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RUSSIA


  
  

 

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Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 433,491 346,520 310,000 16
         
GNI per capita
 US $ 2,610 2,140 1,750 97
Ranking is given out of 208 nations - (data from the World Bank)

Books on Russia

REPUBLICAN REFERENCE

Area (sq.km)
17,075,400

Population
143,782,338

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: 291 - (01/04/05)

New challenges to Putin
Putin looks as if he is in a very secure position. The economy continues to grow as it has done throughout his rule, while his ratings in the polls remain high, if not quite as high as the 70% of last year. For there are a few clouds on the horizon, albeit nothing very threatening as yet.
The unfolding Orange Revolution in Ukraine after the Rose Revolution in Georgia and the turmoil in Kyrgyzstan all indicate that post-Soviet dictatorships can prove to be brittle under fire from an opposition that is aroused by dubious elections. Russia does not face elections for a while and they are now pretty anodyne, due to the absence of any effective organised opposition.
Nevertheless there are a few stirrings all the same. A series of inept moves recently by the government, particularly savage welfare cuts for the elderly, have emboldened criticism from unusual quarters, namely the master chess player, Garry Kasparov, and the former premier, Mikhail Kasyanov, neither of whom would have been regarded until recently as a serious threat to Putin. Nor in all probability are they now. But Putin is not taking their challenges lightly, one may be sure.
Previously, Putin's challengers have been oligarchs, and Jewish ones at that, doubly unpopular in Russia, Boris Berezovsky, Vladimir Gusinsky and Mikhail Khodorkovsky. Kasparov and Kasyanov are Russians through and through, both in their forties, with ample funds and well able to contemplate the long haul.

Kasparov - the knight in shining armour?
Kasparov has made the bold decision to give up his extraordinarily successful chess career he has been the world's leading player for twenty years and is undoubtedly one of the game's all-time greats, perhaps the greatest) to enter into the political arena, explicitly to challenge Putin, whom he utterly despises. 
His audacious, risky style of play is one he intends to emulate in the political sphere. He put the matter thus in an interview with the Guardian correspondent Stephen Moss in London on March 14th; "I wouldn't say that I'm entering Russian politics, because politics doesn't exist in Russia in the terms you use here. I will be trying to help Russia to get back into normal political life and to make sure my country lives in a civilised way."
Kasparov is already a leading figure in a pro-democracy organisation called Committee 2008: free Choice, which was formed last year. He has decided that the threat to freedom of expression in Russia is so great that he needs to devote himself full time to campaigning for it. He has been talked of as a possible presidential rival to Putin in 2008, and he doesn't rule out standing for public office at some stage. But his real concern is that there will be no election to stand in. "People say to me, 'Garry, are you planning to run in 2008?' I say, 'Run for what?' The trend in Russia is very clear: Putin is abandoning democracy as an institution. He doesn't want there to be an election. There will be an appointed parliament that will then appoint the president. It will be like a perpetuum mobile."
Kasparov's castigation of Putin could not be more abrasive and comprehensive, like his chess play. Under Yeltsn the system had many flaws, but it was a democracy. There was an independent press, independent television, a parliament, political parties. "We could dislike the opposition - it was a communist opposition - but we had all the right elements of a democratic society. Now, five years after Putin took office, there is no independent press, no independent television, the election of the regional governors has been cancelled, the election of the parliament has been changed, parliament is a branch of the executive office, and Putin controls virtually all decision-making in the whole country."
"The tragedy of Russia - and Western leaders don't want to recognise it - is that Putin has already crossed the red line where he could just retire as Yeltsin did. He and his group have to fight to keep power because they have too many enemies, too many unsettled scores - and that is why they are desperate to retain power. Their wealth is based on their grip on power. They are seizing new properties, seizing more control of Russian finances by using their power. The moment they lose this grip, it will be a different ball game."
Kasparov is totally scathing about the West's compliance and complaisance with Putin, their complete failure to hold Putin to account, although he is probably exaggerating Western power here . "Putin has learned that because of certain geopolitical realities - the war on terror, the high oil prices - he is immune to criticism. He knows that he will have enough political support from Chirac, Schroeder, Berlusconi, Blair, all of whom are supporting a criminal regime in Russia." 
The West is anxious of course to avoid a new Cold War with Moscow. Moreover, rightly or wrongly, they feel that there is very little leverage they can exert over Russia. Public lecturing is hardly likely to have any effect and private remonstrations can be ignored.
So long as Putin is popular at home, so long as Russia wants an authoritarian 'strong' man in charge, then Putin can operate his repressive regime with impunity.
There is a new cult of Stalin in Russia that indicates one of Putin's models. One half in polls say that Stalin was a 'wise' leader. One quarter say that they would vote for him today. He made 'mistakes' of course, but the numbers of those killed under his rule has been greatly exaggerated, many think. And after all most of them were doubtless enemies of the state that deserved what they got. That mentality is still very strong in Russia. It can hardly be an accident that all the most revered Russian rulers were tyrants, Ivan the terrible, Peter the Great, Catherine the Great, Lenin and Stalin, while the most despised is certainly Gorbachev with his glasnost and the rest of it.
Kasparov is, therefore, going to have a hard time of persuading the Russians to embrace democratic standards and ideas. The last thing they want is another Westerner like Gorbachev. He will go on giving rousing interviews to the Western press, but have little impact in Russia. 

