Books on Russia
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
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
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
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
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
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
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
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.
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
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
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
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
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.
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
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
"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
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
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
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
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 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
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,
"We are happy with the level and the character of Indian-Russia
relations," Khristenko said. "They must be maintained and
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
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
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
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.
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
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.
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
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
"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
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
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
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
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.