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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
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Update No: 296- (26/08/05)
Russians and Chinese in joint military
exercises
On August 18th-25th Russia and China held joint military exercises for the first
time. Some 10,000 forces were engaged, air, naval and military, 8,000 Chinese
troops and 1,800 Russian ones. Peace Mission 2005, launched from Vladivostok,
involved manoeuvres in the Yellow Sea and off the Chinese coastal province of
Shandong. The Mission was avowedly preparing the way for joint action against
the ubiquitous threat of "terrorism, extremism and separatism."
The mention of 'separatism' is an apparent reference to Taiwan, where there is
growing support for formal independence. That statement, the inclusion of an
amphibious assault in the exercises and the use of long-range bombers capable of
carrying nuclear weapons have caused concern in Taiwan, and among some regional
experts. The Russians refused the proposal that the exercises should take place
in the Taiwan Straits, not wanting to offend Taipei. However, a mock amphibious
invasion took place, enough to alarm the Taiwanese.
But there was more to the 'Peace Mission' than that. In the first place the
display of awesome air might was clearly designed to impress the Chinese with
Russia's new bombers and fighters, notably the Tu-95 "Bear" and
Tu-22m3 "Backfire" bombers, capable of delivering both nuclear and
conventional weapons. These are now for sale. The PLA Air Force has made
considerable progress of late in modernising its fighter wings by buying
advanced Russian aircraft, but its bombers are often antiquated Soviet-era
planes. China is Russia's largest arms buyer; and it wants it to remain so even
after the EU, as it is about to do, lifts its ban on member countries' arms
sales to Beijing.
Russia and China may go on to conduct joint military exercises on a regular
basis, Defence Minister Sergei Ivanov said on August 24th. "This is
possible, but we have not made any plans yet," the minister told
journalists upon arrival in Qingdao. He said he did not rule out that such
exercises might be conducted regularly, but added he did not think this should
be done annually.
*****
The main point of the exercises, however, is clearly directed against the US and
its dominance in Asia. In July at a meeting of the Shanghai Cooperation
Organisation, which brings together these two with Kazakstan, Kyrgyzstan,
Tajikistan and Uzbekistan, they demanded dates for the withdrawal of US forces
from military bases in Central Asia. US influence in the Western Pacific, they
would like to hope, is on the wane.
Reaction of Rumsfeld and others in the US
In his usual nonchalant form, U.S. Defence Secretary Donald Rumsfeld said that
he was not concerned about the Russian-Chinese exercises, despite the fact that
they included an amphibious landing in eastern China, not far from Taiwan. U.S.
experts on the region have differing views on the Secretary's comment.
At a Pentagon news briefing August 24th, during the second week of the
exercises, Secretary Rumsfeld indicated that he was not at all concerned about
the two huge powers expanding their military cooperation through joint
exercises. "I don't find it notable," he said. "It is just a fact
that countries get together and engage in various types of exercises. We are
obviously observing what's taking place, but I didn't see anything in that that
was threatening to Taiwan or anyone else."
Secretary Rumsfeld said that the United States frequently holds military
exercises with a variety of countries, including Russia, and that the
Russia-China exercises should not be seen as anything out of the ordinary.
But China expert Daniel Blumenthal of the conservative American Enterprise
Institute, a Washington research organization, takes a very different view. He
says the exercises are notable for several reasons. "I think the exercises
are quite notable," he explained. "There's a few points of context.
One is the rapid growth in Chinese military power. The second is its refusal to
renounce the use of force against Taiwan. The third is its statements with
Russia recently about getting U.S. forces out of Central Asia. So, I think, in
that context, these exercises are quite notable." Mr. Blumenthal says China
is involved in a serious effort to counter U.S. influence in Asia, and these
military exercises with Russia are part of that, which is probably true, if not
very significant.
At the more liberal research organization the Brookings Institution, however,
Michael O'Hanlon agrees with Secretary Rumsfeld's conclusion that the
China-Russia military exercises are not notable. "I think he had it exactly
right, both in terms of the politics and the substance," said Mr. O'Hanlon.
"The politics of this are, don't get too excited because if you do you're
going to make Russia and China feel even more desire to have these sorts of
things because they're going to feel the United States is not giving them their
sovereign right to maintain their militaries and work with their neighbours and
friends the way we ourselves do here. So, it would have been an mistake, given
that the exercise didn't harm anybody, it would have been a mistake for Mr.
Rumsfeld to object to it too strenuously, or for that matter, even a
little."
And on the substance, Mr. O'Hanlon says Russia is not likely to actually fight
beside China in any future conflict, so the joint exercises are not relevant in
that sense. But he is concerned about any further increase in Russian arms sales
to China.
In addition, Daniel Blumenthal at the American Enterprise Institute says the
exercises are further evidence that Russia and China are finding that they have
similar critical views of one of the key policies of the Bush administration.
"Russia and China are finding common cause in the sense that neither one
very much likes the U.S. strategy of spreading democracies, and so they're
finding common cause here in countering what they see as too much U.S.
influence," said Mr. Blumenthal.
Secretary Rumsfeld doesn't see it that way. He knows that both Russia and China
are extremely uneasy about the world's only superpower ringing the globe with
military bases to enable rapid response scenarios. But he referred reporters to
his department's annual report on China, issued in July, which said that the
country is working intensively to modernize its military, is changing the
military balance in Asia, and is making preparations to expand its military
reach beyond its home region.
Putin dusts off military image, flies in bomber
Putin is keen to burnish his military image, not just as a strategist, but
as a worthy participant. On August 16th, just two days before 'Peace Mission
2005,' he flew in Russia's most potent bomber to take part in the launch of
cruise missiles in the Arctic north, refurbishing the military aura he
cultivated when he first came to power, reported Oleg Shchedrov of Reuters.
The TU-160, or Blackjack, took Putin to major naval exercises in Russia's frigid
north, just days after the country's second most senior admiral accused the navy
of bungling the rescue of seven submariners. They were eventually rescued with
British help, a stark contrast to the refusal to accept foreign assistance to
save the sailors of the doomed Kursk submarine five years ago. The navy had to
turn to British experts and equipment to save the seven men on board a
mini-submarine which had become entangled deep underwater off Russia's Pacific
coast. In a rare admission, navy chief of staff Admiral Vladimir Masorin said
poor training and discipline were to blame for Russia's own bungled efforts to
save the men, although not having the necessary heavy equipment would seem more
relevant.
News agencies said the 52-year-old Putin would have had to endure two and a half
times the force of gravity when the bomber broke the sound barrier on its way to
watch the firing of cruise missiles near Vorkuta, 2,000 km north of Moscow.