Kasyanov - the poacher turned gamekeeper?
A figure with more political credibility and clout is former premier Kasyanov, who was very much part of the Yeltsin team and then presided over four years of boom in the economy, 2000-04. His successor, Mikhail Fradkop, is a complete cypher, whom no-one takes seriously. Kasyanov fell out with Putin over the treatment of Khodorkovsky, an old ally of his. Kasyanov, indeed, was at the heart of the crony capitalism of the 1990s which made the oligarchs, poaching Russia's resources for a few.
This is his Achilles' Heel. But maybe he can live down this reputation if he now re-invents himself as Mr Clean. He launched a withering attack on Kremlin policies in late February and said that he would consider running for president in 2008. He has the contacts in the upper ranks of the present regime that Kasparov lacks. There is bound to be a certain opposition to the Putin gang inside the upper echelons of the bureaucracy and even the Kremlin. As everybody knows there is nothing like power to destroy old friendships; ask Blair and Brown. 
Kasyanov said at a press conference that Russia is on the 'wrong tack,' that its democratic forces had 'to unite' and that he could help them do so. Asked if he would run for the presidency, he replied: "Anything's possible."
Kasyanov gave a more restrained version of the line taken by Kasparov. But he is a career politician of course, who knows and has worked with those he is criticising. The Putin administration is moving Russia away from democratic values, such as an independent judiciary, independent media and political pluralism. He called the dismantling of Yukos, Khodorkovsky's old firm, 'intolerable,' and averred that the decision to abolish elections for governors 'a mistake,' while declaring that the welfare cuts were carried out in 'a third-rate manner.'
The problem is that Kasyanov has a grey manner himself and has little fire in his belly, unlike Kasparov. A composite of the two might be a tough challenge for Putin. Singly, he can probably see them both off.

Putin the Tsar
Putin is a very Russian phenomenon. He believes the Kremlin should be in full charge of the enormous space of Russia; or all hell will break loose. Hence his recent anti-democratic moves, already noted, abolishing elections for regional governorships and turning parliament into a rubber-stamp of his authority. The media are now mouthpieces of the Kremlin. Russian autocracy is back full throttle.
This set of ideas could not be more inimical to democracy. But the West thinks maybe he is right; and plays along with him obligingly. At least he is not a communist.

A retrospective
It is a sobering thought that had the communist candidate, Gennady Zyuganov, won in 1996 against Boris Yeltsin for the presidential election then Russia today would still have a fledgling liberal democracy, with elections for regional governors and a free media. The communists would have bent over backwards to have established their liberal- democratic respectability, having plenty to live down in that regard of course, and well aware of it.
The West instead backed Yeltsin as the guarantor of Russia's new freedoms against the bogey of a return to communism. The communists paid dearly for cleaving to their ill-fated name. Yeltsin himself chose his successor for his discretion, not his democratic credentials, which were non-existent, as it so happened, a long-time KGB apparatchik who once said, "there is no such thing as an 'ex-KGB' man."
He was a reliable bet to cover up the secrets of the Yeltsin regime, its endlessly corrupt commercial ways, but also to keep under wraps the perpetual shenanigans and peripatetic goings-on of the Kremlin in political and geopolitical matters; and what better a way to do that than by emasculating liberal-democracy. No proper investigation into the September massacres of 1999 that set off the second Chechen War, for instance, that gave Putin his initial popularity and has propelled his whole presidency.
One might query why the communists would have done better. The reasons are not far to seek. In the bad old Soviet days the Communist Party was full of careerists and was as corrupt as could be. The epoch of Brezhnev (1964-82) was a world of coterie and corruption, cronyism and crime. Russia's notorious gangsters came to the fore then. After the gerontocracy of his feeble successors, glasnost from 1985 only gave them freer scope. Gorbachev, the darling of the Western intelligentsia, was a genuine communist, a fact not appreciated in the West. "I am a life-long communist," he said on return from the Crimea in August 1991.
In that extraordinary moment of 1991 when everything came to a head the Soviet Communist Party was dissolved by Yeltsin; and in a manner that will be forever remembered and retold. The downfall of the Roman Empire could not have been more dramatic.
The communists regrouped as the Communist Party of Russia, that is the idealists among them, the remaining true believers, people such as Gorbachev. Such people did exist, strange as it may seem to a Westerner. Communism always had its generous ideological side ('workers of the world unite'), as well as its invitation to hate class enemies. The bourgeoisie, cast as the villain of the piece, were to be given short shrift of course in the promised land. But until that time came, they could be 'useful idiots' of the cause of communism, helping to prepare the way for it, so long as they cooperated with the comrades. 
The Communist Manifesto is a paean of praise to capitalism as the necessary stage of History before communism. Destined for the Dustbin of History eventually, the bourgeoisie are the progressives in their time, initiating the great bourgeois upheavals, The Industrial Revolution and the French Revolution, with their promise of universal abundance and liberte, fraternite et egalite. Nevertheless, their ideas, technological and political, can only reach their correct fulfilment under communism (as Lenin said of it, 'the Soviets plus electrical power').
Of course it has been the comrades who have been put in the Dustbin of History by the course of events, helped on, however, by Reagan, who presciently said in 1980, when the reach of the phenomenon geographically was at its apogee, extending to Nicaragua in the west, as well as China and Indo-China in the east: "I believe communism to be a strange, sad episode in the history of humanity, whose last chapter is about to be written." He was to help out with the script for a change. The Hollywood B actor was also the Great Communicator and far more in tune with his epoch than many of his derisive opponents. Who else saw things so clearly at the time? Star Wars was, indeed, a brilliant bluff that came off quite spectacularly.
By then we were not living in the Age of Late Capitalism, as leftists ritually intoned, but in the Age of Late Socialism, as a matter of fact. Reagan saw this; they, with their more 'brilliant' intellects, did not.

