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Key Economic Data 
  2003 2002 2001 Ranking(2003)
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)

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ethnic groups 
Russians 82%
Tatars 3.3%
Ukrainians 2.7%

Principal towns 
Moscow (capital)
St Petersburg
Nizhni Novgorod 


Vladimir Putin

Update No: 299- (28/11/05)

Reshuffle of government
There has been a reshuffle in Russia, which portends important developments. Dmitry Medvedev, chief of the presidential staff, and Sergei Ivanov, the Minister of Defence, certainly Putin's closest political allies and both close friends, have been made deputy premiers, Medvedev as first deputy premier. His job has gone to the governor of the energy-rich Tyumen region, Sergei Sobyanin. He now occupies one of the most powerful posts in Russia, always able to have a word in the president's ear. 
This reshuffle greatly enhances the standing of the two new deputy premiers in the government, because the premier, a complete mediocrity, is an obvious caretaker. It is a strong indication that Putin is grooming one or other of them to be his successor.

The succession issue
There is no more important matter of state than how succession at the top is to be handled. Putin made a close study of Yeltsin's deft use of presidential power to sack the premier and appoint a new one, of which he was the ultimate beneficiary. 
Technically, the parliament can veto the appointment, but it is a rubberstamp body and would never do so. The president can in effect choose his successor.
The strategy seems to be as follows. The present colourless premier, Mikhail Fradkov, an ex-tax policeman, carries on taking the blame for unpopular reforms until closer to the elections to parliament in 2007 and to the presidency in 2008, when he is replaced by one of Putin's two closest cronies. Either of them would readily give Putin an amnesty on stepping down, and others in the inner circle as well, who are more likely to need it. In other words this move suggests that, Putin is going to step down in 2008, but assured of a still prominent role in political life.
Medvedev, only 40, is already one of the most powerful men in Russia. He is chairman of Gazprom, the energy giant. A former lawyer, he met Putin in St Petersburg in the early 1990s when the then future president was Mayor Anatoly Sobchak's right-hand man. Putin's links with Ivanov, who is 52, go back much further to the 1970s, when they were both KGB operatives in East Germany fighting the good fight against capitalism in the Cold War.
A logical political scenario presents itself, Ivanov takes over in 2008 and the younger man, Medvedev, in 2016, when he would still be only 51. The Russians are master chess players and like thinking ahead.
There is something to be said for listening to the advice of a master chessplayer. One of the greatest ever, if not the greatest ever, is Garry Kasparov, who has retired from the game to concentrate on politics, and has let it be known that he is standing for the presidency in 2008. 
He is chairman of Committee 2008 Free Choice, focusing on the 2008 presidential elections in which Kasparov will stand as leader of the United Civil Front of Russia. He is also contributing editor of the Wall Street Journal Europe, in whose issue of November 18-20 appeared the following article under his name.

