Books on Russia
Update No: 311 (30/11/06)
The post-Soviet predicament
Putin is not known for his profound philosophy; but he has a certain wit and
power of repartee all the same. He is renowned for saying: "There is no
such thing as an ex-KGB man," being one himself of course. And "Those
who have no nostalgia for the Soviet Union have not got a heart; but whoever
thinks it can be brought back again has not got a head."
But is he bringing back a simulacrum of the same? He is certainly bringing back
something strongly reminiscent of the KGB, the passion of his life.
Putin knows his Russia and that the Russians yearn for a strong ruler more than
anything else, far more than liberty. Hence the nostalgia for Stalin, now
receiving approval from more than half the respondents in opinion polls. Hence
also Putin's own popularity, which is sky-high, over 70% and climbing, along
with the economy, booming on 6.5% this year in line with an average 7% per annum
since 2,000 and Putin's assumption of full power.
Lenin was fond of the dictum: 'One step backwards; two steps forwards.' He
applied it in 1921 when he introduced the New Economic Policy (NEP), which
enabled the USSR to recover from the chaos and sundry misery of the time after
the dread carnage and destruction of the Civil War (1917-20). It involved for
him and all true believers a step backwards from the War Communism of those
years to capitalism and the free market, at least for small and medium-sized
The economy did duly pick up and a new social peace accompanied the improvement
in living standards, two steps forward indeed.
Putin is giving the Leninist formula a new twist. He knows that the return of
capitalism after the Stalinist and Brezhnevite interlude since 1991 is a step
forward for Russia, only fortuitously evident since 2,000 and his own advent,
due to rising global energy prices. So is a comparative social peace, as the
gangsters are being sidelined, indeed are leaving for abroad of their own
accord, once they have accumulated their ill-gotten gains.
But in his view to guarantee no relapse, there has to be very firm leadership
from the centre, a step backwards, some may think in the West, but not in
Russia. It has to be accompanied in his view with 'special activities' by the
security services, forever his pride and joy.
The rise and rise of the FSB and the Siloviki
Former Soviet spies say there is no doubt that the FSB has grown
increasingly powerful under Russian President Vladimir Putin. "This may be
a coincidence, but there can be no doubt that the FSB is both more powerful and
more prepared to flex its muscles than for about 25 years," said a former
Mr Putin himself, as a KGB alumnus who served during the Cold War in Germany, is
determined to regain Russia's superpower status - at least in the energy sector,
perhaps where it now counts the most. He has increased intelligence funding
fivefold since he came to power six years ago. The most powerful faction in the
Kremlin, known as the Siloviki, is dominated by former KGB officers.
The Kremlin says increased funding of the intelligence services is a response to
the conflict in Chechnya and the war on terror. But Siloviki hawks have
also used the FSB and other agencies to enforce increasingly repressive domestic
legislation and punish recalcitrant former Soviet satellites. Earlier this year
there was a strong alarm sounded in the West when Russia's parliament formally
endorsed the principle that its government enjoys the right to hunt down state
enemies overseas, given a new poignancy by recent events in London.
While the terror of Soviet times has not yet returned, many Russians are now
scared to speak out against the Government or corruption as the state again
assumes control of leading companies, particularly in the energy sector, where Siloviki
officials have been given plum positions.
Some who have spoken out have paid the ultimate price. Yuri Shchekochikhin,
editor at Novaya Gazeta, a bastion of free press in Russia, died in 2003 after
he was poisoned with dioxin. This October saw the killing of Novaya Gazeta's
prize investigative journalist, Anna Politovskaya. Then in November came the
mysterious death of Alexander Litvinenko in London, who was investigating her
assassination at the time. This has caused an international furore.
Less discussed was the Chicago-like brutal slaying of Movladi Baisarov on
Moscow's Lenin Avenue, his body riddled with bullets fired by the Chechen
special forces and Russian intelligence officers who had ambushed him.
According to Russian authorities, Mr Baisarov was killed after he attempted to
detonate a hand grenade. But such is the atmosphere in Russia these days, there
are many who reflexively question the official explanation.
Like Alexander Litvinenko, Mr Baisarov had many enemies within the Federal
Security Bureau (FSB), the successor to the KGB, and in the Kremlin-backed
Chechen Government. He had emerged as a leading critic and rival of Ramzan
Kadyrov, the 30-year-old Chechen Prime Minister, approved of course by Moscow.
Whether or not the Baisarov, Litvinenko and Mrs Politkovskaya cases are
connected, liberal commentators in Russia have linked Mr Kadyrov to her murder,
she was the country's most prominent investigative journalist, who dedicated her
career to highlighting the abuse of human rights in Chechnya.
