Books on Russia
Update No: 292 - (26/04/05)
Everything in Russia revolves around Putin, which is exactly
how he likes it. The toppling of oligarch Mikhail Khodorkovsky has made that
clear to all and sundry.
In the West this has put many against him. In Russia it has only put the few
liberal elements against him, such as the chess genius Kasparov and his
disaffected former premier Kasyanov. However students have been staging rallies
against him right across the country. With the population at large he is still
very popular, although not quite on the 74% with which he was re-elected last
Putin rules out seeking re-election for presidency in 2008
Vladimir Putin has ruled out running for re-election yet again in 2008, the
Kremlin has said.
Amid continuing speculation about the Russian leader's wish to remain in power
despite a constitutional bar on a third consecutive term, Putin told a group of
media executives he would not seek to change the constitution. "I will not
change the constitution and in line with the constitution, you cannot run for
president three times in a row," he said, according to the presidential
Putin pointed out that he could theoretically seek a third term at a later date.
But he added: "True, I am not certain that I want to."
Political analysts said that Putin's team were still casting around for ways to
ensure they keep control of the country when the president is due to step down
One option floated in political circles was to change the constitution to make
the presidency ceremonial, turning Russia into a parliamentary republic in which
Putin as prime minister would continue to hold the reins of power. But that
appears to have been shelved because of resistance to such a radical change to
the political system, said Olga Kryshtanovskaya, a political observer who
specialises in the Russian elite.
Instead, another possibility could be to shift much of the powers from the
presidency to the prime minister, leaving Putin's successor with a limited role
- which could be achieved without amending the constitution, she said. As prime
minister, Putin could serve four years from 2008 before enjoying the right to
run for president for another two consecutive terms. "The clan in power
under Putin has to complete the redistribution of assets and safeguard their
gains," Kryshtanovskaya commented.
Autocrat or democratic centralist?
The gravest charges levelled at Putin in the West and by Kasparov and liberals
in Russia are that he is destroying a fledgling liberal-democracy there and
turning himself into an autocrat, very much in the old-time mould, as regards
Muscovy. That governors are no longer to be elected locally, but be chosen by
the Kremlin centrally, is deemed by his critics a grave crime, as is the drastic
curbing of the media and the transformation of parliament by various measures
into being a rubber-stamp of the executive.
There is certainly something spine-chilling about all this for anyone brought up
in the West - shades of totalitarianism!
There is a logic for it all the same in a country in Russia's peculiar plight.
There is a case for it that at least needs to be considered, albeit certainly
with one's critical faculties against it fully alert.
Here it is.
The rise and demise of liberal-kleptocracy?
When Yeltsin disbanded the USSR in 1991, he told the former Soviet republics
to grab 'as much autonomy as they could.' They duly did.
The same message was broadcast to the 89 constituents of the Russian Federation,
69 provinces and 20 autonomous republics. They did too.
And what was the result?
The local barons grabbed power - and how. These were utterly corrupt bosses,
marinated, indeed, matured, by decades of venal Soviet practices. Of course the
local elections were rigged. What else?
Russia at its local governmental level became a congerie of crooks. It was not
the rise of liberal-democracy that was going on, but the rise of liberal-kleptocracy.
It is only the re-imposition of Kremlin authority that could redress the
Since his 2000 election, President Vladimir Putin has steadily restored Moscow's
control over Russia's sprawling regions, carving up governors' political and
economic powers and appointing his own representatives to keep watch
Putin the panacea
Putin knows all the problems very well; and is determined to put a stop to
the mischief. He thinks that you first have to have an effective state before
you can have an effective democracy,
He thinks that it is far better if he appoints the local governors; and he may
well be right. A democratic centralism is the order of the day, with the
emphasis on centralism. He is right so long as he takes the long democratic
view. He intends to re-unite Russia.
The West, as his essential business partners, should monitor every appointment.
