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RUSSIA


  
  

 

In-depth Business Intelligence

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

Books on Russia

REPUBLICAN REFERENCE

Area (sq.km)
17,075,400

Population
143,782,338

Principal 
ethnic groups 
Russians 82%
Tatars 3.3%
Ukrainians 2.7%

Principal towns 
Moscow (capital)
St Petersburg
Novosibirsk 
Nizhni Novgorod 
Yekaterinburg 
Samara 

Currency 
Rouble

President 
Vladimir Putin



Update No: 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 year.

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 administration.
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 in 2008.

Other options
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 situation.
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 far-flung provinces.
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. 

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AUTOMOBILES

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.

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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 2008.
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 developing production.
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 Barnin), said.
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 technology.
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.

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BANKING

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 said. 

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CREDIT RATINGS

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 companies

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).

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ENERGY

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 international institutions.
"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 said.
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.

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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 reported.
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.

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FOREIGN AID

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.

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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," Rakhmonov said.
Opening the meeting with Rakhmonov, the Russian president said that "in the trade and economic area, everything we have planned is gradually developing."

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FOREIGN INVESTMENT

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. 

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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 agency said.
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 (US$2.06bn).
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 US$700m.
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%.

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TELECOMMUNICATIONS

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 has reported.
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 GAAP.
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 Moscow.
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 Agency reported.
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 in London.
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.

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