severnaya field. The company also started the geological exploration in the Severo-Vankorskaya licence area in Eastern Siberia.
Rosneft had 8,503 oil wells as of July 1st of this year. The number of oil wells has been decreased by 252, compared to that in the first six months of 2003, due to the mothballing of inefficient oil wells.

Russia to reconstruct Aswan dam in Egypt

Russia's "Siloviye Machiny" (Silmachiny) concern is to accomplish the reconstruction of the Aswan dam's electric power plant the Soviet Union delivered to Egypt in the 1960s, Russo-British Chamber of Commerce Weekly Observer reported recently. 
The reconstruction is being carried out together with Germany's Voith Siemens Hydro Power Generation. The project provides for the renovation of 12 hydro generators with the capacity of 175 MW each, which were supplied to Egypt by St Petersburg's Elektrosila company, now incorporated in the Siloviye Machiny concern. Each generator will have its capacity increased to 200 MW. Under the contract, the reconstruction is to take more than six years until 2010.

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FOREIGN ECONOMIC COOPERATION

Russian, South African diplomats discuss economic cooperation

Moscow advocates boosting trade and economic relations with South Africa, RIA News Agency reported.
A message from the Russian Foreign Ministry's press and information department says that a meeting between Russian Deputy Foreign Minister, Yuriy Fedotov, and South African ambassador, Mochubela Seekoe, took place in Moscow recently.
The sides stressed the importance of collaboration in the international arena to strengthen both principles of versatility and the UN's role in peace affairs.
In this context, the Russian side wished success to the forthcoming conference of the foreign ministers of the Non-Alignment Movement due to be held in Durban on 19th August.
When discussing economic issues the sides also considered the work of a mixed intergovernmental committee for trade and economic cooperation between Russia and South Africa.

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FOREIGN LOANS

WB to invest US$900m

The World Bank (WB) plans to invest US$900m in the funding of its projects in Russia in 2005, said Kristalina Georgieva, director and permanent representative of the World Bank in the Russian Federation, the Russo-British Chamber of Commerce has reported.
"In 2005 we need to invest US$900m in Russia," she said. "Next year the Russian government intends to accelerate the use of the World Bank's assets 2.5-fold," Mrs Georgieva added. According to her, next year US$700m will be allocated for implementation of the so-called old project, which has already been approved by the World Bank's board of directors and the Russian government. The remaining assets will go for development of new projects, she said.
Speaking about the new projects, Mrs Georgieva noted that five such projects have been approved by the World Bank's board of directors in 2004. They are the projects for developing the city of Kazak, upgrading RosHydroMet (Russian Hydrometeorologic Service), the judicial reform, the cadastre reform and the Land Launch programme.
Mrs Georgieva pointed out that in 2004 the World Bank has invested US$358m in Russia.

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INFORMATION TECHNOLOGY

Russian Internet segment growing

The Russian segment on the Internet is growing rapidly. Registering their domain names, most Russians prefer the national RU domain, Cnews Internet edition reported.
The number of second-level domains is growing on the analogy of Russian users. As of June 2004 the Russian weekly Internet audience totalled 5.9m people, which is 1.4m more than last year's level. The average number of the Russian Internet users is growing by 30% a year. In January-June of 2004 the amount of second-level domains grew by 19.82% (against 16.02% in the first half of 2003) and totalled 256,356 domains on July 1st 2004, according to the Russian research institute of public nets development. 
Patriotism is typical of Russians registering their domain names. Compatriots choose RU domain for their web sites. Russian nationals and organisations registered 97% of second-level domains in RU domain. Only 3% belong to non-residents but they are used for resources meant for the Russian market. Meanwhile, Russians registered only 27,000 names in CON domain.

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MINERALS & METALS

Alcoa to join Russian aluminium project-Sual

US company Alcoa, the world's leading aluminium producer, is ready to join a project launched by the SUAL Group, one of the world's top ten aluminium producers, and involving an aluminium output increase in a Russian region, SUAL said recently, Interfax News Agency reported. 
The Komi Aluminium project involves an increase in the yearly bauxite yield of the Sredne-Timanskoye deposit in Komi region to 6.5m tonnes from the current 1m tonnes and building an alumina plant and an aluminium plant to produce 1.4m tonnes of alumina and between 300,000 and 500,000 tonnes of aluminium per year, said the news service.
Alcoa would be involved "in the development of aluminium production. The company won't be involved in the alumina complex as this would mean Alcoa setting up rival facilities," Viktor Vekselberg, chairman of the SUAL Holding board of directors, told a news conference. He said Alcoa's definitive decision depended on a planned long-term agreement between SUAL and Russian national electricity company, UES, on electricity supply for the planned facilities. "There is no agreement yet but we are in a phase of fruitful negotiations," he said.
The SUAL Group produces more than 90% of the bauxite, more than 60% of the alumina, and 25% of the primary aluminium in Russia. Alcoa, who owns 25% of the world's alumina deposits, plans to invest US$1bn in a new facility in Trinidad and build a facility in Iceland, buys fabricating facilities in Russia, and has projects in Brazil, Bahrain, Brunei, China, and Australia on its agenda.

KrAZ ups primary aluminium output 4.7% in January-June

Krasnoyarsk Aluminium (KrAZ), one of Russia's leading aluminium producers, which is part of Russian Aluminium, produced 465,149 tonnes of primary aluminium in the first half of 2004, up 4.7% year-on-year, Interfax News Agency reported recently.
KrAZ exceeded its production target by 2.5%. Aluminium alloy production increased 21.6% to 43,300 tonnes.
A programme to develop foundry production, which is envisaged to continue to 2006, enabled an increase in alloy production, the company said. "After the completion of all projects planned to the end of 2006, alloy production will increase to 250,000 tonnes a year, or 25% of overall finished production" the statement said.
In steps to improve foundry production, the company has reduced the use of asbestos containing materials. It will completely stop using asbestos in the first quarter of 2005. Krasnoyarsk Aluminium was launched in 1964 and it became part of Russian Railways in 2000.