Democracy, Russian style
"In typically secretive KGB fashion, Russian President Vladimir Putin abruptly named a pair of his closest associates - Defence Minister Sergei Ivanov and Kremlin chief of staff Dmitry Medvedev - to deputy prime minister positions. In the power corridors of the Kremlin, Medvedev is typically portrayed as a liberal dove while Ivanov is said to be a hawk, but these distinctions mean little, while the fact that they are Putin's cronies means everything.
In a democracy, such a cabinet shuffle would reflect a battle between interest groups and a change in the direction of policy. In Putin's Russia, we should not waste time reading meaning into Byzantine palace intrigues. The changes have nothing to do with how best to run the country; there will be no change in direction. Everything is about trying to find the best combination to keep Putin's clique in power.
Many of those sceptical of accusations that Russia is backsliding on democracy seem to be waiting for a dramatic event that will make it obvious to one and all - tanks rolling through the streets of Prague or at least rolling over a few protesters in Red Square. Opposition forces and human-rights groups are met with yawns when they produce laundry lists documenting the Kremlin's systematic whittling away of democratic institutions. The Putin regime realised that as long as their machinations are kept under the radar - and the tanks are kept in North Caucasus - the interest level of western leaders will remain at vague concern at worst.
This attitude is often accompanied by deluded attempts to look on the bright side, as when Bill Clinton recently spoke with Mikhail Gorbachev in Washington DC and made a positive comparison of Russia's democracy today versus the USSR in 1985. Gorbachev himself is on board with Putin these days. Perhaps he's envious at seeing the Kremlin regain the authoritarian grip he wasn't able to maintain while desperately trying to put a human face on the communist monster. If flattering comparisons are to be made, why not skip 1985 and instead go back to the years of Stalin's Great Terror?
I would prefer a more relevant comparison, one between 2005 and 1999. In the past six years there have been countless steps backwards on the path of civil rights in Russia. The trend has steadily accelerated as the Kremlin's confidence increases in the face of the West's apathy. President Bush continues to signal his willingness to buy into Putin's concept of "Russian-style democracy," a breed that would scarcely be recognised by the Founding Fathers.
Those looking for symbols instead of examples of Russia's turn from democracy need look no further than the yard in front of the Moscow police headquarters, where a bust of Felix Dzerzhinsky ("Iron Felix"), founder of the first communist secret police, appeared recently. His towering bronze likeness was pulled down by jubilant crowds in Lubyanka Square in August 1991. Now he's back- albeit in a smaller form and less prominent location - without a comment, fitting for a man and a current administration who prefer their deeds to be done quietly.
A rosy picture of the Russian economy is being painted by some analysts. Unfortunately, it's an oil painting. The GDP is being kept afloat by record-high oil prices while just about every segment of the industrial infrastructure is falling apart.
More accurate evaluations surprisingly surface from within the Russian administration. Prime Minister Mikhail Fradkov didn't inspire confidence with this recent statement: "Our wagon is without wheels, but during the trip we will put wheels on it and make round wheels from the square ones, but it is not simple because we don't have roads yet either."
Putin economic advisor Andrei Illarionov, demoted earlier this year for making comments critical of Kremlin policy, warned of a return to "the state dominating the economy," comparing the current situation to 1929, when Stalin put an end to private enterprise in the USSR. Deputy Prime Minister, Alexander Zhukov, went on television to say that the state had more money that it knew what to do with, news that came as a shock to those living in the impoverished regions distant from the luxuries of Moscow's innermost Garden Ring. 
The mechanisms of government are now so crippled, and the grey economy is so close to black, that money is siphoned off the moment any investment is attempted, so few attempts are made. There are no longer any open channels to use the oil cash windfall to improve the lives of average Russian citizens. The sclerotic corruption prevents capital from circulating to the extremities, or anywhere other than inside the head.
Eventually a stabilisation of energy prices will cause a fatal stroke.
We still hear some of Putin's foreign fans saying that, despite these irregularities, Russia is a good place to make money. That is only the case, however, if you are willing to do what is necessary to be on intimate terms with the Kremlin. Oligarch Roman Abramovich (disguised as the Governor of Chukotka) once sold his company Sibneft to Yukos for a percentage of Yukos stock and ready cash in the range of three billion dollars. As a subplot during the Yukos saga, Abramovich, a friend of Putin's, managed to regain control of his company through the courts, of course without returning the purchase price. Now 72% of his company has been bought by Gazprom for over US$13bn, a healthy cut above market value. It doesn't take business genius to sell the same company twice in Russia; you just need to have good business partners, who can guarantee the right court decisions. That's the best way to make money in the wild, wild East.
The case of jailed Yukos billionaire Mikhail Khodorkovsky continues to serve as a bellwether. Even though he has been sent, against all modern precedent, to a Siberian jail in the furthest reaches of the country, the government has not relaxed its persecution of everyone related to his case. Another major Yukos shareholder, the seriously ill Platon Lebedev, was sent to a prison north of the Artic Circle. And now that the prosecutors are harassing and attempting to disbar the Yukos lawyers, keep in mind that the Russian court system currently boasts a conviction rate of over 99%.
Khodorkovsky might have been able to avoid all this trouble, according to Kremlin stooge Sergei Markov (disguised as a political scientist). He suggested that all Khodorkovsky need have done was turn over most of his assets, and promise not to use the remainder to support any agenda contrary to that of the government.
Ordinary taxpayers who haven't done anything to threaten the Kremlin aren't faring any better. The latest regulation from the Duma boldly discards the presumption of innocence, if only in matters of taxation. The money disappears from your bank account first and it's up to you to prove the state must pay it back. Who says former Communists can't learn fiscal efficiency?
In 2000, after Putin came to power in exactly the sort of backroom deal we are hoping to prevent in 2008, he promised to establish a "dictatorship of law" in Russia. So far we have the former at the expense of the latter. The consequences of this transformation may only seem relevant to Russians today, but a Russia with a disintegrating economy and no respect for the rule of law will soon make our problems yours." 