This is where the West can exert influence. This is the monitor the West should
keep on him - who is he appointing to these outlying places; what and when, will
accountability in the regions to the citizens be implemented.
Regions vote to reunite
In apparent vindication of his view, the provinces are spontaneously
re-uniting. Residents of three sparsely populated Siberian regions have voted to
reunite in a resource-rich territory that will be larger than Western Europe,
Russian media have reported.
The move extends the trend to increased Kremlin control over the country's
Izvestia predicted that April 24th's referendum on reunification of the
Krasnoyarsk region with the Evenki and Taimyr autonomous districts would pave
the way for a series of similar plebiscites aimed at bringing the number of
Russian regions down from the current 89 to 35-40.
"Reduction of the number of federal subjects will increase the level of
co-ordination and efficiency of regional authorities," Izvestia quoted
Vladimir Yakovlev, the minister of regional development, as saying.
The reunited region will be almost the same size as the Krasnoyarsk region of
Soviet times. The entire region boasts thick forests, abundant mineral deposits
and extensive if antiquated industrial infrastructure.
Izvestia said it would get about $10 billion in state investment as part of a
development programme accompanying reunification.
In 2003, the Perm and Komi regions voted to unite in a test case for
consolidating the provinces.
Izvestia predicted that among the regions that could be expected to unite in
near future are Moscow and the surrounding Moscow region, and St Petersburg and
the Leningrad region.
Condi comes to town
US Secretary of State Condoleezza Rice came to Moscow in mid-April
officially to prepare the way for a visit by Bush in May. Actually, Putin is
well aware that Rice is a Russia expert, who knows Russian and Russian history
well and has been there many times. She is known to be very close to Bush. He
was already speaking to the person who decides US policy on Russia and knew it.
She is very able, a fact attested by several of her predecessors not usually
over-indulgent with praise, namely Kissinger and Schultz, and duly crafted a
shrewd strategy. Making it clear that she does not agree with those of Putin's
critics that say he is abandoning democracy she, nevertheless, expressed unease
at recent developments in Russia. She noted that Russia is due to host the G8
next year. It is expected that each G8 member be a liberal-democracy.
Acknowledging that Russia is very much 'still in transition,' the West yet
expects there to be signs before then that it is back on a democratic path.
Whether this gentle chiding will work is another matter. Time will tell.
Baltic gas pipeline agreed with Germany
One foreign leader with whom Putin has close relations is Chancellor Gerhard
Schroder of Germany. Putin is fluent in German, which makes for a warmer
relationship than when everything is conducted via interpreters.
At a recent meeting they put the final stamp on a long-debated agreement for the
construction of a gas pipeline from Vyborg north of St Petersburg to Germany via
the Baltic Sea. The emergence of a more independent Ukraine was obviously a
factor here. By 2010, the date due for completion of the project, Russia will
have its Baltic option to diversify its gas exports to Europe. Spurs to other
countries, such as Sweden and Denmark, are under consideration.
The pipeline will enhance the European orientation of Russia.
Muscovy has triumphed over Siberia.
Kia Motors to move regional HQs to Moscow
South Korea's KIA Motor Corporation is moving its headquarters for Eastern
Europe and the CIS from Warsaw to Moscow, a source in the automobile industry
said, Interfax News Agency reported.
The Moscow headquarters will coordinate the company's activities in the CIS,
Russia and in other countries in Eastern Europe that are not in the European
Union. KIA Motors Corp increased sales through official dealerships in Russia
65.6% to 19,119 vehicles in 2004.
AVIATION & SPACE
Russian space agency, French firm agree to launch Soyuz rockets
A contract to build a launch pad for Soyuz rocket boosters at the Kourou
spaceport in French Guiana was signed recently by the head of Roskosmos [Russian
Federal Space Agency], Anatoliy Perminov, and the president of the French
company, Arianespace, Jean-Yves Le Gall, Radio Mayak reported.
The talks on using Russian Soyuzs at Kourou have been going on since May 2003.