A prospective
What is the relevance of all this for Russia today?
The communists look like a spent force there in every respect, discredited and only appealing to the destitute. 
But there are a lot of very poor people in Russia. That is the rub. They are 90% of the population; and a half of the other 10% are feeling not so well off either, engaging in penny-pinching all the time.
The communists appealed demonstrably to the poor and deprived in 1917 with dramatic effect. But they did not deliver. In fact they made things much worse. 
This is their big problem and it finished them off in 1991 and again in 1996. 
But times have moved on, as it so happens. There is a place where the communists have delivered after all, Moldova.
The communists there are not corrupt. They are the idealists; the gangsters have moved on to more abundant pastures.
They have not totally conquered corruption, naturally, but things are at last going in the right direction. They are spending the aid from the West wisely and are pushing ahead with reforms - all in the direction of capitalism, seen as the parturient processor of true communism. The economy is growing at 6% plus per year.
Are the Russian communists as intelligent? One thing is for certain. They are the only viable opposition force in Russia. They have a state-wide organisation and a world-view, however tarnished it might seem in the West. They have a chance.

Chechen Leader Aslan Maskhadov Killed 
Chechen rebel leader Aslan Maskhadov has been killed by Russian troops fighting to quell a long rebellion in the mainly Muslim Caucasus region, the Russian army announced on March 8th. The death of Maskhadov, 53, would seem to boost Russian President Vladimir Putin, who built his power largely on a tough line against the Chechen rebels. The armed campaign which Maskhadov led had brought bombings to the very heart of Russia."
A special operation was carried out by us in the village of Tolstoy-Yurt as a result of which the international terrorist and leader of the rebel group Aslan Maskhadov was killed," FSB Security Service chief Nikolai Patrushev told Putin. Tolstoy-Yurt is 20 km (12 miles) north of Grozny.
Four close comrades of Maskhadov had been detained, Patrushev was shown on television telling Putin. He added that there had been no casualties among Russian security forces. 
Moscow blames Maskhadov, who had a US$10m reward on his head, for a string of deadly operations in Russia, including an attack on a Moscow theatre, a bombing near the Kremlin and an action against a school in the south Russian town of Beslan. At least 326 hostages -- half of them children -- died at the school in Beslan last year. 
Maskhadov actually condemned the assault on the school, for which his rival, the extremist, Shamil Basayev, claimed responsibilty. Maskhadov was the moderate by comparison and did not demand full independence for Chechnya. He had negotiated the peace of 1996 when General Lebed was the Russian security supremo, The two agreed to postpone resolution of the status of Chechnya until a referenum in 2001. The outbreak of the second Chechen War in 1999 aborted that. The referendum would have course have been won by the independence party.
Although it never took place, the aborted referendum gives Chechnya an unusual status already, namely an international legal profile. This can be said to justify its independence movement lobbying abroad for their cause. 

Links to al-Queda
Moscow claims, however, that the Chechens have been going much further than that. It links Maskhadov, and field commander Basayev, to groups that conducted attacks such as the Sept. 11, 2001, attacks on the United States. In the case of Basayev, a fanatic a l'outrance, the claim is plausible, but not for Maskhadov.
Recently Maskhadov had called for talks with Moscow on Chechen demands for independence, but the Kremlin insisted it would not negotiate with terrorists. Critics of Moscow's policies in Chechnya saw Maskhadov as more moderate than Basayev and a man with whom the Kremlin could have negotiated, as Lebed did. 
Russian leaders, fearing successful breakaway by Chechnya could trigger secession moves by other regions in the sprawling federation, have fought two wars in Chechnya. Tens of thousands were killed on both sides in the first conflict from 1994-96. Putin sent troops back into the territory in late 1999 to cement his image as a strong leader ahead of his election as president in 2000. The territory suffered widespread devastation and thousands more were killed. 
Russia has suffered a series of humiliating setbacks in its bid to control Chechnya, including last year's assassination of the Moscow-backed president of the region in a bomb attack. In 1996, Russian special forces killed the first post-Soviet rebel leader Dzhokhar Dudayev. Being Chechen leader is not an enviable role.