Putin was accompanied by two other TU-160 bombers, one of which fired the
missiles, the latest of a series of periodic tests. Russia has 15 such bombers
capable of carrying nuclear bombs and cruise missiles up to 6,000 km.
Interfax quoted Lieutenant-General Igor Khvorov, one of the pilots, as saying
before the take-off that they would perform a risky low-level pass 200 metres
(yards) above ground at a speed of 900 km per hour.
Putin, a little known former KGB spy formerly, has long used well-publicised
trips with the military to help boost his image as a dynamic leader, notably
when he took over the top Kremlin job from an ailing Boris Yeltsin in 2000.
Before his election in March 2000, Putin made a surprise visit to Chechnya on
New Year night, 2,000, to meet troops fighting separatist rebels. He later made
another trip to Chechnya in an SU-27 fighter jet.
Soon afterwards, he became the first Russian leader to go underwater in the
Arctic in a nuclear submarine. But that trip was soon overshadowed by the Kursk
disaster, when a similar submarine sank together with 118 crew during military
exercises. The botched attempt to save the Kursk put the spotlight on the poor
state of the military Russia had inherited from Soviet Union -- something Putin
has vowed to reform.
With the help of Russia's oil export windfall, the military has started to buy
new weapons. The military budget is being boosted by 22% this year. However,
critics say the extra cash has not been accompanied by structural reforms to
turn the armed forces into an effective modern army, whose problems have been
underlined by a string of recent mishaps. Last year, for instance, a furious
Putin watched two failed attempts in as many days to launch intercontinental
missiles. The navy is evidently in no better shape.
Putin flexes his muscles in the regions
Putin has much to worry about as regards domestic security, with regular
terrorist attacks in Moscow and in the regions. He has used the issue to
overhaul Russia's federal system of governance.
Until recently, the leaders of Russian regions were elected by direct popular
vote. Now Russian law allows the Russian president to submit a candidate to a
regional assembly 35 days before the term of the previous holder of the position
expires. The assembly then has 14 days to consider the candidate.
If the assembly rejects the candidate, the president should then submit a new
candidate within seven days. If the second candidate is rejected, the president
has one month to carry out consultations and submit a new candidate or appoint
an interim governor, but only for six months. The president has the right to
disband the assembly, if it rejects the third candidate.
But Putin may be having second thoughts about this decision to cancel regional
elections and appoint governors with only pro forma confirmation by respective
parliaments.
Just a year ago, the plan appeared to offer a perfect solution to the multiple
problems of federalism, with its empowerment of regional leaders who build local
support bases. Putin with his authoritarian instincts naturally never liked that
arrangement; but in December 2002, he had after all reassured Russian voters
that the system of elections would continue because it was enshrined in the
constitution.
Then last autumn Putin cited the Beslan tragedy as the pretext for scrapping
this system, even if the "war-on-terror" justification was far from
convincing. Opinion polls regularly confirm that more than 75% of voters would
prefer to elect the head of their respective region and believe that their
political rights have been infringed, as recorded by Ekho Moskvy on June 16th
and the Levada Centre on July 1st.
The regional elites, nevertheless, expressed broad support for this deepening of
"managed democracy," not least because it granted governors an
opportunity to keep their jobs beyond the two-term limit. In June, for example,
Putin re-appointed Vladimir Chub as the governor of Rostov oblast, prolonging a
term that started back in 1996. Even such a mainstream commentator as Vitaly
Tretyakov has argued in Rossiiskaya Gazeta, June 23rd that legitimising this
indefinite continuity of regional fiefdoms is one of Putin's most serious
political mistakes.
This mistake results from a conscious choice for preserving "peace" in
the regions by supporting the most loyal elite groupings, but this summer the
Kremlin has been drowned by a flood of local feuds. Regional politics has turned
out to be full of high drama and the contestants, instead of resolving their
conflicts in the local arenas, now bring them to Moscow. They all claim absolute
loyalty and seek to secure backing from various mini-groups in Putin's extremely
closed "inner circle" by every available means.
The problem is that it is only Putin who can make the final decision, since he
refuses to delegate this responsibility either to his aides or to the
"presidential envoys" in the seven federal districts, who are formally
responsible for suggesting candidates. He knows how vital it is to keep power
centralised in his hands. The Yeltsin years were an awful warning in that
regard, when local potentates were actually encouraged to take over as much of
the prerogatives of the centre as they could, with dire results.
But Putin apparently finds his new powers of arbitration much less pleasant than
he thought when he initiated this strengthening of central control; he was
embarrassingly late with finding a suitable person for Irkutsk Oblast, and now
he has to deal with Kaliningrad, as Kommersant reported on August 15th, always a
headache. Irritated by the amount of intrigue, he tried to order the local
politicians to stop their bickering; but the vendettas he is dealing with cannot
be stopped that easily. So in most cases he prefers to issue the incumbent a new
mandate, even if that means preservation of such outrageously despotic regimes
as Kirsan Iliumzhinov's in Kalmykiya and Murtaza Rakhimov's in Baskortostan.
Another and more serious problem is the distortion of the system's distribution
of authority between the centre and the regions. In handpicking the leader, the
Kremlin implicitly assumes responsibility for his performance (only St.
Petersburg has a female governor, a true Putin loyalist for his own patch) --
and in most cases this performance is in reverse proportion to the proclaimed
loyalty. This necessitates increased transfers from the federal budget in order
to compensate for the financial "irregularities" -- but that only
encourages further corruption, as Vedomosti reported on August 9th.
Seeking to break this vicious cycle, Dmitry Kozak, the envoy in the Southern
Federal District and one of the more capable administrators in Putin's team,
suggested imposing direct financial management from Moscow for regions that
depend on federal support for more than 80% of their budgets, reported Expert on
July 25th. There is a rational point in this suggestion, experts agree, but
generally taking the financial levers away from a governor appointed personally
by the president is not going to improve the integrity of the system.
Let the Oligarchs earn their salt
A more "radical" solution was proposed by Konstantin Pulikovsky,
the envoy in the Far Eastern Federal District, who suggested appointing Viktor
Vekselberg, one of the richest entrepreneurs in Russia, the governor for
Kamchatka. This extravagant idea is based on the experience with Roman
Abramovich, the most famous of Russian "oligarchs," who a few years
back got himself elected governor of Chukotka -- and has sponsored a few
projects in the region that make a significant impact on everyday life of its
population. The real political message, however, is that such disaster areas as
Kamchatka need leaders who know how to make things happen, but do not need to
steal the last kopek. Unfortunately, it is all but impossible to find such
people among Putin's trusted cadre. Hence the logic of appointing a tycoon.