They've been difficult mostly because the European Space Agency simply couldn't
find any money for the project but the funding problems have now been resolved.
The total cost of the project amounts to 344m euros, of which around 130m will
go directly to Russia. The first launch of a Soyuz from Kourou is scheduled for
According to the contract, Russia is to build a Soyuz launch pad in Kourou.
Moreover, the rockets themselves will also be modernized. The European Space
Agency is to build the infrastructure. Roads to the future launch site are
already being built in Guiana's tropical forest. Buildings are being constructed
and communication lines are being laid. The European agency needs this project
very much. It does not have its own medium-class booster rockets and developing
them is a lengthy and expensive process. The use of Russia's Soyuzs at Kourou
should be a good solution to the problem. They are extremely reliable and highly
ecological since they use only paraffin and oxygen.
This project is also very attractive for our country, the head of Roskosmos,
Anatoliy Perminov, said.
The Russian side will gain work for rocket and space industry enterprises and,
obviously, additional opportunities for not simply maintaining but also
The Russian side will have to resolve a range of interesting engineering
problems as it builds the launch pad at Kourou. So, for example, at the
cosmodromes, rockets which are already in their starting positions are serviced
in the open air but the Europeans want the Soyuzs placed in a special tower in
Kourou, the director-general of the design office of general machine building, (Yuriy
This is first of all dictated by the peculiarities of the climate and the
specific nature of working with these payload. Once it's installed, a service
tower will be drawn up and all further work on the rocket will be carried out
under cover. Before the launch, the service tower will obviously move away and
the rocket will be standing just as they do at Baykonur and Plesetsk.
At Russia's sites, a spacecraft is assembled horizontally on an assembly
platform and then the fully-assembled rocket is raised into the vertical
starting position. In Guiana, the spacecraft will be assembled on a rocket that
is already in the vertical starting position. So then, it is a different
This is also dictated by the peculiarities of some of the payloads which cannot
be integrated into a booster rocket horizontally. Moreover, because of the
proximity of Kourou spaceport to the equator, the payload of the Soyuzs will
double. And, according to their parameters, they will be very close to heavy
carriers, the director-general of the Progress central specialized design office
in Samara, Aleksandr Kirillin, said.
In terms of its medium, the Soyuz-ST rocket, which will be launched from the
spaceport at Kourou, is completely different from the rockets currently being
used. Both regarding its control system and regarding its telemetry, it will be
adapted to the launch conditions of the spaceport at Kourou.
For the time being, according to the European agency's plans, two to four Soyuzs
will be launched annually from the spaceport at Kourou. And the first three
contracts on launches have already been signed.
Russia, Syria sign banking agreement, plan to boost trade
The signing of an agreement between banks has become the main result of the
third session of the Russian-Syrian commission on trade and economic, scientific
and technical cooperation, which ended recently in Damascus, the head of the
Russian delegation, Regional Development Minister, Vladimir Yakovlev, said at an
official ceremony. He said the document signed "will allow Russian banks to
act as guarantors that specific projects will be implemented."
"Western banks have so far fulfilled this role, making the projects more
expensive," the minister said, ITAR-TASS News Agency reported.
"We have also set ourselves the goal of increasing trade turnover to one
billion dollars, because the sides find the current level of 218m
unsatisfactory," Yakovlev said. He said an agreement on a final settlement
of the issue of Syria's debt will be concluded at the end of the Russian Finance
Minister, Aleksey Kudrin's, visit to Damascus.
Minister of Economy and Trade, Amir Lutfi, said the Syrian government was ready
to take every measure "to increase the flow of Russian investment in
tourism, oil and gas extraction and the construction of major industrial
sites." He listed among the projects of strategic importance to Syria the
laying of a pipeline from the Iraqi border to the shores of the Mediterranean
and the building of the Syrian section of the "Arabian gas pipeline"
through which Egyptian gas will flow to Jordan, Syria and Lebanon.