There's good stuff happening in Russia, too 
Headlines in the Western press are pessimistic about Russia's commitment to democracy. The arrest and conviction of Mikhail Khodorkovsky, the takeover of NTV, constitutional reforms that replace elected regional officials with appointed governors, vague assurances from Vladmir Putin that while he would not run for a third term in 2008, he would not disappear from Russian politics - all paint a portrait of sharp retreat from the Yeltsin era, reports Jonathan F. Fanton in The Boston Globe. He is president of the John D. and Catherine T. MacArthur Foundation, which has been active in Russia since 1992, making a 20-year, US$100 million commitment to building a robust system of higher education and to strengthening the country's intellectual life. 
But the picture in Russia is more complex. Leaders in higher education and civil society have a more nuanced story to tell.
Changes underway in higher education are a good indicator of the deep transformation taking place in Russia. Private universities are gaining strength and state universities are being encouraged to modernize by opening themselves and their curriculums to the West.
For instance, cutting-edge science is being conducted at 16 research and education centres across the country. Affiliated scientists have produced thousands of publications. In the past year alone, more than 70 patents have been filed and 16 new enterprises have been started. Nine other campuses host centres for advanced study and education in the social sciences. They are building a cadre of policy experts that advise the government on issues like sustainable economic development, migration and ethnic diversity, human rights and the rule of law and healthcare.
At the national level, the Ministry of Education and Science is bringing Russia into the "Bologna process," which is creating a Europe-wide higher education area. University systems in 40 countries will have a common framework for undergraduate and graduate degrees, transferable credits, shared standards for academic quality and mobility for students and faculty.
The isolation of Russian intellectual life is over. Although much more must be done before Russia's universities fully recover from years of neglect and repression, the progress is real. These developments in higher education do not square with the image of Russia moving backward into isolation and suspicion of the outside world. No government bent on long-term authoritarian control would promote Internet connectivity, faculty and student exchanges and the adoption of a Western model of higher education.
The number of civil society groups is growing, and there is positive movement on fundamental issues. To be sure, the situation in Russia is paradoxical. On high profile cases of political sensitivity, the Kremlin interferes with the judicial process, is willing to use force to put down demonstrations and violates civil rights in the pursuit of terrorists. 
Yet Russia has begun to improve prison conditions. A new criminal procedures code is making incremental improvements in the justice system. And a broad network of human rights groups across the country is working undeterred, often helping the government reform itself.
For instance, the INDEM Foundation is developing a registration process at police stations in 15 precincts in Moscow and Kazan. Because most instances of police torture occur during the first hours spent in custody, booking detainees, logging the charges against them and other procedural improvements are an important step for combating abuse.
To monitor the police and the courts, human rights ombudsmen are at work in 31 of Russia's 89 regions, and there are plans for significant expansion. An umbrella organization of the ombudsmen is developing a common, automated system to register complaints and track their disposition.
A USAID/Russia project on legal reform has helped more than 1,000 judges attend training seminars in the United States and has been building a database of Russian court decisions to enhance consistency and strengthen the judicial system.
Russia is at a critical crossroads. There is no question that Putin is tightening his grip on various sources of power - political, economic, media. But so far, he has allowed civil society to grow, scholars to pursue their work, and niche media to criticize the government. 
The West needs to be open to a more nuanced view of Russia's progress while continuing to criticize the backward steps that Putin takes. This is a moment of paradox and new voices that requires patience as the country's fragile democracy takes root.

Why do we welcome these robber barons to Britain? 
Russia matters to the West for more reasons than one. It is receiving a flood of Russian money and immigrants, nowhere more so than in London, as the following article attests. 
The mayor of London is backing a campaign to entice Moscow's oligarchs to bring their ill-gotten gains to his city, (reports Tristram Hunt in The Guardian). 
For a politician who once suggested that capitalism was responsible for more deaths than Hitler, Ken Livingstone is in the midst of a monstrous U-turn. Backed by "real enthusiasm from the mayor's office," the tourism quango 'Visit London' is engaged in a determined campaign to attract Russia's super-wealthy. Advertising in high-end lifestyle magazines and running press junkets to the West End, marketing chiefs have their eye on the spending power of the Muscovite nouveaux riches. Livingstone's weakness for oligarchs is in danger of turning Britain's capital into the Sun City of the 21st century.
The commercial ties between England and Russia have a proud pre-history. In 1553, the Muscovy Company, England's first joint-stock enterprise, was set up to trade cloth for Russian furs. Elizabethan entrepreneurs made numerous trips to Ivan the Terrible's court at Moscow while Russian merchants began to arrive in London in large numbers from the later 17th century. Famously, in 1796, Peter the Great toured London incognito to pick up architectural and planning tips for his new city of St Petersburg.
During the following two centuries, London also provided a refuge for Russia's intellectual elites and political dissidents. Alexander Herzen made the capital a base for anti-tsarist propaganda. The anarchist Michael Bakunin exploited the city's freedoms to agitate for European revolution. In 1907, London hosted the congress of the Russian Social Democratic party, complete with Lenin, Trotsky and Stalin.
Now, in place of intellectuals and radicals, Britain has become an offshore depository for Russia's robber barons. Those who plundered the natural wealth of the crumbling Soviet Union during the 90s "privatisation" have ploughed their ill-gotten gains into London life. Money that should be in Russian pension funds, public salaries and supporting infrastructure is paying for private schools, chauffeurs and chefs in southern England. It is estimated that Russia has 27 billionaires and hundreds of paper millionaires. Most, it seems, are making their homes in London. Indeed, when the future history of the capital is written, the early 21st century will surely be known as "the Russian epoch."
Their spiritual leader is Roman Abramovich, the oil and aluminium billionaire and owner of Chelsea football club. He is joined here by his former business partner, Boris Berezovsky. Equally at home flitting between Surrey and the City are the mineral billionaire Vladimir Potanin, metals magnate Oleg Deripaska, and oil and gas speculator Chalva Tchigirinski. Given that so much of Russia's wealth was given away to these oligarchs by the Boris Yeltsin administration, it is appropriate that Tatyana Dyachenko, daughter of the former president, and her husband Valentin Yumashev have also made London their base.
What attracts these people is a witches' brew of favourable tax planning, the financial services sector, and a stable of corporate law firms for the endless litigation that pursues them. They also like the history and heritage of Britain along with high society's no-questions-asked approach to fabulous new money. The traditional defence of Britain as tax haven is the trickle-down argument. All boats will rise as the riches of the super-wealthy gently percolate. But aside from international footballers, top-flight libel lawyers and fine sushi restaurants, it is hard to see what greater good the money is doing - not least since the chancellor has steadfastly refused to reform non-domicile tax law. Where are the businesses, cultural patronage or charitable institutions from this new Russian community?
More important, the riches that the south-east's service economy is siphoning off represent a grotesque theft of assets from the Russian people. The 90s saw a legal ram raid of Russian resources that sent life expectancy and GDP rates plummeting. What was billed as free-market economics was in fact a quick-fire sale of a nation's wealth to a handful of well-positioned state apparatchiks. Gas, oil and minerals were flogged off at rock-bottom prices to Kremlin cronies. And like South Africa's Sun City during the 80s, London is growing fat off these immoral earnings with absolutely no regard for their provenance.
During his time in office, Mayor Livingstone has been as much concerned with foreign policy as city politics. But when it comes to the oligarchs, he is curiously silent. If London is to be a world city, then it should have regard as to which parts of the world are picking up the tab.
The Russian government is reconsidering one key matter of foreign policy themselves. Generally, the main principle of their policy can be summed up as resist Western encroachment in the Near-Abroad; make allies in the Middle-Abroad wherever possible and selectively in the Far-Abroad. 
They are here following what can be called the Kautilya principle, after the geopolitical thinker of the Mauragupta empire in the Punjab in the third century BC, who enunciated this idea himself. Indeed, he did more than that - he practised it as its chief minister.
Moscow is realising that an exception should now be made as regards its Iranian policy. Hitherto, it had wooed Tehran by selling it nuclear technology for its plant at Bushehr. Now it is having second thoughts. If Iran is developing nuclear weapons, whom could it be targeting? Not Russia for sure. But somebody, perhaps Israel in a lightning first strike and the world would be a different place! Moscow hardly wants to go down as having facilitated this, not out of any love for the Israelis, but because it would damage its relations with the West deeply and the Pandora's box of nuclear weaponry woul dhave been opened, with barely imaginable consequences. Hence the reaction indicated in the following article.