Both Pulikovsky and Kozak appear to be desperate, and if the former is unable to
reverse the economic dislocation of his vast region, the latter cannot
extinguish the brushfire of violent conflicts caused by the paralysis of the
system of power. He submitted an honest report on the deteriorating situation in
Dagestan; but Putin, paying a surprise visit to the region in mid-July,
confirmed his confidence in the leadership of Magomed Magomedov, perhaps fearing
that the slightest rock could sink this fragile boat, reported Ezhednevny
zhurnal on July 18th. For the same reason, Mustafa Batdyev remains in charge of
Karachaevo-Cherkessia despite public protests against the gangster style of
business adopted by his family, reported Nezavisimaya Gazeta on August 10th.
With consolidation also in mind, Putin has recommended that the State Council of
Russia's Chuvash Republic reelect Nikolai Fyodorov as Chuvash Republic's
president, the Russian presidential press service, Prime-Tass, reported on
August 17th. In a parallel move, Putin has recommended a regional assembly to
endorse Valery Shantsev as governor of Russia's Nizhny Novgorod Region, said
Alexei Gromov, the president's spokesman. Shantsev, born in 1947, has been the
deputy mayor of the Russian capital of Moscow since June 1996.
Yevgeny Lyulin, chairman of the Nizhny Novgorod regional parliamentary assembly,
said that the assembly was to consider Shantsev's candidacy on August 8th.
Shantsev's candidacy was approved and he will replace Gennady Khodyrev, who had
been the region's governor since August 2001. His removal from Moscow and the
orbit of Moscow City Hall is doubtless a key attraction of the appointment.
No regional governor could win presidential election - survey
Putin, then, is succeeding in turning Russia's incumbent provincial
governors into placemen, totally under his control. The advantage here is that
none of them would be capable of winning the next presidential elections in
2008, according to a survey cited in a popular daily on August 22nd. Experts
told Noviye Izvestia that the results of the study conducted by the Russian
Center for Public Opinion Studies (VTsIOM) were due to the Kremlin's constant
efforts to drive regional elites to the periphery of political life.
Sociologists asked respondents to assess the performance of governors according
to the following criteria: how successful he or she had been in addressing
social problems, tackling economic issues, and fighting crime. Respondents were
also asked to name the governor they believed was an example to others.
Aman Tuleyev, the governor of Kemerovo region, a large coal-mining region in
Asian Russia, Mayor of Moscow Yury Luzhkov, Mintimer Shaimiyev, the president of
the Volga republic of Tatarstan, and Alexander Khloponin, the governor of the
northern Krasnoyarsk Territory, appeared to be the most popular.
Leonty Byzov, the head of analysis at VTsIOM, said Tuleyev had outdone Luzhkov,
as Moscow was disliked in the country because people said it existed on the rest
of Russia's money. Tuleyev, on the other hand, was working hard for Russia.
Roman Abramovich, the governor of oil-rich Chukotka in Russia's Far East, is
extremely unpopular in Russia because he is seen as a typical Russian
"oligarch," one of several business tycoons who got rich in dubious
privatisation deals the 1990s and are now hated for this. According to the
survey, the majority of Russians wonder why he has not been put in jail with ex-Yukos
oil major founder Mikhail Khodorkovsky.
According to Byzov, Shaimiyev is popular as he is seen as President Vladimir
Putin's favorite. Moreover, in the 1990s he managed to check ethnic tensions in
Tatarstan and prevented a major conflict there similar to the one in Chechnya.
Therefore, Byzov concludes, there are no future national leaders among today's
regional governors. The provincial political elite has grown weaker and is
unable to nominate a strong candidate to succeed Putin, the expert said. An
experienced regional governor could have emerged as a national leader. However,
the reform of the Federation Council, the upper house of parliament, designed to
weaken governors, has made even the most popular of them unknown in the country.
The real worry is the capital
There is one exception that proves the rule. The region, if one can call it
that, that Putin really worries about is Moscow, which remains under the control
of Mayor Yuri Luzhkov, whose loyalty has always been questionable. Luzhkov is
known to all throughout Russia. The spectre of a "colour revolution"
has retreated during this summer, but the fearful Kremlin worries that it could
suddenly reappear right at its gates; and the outcome would be decided by the
unreliable capital and mayor.
Seeking to weaken Luzhkov's grasp on power, Putin, as we have seen, appointed
his deputy, Valery Shantsev, to the governorship of Nizhny Novgorod, resolving
with the same "master-stroke" the local power conflict, according to
Rosbalt on August 6th. Luzhkov, however, is focused on the forthcoming elections
to the city parliament, assuming that a clean victory would make it extremely
hard for Putin to replace him with a "man from St. Petersburg."
By no means a "revolutionary," Luzhkov understands all too well that
the system of power has turned rotten beyond the Soviet standard. The
all-powerful president is helpless to prevent the gathering storm; but the
shrewd Moscow mayor expects to survive it -- and join the yet unknown winner.
Personal safety in question
Putin's allies are worried about not just his political, but also his
personal, safety. They are confident of his health about which he is very
careful, training regularly in the gym. But they fear an accident in Russia's
far from safe transport system, even at its pinnacle serving the Kremlin. An
accident in the course of his travels is the one eventuality that they fear
could end his presidency abruptly, as it did the career of Alexander Lebed, the
general and governor of the region, in Krasnoyarsk several years ago.
Putin is not above removing police chiefs in this regard, after his old remit as
a former head of the FSB. On August 10th Putin signed an order dismissing the
chief of police, Vladimir Valkov, in Siberia's Altai Krai. The
Prosecutor-General's Office said the dismissal was connected to the death on
August 7th of Altai Governor Mikhail Yevdokimov in an automobile accident. The
prosecutor's office said Valkov had not provided Yevdokimov with adequate
security.
Yevdokimov died when his car veered off a highway and hit a tree near the town
of Biisk, some 3,000 kilometers southeast of Moscow. The driver of the vehicle
and a bodyguard were also killed. Yevdokimov, a well-known comedian elected
governor last year, was buried on August 10th.
For the first time in the history of Russian civil aviation, authorities made a
decision to temporarily stop the flights of all airlines of the same model -
Il-96, a regular for the Kremlin, as it so happens. On August 22nd,
Rostransnadzor (state agency, which supervises the transport) banned flights of
Il-96-300 "due to multiple malfunctions of the braking and hydraulic
systems."