Norilsk Nickel gains Gold Fields shares

Russia's largest metals producer Norilsk Nickel has acquired 20.05% of the stock in South African mining company Gold Fields Ltd from its subsidiary company, Britain's Norimet, for some US$1.25bn, a Norilsk Nickel press statement said on August 2nd. Norimet Ltd is Norilsk Nickel's 100% owned subsidiary, MosNews reported. 
Norimet bought the 20% stake in Anglo-American Gold Fields earlier this year for US$1.16bn. To finance the deal Norimet received a US$1.249bn loan from Norilsk Nickel, which in turn attracted a US$800m loan from Citigroup Global Markets Ltd.
PR Director, Dmitry Usanov, said that Norilsk Nickel had to acquire the stake in Gold Fields through its British subsidiary in order to avoid the process of applying for a capital export licence. "Now that the exchange regulations have changed, we made a decision to transfer the Gold Fields shares to Norilsk Nickel's balance," Usanov said.
Norimet should get the money for the stock from parent company in no more than 90 days starting July 29th, the date the stock transfer deal with clinched. Head of the mining giant's investor relations department, Dmitry Usanov, told Interfax that due to changes in the South African national currency rand's exchange rate, the final cost of the 20% stake came to US$1.22bn.
"The remaining US$29.6m is transaction costs, including interest on the Citigroup credit and payments to deal consultants," Usanov said. Gold Fields is one of the world biggest gold producers, with annual output of 4.3m Troy ounces and mineral reserves of 84m ounces. Norilsk Nickel supplies the world with 18% of its nickel, 13% of its cobalt, 3% of its copper, over half its palladium, 14% of its platinum and 1.5% of its gold.
Norilsk Nickel has no plans to reassign shares in its gold mining companies in Russia as well as rights to existing or future production facilities and deposits to the South African company Gold Fields Ltd (Gold Fields), according to news agencies. In July the Senior Vice President of Gold Fields, Craig Nielsen, said Norilsk Nickel had offered its gold assets to Gold Fields in exchange for a higher stake in the company, according to MosNews.
Nielsen said that Gold Fields' experts studied Norilsk Nickel's gold deposits and found them "promising." The Norilsk Nickel's press office declared that the company had not made such an offer to Gold Fields.

RusAl to invest in Nigeria plant

Russian Aluminium, which makes about an eighth of the world's primary aluminium, is back in negotiations to buy Nigeria's Aluminium Smelting Co, Bloomberg reported recently. 
BFI Group of the United States offered US$410m for the smelter, which has a capacity of 193,000 tonnes a year. The Nigerian government turned to RusAl when BFI did not make its first payment recently, Nigeria's Daily Times said.

Gold field auction in Khakasia

The republic of Khakasia will auction its Magazinsky gold field on November 25th, 2004, Interfax News Agency reported recently. 
The Siberian republic will start the bidding for the field at 500,000 roubles (US$17,154) with increments of 50,000 roubles, according to Interfax. The field contains 18 tonnes of reserves.

Severstal profit at US$530m

Severstal, Russia's third largest steelmaker, increased first-half profit based on Russian accounting standards by 67%, Interfax News Agency reported recently. 
First-half net income rose to 15.392bn roubles (US$530m) from 9.228bn a year earlier, Interfax said. Prices for cold-rolled steel in the first half averaged 23% more than in the year earlier period, according to the Metal Bulletin, as European demand improved.

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TELECOMMUNICATIONS

Transtelecom revenues up 80%

ZAO Transtelecom Company increased its revenue 80% year-on-year to amount to US$146m in the first half of 2004, a company press release has said, Interfax News Agency reported.
Company revenue from communications services more than doubled (up 112%) from the same period in 2003 to amount to over US$80m, stated the company. Transtelecom has paid 3bn roubles to OAO Russian Railways since the start of the year in rental payments for trunk communications lines. Total Transtelecom rental payments to Russian Railways in 2003-2004 amounted to over 3.5bn roubles. ZAO Transtelecom Company was set up in 1997. Russian Railways owns 100% of the company. Transtelecom is the operator of over 45,000km of fibre optic communications cables along Russia's railways, with over 900 access points in 71 of Russia's 89 regions.

Elcoteq to build a new plant in St Petersburg

The Board of Directors of Elcoteq Network Corporation, global provider of electronics manufacturing services (EMS) for the Communications Technology Industry and the largest European electronics EMS provider, announced its plan to build a new plant in St Petersburg. Construction of the plant, with an area of 14,700 sq m is expected to begin in the final quarter of 2004 and to be in operation in the autumn of 2005, Russo-British Chamber of Commerce Weekly Observer reported recently. 
"From 2005 on we will need more production capacity for mobile phones and communications network equipment. This investment programme will safeguard our service capability to European customers, and at the same time it will strengthen our position as the number one communications technology electronics manufacturing services company in the fast growing Russian market," Mr Jukka Jaamaa, Executive Vice President at Elcoteq, said.
The investment in land and construction will total approximately €15m (US$18.6m). The machinery and equipment needed will be determined by the type of products, production volumes and timing of product programmes. When operating at capacity the plant is expected to employ about 1,500 people.
Elcoteq has operated a manufacturing plant in St Petersburg since 1997; it currently employs 170 people.

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