The word on the diplomatic grapevine is that more of the same should be expected
as the Siloviki and their allies seek to tighten their hold on big business
before the 2008 election, when Mr Putin is required to stand down.
The powerbrokers of the Kremlin
The most pitiless power centre in the world for centuries has certainly been
the Kremlin. It had to be to hold together its vast domain, bordering so many
potentially hostile countries in Eurasia. It has had a series of ruthless
leaders in charge for a long time now. Gorbachev was an exception, not to be
emulated and as much despised by his people and successors as he was loved by
the West. Only those feared by the West and everyone else, are likely to be
respected in Russia.
Putin understands this very well. He is increasingly disliked abroad and well
regarded, indeed revered, at home, the right combination the Russians aver. He
looks to have won a victory of sorts in Chechnya by divide and rule tactics,
using Kadyrov and his death squads against the rest, in a war that brought him
to popularity and power in the first place.
That was back in September 1999, when a series of bombings killed 300 in
apartment blocs in Moscow and elsewhere, as it turned out very conveniently for
Putin, whose ratings as Yeltsin's latest premier were a mere 2% in August, but
soared to 70% by year-end, making his election as president in March 2000 a
shoe-in. But were the Chechen terrorists really responsible? Never bashful about
their outrages otherwise, they never claimed to have been. But many
Russian-watchers of the period are making accusations as to the real
perpetrators; all of which had in common that they were NOT Chechens. It would
have been a remarkable folly for them to have provoked the Russians in such a
fashion, given that there had been an agreement in the peace treaty of 1996 that
a referendum was to be held in Chechnya in 2001 on its independence, of whose
outcome there could have been no doubt. An FSB conspiracy was a clear
No evidence has ever turned up that the Chechens were involved. A few Chechen
gangsters were rounded up, but no charges were pressed. A sinister event
occurred in autumn of 1998, pointing in a very different direction. In Ryazan in
Southern Russia alert local police spotted some mysterious, but undeniably
Russian, figures depositing sacks of something in the basement area of an
apartment block, which on inspection turned out to be highly incendiary
materials. They informed Moscow. In the middle of the night the sacks promptly
disappeared. No more was made of the matter. The late Litvinenko's 2002 work,
co-authored with Yuri Felshtinsky, FSB blowing up Russia, re-iterated this type
of revelation. It is a dagger directed at the very heart of the legitimacy of
the Putin presidency.
So the foundation of Putin's reign was a series of crimes more than likely
perpetrated by his old mentor and ministry, the FSB. Born in blood, his regime
continued in the like, the Second Chechen War being even more sanguinary than
There has been a succession of Russian journalists investigating these matters;
they have all come to a sticky end. On October 7th this was the fate, as we have
seen, of Politovskaya, who had made the exposure of Russian atrocities in
Chechnya her specialty. She was gunned down in the staircase of her apartment
bloc, as had been Galina Starovoitova, a leading liberal deputy and human rights
campaigner, in 1998 for investigating corruption in St Petersburg, Putin's
backyard. Foul play by 'rogue elements' or hired hit men of the FSB was an
obvious possibility in both cases.
In November came the new news
Then in November, on the 23rd, came the death of exiled Litvinenko, who was
a fierce critic of Russian President Vladimir Putin and his government. The
43-year-old Litvinenko, a former agent of the Soviet KGB, and its successors,
the FSB on the home front and the SVR abroad, had been investigating the murder
of Anna Politovskaya at the time. It looked at first as if he was poisoned in
London by mysterious KGB types he met on November 1st. But there are wheels
The demise of Alexander Litvinenko has caught the attention of the world. It is
like a Le Carre novel, culminating in an ex-spy cursing with his dying breath,
as the man who instigated his killing, the President of Russia himself.
Litvinenko became an ex-spy when he was sacked by the Federal Security Service (FSB)
in 1998. As a Lieutenant-Colonel, a high-up rank in a very sensitive position,
investigating corruption in the security services themselves, as well as in
society at large, his eviction would certainly have been agreed at the highest
level. In fact according to his interview published in the Sunday Telegraph -
his function was in the department that specializes in 'wet jobs' - murder and
assassination of 'inconvenient' figures on the Russian scene - and he was a
lieutenant- colonel, a senior enough rank! The FSB was headed at the time by a
certain Vladimir Putin.