Russia Frustrated With Iran
By George Jahn, The Associated Press 
Russia is increasingly frustrated with Iran's reluctance to reduce international fears about its nuclear agenda and that anger is helping the United States and other nations seeking to refer Iran to the UN Security Council, diplomats said on November 17th. 
Most recently, the diplomats said, Iranian officials told the Russians on the previous day that they would not resume uranium conversion -- only to restart the process a few hours later. 
The move to restart conversion was expected. Still, with Iran under international pressure to reduce concerns that it seeks full control of the uranium enrichment process to make weapons, Russia and other countries would have welcomed a decision not to resume conversion. 
Senior Iranian officials told their Russian counterparts just that on November 16th, saying a re-launch was postponed for "technical reasons," the diplomats revealed, agreeing to speak on condition of anonymity. 
The Russians interpreted that as a signal that raised hopes of an easing of tensions a little more than two weeks before the 35-nation board of the International Atomic Energy Agency met in Vienna on November 24th to consider possible Security Council referral. 
The Iranian officials later told the Russians that conversion had restarted, further eroding the Russian goodwill needed by Tehran to deflect the U.S. and European push for Security Council involvement, the diplomats said. 
A European official speaking from outside Vienna said the reversal -- coming soon after Security Council head Igor Ivanov had briefed senior European Union officials about Iran's readiness to compromise -- embarrassed and angered the Russians. The situation remains tense on all sides, but still it is felt to be amenable to negotiation

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Russian bank to borrow US$1bn

A loan for Russia's state-owned Sherbank carrying a record-low interest rate margin has been doubled in size to US$1bn as western banks continue to clamour for Russian assets, the Financial Times reported on November 11th.
The loan to Sberbank, which dominates Russia's financial sector, will be the largest unsecured syndicated loan to a financial institution in the region, said ABN Amro, which arranged the deal with HSBC. It is its first syndicated borrowing in seven years.
The desire of western banks to enter the region has drastically reduced the cost of borrowing, leading to questions over whether lenders are relaxing their standards too much.
The Sberbank loan will pay Libor plus 55 basis points, a new low for a Russian borrower in the syndicated loan market. This compares to Libor plus 150bp for a loan to Gazprombank near the beginning of this year and more recently Libor plus 90bp for a loan to Vnesheconombank.
Alexander Kiselevitch, director of capital markets for ABN in the region, said, "It's fair to say people are looking for assets. In that sense banks are becoming very keen to lend in emerging markets. But Russia is still giving an adequate risk-reward margin for investment grade borrowers."
Bookbuilding for a US$500m loan to Sberbank was launched on October 11th, but quickly attracted US$1.4bn in demand from 42 banks, ABN said. Mr Kiselevitch said a number of banks new to Russia had come forward, including some US banks.
Recently Moody's, the rating agency, upgraded Sberbank's senior unsecured debt to A2 from Baa2. The agency said that the outlook for Russian banks was positive.