Fourteen aircraft from five air carriers were grounded, including two planes
that serve the president of Russia. In September, the presidential Il-96-300PU,
which was making a test flight before Vladimir Putin's visit to South America,
could not take off from the Lisbon airport Portela de Sacavem. There were
rumours about a bird getting into the engine; however according to the official
version the flight was delayed because of the wrong reading of sensors which
showed that the engines were not ready for takeoff. Another incident with the
presidential jet occurred in Turku earlier this year.
The producers of the Ils consider the action of Rostransnadzor as excessive.
Krasair and DAL are counting the losses and Aeroflot announced that before the
end of summer schedule it can lose up to US$20 million. But matters of state
outweigh commercial considerations.
Putin in another disclaimer about a third term
Putin was elected president in March 2000. In March 2004 he was re-elected
with over 71% of the vote. Putin, who remains popular among Russians, was widely
speculated to look for ways to stay for a third term, which would be against the
Russian Constitution. But he has once again diclaimed any such ambition.
On August 2nd he said that he could not remain president after 2008, since the
Russian Constitution forbids him to do so, ITAR-TASS reported on the same day.
"I might have wished (to remain president after 2008), but the Russian
Constitution does not allow me to do it," Putin said at a press conference
following a meeting with Finland's President Tarja Halonen.
He would almost certainly be re-elected a third time if he stood. Opinion polls
consistently put him on or around 70% support. The Russian president is the only
federal authority whose approval rating is positive, an opinion poll carried out
by the All-Russian Public Opinion Research Centre showed, New Europe reported
recently. 69% of respondents said they approved of Vladimir Putin's performance,
against 70% in May. The president's disapproval rating dropped from 27% in
February to 21% in June and July.
The government's approval rating, by contrast, fell from 30% in May-June to 28%
in July. 22% approved the performance of the State Duma lower house of
parliament, and 61% said they disapproved. The federation council upper
chamber's rating remained unchanged, with 24% approving of its performance and
47% disapproving.
Putin still leads in opinion polls. In April and May, he was seen among the
country's most trusted politicians by 40% of respondents, followed by 41% in
June and July. He is followed by Emergency Minister Sergei Shoigu, with 13%, and
Vladimir Zhirinovsky, leading of the Liberal Democratic party of Russia, who
enjoyed 11% in May and 10% in April-June. Putin also tops the list of potential
candidates for president.
Paper considers calls for third Putin term
It is these findings that make it clear why calls for a change in the
constitution to allow for a presidential third term continue to be made - and by
influential organs at that. The leader of Russia's republic of Mari El, Leonid
Markelov, proposed on August 21st amending the Russian Constitution to allow the
Russian president to be elected three consecutive times for a term of between
five and seven years, a popular daily, Nezavisimaya Gazeta, reported on August
22nd, according to RIA Novosti on the same day.
Nezavisimaya Gazeta asked politicians and political scientists to comment on who
was behind such statements - the president or his inner circle. Georgy Satarov,
the president of the Indem Foundation, a Moscow-based think tank: "I
believe this is the president's initiative. A change to the terms is quite
possible. The time needed to make constitutional amendments varies from country
to country, and it could change in Russia too. But countries that respect their
legal principles introduce such amendments to the constitution for the next
president, not for the incumbent."
Leonid Gozman, the deputy chairman of the political council of the Union of
Right Forces (SPS): "Many people think such statements are attempts to make
society expect a third term and look forward to it. The saddest thing is that
such sentiments are quite widespread in society. In Russia, the idea that power
needs to change hands is not so widely understood as it should be. This is the
real problem."
Gennady Gudkov, a deputy of the State Duma, the lower house of the Russian
parliament, member of the security committee: "The initiative has not come
from the president himself, but from people who owe their posts and offices to
him, and they care about their positions more than anything else."
Yulia Latynina, a political and economic commentator: "Most of these
statements are due to the self-promotion of politicians who want to solve their
problems. I think President Putin will secure a third time simply because this
is the authorities' logic. Power in Russia is in essence authoritarian, and
there are no other ways to hand over power: control must be maintained over it.
I believe Putin has not made a final decision because he does not make decisions
in advance. The decision will be made in the end and in a great hurry."
ENERGY SUPPLEMENT
Gazprom begins North-European gas pipeline construction
Gazprom, Russia's natural gas monopoly, began construction on the
North-European natural gas pipeline (NEG) and plans to complete the first 100km
through the Boksitogorsky area in the Leningrad region in six months, the daily
Biznes has reported.
With an estimated 55-million-metric-ton annual capacity, Gazprom will open a
direct under sea route for Russian gas exports to Europe, which would allow it
more flexible pricing and long-term and fixed-priced intermediary contracts. The
article cites Arif Zeynalov, an analyst within the Zurich Capital Management
investment company, as saying that Gazprom's Western partners, including E.ON
and BASF (both German), currently resell natural gas at a higher interest
margin.
Gazprom is seeking independent operation in Europe under short-term contracts.
It recently bought underground storage facilities in Britain, along with leasing
storage facilities in several European countries, since it believes that NEG
construction would guarantee increasing gas supply.
Gazprom intends to complete construction on the project in 2008. However,
project success depends on the development of the South Russian gas field in the
Yamal Peninsula in West Siberia, with its estimated 688-billion-cubic-meter
natural gas deposits and 35-45-billion-cubic-meter annual production capacity.
The gas field is going to be the main supplier of gas for the North European gas
pipeline. The company has already conducted exploration drilling in the area.
The NEG project is estimated at US$7.8 billion, of which US$5.7 billion is to be
allocated for the development of the South Russian natural gas field. Experts
believe Gazprom will most probably try to finance construction by issuing loans.
It will also lobby for help from one of its assets, Gazprombank, though it has
yet to attract more investment into gas field development, the article said.
Gazprom has recently stepped up efforts to enter the Sakhalin-2 consortium,
owned by British oil company Shell, having proposed in return a stake in the
Shtokmanovskoye field on the Barents Sea shelf, whose reserves are estimated
higher than those of the South Russian natural gas field, but its operation
would begin much later. Shell is therefore unlikely to wait and will opt to join
the project.
FT Appraisal; Roman's tainted gains
The proposed sale by Roman Abramovich, the Russian oligarch, of his
estimated US$10bn stake in the Sibneft oil company to Gazprom, the
state-controlled gas group, looks like a neat way of settling accounts with his
country, avers the Financial Times.
