Books on Russia
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
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Kvashnin has been replaced by Col.-Gen.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,
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
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
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.
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.
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
"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
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.
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
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
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).
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
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
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
Russia's oil output is expected to be 453m tonnes this year, up 7.5 per cent on
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
Russia's coal output is expected to be 280m tonnes this year, up 1.8 per cent on
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
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
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
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
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.
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.
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
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
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
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.
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
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
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
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
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.
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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