Litvinenko Accused Kremlin Before His Death
Sometimes an event can light up a whole political landscape. Here it is two
events in quick succession, which are clearly related, since Litvinenko had made
progress in investigating Politovskaya's assassination at the time of his own.
Litvinenko, who died in a London hospital on November 23rd, accused the Kremlin
of killing him in a statement dictated shortly before he lost consciousness.
As a former agent he had excellent contacts and may have been in a position to
have found out the truth of her death, the identity of her killers and whoever
planned the operation in the shadowy underworld of Russian intelligence and its
murky purlieus in the criminal community. It looks as if somebody may have
thought so and acted accordingly.
Litvinenko alleged he was poisoned with a radioactive substance because of his
criticism of the government of Russian President Vladimir Putin. "You
succeeded in silencing one man, but the howl of protest from around the world
will reverberate, Mr. Putin, in your ears for the rest of your life,''
Litvinenko said in the statement. It was dictated on November 21st and read
publicly by Litvinenko's friend, Alex Goldfarb, outside University College
Hospital, where the former spy died.
Was the murder a symbolic deterrent killing warning others not to venture where
the victim did, or they will suffer the regime's lethal vengeance? Or was it
simply the belated treatment meted out to someone who defected from the secret
services, a deed that merits death in the espionage world? Or both?
Top UK Counter-Terrorism Officer and top Italian nuclear expert
''Inquiries continue into the circumstances surrounding how Mr. Litvinenko
became unwell,'' Scotland Yard officially statement. The UK's top
counter-terrorism officer, Peter Clarke, is leading the investigation.
A man came all the way from Italy to call Litvinenko to an emergency meeting at
the now-radioactive sushi bar on November 1st, where it turned out that all he
had was the print-out of an email, a fact that Litvinenko himself found
puzzling, since he could have just e-mailed it to him. It was a list of figures
in the Russian security world who could have been implicated in Politovskaya's
death, a subject which was bound to have an irresistible lure for him.
His visitor was in a highly nervous condition, said Litvinenko, and did not eat
The man is Professor Mario Scaramella, an agent of the notorious Italian SISMI,
whose history includes collusion with fascist coup plotters to blow up a train
station (Bologna 1981), forgery of "Niger uranium" documents so that
the US can invade Iraq, and the kidnap of innocent Muslims for the CIA.
Scaramella also happens to be SISMI's top nuclear materials expert.
Litvinenko was convinced himself that Scaramella was his murderer, says his
friend and co-author. "When I talked to Alexander around 12 November about
who poisoned him, we were talking only about the Italian guy Mario," Yuri
Felshtinsky, who co-authored "Blowing up Russia: Terror From Within"
with Litvinenko, told the UK tabloid, the Sun. "He was sure at this time it
was Mario. He was telling me that he was in a scheme."
"There is no doubt that this was done by the Russian government or FSB
(Russia's secret service). I think it was a warning. It is also a demonstration
that Russia doesn't care how the world reacts to what it is doing,"
Felshtinsky, 50, said.
But there is a distinct possibility that this is all coincidence. Scaramella
insists that he had nothing to do with the murder and thinks the lethal dose was
administered before he met Litvinenko. He agreed to return to London and was
undergoing tests for potential exposure to radioactive polonium 210, traces of
which were found in Litvinenko's urine.
The murder involved Polonium-210, a poisonous radioactive metal first discovered
by Marie Curie in the home country of the famous assassination target of 1981,
Pope John Paul II. The Italian panel investigator, Mario Scaramella, the very
same (whose panel found that the USSR was behind Pope John Paul II's
assassination attempt beyond a reasonable doubt) was the one who met with
Litvinenko at the Sushi restaurant, possibly to compare notes in each others'
Scaramella would learn from Litvinenko more about how the USSR accomplished the
attempted assassination operation and who could have knowledge about it in
today's regime. That information would be radioactive itself.
It is possible that Litvinenko had the ability to go further for Scaramella and
find out actual names of those FSB and former KGB involved in the 1981 papal
Pointing the finger at Putin
Whoever was the agent of his destruction, Litvinenko remained convinced that
the real instigator was Putin. ''May God forgive you for what you have done, not
only to me but to beloved Russia and its people,'' Litvinenko said in his
death-bed statement, referring to Putin. The person responsible for his death
was ''barbaric and ruthless,'' had no respect for civilized values, and was
unworthy of office,'' Litvinenko said.