DnB NOR buys 97.3% of Monchebank from Rosbank 

Norwegian banking group DnB NOR ASA said it is buying 97.3 percent of the Russian bank Monchebank for US$21 Russia's Rosbank, Interfax News Agency reported.
The bank, which has its headquarters in Murmansk, has 180 employees and has cooperated with DnB NOR for several years. Under the selling agreement, the Norwegian side will receive all Mochebank's business, its staff and its branch network in four cities on the Kola Peninsula, noted Interfax.
"The acquisition of Monchebank will give us a sound position in an area with exciting prospects once the large oil and gas fields in the Barents Sea are due for extraction," said DnB NOR's CEO Svein Aaser. Monchebank has 3,000 corporate clients and around 50,000 retail customers in Murmansk. Monchebank charter capital amounted to US$9.811 million on October 1, 2005, with total assets at about US$72 million, said Interfax. The bank's equity totals around US$10 million, and annual operating profits have been just above US$1.5 million in recent years. The acquisition of Monchebank needs to be approved by both Norwegian and Russian authorities. Looking ahead, DnB NOR said that even though Monchebank is a small regional bank, it has all the necessary licences to engage in banking throughout Russia. "In addition to sound operations in the Murmansk area, which we will develop further, the acquisition of Monchebank will give DnB NOR immediate access to the Russian banking market," Aaser said.

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Fitch upgrades MDM Bank and MDM Holding one notch to BB- 

International rating agency Fitch has raised the long-term rating of MDM Bank and MDM Holding GmbH one notch from B+ to BB-, with stable long-term outlooks, the agency announced recently.
The bank and the holding's short-term, individual, and support ratings were confirmed at previous levels.
The upgrade is due to substantial improvements in the bank's corporate management and risk management procedures, and the reduced concentration and volume of operations with affiliates, the agency said. The long-term, national long-term, short-term, and individual ratings also take into account the bank's careful approach to risk, sufficient liquidity, stable profitability from its main operations, high-quality assets, and good capitalization.
Negative factors are potential volatility in the bank's revenue due to its securities operations, and substantial risks taken on from affiliates (although such risks are limited to 10% of total assets).
Fitch analysts said the ratings might go up in the future if the bank improved profitability, continued to reduce the volume of operations with affiliates, strengthened risk and corporate management procedures, and continued to diversify operations and its client base.
A drop in the ratings would be caused by a substantial worsening in the quality of assets, which would push capitalization down and reduce profits.
MDM Holding GmbH is the MDM banking group's holding company. MDM Bank, one of the 30 largest banks in Russia in terms of assets, is the major element of the group.

Moody's increases Transneft's ratings 

Moody's Investors Service has upgraded the ratings of OAO AK Transneft following an earlier decision by Moody's to upgrade Russia's long-term ratings and foreign-currency country ceiling to Baa2, with a stable outlook, the agency said in a statement. Ratings affected are as follows: long-term local currency issuer rating upgraded to A2 from Baa1; and long-term foreign currency issuer rating upgraded to Baa2 from Baa3. The outlook on both ratings is stable, the statement said. At the same time, Moody's Interfax Rating Agency affirmed Transneft's national scale rating. As a government-related issuer (GRI), Transneft's ratings are assigned in accordance with Moody's GRI rating methodology. The inputs into Transneft's ratings are as follows: Russian Federation local currency rating of Baa2; baseline credit assessment of 4; low default dependence; and high support, New Europe reported.
Moody's assessments of Transneft's baseline credit risk, default dependence, and government support remain unchanged at this stage. The ratings upgrade therefore solely reflects the impact of the sovereign ratings upgrade, as applied through Moody's GRI rating methodology. OAO AK Transneft, headquartered in Moscow, is the world's largest crude oil transportation company in terms of pipeline length (as of March 31, 2005 approximately 48,500 km) and volume transported (450 million tonnes in 2004), the statement said.

Moody's raises Russia's rating to Baa2 

Moody's Investors Service has raised Russia's foreign-currency country ceiling for bonds and the foreign- and local-currency rating of bonds of the Russian government to Baa2 from Baa3 to reflect a confluence of factors, including a very rapid and significant buildup in the government's foreign currency and oil stabilization fund reserves, the agency said in a statement. In addition, Moody's also raised the ratings of ministry of finance tranches V, VI, and VII to Baa2. The foreign-currency bank deposit ceiling was raised to Baa2 from Ba1. The short-term foreign-currency country ceiling, the foreign-currency country ceiling for short-term bank deposits, and the short-term local-currency issuer rating of the Russian government were all raised to P-2 from NP. The outlooks for all the ratings are stable. The country guideline for local currency obligations of the Russian Federation remains at A1, the statement said. In addition to the pickup in oil revenues, the rating upgrades reflect the Russian Federation's prudent fiscal policies, stable politics, and an exhibited commitment to pay (and in some cases, pre-pay) outstanding debt, said Moody's. Russia's liquidity and debt ratios have improved dramatically in a relatively short time period. Although fiscal policies have loosened in 2005 and may well be marginally looser in 2006, Russia should continue to experience no difficulty in making timely debt payments over Moody's three-to-five-year time horizon, the statement said. This holds true even in the unlikely event of a drastic, downward correction in commodity prices. While the current account and budget may not run surpluses in the next two to four years as large as the current surpluses, foreign-currency and oil-stabilization reserves will likely continue to grow substantially, providing the necessary means to easily service government debt, said Moody's.