"He sails off into the sunset, free to buy yachts and football clubs, while
the Kremlin virtually completes the renationalisation of Russia's core energy
assets. Smiles all around, not least among the bankers involved, " says the
FT. Actually, it is not as simple as that. Abramovich is being obliged to stand
again for the governorship of Chukotka and continue to bail it out of its
financial hole. He must regret the whim that made him become its governor in the
first place.
The truth is far less pleasant, indeed, than the FT original account, both for
Russia and for Abramovich, as the paper went on to say itself. This deal, if it
goes ahead, will be the latest development in the untransparent privatisation of
Russia's mineral wealth in the mid-1990s, of which Abramovich was a principal
beneficiary. After selling the Sibneft assets for a song under former president
Boris Yeltsin, the Kremlin is buying them back for a fortune under president
Vladimir Putin. The wheel has come full circle, leaving Abramovich very rich and
robbing Russia of money that might have financed schools and hospitals.
Strikingly, Abramovich has avoided the fate of Mikhail Khodorkovsky, founder of
the Yukos oil group, who has been jailed for fraud and had his assets
confiscated. Both men made their fortunes in similarly opaque ways. Khodorkovsky
was punished because he dreamt of ruling Russia. Abramovich has had the sense to
respect the Kremlin.
There may be even more to it. Khodorkovsky was always his own man. Abramovich is
close to former president Yeltsin and his family. Exporting the Sibneft billions
could be the Yeltsin family's way of taking out insurance against political
change, perhaps in the 2008 presidential poll, when Putin must supposedly stand
down.
The punishment of Mr Khodorkovsky now looks even more arbitrary than before.
Putin could have dealt with the underpriced privatisations by a one-off supertax
applied equally to the main beneficiaries. In return, he could have offered a
statute of limitations and left the original deals in place. The oligarchs would
have grumbled but they would have paid up. There would have been a
rough-and-ready equality before the law. The principle of property rights, the
foundation of a good business climate, would have been established, however
imperfectly.
Now, arbitrary rule has triumphed. The victors are the Kremlin bureaucrats who
have established, with Putin's support, that might is right. They have also made
clear they want their share of the spoils, by taking top jobs in state-run
industries.
However, the present Kremlin team have no guarantee the authoritarian power they
have accumulated will remain in their hands. They worry about 2008. And they
have nightmares about democratic revolts of the kind that swept Ukraine, however
unlikely that may seem in Russia today. The forces released by communism's
collapse have yet to play themselves out.
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AUTOMOBILES
GM CIS to increase car sales in Russia
General Motors CIS, which represents the US company General Motors in Russia,
plans to increase car sales through its official dealers by 130 per cent to
35,000 cars in 2005, GM CIS Director General, Jacek Gorski, said recently, New
Europe reported.
"GM plans to sell 35,000 cars in Russia this year. Last year, we sold about
15,000," Gorski said, adding that these figures do not include the sales of
cars produced at the joint enterprise GM-Avtovaz.
The potential to significantly increase car sales is attributable to the sales
of Chevrolet produced by the South Korean company GM Daewoo Auto &
Technology, he said.
Gorski also said that GM CIS plans to begin selling its renovated Opel Zafira
and Opel Vectra models in Russia in the fall. He said that sales of the Opel
Astra model would remain the same in 2005 as they were in 2004 due to a deficit
in the number of models delivered to Russia.
Inchcape plans to expand into Russia and China
Inchcape the international car dealership group, is planning to motor into
Russia through a joint venture, the Financial Times reported on August 2nd.
Peter Johnson, chief executive, said the group was in the process of identifying
a number of local operators to help it tap into the increasingly lucrative
market. "There are terrific growth opportunities, over the last 12 to 18
months the market has really developed," he said.
Inchcape initially plans to focus only on Moscow and St Petersburg.
Mr Johnson said any investment would not be significant and would follow the
pattern set in Macedonia, Romania and Bulgaria, of building from a low base to
freehold operations. The group also intends to increase its presence in China,
through joint ventures in big cities such as shanghai, and is believed to be
talking to the Shanghai Automotive Industry Corporation.
Inchcape's expansion plans follow a strong half year, with pre-tax profits in
the six months to June 30th up from £86.2 to £104.8m. Sales increased 5% to £2.26bn.
Greece was the only European market that fell because of the difficult
comparisons with sales during the Olympic year. All other markets grew, with
Australia performing strongly on the back of record Subaru sales.
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AVIATION & SPACE
Government signs off 10-year space budget
The Russian government recently announced approval of a 10-year space programme
budget, the BBC reported.
That budget will include funding for development of a reusable spacecraft to
replace Russia's aging Soyuz manned launch vehicle.
Russian officials say they also want to start experiments testing whether it's
possible for humans to make the flight to Mars.
Under that plan, six volunteers will spend 500 days in a mock space module in
Moscow. The BBC said more than 20 volunteers have already applied to take part
in the experiment.
Russia has been struggling to finance the International Space Station in the
absence of the US space shuttle fleet. The Soyuz became responsible for all
trips to and from the space station following the Columbia shuttle disaster in
2003.
Although the new Russian 10-year space budget will total about US$10.5m (300bn
roubles), it is less than what the United States spends annually on its space
programme, the report said.
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BONDS
Bank for Development places Eurobonds
Russian Bank for Development has floated a debut issue of Eurobonds worth
US$170m, whereas initially it had claimed a loan worth US$150m, the bank's press
service reported recently. The maturity date of the bonds is due in three years,
and the coupon rate has been fixed at 6.5 per cent, New Europe reported.
Barclays Capital acted as the issue's lead manager. Placement was preceded by
the bank's road show in Asia (Korea, Hong Kong, Singapore) and Europe
(Switzerland, Germany Greece and Great Britain), when the bank's representatives
held 62 meetings with potential foreign investors. Investors' bids exceeded the
issue's initially planned volume and equalled US$400m. Seventy-two financial
institutions, including leading foreign banks, assets management funds, pension
funds, etc, took part in the floatation.
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CREDIT RATINGS
S&P upgrades Sibneft to BB-, outlook is stable
Standard & Poor's Ratings Services said on August 8th that it raised its
long-term corporate credit rating on Russia-based OAO Siberian Oil Co (Sibneft)
to BB- from B+, following a review of the company's 2004 operating and financial
performance and the relative clarification of its shareholding situation. The
outlook is stable. At the same time, the national scale rating on Sibneft was
raised to ruAA- from ruA+. "The rating action reflects Sibneft's strong
financial and operating performance in 2004, when free operating cash flows of
US$1.3bn - in the absence of dividends or any material acquisitions - helped to
reduce net debt to only US$308m at end-December," said Standard &
Poor's credit analyst, Elena Anankina. Following a court decision in July 2005,
Sibneft's core shareholders have now regained control of 72 per cent of the
company (up from 57.5 per cent), leaving OAO NK YUKOS with a stake of only 20
per cent. This provides further comfort that Sibneft should remain reasonably
distant from the challenges faced by troubled oil company YUKOS, New Europe
reported.