"Damascus attaches great importance to the participation of Russian
companies in setting up tourist complexes along the coast at Lataki," Lutfi
Moody's affirms city of Moscow's AAA (Rus) rating
Moody's Interfax Rating Agency affirmed the City of Moscow's national-scale
ratings. The agency affirmed the long-term rating of Aaa (rus) and short-term
rating, which is RUS-1. The rating reflects the city's crucial role in Russia's
economy and finances the considerable potential of the city's own economy, the
high diversification of the city's budget revenues and revenue-base, good degree
of financial flexibility, moderate accumulated debt and highly competent
financial administration. The rating takes into consideration the need for
significant capital expenditure on infrastructure and the negative impact of
federal tax reform on the rate of budget revenue growth. The city's industrial,
trade and services sectors sustained fairly high growth in 2004. Industrial
output rose 9.1%, compared with 11.6% in 2003, and retail turnover grew 8.3%.
The city's budget was again robust in 2004, despite the federal tax reform.
Budget revenue increased by 16.3%, even though sales tax, which used to
constitute approximately 6% of budget revenue, had been abolished. Tax revenue
increased 20.3% in 2004, thanks mainly to above-target profit tax and income tax
returns. Good financial flexibility was attributable to a still-high current
operating surplus. Moscow remains Russia's key sub-federal borrower. In 2004,
the city's debt increased 24.3% and the ratio of debt to budget revenue
increased to 26.3% from 24.6%. The 2005 budget projects a further increase in
the ratio, to 32.8%. The city's long-term strategy involves keeping the
debt-to-revenue ratio at 33% in the next three years. The debt will increase as
long-term rouble bonds (maturing in 10-15 years) are issued.
Standard & Poor's notes increased corporate governance in Russian
Standard & Poor's, the rating agency, has suggested that several Russian
companies, including oil producers, are worthy of high ratings. Agency analysts
note that Russian companies have made progress on compliance with corporate
governance standards in recent years, the RBCC Bulletin reported.
S&P experts have compiled a list of Russian companies that have fared the
best in this regard. Wimm-Bill-Dann, the food and drink producer, tops the list
with 7.6 points on a ten-point scale, followed by MTS (7.0), Rostelecom (6.4),
Lenenergo (6.0) and Aeroflot (5.4).
Go-ahead for 900m Euro pipeline to ease pressure on the Bosphorus
Bulgaria, Greece and Russia signed an agreement recently to build an oil
pipeline from the Black Sea to the north Aegean, providing a new outlet for
Caspian oil, The Financial Times reported.
The 300km pipeline, linking the ports of Burgas and Alexandroupolis at a cost of
900m Euro (US$1.1bn), would relieve pressure on the over-crowded Bosphorus
Strait, where oil tankers face lengthening delays. The pipeline is due to start
operating in 2008.
With an annual capacity of 35m-50m tonnes, the pipeline would also offer greater
flexibility to oil exporters, while reducing the environmental risk of
transporting oil out of the Black Sea.
The project was first mooted 11 years ago, but failed to make headway until this
year because of disputes between the three countries over the pipeline's
ownership and financing.
"Agreement came after we shifted from a geopolitical to a market
approach," Valentin Cerovski, the Bulgarian regional development minister,
said. "This is a project for companies that extract oil in Russia and
Kazakstan and export via the Black Sea."
At least a third of Russian oil exports are moved out of the Black Sea, the
country's main conduit to Mediterranean markets. But tankers have to compete for
space on the waterway with rising numbers of ships carrying industrial exports
from Russia and Ukraine.
The accord called for TNK-BP, the Russian-UK oil joint venture company, to act
as informal co-ordinator, advising the three governments on commercial aspects
of the deal, a BP spokesman said.
A project development company for the pipeline, which would include Bulgarian,
Greek and other Russian shareholders approved by the respective governments,
would carry out a final engineering study and arrange financing with
"This complex project is finally viable because it will be financed by
users of the pipeline, not out of state budgets," said George Salagoudis,
the Greek Energy Minister.