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Itera to invite CNPC, Indian firm to develop Kalmykia fields 

Russian independent gas producer NGK Itera is holding talks with China National Petroleum Corporation (CNPC) and a large Indian oil and gas company concerning the development of gas fields in Kalmykia, Kalmykian president Kirsan Ilyumzhinov said at a meeting in the Interfax central office. "Itera is participating in the development of 11 fields in Kalmykia 'and is inviting a large Indian oil company and China's CNPC," he said. "Talks to attract foreign investors are underway, but we are not commenting on the pace of these negotiations," Itera press secretary Yevgeny Ostapov said. Ilyumzhinov said that on September 1 Yugneftegaz started to drill "one of the deepest wells - with a depth of 5.5 km, and has already drilled 2.5 km." It was reported earlier that Itera was considering the company Oil India Limited as a partner for the joint purchase of shares in Saratovneftegaz from TNK-BP. Itera set up the Yugneftegaz joint venture with the Kalmykian government in 2003 to explore and develop fields in the republic. The venture owns licences to explore 11 fields with reserves of about 300 billion cubic metres of gas. Itera plans to invest over 100 million Euro in exploring fields in Kalmykia over five years, Interfax News Agency reported.

Russia to build Chinese nuclear, thermal power plants 

Russia is ready to build all the nuclear and thermal power plants China needs, Prime Minister, Mikhail Fradkov, said at a press conference following negotiations with Chinese State Council Premier, Wen Jiabao. "We are ready to build all nuclear power and thermal power plants here," he said. "We can do that."
He also said that Russia would meet this year's commitments in oil deliveries to China. Russia supplied 5.8 million tonnes of oil to China by rail in 2004 and about eight million tonnes will be delivered this year, New Europe reported.
"We will meet our commitments," Fradkov said. Oil cooperation never stops, he said. 
"We are not waiting for anything but working in real-time and coordinating the specific proposals of companies," he said, referring to the possible construction of an oil pipeline extension from the East Siberia-Pacific route to China. The project will be assessed and proposals will be made with due consideration of economic and technical details, he said.

Gazprom to complete Sakhalin-2 deal by August 

Russian gas giant Gazprom plans to complete an asset exchange deal with Royal Dutch Shell enabling it to join the Sakhalin-2 project by August 2006, Gazprom Deputy Chairman and Gazexport General Director Alexander Medvedev said recently in Washington, New Europe reported.
"It is no secret that Gazprom is holding talks about joining this project. Gazprom and Royal Dutch Shell in July signed an agreement about exchanging assets. According to the agreement, Gazprom receives 25 percent plus one share in the Sakhalin-2 project and Shell receives a share in the Zapolyarnoye Neocomian field. And when the deal has been completed we will together start supplying liquefied natural gas from the Far East to terminals in North America and the Far East," he said.
Gazprom plans in early spring 2006 to complete detailed commercial negotiations with a preliminary list of potential partners in the development of the Shtokman gas condensate field in the Barents Sea. The companies on the list are: Hydro, Statoil, Total, Chevron and ConocoPhillips.

LUKoil board approves Timan-Pechora plan 

Russian oil major LUKoil plans to increase oil production in the Timan-Pechora region to 22-23 million tonnes by 2015, from 12.3 million tonnes at present, the company said in a press release after a board meeting in Usinsk recently, New Europe reported.
The board of directors specified the recovery of the commercial oil reserves as a priority in Timan-Pechora region, which should increase by at least 120 million tonnes of oil within the period from 2005 to 2010, as well as increasing oil production output to the level of 22-23 million tonnes per year by 2015, the statement said.
Total investments in Timan-Pechora province by 2015 may reach 197 billion roubles. The company expects 31 new fields to be put into development in Timan-Pechora province by 2015.
At the meeting it was noted that in the period from 1999 to 2004 five new fields were discovered in Timan-Pechora oil province, with 13 fields put into development and eight fields prepared for development in this period. The Varandey oil terminal was also launched on the Barents Sea, and a joint venture was set up with ConocoPhillips to develop fields in the northeast part of the province.
According to a Miller & Lents audit, as of January 1 LUKoil proven oil reserves in Timan-Pechora oil province amounted to 3.892 billion barrels. It was stated at the session that oil production in Timan-Pechora province nearly doubled during the period from 2000 to 2004 to reach 11.7 million tonnes. The company plans to produce 12.3 million tonnes in the province in 2005.
They also decided to develop a project to increase the capacity of the Varandey oil terminal to 12 million tonnes per year, to be commissioned in 2007, the statement said.
Meanwhile, LUKoil board of directors, as part of a strategic development plan for 2005-2014, has set as a target that growth in hydrocarbon reserves should be 30 percent higher than production.
The company said in a press release that the board of directors discussed the main items in the LUKoil draft budget and investment programme for 2006 and a development plan for 2006-2008 at as meeting in Usinsk.
When drawing up the draft plans steps were included to achieve the main tasks in the strategic development programme for 2005-2014.
Growth in hydrocarbons reserves is expected to be 1.3 times higher than production to ensure the company's stable development in the forward-looking period, the statement said. It has not been possible to find out from the company's press service by what date this target should be reached. The company plans to use its own and borrowed funds to implement these projects "while at the same time maintaining the high financial stability of the LUKoil Group," the press service said.
The high results planned for 2006-2008 have made it possible to consider a future increase in dividends to shareholders compared with 2004-2005.