Fitch upgrades Russia to BBB, outlook stable
Fitch Ratings, the international rating agency, has upgraded the Russian
Federation's Long-term foreign and local currency ratings to BBB from BBB- (BBB
minus). The Country Ceiling has also been upgraded to BBB from BBB- (BBB minus)
and ratings for the MinFin V and VIII bonds have been upgraded two notches to
BBB from BB+. The short-term foreign currency rating has been affirmed at F3,
New Europe has reported.
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ENERGY
Gazprom lists its bonds in Dublin
Gazprom, Russia's state-controlled gas monopoly, has for the first time, listed
its bonds in Dublin instead of Luxembourg, which is struggling to cope with the
additional workload created by the European Union's new prospectus directive,
the Financial Times reported on July 19th.
Gazprom, Russia's biggest borrower, recently raised nearly US$1.9bn by means of
two separate bond issues, lead-managed by Deutsche Bank and MCC of Italy.
People close to the transactions said the company had opted for Dublin because
of a backlog of listing on the Luxembourg Stock Exchange, prompted by the July
1st adoption of the prospectus directive. It calls for more stringent disclosure
from issuers, such as accounts prepared on the basis of International Financial
Reporting Standards.
European corporate bond issuance rose to a two-year high in June, as companies
rushed to the market before implementation of the new directive. The Luxembourg
Stock Exchange said it registered 1,241 new securities in June, up from 775 in
June 2004. Most of them were bonds.
But an official at the exchange said many companies had also waited until after
July 1st to start new borrowing programmes in order to avoid having to review
documentation after the rules had taken effect.
An official at the exchange said: "There is a bottleneck in Luxembourg -
we're getting a lot of listings prospectuses right now. But a bottleneck is also
a sign there are many securities waiting to be listed on the Luxembourg Stock
Exchange."
The London Stock Exchange said it had experienced no delays. The Dublin exchange
was unavailable for comment.
MegaFon profit doubles in Q1
Cellular phone operator MegaFon said profit more than doubled in the first three
months, Interfax News Agency reported.
Net income was US$76.1m, 122 per cent more than the US$34.3m earned in the same
period last year, the company said. Revenue rose 66 per cent to US$459.9m under
US Generally Accepted Accounting Principles (GAAP).
Kazakstan, Russia sign oil production sharing agreement
Russia and Kazakstan recently signed a US$23bn production sharing agreement to
develop one of the Central Asian nation's largest oil and gas fields, Interfax
News Agency reported. The shareholding structure will be 50:50.
Executives from Russian oil firm Rosneft-Kazakstan Ltd and the Kazak national
oil and gas company, Kazmungaz, signed the deal at a ceremony in the Kazak
capital, Astana. Rosneft holds 25 per cent, and the Russian state company
ZarubezhNeft (specialising in offshore drilling) holds an option for the
remaining 25 per cent.
Russian President, Vladimir Putin, attended the signing ceremony along with his
Kazak counterpart, Nursultan Nazarbayev. Putin was in Astana for a regional
security alliance summit. The agreement is for 55 years, with up to 10 years to
be spent on exploration and 45 on extraction, said Baktykozha Izmukhambetov,
first deputy minister of energy and mineral resources of Kazakstan.
Over the term of the agreement, Kazakstan will earn more than 30bn Euro in taxes
and other payments, Izmukhambetov said. The deal envisages equal investments in
the Kurmangazy field, located offshore in the Caspian Sea, with an estimated
980m tonnes of known oil and gas reserves, said Izmukhambetov. Extraction of the
oil and gas could begin in a decade. "We have worked on the Kurmangazy
project since 2002. This is the completion of a huge amount of work," said
Putin.
Kazakstan has vast oil and gas resources, located mainly in the western part of
the Central Asian country.
More than three-quarters of the total profits from the Kurmangazy field will go
to Kazak government coffers, in contrast with other deals that have given the
Kazak government much lower proceeds.
Primarily an international consortium led by Italy's Eni SpA is developing
Kazakstan's largest field, Kashagan, with more than a billion tonnes of
estimated gas and oil reserves.
Rosneft may invite foreign investor to Vankor
Russian oil company Rosneft is considering attracting a foreign investor to
develop the Vankor oil and gas field after the completion of exploration,
planned for September 2006, Rosneft President, Sergei Bogdanchikov, said,
Interfax News Agency in Krasnoyarsk reported recently.
"A decision on the possible attraction of foreign investors will be reached
after the completion of exploration of the field. We plan to complete this by
September 2006," Bogdanchikov said. He said that France's Total and India's
ONGC Videsh have already expressed interest in the Vankor field. The Rosneft
chief also said that according to preliminary estimates, all investment
expenditure on the project, including on transport infrastructure - the
construction of pipelines, would amount to about 4.5bn Euro.
Bogdanchikov said that two routes are currently being considered for pipelines
from Vankor - to Dikson in the north, or to Purpe or the so-called Tarasovsky
hub in the south. He said that each route "has its plusses and
minuses" and that a final decision would be reached in the second half of
this year.
Gazprom acquires capacity in Humbly Grove gas storage
Gazexport, the export arm of the worlds largest gas company Gazprom, recently
announced that it signed a deal with Vitol SA to buy 53m therms (143 Million
cubic metres) of capacity in the UK's newest gas storage facility at Humbly
Grove, Interfax News Agency reported.
According to a statement from Gazprom marketing and trading, the UK-based
marketing and trading subsidiary of Gazprom, the five-year deal gives Gazprom
access to approximately half of the facility's total storage capacity. The
capacity will be managed by Gazprom marketing and trading to provide its UK and
Northwest-European downstream and wholesale customers with more flexible and
tailored gas service products.
VEB says no plans to offer funds for Trans-Siberia pipe
Russia's Vnesheconombank (VEB) does not yet plan to fund a project to build the
Eastern Siberia-Pacific Ocean pipeline, bank Chairman, Vladimir Dmitriev, said
recently, Interfax News Agency reported.