Technoexportstroi, Bulgarian's state-owned contractor, would be a shareholder in
the development company, together with Hellenic Petroleum, the Greek
state-controlled refiner and distributor, and Latsis, the Greek family-owned oil
and shipping group that launched the pipeline project in 1994.
BP does not envisage using the new pipeline for its growing Caspian production,
given that a 1m barrel-a-day pipeline linking Baku in Azerbaijan with Ceyhan, on
Turkey's Mediterranean coast, will start up this year, bypassing the Bosphorus.
LUKoil, Russia's biggest producer, which controls an existing refinery at Burgas,
is not expected to participate.
But Caspian producers in Kazakstan may opt to divert exports that now move
through the Bosphorus to Alexandroupolis.
Bulgaria would build a 50m tonnes storage facility near Burgas, the landing
point for oil shipped across the Black Seaa from Russia and Georgia, while
Greece would build an offshore tanker loading facility at Alexandroupolis but
would not invest heavily in tank farms because the area is a tourist zone.
Construction of the Burgas pipeline would not rule out another Balkan pipeline
project, Bulgarian officials said.
The US-based AMBO group plans to construct a 900km pipeline running from
east-west from Burgas through Macedonia to Albania's port of Vlora.
Russia's LUKoil enters gas production market
LUKoil, a Russian oil major, has put into operation the Nakhodkinskoye gas
condensate field in Yamal, ITAR-TASS news agency reported on 4th April.
The Nakhodkinskoye field was discovered in 1974. As a result of test production,
2.4m cubic metres of gas was produced in 2003 and 19.6m cubic metres - in 2004.
LUKoil estimates the field's reserves at 275bn cubic metres of gas and aims to
produce 10bn cubic metres annually.
"The development of the gas sector is an important part of LUKoil's
corporate strategy. Starting the commercial development of Yamal fields together
with Gazprom is an honour for us," LUKoil president, Vagit Alekperov, has
This year Yamalneftegaz, a LUKoil affiliate, is set to drill 36 wells at the
Nakhodkinskoye field. Within 10 years, LUKoil intends to produce up to 1,000bn
cubic metres of gas at its licensed sites in Yamal, the report quoted Alekperov
as telling an energy conference in Houston, Texas, in February 2005.
On 29 March LUKoil and Gazprom signed a general agreement on strategic
partnership for 2005-2014 envisaging that Gazprom would buy LUKoil's gas
"at economically substantiated prices" in exchange for LUKoil's
financing the revamp of the gas transport system in Yamal, Russian newspaper
Kommersant said on 30 March.
Russia and Egypt launch energy agreement
Russia's Gazprom gas giant and the Egyptian Natural Gas Holding Company (EGAS)
signed a memorandum on mutual understanding in Cairo on March 27th, Interfax
News Agency reported.
The memorandum was signed by Gazprom CEO, Alecei Miller, and EGAS Chairman,
Mohamed Tawila, in the presence of Egyptian prime Minister, Ahmed Nazif, and
Petroleum Minister, Sameh Fahmy, in the house of government.
The memorandum enhances further bilateral cooperation in the production,
processing and transportation of natural gas. The document "defines main
spheres of cooperation between Gazprom and EGAS - geological survey and
production of oil and gas; construction of gas pipelines for the Egyptian market
and exports; deliveries of Russian oil and gas equipment to Egypt; training of
personnel for the Egyptian oil and gas industry in Russia," Miller said.
Gazprom is ready to consider investments in the Egyptian oil and gas industry,
joint ventures and certain works, including the construction of gas pipelines,
Miller said. Commenting on the project of an Arab gas pipeline, in which Egypt
is taking part and which will deliver Egyptian gas to Europe, Miller said that
marketing is very important for cooperation projects. During his visit to Egypt,
Miller held negotiations with Fahmy and Egyptian Natural Gas CEO, Mohamed
Ibrahim Tawila, the Russian company said in a statement.