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AVIATION

Aeroflot increases cargo shipments by 85%


Aeroflot, Russia's largest airline, said 2004 revenue from cargo shipments rose 48 per cent to US$198m as it carried more goods farther, Bloomberg reported recently.
Aeroflot carried 143,000 tonnes of cargo, 85 per cent more than the previous year, the airline said in a statement. Its volumes reached 842.5m tonne-kilometres last year, 3.7 times more than the previous year. The airline, which operates four DC-10 cargo planes, filled 70.1 per cent of its cargo space, 6 per cent more than the previous year. Passenger planes carried almost half of all cargo, or 84,500 tonnes, an 8 per cent increase from the previous year.

MiG to become joint-stock company by early 2006

Russian Aircraft Corporation MiG is to be converted into a joint-stock company in late 2005 or early 2006, the corporation's Director General, Alexey Fyodorov, said recently, RBC reported.
He said this is to be accomplished so that MiG is able to enter a consolidated aircraft-building corporation like Boeing or EADS. MiG incorporates 15 enterprises, responsible for all aspects of the production, sales, maintenance and repair of MiG aircrafts. Last October Boris Aleshin, head of the Federal Industry Agency, voiced the Russian government's intention to convert MiG, with a monthly turnover of 500m roubles (US$17.9m), into a joint-stock company for its subsequent merger with Irkut Corporation. Russia's consolidated aircraft-building company will finally be established in 2006 or 2007.

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ENERGY

Russia's trump card: Eastern Siberian-Pacific Ocean pipe

Russian plans to build an Eastern Siberian-Pacific Ocean export oil pipeline with a possible branch to China are gaining momentum, New Europe reported recently.
Transneft has started working on the design of what could be the world's longest and most expensive oil pipeline.
The massive pipeline would run from Taishet in Siberia's Irkutsk region to the town of Skovorodino to the east near China's border, and from there continue to Perevoznaya Bay at the Sea of Japan.
The oil pipeline is expected to have a total throughput capacity of 80m tonnes. Russian Prime Minister Mikhail Fradkov signed a resolution on December 31st, 2004 to create the 4,130km pipeline, which is estimated to cost US$11bn, according to Transneft. Japan is promising to provide a big part of this amount (US$6bn) in the form of low-interest loans.
Tokyo's interest in the project is not accidental. The point is that there was an alternative route from Angarsk to the Chinese city of Daqing. Out-of-favour YUKOS had been pushing this project since 1999, but Transneft successfully black-balled it.
"That's pretty much dead," Anna Boutenko, an oil analyst with Alfa Bank in Moscow, told New Europe. "That has been overridden by the proposal of Transneft."
The problem is that the Daqing pipeline is included in an intergovernmental agreement between Russia and China. In order to calm the Chinese, Russia has promised that the pipeline to the Sea of Japan would branch off from Skovorodino over to China. It also said that 30m tonnes of oil out of the 80m tonnes would go to this country.
The head of the Russian Federal Energy Agency, Sergei Oganesian, stated this when commenting on the pipeline during a press conference on February 1st, 2005. "There will be a branch to China if it so decided," he was quoted as saying.
The Eastern Siberian-Pacific Ocean pipeline shook the geoeconomic strategy in the entire East Asia region in 2004, triggering fierce triangular wrestling between China and Japan, China and Russia, as well as Japan and Russia in energy and political relations. In Russian President Vladimir Putin's pragmatic diplomacy, the pipeline is Russia's trump card to gain political and economic interest in the Pacific region through oil.
Boutenko noted that "it is a political issue and Russia does not want to spoil relations with either party (China and Japan). But, I think it's not just words. They (the Russians) want to build this link (to China) which is actually economically sound because the demand is there and there would be enough crude to supply them with." She said it is cheaper than building the pipeline all the way to the Sea of Japan - at least at the initial stage.
For quite some time China has wanted flows from Russia in order to secure supplies of crude oil. It currently receives all its Russian oil by rail, which is significantly more expensive than piping it. Beijing has secured a contract with Russia's Rosneft for the delivery of crude by rail. Rosneft plans to supply 4m tonnes of oil to China in 2005 and 48.2m tonnes of oil by 2010.
Moreover, Rosneft President Sergei Bogdanchikov was quoted as saying in Tokyo on February 2nd, 2005 that the Russian company plans to participate in filling the Eastern Siberia-Pacific Ocean pipeline.
However, due to Russia's hesitation to build the Daqing pipeline, China and Kazakstan decided to build the China-Kazakstan pipeline, which has a projected delivery capacity of 50m tonnes.
Boutenko shrugged it off, saying that China's demand for oil is rapidly growing. "The fact that they have secured this contract from Rosneft for crude deliveries shows that there is still demand that is unfulfilled that could be filled by this Russian pipe," she explained.
Currently, there is not enough oil to fill the 80m tonne Eastern Siberian-Pacific Ocean pipe since production in Eastern Siberia has yet to get off the ground. For that reason the first stage of the project is to build the pipeline from Taishet to Skovorodino with a branch to China that will carry Western Siberian crude and to build a rail oil terminal in Skovorodino. In the meantime, Moscow may offer joint venture opportunities to countries like Japan, China and South Korea in order to prospect Eastern Siberia for new oil.
The last stage, as Eastern Siberian fields are developed, envisages organising railway transit from Skovorodino and Perevoznaya and to build a pipeline along that route. Oil would be shipped to Japan, South Korea and even to the United States as it may supply oil to the west US states. China and Japan both rely on the Middle East for about 85% of their oil imports.
Russia's government had initially wanted to finish the line at the bustling port of Nakhodka before unexpectedly changing its mind and deciding to run the oil to Perevoznaya - a decision that prompted fury from environmentalists because the port is marked as a nature reserve. But Boutenko said Transneft has taken into consideration these environment issues. "It is quite common that you get this noise but I don't think that would be a serious deterrent to the project," she opined.
The construction of a pipeline to the east, with a tributary to China, is part of the Russian Energy Strategy until 2020. Transneft has until May to present a feasibility study for the pipeline.