Rosneft to ship oil to China through Kazakstan

Russia's state-owned oil producer Rosneft has applied to transport 1.2m tonnes of oil to China through Kazakstan in 2006, Sergei Yevlakhov, vice president of the Russian oil pipeline monopoly Transneft, announced in London. Russian crude could be pumped to Kazakstan via the Omsk-Pavlodar pipeline, a Tatneft spokesman said, Interfax News Agency reported.
This year in July, Rosneft, which had bought the YUKOS oil company's subsidiary Yuganskneftegaz, the main supplier of oil to China, and China's National China Petroleum Corporation (CNPC,) signed an agreement on long-term cooperation in exploring opportunities to increase Rosneft oil supplies to China. Rosneft said it would consider using the Atasu-Alalashankou and Taishet-Skovorodino pipelines.
Rosneft currently ships oil to China by railway from regions bordering on China under a deal to supply 48.4m tonnes to that country until 2010, inclusive, on condition of advanced payment. Rosneft plans to export 4m tonnes of oil to China in 2005. First crude will be filled into the Kazakstan-China (Atasu-Alashankou) oil pipeline on January 1st, 2006.
The Russian oil company LUKoil has shown interest in shipping oil through this pipeline from Kazak oil field it owns.

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China, Russia aid Coca-Cola recovery

Coca-Cola recently provided more evidence that it is returning to health when it beat Wall Street earnings expectations for the fourth consecutive quarter, the Financial Times reported on October 21st.
Delivering some of his most upbeat comments since taking charge last year, Neville Isdell, chief executive, declared the turnround "on track" and said the company's performance was improving around the world. "I am satisfied with our progress to date," he said.
Double-digit volume growth in developing markets, such as China, Russia and Latin America, was at the heart of Coke's 37 per cent increase in net profits.
Surging sales of non-carbonated brands, such as Powerade sports drink and Dasani bottled water, also helped offset continued decline in demand for fizzy drinks in the health-conscious US and western Europe.
However, Mr Isdell warned that "considerable work" remained to be done in several struggling markets, including Germany, the Philippines and India. "There will be some bumps along the road as we manage our way through to that goal of sustainable growth," he said.
Net profits were US$1.28bn, or 54 cents a share, compared with US$935m, or 39 cents, in the same period last year. Analysts had expected, on average, 53 cents a share.
The results included a net charge of 3 cents a share related to asset write-downs in the Philippines.
Revenues were up 8 per cent at US$6.04bn, from US$5.6bn last year.
Mr Isdell, a company veteran, is attempting to lead Coke out of a long period of sluggish growth and erratic management, during which time its rival PepsiCo has been performing strongly.
He has aimed to stem decline in the flagship cola brand by launching more sugar-free versions of the drink in North America, while at the same time strengthening the company's portfolio of healthier non-carbonated beverages.
Coca-Cola was slower than PepsiCo to respond to the trend away from sugary fizzy drinks but is gradually catching up.
Global beverage volume increased 5 per cent, helping the company maintain its share of the global non-alcoholic beverage market following recent declines.
Non-carbonated beverage volume grew 13 per cent while water, which is measured separately, was up 21 per cent. Carbonated soft drink volume was up 2 per cent globally, including 2 per cent growth in the flagship Coke brand. But increased investment in marketing and product innovation failed to prevent a further 1 per cent decline in fizzy drinks in North America.
Mr Isdell also sounded a note of caution saying: "We are monitoring the potential impact of energy costs and macro-economic trends on consumer sentiment and disposable income."

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EBRD plans to invest 1.1-1.3bn Euro in Russia in 2006

The European Bank for Reconstruction and Development is planning to invest between 1.1bn and 1.3bn Euro in Russia in 2006, according to preliminary estimates, EBRD President Jean Lemiere said during the World Economic Forum in Moscow, New Europe reported. 
The level of financing is close to this year's volumes, he said, adding that investment targets were the same as before, namely small and medium-sized businesses, the banking sector and leasing companies. In Lemiere's opinion, more investments have been flowing into Russia. "I see more investments and more people ready to invest," he said.