"The participants in the meeting discussed plans to resume the construction
of an underwater gas pipeline that will link the Sinai Peninsula and Israel's
coast. Ways to implement the Arab gas pipeline project through joint efforts
were addressed as well," the statement read.
Miller noted that the memorandum would enhance mutual understanding between
Russia and Egypt. The meeting's agenda involved prospects for Russian-Egyptian
cooperation in the oil and gas sector and Gazprom's possible involvement in
Egypt's efforts to extract, transport, process and sell hydrocarbons, including
liquefied natural gas projects.
Fahmy said that Egyptian-Russian relations in the gas sphere are based on
complete mutual understanding and respect.
FOOD & DRINK
Baltika faces US$10m back tax bill
The St Petersburg-based brewing company Baltika's consolidated financial
report to US GAAP reported net profits of US$131.95m for 2004 (US$123.14m in
2003), where analysts had been predicting US$147.1-161m, Interfax News Agency
Baltika is Russia's biggest brewery controlling over 22% of the national beer
market. In 2004 its earnings (not counting VAT and excises) rose by 34.8% and
reached US$994m. Baltic Beverages Holding owns 75% of Baltika's shares. In the
same report the Russian brewery has announced that tax authorities presented a
US$10.6m claim against a subsidiary and US$1.5m against the brewery itself. The
US$10.598m back tax claim was presented against Leasing-Optimum for the period
from May 27th, 2002, to December 31, 2003, the Vedomosti newspaper wrote
recently. The US$1.5m claim against Baltika itself was presented after a check
of its activities in 2004. Leasing-Optimum holds the equipment lease for Baltika
and other breweries. Baltika said the disagreement with the tax authorities was
caused by a different interpretation of the leasing laws. Leasing-Optimum has
addressed the Arbitration Court but the hearings have not been held yet.
Wimm-Bill-Dann Foods OJSC announces structural changes
Wimm-Bill-Dann has merged its water business into its juice company. The two had
been running as separate entities, with their own marketing and finance
departments, distribution networks and sales forces, the RBCC Bulletin reported.
The merger, which came into effect on March 1st 2005, will allow the company to
significantly reduce administrative, selling and distribution expenses, as well
as benefit from economies of scale in terms of transportation and negotiating
power with distributors and supermarkets. The unified Juice and Water business
segment will be headed up by Jay Yadegar, who currently heads up
Wimm-Bill-Dann's Water business.
In line with the same strategy of reducing overall costs, the Dairy business has
also been restructured with the seven regional divisions being reduced to six.
With immediate effect, all the production facilities in the "Central"
division (comprising Moscow and other central regions) will now report directly
to the management of the overall Dairy business.
Russian, Tajik leaders promise help to Kyrgyzstan
Russia is ready to help normalize the situation in Kyrgyzstan. Russian
President, Vladimir Putin, said this after talks with Tajik President, Emomali
Rakhmonov. The president expressed hope that the situation in Kyrgyzstan will
stabilize in the nearest future, RTR Russia TV reported.
"We spoke, of course, about cooperation in the political sphere, we
discussed the situation in the region, regarding, of course, how the situation
is developing in Kyrgyzstan. We hope that stability will prevail there in the
nearest future and there will be a legitimisation of the organs of power and
administration. We are in contact with parliament and other colleagues of ours
who are dealing with the process of normalization, and we are ready to give all
kinds of help to stabilize the situation in Kyrgyzstan." Putin said
"Kyrgyzstan is a member of the Collective Security Treaty Organization and
the organization of Central Asia states, and as you know, we had plans for a
series of contacts on the government and head-of-state levels. We will meet in
Moscow in the near future and discuss the possibility, the plan of action for
our contacts and our joint work," he added.