"As far as I know the concept has not yet been prepared, and the technical
parameters of the project have not yet been approved," he said. At the same
time Dmitriev said that Transneft is likely to finance this project based on the
market attractiveness of one proposal or another. He also said that VEB is part
of an interdepartmental working group working on the development of a concept
for the construction of the pipeline. Transneft President Semyon Vainshtok said
earlier that the company has approved a financing plan for the Eastern Siberia -
Pacific Ocean oil pipeline, which will cost about 11.5 billion Euro to build.
"With a necessary investment of six billion Euro for the first phase, we
have already found financing for eight billion Euro for a period of 15 to 20
years," Vainshtok said.
Oil extraction in Russia reaches 40m tonnes
Oil extraction in Russia in July amounted to 39.973m tonnes against 39.453m
tonnes over the same period of 2004, the economic news agency with reference to
the ministry of industry and energy said, Interfax News Agency reported.
At the beginning of the year, oil extraction amounted to 270.98m tonnes against
263.06m tonnes in 2004 while the oil export amounted to 124.67m tonnes against
114.13m tonnes in 2004. The oil export to far away foreign countries through the
Transneft system reached 18.16m tonnes in July 2005 against 17.02m tonnes over
the same period in 2004. Gas production in Russia in the first half of the year
reached 372.91bn cubic metres or 3.79bn cubic metres more compared with the same
index of 2004. Gas exports to foreign countries amounted to 92.212bn cubic
metres or 8.802bn cubic metres.
Stroitransgaz to build gas pipeline in Algeria
Russian company Stroitransgaz and Algerian state-owned oil and gas company
Sonatrac signed in Algeria a contract for the construction of the
Souguer-Hadjret En Nouss gas pipeline, a representative of the Russian company
in Algeria said, Interfax News Agency reported.
From the Russian side, the vice president of Stroigransgaz, Leonod Bokhanovsky,
inked the deal, Nikolai Rudevsky said. Under the contract, which is estimated at
US$226m, the Russian company is to build a 273km long pipeline in the northwest
of the country within 20 months. The aim of the project is to provide a thermal
power plant, currently under construction in Hadjret en Nouss (Tipaza province),
and nearby settlement with natural gas.
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FOREIGN DEBT
Russia to repay 40% of debt to France early
Russia is to reduce its debt to France from 2.4bn Euro to 1.5bn Euro due to
early debt repayments, the French embassy in Russia said in an official
statement, Interfax News Agency reported.
According to the statement, on July 12th Finance Minister, Alexei Kudrin, and
French Ambassador to Russia, Jean Cade, signed the corresponding agreement,
which is a continuation of an agreement signed on May 13th, 2005 by the Paris
Club and Russia, according to which Russia will repay up to 15bn Euro to its
creditors ahead of schedule. The first payment to France, amounting to 818m
Euro, was to be made in mid-July, the press release said.
Kudrin told journalists earlier that at the moment the Russian Finance Ministry
is signing agreements with Paris Club members to repay debt early, on
practically a daily basis. "Today (July 12) we signed an agreement with
France, yesterday - with the US," he said. Russia and the Paris Club agreed
on May 13th on the early repayment at face value of part of Russia's debt to the
Club, amounting to US$15bn, from a total of US$40bn. Money from Russia's
Stabilisation Fund will be used to make the payments.
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FOREIGN LOANS
EBRD board approves loans to Russian banks
The board of directors of the European Bank for Reconstruction and Development (EBRD)
has approved lending Renaissance Capital Bank an 830m rouble loan, the EBRD said
recently. The loan will be used to finance the consumer credit portfolio, New
Europe has reported.
Renaissance Capital Bank is a part of the financial group Renaissance Capital
and specialises in consumer credits.
In the first half of 2005 Renaissance Capital Bank was 493rd in the size of
assets in the Interfax-100 ranking of major Russian banks. The board has also
approved two loans for US$30m and 300m roubles for Delta Credit, the EBRD said.
Part of the US$30m loan will be syndicated and the other part will be directly
extended by the EBRD. The EBRD will extend the 300m rouble loan in full. The
credit line will allow the bank to launch a programme to issue rouble mortgage
loans, the EBRD said. At the end of the first quarter 2005 Delta Credit, which
specialises in mortgage crediting, was in 184th place in the Interfax-100 rating
of Russia's banks.
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MINERALS & METALS
RusAl increases H1 aluminium output 1%
Russia's RusAl raised output of primary aluminium and cast-house products by 1
per cent year-on-year in the first half of 2005 to 1.346m tonnes, Interfax News
Agency reported.
Output of value-added cast-house products alone grew 17.6 per cent to 402,105
tonnes and accounted for 30 per cent of total output, up from 25.6 per cent a
year previously, according to Interfax. RusAl said 68 per cent of the
value-added output consisted of alloys, production of which grew 27 per cent to
275,000 tonnes in the half. RusAl increased alumina production 5.2 per cent to
1.6296m tonnes.
Bauxite production rose 8.8 per cent to 2.418m tonnes. The company increased US
GAAP revenue more than 14 per cent year-on-year in the first half of 2005 to
US$3bn. RusAl said revenue grew on higher output of value-added cast-house
products and price growth on the London Metals Exchange in the first quarter of
2005. Revenue from sales abroad constituted 76 per cent of total revenue. The
company did not disclose net profit or other financial results for the half.
RusAl has said it is targeting revenue of US$5.5bn in 2005 as a whole.
Alrosa expects China to become major diamond buyer
Russian diamond monopoly Alrosa expects China to become one of the largest
purchasers of its products and is considering setting up its own list of site
holders, Alrosa President, Alexander Nichiporuk, said speaking in the town of
Mirny, New Europe reported.
"We're setting up our representative offices abroad; in particular, we're
actively trading in Antwerp. A new representative office will open in Hong Kong
soon. We will mainly use that office to trade on the Chinese market, which is
the largest in terms of the capacity of the cutting industry and is growing
rather quickly in terms of usage," Nichiporuk said. He noted that the
situation on the diamond market will be prosperous in the near future and prices
of raw materials are going to grow. "Demand is gradually increasing, and
such large mines like Argyle in Australia are stopping production, overall
extraction in Botswana is dropping, apparently, there's going to be a serious
drop in South Africa, and large mines are not being built. Three mines were set
up in Canada, but they're not very big. Therefore, the lack of raw products and
the growing demand will lead to growing prices," Nichiporuk said.
Alrosa is also thinking about setting up a long-term system for buyers or
so-called site holders, which would be compelled to buy diamonds if the company
offered them for sale, Nichiporuk said. "This is a key principle for us. We
feel that an independent sales network in the form of company representatives
and site holders, which mainly purchase raw materials in Moscow and Yakutsk,
will be the basis for the future sales strategy," Nichiporuk said.