Gazprom to launch North TransGas pipe in 2010

Russian gas giant Gazprom plans to launch the North TransGas Pipeline in 2010, Gazprom CEO, Alexei Miller, said recently after a meeting between Russian businessmen and German Chancellor, Gerhard Schroeder, Interfax News Agency reported.
The total cost of the North TransGas Pipeline is estimated at 5.7bn Euro.
"The North TransGas Pipeline will be launched in 2010 and of course, the implementation of this project will make it possible to increase gas supplies, both to Germany and to other countries in the European Union," Miller said after the meeting.
He added, "Plans were confirmed to build cooperation between Russian and German energy companies along the entire chain of vertical integration in the energy sphere, based on a mutually beneficial exchange of assets."
Miller believes that the project would also be "a good impulse for the development of cooperation in the areas of engineering, construction and the banking sphere."
During the summer of 2003 Gazprom Deputy CEO, Alexander Ananenkov said the completion of the North TransGas Pipeline was planned for 2007-2008.
"It is necessary for this to be a working pipeline, therefore what is important is not the date, but the fact that the gas that is pumped into the North TransGas Pipeline is in demand," Gazprom Press Secretary, Sergei Kuprianov said. Gazprom has already begun preparations for the project and survey work is currently being carried out on the 917km onshore section in Russia.

Russia welcomes India as possible oil partner

The Russian Industry and Energy ministry said recently that the country was interested in working with Indian businesses to develop its oil fields, amid speculation that India's state-run Oil and Natural Gas Corp might buy into the once-core subsidiary of the former oil giant, Yukos, the International Herald Tribune reported.
The industry and energy minister, Viktor Khristenko, told his Indian counterpart, Mani Shankar Aiyar, that fields in the Far East, eastern Siberia, the Barents Sea and the oil-rich Timan Pechora region could offer opportunities for Indian investment, the ministry said in a statement.
"Russia is open to considering offers by the Indian side to participate in projects with Gazprom, Roseneft and Transneft," the statement cited Khristenko as saying, referring to Russia's natural gas monopoly, its main state-owned oil company and the state-controlled pipeline operator, respectively.
"We are happy with the level and the character of Indian-Russia relations," Khristenko said. "They must be maintained and developed."
Gazprom's chief executive, Alexei Miller, and Subir Raha, the chairman and managing director of the Oil and Natural Gas Corp, India's largest explorer, signed a memorandum in Moscow recently to expand cooperation, the Russian company said.
The partners will examine joint projects to develop oil and gas in both countries and may market liquefied gas in Asia. 
India imports 70% of its crude oil, a figure that is expected to rise to 85% over the next 20 years. Indian companies such as Oil and Natural Gas and Reliance Industries, the country's biggest non-state refiner, are acquiring oil and gas fields abroad to secure supplies. Gazprom holds about 16% of the world's gas reserves.
Aiyar said that Oil and Natural Gas was unburdened by debt and could borrow as much as US$25bn, some of which could go into Russian deals. India is one of the largest energy consumers in Asia.
"The Indian company is ready to invest a significant part of this sum in energy projects in Russia," a source in Russia's Industry and Energy Ministry said. The source added "Aiyar had expressed interest in acquiring part of the former Yukos subsidiary, Yuganskneftegaz, during a meeting with Khristenko, Interfax News Agency reported.

Transneft to Build Terminals

Transneft JSC is planning the construction of sea terminals on the coasts of the Pacific and Arctic Oceans, FRAEC News Digest reported. 
The Arctic terminal will be located in Indiga. At present the feasibility study for the construction of the oil pipeline Khariaga - Indiga is underway. The project is worth US$72.7m. The pipeline's capacity is to reach 24m tonnes annually.
The Pacific terminal to be built in the framework of the oil pipeline Western Siberia - Pacific Ocean development will be located in the Perevoznaya Bay. The Taishet - Skovorodino span of the pipeline is to be put into operation in 2008.
At the same time Transneft re-signed the participation in the project aimed to build a pipeline bypassing the Bosphorus. 