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Severstal takes majority stake in steel project in US 

Severstal, a large Russian steelmaker, is taking a majority stake in an US$880-million US venture that will make steel sheet for automobile bodies and will be closely watched by the global steel industry, MosNews reported, citing the Financial Times. 
Such a large investment in the US by a Russian company is highly unusual. The project will also put the spotlight on 20-year-old German technology for making steel from scrap metal that has never delivered steel to the high quality required for the exposed parts of vehicles.
The new venture pits Severstal against Nucor Steel, America's second-biggest steelmaker, which has considerable experience with the German technology but reckons it is not sufficiently advanced to meet the needs of the carmakers. John Correnti, a US steel industry veteran, is the driving force behind the project, based in Columbus, Mississippi. He is chief executive of SeverCorr, a joint venture in which he and other investors hold 20 percent, with Severstal accounting for the rest.
The venture should start making steel in late 2007. Correnti said that the new plant - construction of which has started in recent weeks - is within 250 miles of 14 car plants in the southern US and run mainly by non-US companies such as BMW, Honda, Daimler-Chrysler, Toyota and Nissan. "At the moment these plants - making four million cars a year - have to ship their sheet steel either from plants in the northern US or from Japan or Europe," Correnti was quoted by the paper. 
"I estimate we will be able to cut up to US$100 a tonne from these plants' shipping costs by having a steel mill making steel of the correct quality and which is (physically) much closer." For Severstal, the project is an important part of its effort to expand in the US 
The company, which until now has produced virtually all its steel in Russia, last year raised a stir through its US$286 million acquisition of Rouge Industries, a struggling steelmaker near Detroit that makes all its steel using blast furnaces, an acquisition MosNews reported earlier.

MMK to boost steel exports to EU in 2006 

Magnitogorsk Iron & Steel Works (MMK) could increase exports to Europe in 2006, Viktor Rashnikov, the company's chairman of the board, said recently, Interfax News Agency reported.
He was commenting on two signed agreements under which Russia could increase exports of metal products to the European Union to 2.2 million tonnes in 2005 from 1.8 million tonnes in 2004, MMK's press service said. Quotas are also expected to be increased by 2.5 per cent in 2006 to 2.27 million tonnes.
The agreement will be in force until December 31, 2006, or until Russia joins the World Trade Organisation (WTO) if that takes place earlier. MMK is Russia's biggest exporter and exports approximately half of its products - 51 per cent in 2004. MMK increased metal exports to Western Europe to 17 per cent of total exports in 2004 from 13 per cent in 2003.

Norilsk Nickel to build port in Murmansk by 2008

MMC Norilsk Nickel intends to build a port capable of handling 2m tonnes of cargo by the end of 2007, the Arctic mining and smelting giant said in its corporate magazine, Interfax News Agency reported. 
This will give the company total independence from its transport partners after the middle of 2008.
"Ships from Norilsk have to dock at Murmansk, Arkhangelsk and Kandalaksha. We plan to build one base port, and our ships will sail on one route from Dudinka (in Norilsk) to Murmansk. This will cut shipping time and enable us to carry more freight. We will be able to store and process coaster cargo and prepare export cargo for shipment," the article quoted Alexei Tyukavin, head of Norilsk Nickel's recently established Murmansk Transport Branch, as saying. Norilsk Nickel will be able to cut the cost of preparing cargo for exports and the cost of shipping that cargo, Tyukavin said. The creation of the company's own infrastructure is "the only way out of the situation that has emerged," he said. "The company currently uses the services of the Murmansk Shipping Company. 
"However the shipping company does not plan to build any more ships, and its existing fleet is ageing and will be decommissioned in a few years," Tyukavin said. And Norilsk Nickel calculates it will be cheaper to build its own fleet and port than to use the services of another shipping company. 
It is anticipated that the designs will be finished by the end of this year and that construction in Murmansk will begin early 2006.
Norilsk Nickel did not say how much it plans to invest, but it did say that this would be a state-of-the-art cargo terminal. The company has estimated that it could cut transport costs 25%-30% if it stops leasing ships from other companies and uses its own vessels. Norilsk Nickel needs 4 or 5 modern ice-class ships in all.
Finland's Kvaerner Masa-Yards Inc is building a container ship capable of carrying 14,500 tonnes of cargo at a cost of 70m Euro.
This will be the first in a possible series of ships which will replace the SA-15 dry cargo ships built at other Finnish yards in the 1980s and which have operated on the Arctic shipping route for the last 20 years. The new ship will be tested in March 2006.

SUAL mulls US$300m Eurobond in 2005

Russia's number 2, aluminium producer SUAL Group is thinking of issuing US$300m in Eurobonds as early as this year, said Iosif Bakaleinik, senior vice president of SUAL-Holding, reported Interfax News Agency.
"The likelihood that we issue (the Eurobonds by the end of 2005) is more than 50%, but a more definite decision on the timing will depend on the state of the market," Bakaleinik said. Bakaleinik also said that SUAL's investment programme for 2006 had not yet been finalised, but requests for some US$300m had been received. "Some of them might be granted, but some might have to wait until later, the discussions are under way. The (final) amount may be lower," he said. Moody's Investors Service has affirmed the global scale rating, namely the Ba3 corporate family rating, of SUAL International Ltd (SUAL), the agency said recently in a press release. Concurrently, Moscow-based Moody's Interfax Rating Agency assigned the Russian number 2 aluminium producer an national scale rating. The outlook on the global scale rating remains stable.
According to Moody's and Moody's Interfax, the Ba3 global scale rating reflects the company's global default and loss expectation, while the national scale rating reflects the standing of the company's credit quality relative to its domestic peers.
Headquartered in Moscow, Russia, SUAL is a leading manufacturer of primary aluminium with 2004 revenues of US$2bn (70% from export activities).

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