"We wish that the people of Kyrgyzstan and the political parties and public
movements peacefully and by way of the rule of law solve all the internal
disputes of their country as soon as possible. We will help and support them in
these matters," Rakhmonov
A series of bilateral agreements were reached during the meeting. Vladimir Putin
declared that as before Russia will give Tajikistan military-technological
support including help aimed at combating the narcotics threat from Afghanistan.
And in Russia itself, special offices where Tajik citizens living in Russia can
get Tajik passports are going to be set up in five towns.
FOREIGN ECONOMIC COOPERATION
Russian, Tajik presidents discuss economic cooperation
President, Emomali Rakhmonov, of Tajikistan has offered to discuss concrete
projects of trade and economic cooperation with Russian President, Vladimir
Putin, ITAR-TASS News Agency reported.
"The head of Russian UES [Unified Energy Systems], Anatoliy Chubais, was
expected to arrive in Dushanbe on 15 April for official launch of the joint
construction of the Sangtuda hydroelectric station," Rakhmonov said. He
said another Russian company, Russkiy Alyuminiy [Russian Aluminium], also
intends to invest US$25m in the construction of the Ragun power station. "I
think they will reach the level of 400,000 tonnes in aluminium production,"
Opening the meeting with Rakhmonov, the Russian president said that "in the
trade and economic area, everything we have planned is gradually
Foreign investment in Russia totals 100bn dollars - minister
Foreign investment accumulated in the economy of the Russian Federation
currently totals US$100bn, Russian Finance Minister, Aleksey Kudrin, said
recently, RIA News Agency reported.
"Accumulated foreign investment, including investment in our private
sector, currently totals US$100bn," the minister told the parliamentary
hearings at the State Duma on the implementation of the law on benefit payments.
In view of this, Kudrin stressed the importance of accumulating large gold and
foreign exchange reserves.
MINERALS & METALS
Norilsk RAS net profit drops 33% in 2004 Q4
MMC Norilsk Nickel saw net profits to Russian accounting standards drop 32.87%
year-on-year to 11.245bn roubles in the fourth quarter of last year, Interfax
News Agency reported.
This was attributable to changes during the period in saes of primary and
associated product, as well as an increase in "operational expenditures as
a result of a reappraisal of the issuer's financial investment in securities,
which determines current market value, in accordance with point 20 of the
accounting report "Financial Investments." RAO Norilsk Nikel's, MMC
Norilsk Nickel's subsidiary, increased fourth-quarter net profits to 1.351bn
roubles from 6.150m roubles in the previous period.
The company attributed this considerable increase to the receipt of interim
dividends on the results of its subsidiaries' activities in the period
January-September 2004. MMC Norilsk Nickel also announced it has increased its
stake in OOO Mining Leasing Company from 19.9% to 100%.
Severstal steelmaker posts higher profits
Russian steelmaker Severstal made a net profit of US$1.344bn in 2004, Interfax
News Agency reported recently.
The figures marked a 110% increase in profits from the year before, the news
Severstal is Russia's second largest steel producer by output volume among
metals companies and the world's 15th largest overall.
More than 80% of Severstal's stock is controlled by representatives of
management and affiliated companies, Interfax said. The company's net unaudited
consolidated profits to international accounting standards for last year came to
US$1.344bn and its sales revenue was US$6.415bn.
Severstal's revenue under Russian accounting standards rose 59.5% to 130.38bn
roubles (US$4.68bn) in 2004, compared to that in 2003, the company's press
service said. Production cost for sold products totalled 70.8bn roubles
(US$2.54bn) and the company's operation profit grew 120% to 57.25bn roubles
As for other incomes and expenditures, the expenditures on interest payments
showed the most substantial growth, as they rose 450% to 2.7bn roubles
(US$97.02m). This increase was due to the company entering the international
debt market, where it successfully placed two Eurobond tranches, totalling
Severstal's profit before tax increased 114% to 52.67bn roubles (US$1.89bn), and
its net profit rose 111.2% to 39.62bn (US$1.42bn). According to preliminary
information, Severstal's EBITDA (earnings before interest, taxes, depreciation
and amortisation) increased 237% to US$2.38bn. This growth in the company's
financial results was related to the favourable situation on the steel market.