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FOOD & DRINK

McDonald's to invest at least US$40m in 2005

McDonald's plans to invest US$40m or more in the development of its restaurant chain in Russia in 2005, President of the company's Russian subdivision Khamzat Khasbulatov announced at a press conference recently marking McDonald's 15th year of operation in Russia, Interfax News Agency reported. 
25 new McDonald's will open in Russia this year, both in cities where the company already has a presence and in other places, Khasbulatov said. It costs roughly US$1m to open just one, Khasbulatov said. McDonald's also intends to perform reconstruction on nearly 10 existing restaurants, having done 2 in Moscow last year. One of those took around US$3m. Other outlets will require nearly US$0.5m each. McDonald's plans to open 45 of its Mak Kafe coffee houses near its restaurants over the next 3 years, 10 or so in 2005.

Coca-Cola targets Russian juice maker buyout

International soft drink major Coca-cola wants to secure control over a quarter of Russia's juice market by buying one of the biggest players in this fast growing market, Russia's business daily, Vedomosti, reported.
The paper quoted sources close to the deal as saying that Coca-Cola had nearly completed talks with St Petersburg-based Multon company to buy a 100 per cent stake.
Market analysts estimate the cost of acquisition at up to US$600m. Multon was set up in 1995 in St Petersburg and has an annual production capacity of around 740m litres of juice. Is turnover in 2004 was US$330m, the paper reported.
Coca-Cola's chief executive, Neville Isdell, said in New York recently that the company wanted to add water and juice to its portfolio in emerging markets, and it was looking to make acquisitions in Russia, Brazil or China.

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MINERALS & METALS

Lebedinsky GOK clinches contract for HBI plant

Major iron ore producer Lebedinsky GOK (LGOK) signed a deal with Austria's Voest-Alpine Industrienlagenbau GmbH & Co and Midrex Technologies Inc of the United States in the middle of February to supply equipment for the second stage of its hot-briquette iron (HBI) plant, Interfax News Agency reported.
Gazmetallproyekt, which runs LGOK told Interfax the contract amount was not subject to disclosure, but that the second phase of the HBI plant, work on which begins in the first half of 2005, would cost approximately US$400m in total. Phase two, to be delivered in 2005-2006, will more than double HBI capacity to approximately 2.4m tonnes annually.
The first stage of the HBI plant, capacity one million tonnes annually, was launched at the beginning of 2001. Work on phase one began in 1996. LGOK shareholders at a November 2nd EGM approved contracts and other transactions worth in excess of US$160m connected with a project to build a direct reduced iron (DRI) plant, which will be the second stage of the HBI plant.
LGOK said the deals included contracts worth approximately 71m Euro and US$ 51.8m not including value-added tax (VAT) with a consortium of Voest-alpine and Midrex Technologies Inc. 
LGOK also signed a licence agreement to use DRI technology provided by Japan's Kobe Steel at a cost of US$4.9m, not including VAT. Metals magnate Alisher Usmanov owns 81.51 per cent of LGOK, which is from the Belgorod region, via the Gazmetall firm and Novolipetsk Metallurgical Combine (NLMK), one of Russia's biggest steel mills, owns 11.96 per cent.

Mechel boosts steel, pig iron and coal outputs

Mechel Steel Group, Russia's fifth biggest steelmaker, sharply increased output of steel, pig iron and coal last year as prices for the commodities rose. Interfax News Agency reported.
Crude steel output rose 17% to 6.2m tonnes, rolled steel output increased 21% to 4.9m tonnes and pig iron output was up 23% to 3.9m tonnes, the company said in a statement.
Coal production rose to 15.6m tonnes. The company, controlled by founders, Igor Zyuzin and Vladimir Iorich, plans to boost production of steel by a third to 8.2m tonnes by 2007 and output of coke by 9% to 16.6m tonnes.

Alrosa records sparkly profit

Alrosa reported a net profit of around 13bn roubles based on Russian accounting standards (RAS) in 2004, Alexander Nichiporuk, the Russian diamond monopoly's president, told students at the St Petersburg Mining Institute, Interfax News Agency reported.
"Alrosa made a very large profit last year - around 13bn roubles," Nichiporuk said. Alrosa's sales were a record US$2.4bn and are expected to hit US$2.8bn in 2005, he said.
Alrosa has said it is targeting net profit of 13.2097bn roubles in 2005. Nichiporuk said market demand for uncut diamonds exceeded supply in 2004, and that all the world's leading producers raised prices. Alrosa put its prices up around 25 per cent and De Beers raised its prices 16-17 per cent, he said. "In all probability, excess demand will continue to influence pricing on the uncut diamond market," Nichiporuk said.
He also said Alrosa received offers to do business with all the world's major diamond mining companies last year.
"We'll take advantage of several opportunities to work with leading mining companies," Nichiporuk said, adding that such cooperation was possible in exploration, mining and diamond sales.
Alrosa, Russia's Yakutia-based diamond monopoly, is planning to branch out into other minerals, Nichiporuk said.
Alrosa might start mining coal or iron ore, starting in Yakutia, he said. As for the core business of diamonds, he said Alrosa was expecting the results of exploration at a new pipe, Rozhdestvenskaya, in the Verkhnekepinskaya field in the Arkhangelsk region, within a month. Alrosa also intends to step up its overseas projects, for example in Angola.
"In the coming months we plan to launch the second stage of an ore mill at the Catoca mine. And in April, another pilot mine will be started in Angola," Nichiporuk said. Alrosa is also exploring sites in Sierra Leaone and is "preparing to enter Canada." "We are hoping to partner small geological firms in Canada," he said.