Under a plan awaiting the European Commission's approval, Alrosa, which mines 23
per cent of the world's diamonds, would reduce rough diamond sales to De Beers
by almost two-thirds by 2010, to US$275m.
Meanwhile, Alrosa is continuing to build the underground Udachny deposit, but
has stopped financing the construction of the Aikhal deposit, Nichiporuk said.
Furthermore, he said Alrosa will still rely on its development in the diamond
industry. "This is mainly projects in Nyurba region, the Nakynskoye ore
field, building underground deposits and developing the Mirninsky GOK, where
production volumes are growing. They will be the main volumes next year,"
Nichiporuk said.
The company considers the Momsky field as another promising facility.
"Research has shown that there are five pipes there that are very
promising. We need to work on new technological production that will help make
this a new facility for the company," Nichiporuk said.
Net profit at Alrosa to International Accounting Standards in 2004 increased 90
per cent year-on-year to 12.118bn roubles, the company's report said. A source
at the company told said that this growth was due to an increase in the
effectiveness of sales and favourable market conditions. Sales revenue in the
reporting period increased 30 per cent to 77.949bn roubles.
Alrosa controls 23 per cent of the world diamond market. Alrosa shareholders
include the Russian Federal Property Agency - 37 per cent, the Yakutia Property
Ministry - 32 per cent, and eight districts in Yakutia own 8 per cent in total.
According to official information, the company's workforce owns 23 per cent of
shares.
Norilsk extends share exchange deadline
Russian mining giant, MMC Norilsk Nickel, has held talks on attracting a
three-year US$300m loan from a Western bank syndicate, banking sources said,
Interfax News Agency reported.
One of the sources said the "leader (underwriter) has already been
determined, but the credit agreement hasn't been signed yet and the terms of the
contract are still being discussed."
Another source said the credit rate is expected to be at LIBOR +0.75 per cent.
However, the first source said the rate could be lower than that level. Norilsk
Nickel's press service did not comment on this issue and Dmitry Usanov, the
company's head of investor relations, was also not available for comment.
Meanwhile, MMC Norilsk Nickel has extended the term of its additional third
round for the exchange of RAO Norilsk Nickel shares for MMC Norilsk Nickel to
July 31 2006 from August 1 2005, the company reported. The third round began on
December 1 2004 and was due to end on May 31 2005. The exchange ratio was 1:1.
The additional exchange is being held for all the shareholders that did not use
their right to exchange in 2001-2002. The company said earlier that in the
restructuring that took place in 2001-2002, the holders of over 3.2 million RAO
Norilsk Nickel common shares, who were retired former employees, were for
different reasons unable to exchange their shares for MMC Norilsk Nickel shares.
Norilsk Nickel produced 120,000 tonnes of nickel and 225,000 tonnes of copper in
the first half of 2005, the company said in a statement. According to the
statement, these figures are the preliminary consolidated production results of
Norilsk Nickel's Arctic branch and Kola MMC, Interfax reported. The company
produced 61,000 tonnes of nickel and 112,000 tonnes of copper in the second
quarter of 2005 .
Norilsk Nickel produced 122,000 tonnes of nickel and 222,000 tonnes of copper in
the first half of 2004. Thus, nickel production fell 2,000 tonnes in the first
half of 2005, while copper output grew by 3,000 tonnes. The company plans to
produce 240,000-245,000 tonnes of nickel and 440,000-450,000 tonnes of copper in
2005.
The company is the world's largest nickel and platinum group metals producer. It
produces 20 per cent of the world's nickel, 13 per cent of the cobalt, 3 per
cent of the copper, 44 per cent of the palladium, 12 per cent of the platinum
and 1.5 per cent of the gold.
MGOK spends US$250m on 10% of own shares
Iron ore producer OAO Mikhailov GOK in Russia's Kursk district has spent US$250m
as part of an offer to buy up 10 per cent of its own shares, Interfax News
Agency reported, citing a source in the press service of the management company
Metalloinvest.
The MGOK board of directors decided to buy up 712,000 of the company's own
shares at 9,700 roubles each. Applications to buy shares were accepted from May
27, to June 27 and deals were drawn up from June 28. MGOK charter capital
amounts to 1,780,269 roubles, split into 6,240,808 common and 880,268 preferred
shares with a par value of 0.25 roubles. "Although the deadline for drawing
up deals has not ended, it is already possible to say that MGOK has carried out
its offer, having spent US$250m on acquiring 10 per cent of its own
shares," the source said.
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TELECOMMUNICATIONS
Cellphone subscribers up 4.6% in June
Russia had 97.595m mobile phone subscribers at the end of June, up 4.6 per cent
from the end of May, AC&M Consulting said in its monthly update, New Europe
reported.
Experts said the June results surpassed even the most optimistic forecasts.
An expected drop in the number of subscribers who signed up during the New
Year's campaign did not take place. The number of subscribers in Russia grew by
4.4m in June, up 500,000 from May. Mobile phone penetration, or the number of
cellphones per 100 people, was 67 per cent, compared with 64.2 per cent at the
end of May. Mobile TeleSystems (MTS) showed good results in Moscow, but was weak
in the regions, the analysts said.
Megafon grew slightly in Moscow and the regions. VimpelCom gained the most new
subscribers in Russia on the whole and in the regions, including St. Petersburg.
"If the current trend remains, we predict that Russia will have 130m mobile
phone subscribers in Russia by the end of 2005," the update said.
VimpelCom buys mobile operator in Sakhalin
VimpelCom said it paid US$51.2m for control of a mobile operator in Sakhalin,
opening up the oil-and gas-rich region to the company, it was reported by New
Europe.
VimpelCom bought 84.4 per cent of Sakhalin Telecom Mobile, which holds licences
for the Far East island, the company said in a statement. VimpelCom also paid
US$5m for a 60 per cent stake in Sakhalin Telecom, a fixed-line alternative
operator on the island, the statement said.
Siemens mobile devices sales up
Growth in sales by the Russian division of Siemens Mobile Devices in 2004
amounted to 55 per cent, Mobile Devices chief, Clemens Joos, said recently at a
press conference in Moscow. He said that in the world Siemens Mobile Devices is
currently making a loss, Interfax News Agency reported.
However, in 2006 the company hopes to turn this around following a deal with the
Taiwan company BenQ. The merger of Siemens and BenQ mobile phone production
business may be completed in fall 2005. According to Mobile Research Group
analyst Eldar Murtazin, the disappearance of the Siemens brand will have a
negative influence on company revenue, including in Russia.
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