ZMZ exports steel to USD
Russian steel company, Zlatoust Metallurgical Plantis (ZMZZ) is exporting
cylinders to the United States, Interfax News Agency reported.
ZMZ, which produces a range of more than 1,000 steel products for the Russian
defence chemical and aviation industries, will ship 24 tonnes of round steel
cylinders to the US company, Arwin Meritor, on a trial basis in March, ZMZ's
press office said.
ZMZ said the steel would be tested with a view to certifying it for export to
the North American market following an agreement reached with an Arwin Meritor
delegation in Zlatoust on March 22nd. It said the American company was prepared
to buy up to 500 tonnes of steel product per month. ZMZ sold 57,927 tonnes of
rolled steel products in January-February, down 9.4% from the same two month
period in 2004. However, sales in value jumped 38.6%.
Russia, Germany sign agreement on IT, telecom cooperation
The Russian Ministry of Information Technologies and Communication and the
German Ministry of Economy and Labour have signed an agreement on cooperation in
the IT and telecom sector, Russian Information Technologies and Communication
Minister, Leonid Reyman, said at the Hanover exhibition in Germany, ITAR-TASS
The agreement may help increase investment in the Russian IT and telecom sector
to about US$3bn this year from US$1.5bn in 2004, Reyman said. The agreement
envisages general cooperation in the telecom, mail and IT sectors, but does not
include any specific projects, Reyman said.
MTS to pay US$330m in 2004 dividends
Mobile TeleSystems, Russia's largest cellular provider by subscriber numbers,
turned US GAAP net profits of US$1.022bn last year, a 97.7% increase from the
year before, a company statement said, Interfax News Agency reported.
MTS' revenues increased 52.7% to US$3.887bn last year and its operating income
before depreciation and amortisation (OIBDA) grew 47% to US$2.094bn. The OBIDA
margin was 54%. Analysts surveyed by Interfax recently expected net MTS profits
of US$1.037-1.052bn, revenues of US$3.877-3.934bn and an OIBDA margin of 55%.
MTS said fourth-quarter profit rose 37% and proposed paying dividends equivalent
to one-third of net income.
Profit rose to US$209m, or 10.5 cents per share, from US$153m, or 7.7 cents, a
year earlier, the company said. Sales advanced 40% to US$1.08bn, based on US
MTS added 7.5m new subscribers in the fourth quarter, the majority in December,
as citizens registered for the service during the holiday season. MTS will pay
out roughly US$330m in dividends for 2004, according to Interfax.
"Given the annual financial results, we propose to recommend to the board
of directors that they confirm dividends for 2004 in the amount of one-third of
profits," MTS President, Vasily Sidorov, announced at a news briefing in
This year, the company will be "generating a positive cash flow,"
Sidorov said. Even so, if MTS' acquisition plans for 2005 are realised,
"the company will go into the red." But MTS plans to become a
"cash-positive" company starting in 2006, he added.
Russia seeks to auction Svyazinvest
Russia wants to hold a transparent auction, open to foreigners, when it sells
the national telecommunications holding company Svyazinvest around the end of
2005, the minister of Telecommunications, Leonid Reiman, said, Reuters News
A draft decree has been approved on the sale of 75% minus one share in
Svyazinvest, which controls seven regional fixed-line operators as well as the
long-distance carrier Rostelekom.
"A public auction to sell the government's stake is planned for later this
year or early 2006, and we hope for the broadest possible participation of
institutional and strategic investors," he told the Russian Economic Forum
Separately, the Russian telecommunications and consumer goods conglomerate,
Sistema said it was ready to pay US$2.5bn to US$3bn for the 75% stake of
Svyazinvest, the Sistema chairman, Yevgeni Novitsku, said.