EvrazHolding boosts roll output by 1.7% in January

EvrazHolding, Russia's biggest steel producer, raised commercial roll output 1.7 per cent year-on-year to 1.06m tonnes in January thanks to efforts to optimise production at the group's three steel mills, Interfax News Agency reported. 
Crude steel production grew 3.2 per cent to 1.23m tonnes and pig iron was up 5.7 per cent to 1.05m tonnes.
"The January results demonstrate a positive trend in output for core products at the group's three steel mills, achieved by an extensive optimisation programme," the company said.
EvrazHolding controls the Nizhny Tagil (NTMK), West Siberian (ZSMK) and Novokuznetsk (NKMK) steel mills.
NTMK, from Sverdlovsk region, increased commercial roll output 7.2 per cent to 432,200 tonnes in January. Crude steel output grew 6 per cent to 492,100 tonnes, pig iron 5.3 per cent to 423,100 tonnes and coke 7 per cent to 265,245 tonnes.
NTMK is Russia's fifth biggest steel mill by output and second biggest rails producer. ZSMK, which is from Novokuznetsk, reduced commercial roll output 4.5 per cent to 416,700 tonnes and crude steel output 0.7 per cent to 489,500 tonnes, but pig iron rose 6.9 per cent to 422,800 tonnes and coke 10.9 per cent to 291,600 tonnes in 2004.
EvrazHolding said roll and steel output at ZSMK fell due to higher commercial pig iron exports to meet growing demand on the world markets. ZSMK specialises in long products for the construction and machine-building industries.
The Novokuznetsk combine, which is Russia's biggest rails producer and the country's only producer of tram rails, increased commercial roll output 4.2 per cent year-on-year to 210,700 tonnes. Production of crude steel grew 6 per cent to 237,800 tonnes of pig iron 4.1 per cent to 200,000 tonnes and coke 10.3 per cent to 104,200 tonnes. NKMK sold 58,800 tonnes of rails, up 22 per cent year-on-year. Sales to Russian Railways (RZD) grew 36.8 per cent to 50,500 tonnes and rail exports fell 14.8 per cent to 5,200 tonnes.

Norlik gold unit posts US$199m in earnings

ZAO Polyus gold Company, the umbrella for Norlisk Nickel's gold mining assets, had earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$199m in 2004, Yevgeny Ivanov, the head of Polyus, said at a conference recently, Interfax News Agency reported.
Ivanov said Polyus produced 1.807m ounces of gold in 2004. Reserves were 18.388m ounces and resources were 24.59m ounces he said.
Polyus aims to become one of the world's five biggest gold producers, mining three million ounces each year, Ivanov said. It is targeting proven reserves of more than 48m ounces, he said. "We see ourselves as an international company, so we won't get by without mergers and acquisitions," Ivanov said.
Polyus, the gold arm of Norlisk Nickel, plans to spend US$1.6bn by 2010 to almost triple its production as the metal trade is at the highest prices in 16 years, Ivanov said recently.
The company seeks to boost output to three million ounces by 2010, he said. Gold production rose 6 per cent last year, he said. Polyus bought 74 per cent of OAO Pervenets, which is licensed to the Pervenets and Verminskoye gold fields with a potential 185 tonnes of gold in the Irkutsk region, Polyus said in a statement.
Polyus bought the shares via its subsidiary, Lena Mining Company from four private individuals, the release said. The subsidiary paid US$25.8m and also bought US$1.95m in liabilities.
Polyus subsidiary, Lenzoloto, owns the other 26 per cent of OAO Pervenets. The Verninskoye field is 15km from the giant Sukhoi Log gold lode. Verninskoye and the Pervenets deposits combined hold 84 tonnes of C1 and C2 gold with ore graded at an average 2.3 g/t for gold, and 185 tonnes of probable P1 and P2 gold.

RusAl secures magnesium plant construction contract

Russia's number one aluminium producer RusAl will build a plant capable of producing 40,000 tonnes of metallic magnesium per year in the Volgograd region, Interfax News Agency reported.
RusAl's public relations manager, Vera Kurochkina, said that the company would carry out further exploration at a bishofit field this year and would complete a feasibility study for the magnesium plant. She did not say when the plant might be built or how much it might cost. "We need magnesium to produce alloys, and one of our strategic objectives is to increase the weighting of alloys to 50 per cent of total aluminium output," Kurochkina said. RusAl has said it intends to achieve that objective by 2013. Output of cast-house alloys rose 33.5 per cent, to 740,000 tonnes in 2003 and accounted for 27.8 per cent of total aluminium output. RusAl has a range of more than 80 alloys. RusAl-Bishofit won a public tender last December for the right to develop the estimated 50m tonne bishofit field, which is in the Gorodnishchensky district of the Volograd region.

Norilsk Nickel to bid for Udokan copper field

Arctic mining and smelting giant MMC Norilsk Nickel will bid at an auction for the rights to the bid Udokan copper field in Russia's Chita region, Natalya Abramemkova, spokeswoman for the regional administration, announced recently, Interfax News Agency reported.
Abramemkova was quoting a statement by Ravil Geniatulin, the region's governor. Norilsk Nickel officials expressed the company's interest in Udokan at a meeting with Geniatulin behind closed doors recently, Abramemkova said. Norilsk Nickel was not available for comment. Udokan is one of the world's largest copper deposits. A state commission has confirmed its reserves at 20m tonnes of copper with average copper content in ore of 1.5%. about 70% of the ore can be opencast mined.

Sverdlovsk region attracts business interest

Russia's number two aluminium producer SUAL, electricity holding Unified Energy System (UES) and officials from the Sverdlovsk region will form a special task force to look into the economics of building a 500,000 tpy aluminium smelter in the Sverdlovsk region, Interfax News Agency reported recently.
The Sverdlovsk region governor's information department said Governor Eduard Rossel made the proposal at a meeting with Anatoly Chubais, the chief executive of UES, and Viktor Vekselberg, chairman of SUAL Holding, in Moscow. The task force will draft its opinion in 2 months and propose a site for the smelter.
Chubais gave a very high opinion of the project, the information department said. "It can realistically be implemented by joint efforts," Chubais said. Rossel has suggested the city of Krasnoturinsk as a location for the smelter due to its proximity to SUAL's Sredne-Timan bauxite field in the Komi Republic.
SUAL's Komi Aluminium project calls for the construction of an integrated aluminium complex capable of producing 6m tonnes of bauxite, 1.4m tonnes of alumina and 300,000-500,000 tonnes of aluminium per year.

Severstal eyes majority stake in Italian Lucchini

Severstal is poised to snatch up a controlling stake in Italian steelmaker Lucchini for as much as US$500m, potentially the largest Russian investment in the European Union to date, The Moscow Times reported recently. 
Russia's number 3 steelmaker is buying up at least 60% of mid-size Lucchini for as much as €450m, Italian newspapers and sources close to the deal said recently. Severstal, which is actively seeking foreign acquisitions and has shown interest in Lucchini for months, bought US steelmaker Rouge Industries for US$285m in January 2004, the paper said. Reports of the Lucchini deal came only a day after Italian Foreign Minister Gianfranco Fini visited Moscow in a bid to improve bilateral economic ties, the Russian paper said.
Severstal's interest in Lucchini underscores the overpowering logic behind Europe's hunger for resources and Russia's vast natural wealth, the paper added. Severstal's strategy has been to produce steel cheaply in Russia but acquire rolling facilities close to consumers, said Timothy McCutcheon, metals analyst at Aton. Severstal will acquire the controlling stake of Lucchini after a new share issuance, the Italian newspaper Corriere reported, without saying where it got its information.

Norlisk Nickel records 1.6% production boost in 2004

Russia's Norlisk Nickel's preliminary estimates suggest that it increased nickel production to 243,000 tonnes in 2004, up 1.6% from 2003, RBC News Service reported recently.
At the same time, copper production declined by 0.8% to 447,000 tonnes, the metallurgical company's press service announced. In particular, the company produced 61,000 tonnes of nickel in both the first and second quarters, 59,000 tonnes in the third quarter, and 62,000 in the fourth quarter. Quarterly copper output totalled 110,000, 112,000, 112,000 and 113,000 tonnes in the first to fourth quarters, respectively.
The company's top managers estimate copper and nickel production to remain at approximately the same levels for 2005. Norlisk Nickel has disclosed no information on platinoids output.
Meanwhile, Britain's Peter Hambro Mining (PHM) would welcome the chance to enter into partnership with Polyus, the umbrella for Norlisk Nickel's gold producing assets, to explore the Bamskoye gold field in Amur region, PHM's chairman and co-owner, Peter Hambro, told Interfax News Agency recently.
Hambro's Pokrovsky Rudnik is Amur region's biggest gold producer and third biggest taxpayer. "It is very important for us that Polyus values the Amur region's potential. We would welcome the idea of cooperating with them," Hambro said. PHM raised gold production in Russia 41% to 209,000 Troy ounces in 2004. The company is aiming for one million ounces annually in five years.
Peter Hambro said he thought gold would trade closer to US$500/oz than US$400/oz this year. It was reported earlier that Polyus bought the rights to the Bamskoye field - its first project in the Amur region - for 25m roubles and is talking about cooperating in the exploration and development of the field, which is in the Tynda district.
Bamskoye contains 14.2 tonnes of C1 + C2 gold. Ores have an average grading of 3.7 g/t for Au. The field contains 86.5 tonnes of probable P1 + P2 gold. Polyus has said it plans to invest US$1.6bn in its own assets and US$140m in exploration over five years.

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