The Russian regime is ''a mortal danger to the world,'' the former spy's father,
Walter Litvinenko, said outside the hospital. ''My son fought this regime, he
questioned it and this regime got him,'' he said
Putin's spokesman Dmitry Peskov reiterated the Kremlin's earlier dismissal of
allegations of involvement in the poisoning as "sheer nonsense". Putin
himself has said Litvinenko's death was a tragedy, but he saw no
"definitive proof" it was a "violent death."
This is hardly surprising in the early days of an investigation. A significant
quantity of the radioactive isotope Polonium- 210 was detected in Litvinenko's
urine. Polonium-210 occurs naturally in very small concentrations in food and
people and has industrial uses, including as a heat source in satellites and
early Russian lunar rovers.
The fact that the substance used in the killing was a very rare radioactive one,
suggests a professional security service operation and a violent death.
One could also reply to Putin that there is as yet, seven years later, no
'definite proof' that the Chechens were behind those violent deaths in apartment
blocks in Russia in 1999 and prime facie some evidence of the complicity, to say
no more, of his beloved KGB.
It is perfectly possible that Putin knew nothing about the matter. But given the
suspicious circumstances, why did he not immediately offer full Russian
cooperation with Scotland Yard to clear the case up? He suspects his beloved
former KGB colleagues were involved - that is why. It is a veritable cannery of
worms best left unopened.
As the UK journalist, Max Hastings put it in The Guardian: "The president
may not have personally ordered Litvinenko's murder, but he is overlord of a
culture which legitimated it."
Litvinenko's death has echoes of Cold War assassinations, such as that of Georgi
Markov, a Bulgarian dissident who died after being spiked with a poison-tipped
umbrella on a London street in 1978.
Litvinenko Visited Israel
There is another aspect of the matter that could provide a motive for
murder. Just weeks before he died, Litvinenko travelled to Israel with secret
documents regarding what had once been one of the world's richest energy giants.
According to the Sunday Times of London, a dossier drawn up by Litvinenko on the
Yukos oil company will be given to Scotland Yard. Litvinenko had gone to Israel
earlier this autumn to hand over evidence to a Russian billionaire of how agents
working for President Vladimir Putin dealt with his enemies running Yukos, the
He passed this information to Leonid Nevzlin, the former second-in-command of
Yukos, who fled to Tel Aviv in fear for his life after the Kremlin seized and
then sold off the US$40 billion company. Nevzlin told The Times that it was his
"duty" to pass on the file. "Alexander had information on crimes
committed with the Russian Government's direct participation," he said.
"He only recently gave me and my attorneys documents that shed light on the
most significant aspects of the Yukos affair."
Investigators have told the Times that Mr Litvinenko had apparently uncovered
"startling" new material about the Yukos affair and what happened to
those opposing the forced break-up of the company. This is a very sensitive
subject, as far as the Putin Kremlin is concerned.
A revenge killing?
There is quite another possibility, however. Litvinenko was working in the
Directorate of Operations against Criminal Organisations in the mid-to-late
1990s, under a sinister figure, General Yevgeny Khokholkov, which conducted all
sorts of murky operations, akin to Smersh (death to spies) in the James Bond
films. He admits to having been ordered to hire assassins, to organize
under-cover activities against gangsters, but also enemies of the state. To be
against the Kremlin is to be a criminal in most FSB operatives' eyes and many in
the Kremlin to boot.
Any number of people may have had deep grudges against Litvinenko dating from
that period, not necessarily ever in the FSB, let alone today, gangsters,
disgruntled hitmen and so on. Litvinenko was one of five FSB officers who
brought about the disbandment of DOCO in 1998 by the newly installed Putin after
Litvinenko had conveyed news to Berezovsky, then head of the Security Council,
that he had been told by Khokholkov to kill him: " Go waste that Kremlin
Berezovsky told Yeltsin, who used this occasion to install a new broom in the
shape of a rising star in the Kremlin bureaucracy at the time, who had been a
lieutenant-colonel in the KGB, with plenty of experience of espionage, Putin. He
forced Khokholkov into early retirement and disbanded his department. But it
turned out that Putin had been an honorary FSB agent all along, even if not on
its payroll. The purge went no further, except that the trouble-stirrers,
Litvinenko prominent amongst them, were sacked. Putin was to fall out with
Berezovsky once he had lost his usefulness after being elected president in
March 2,000. So Litvinenko, and, even more so, Berezovsky had a hand in Putin's
swift rise to power. Hence why he dispensed with them as soon as he could.
That Putin would have wanted Litvinenko 'wasted' is possible, but unlikely. He
is certainly a vindictive man, as jailed former Yukos oil tycoon, Mikhail
Khodorkovsky, could testify. But it is far-fetched to suppose that he would bear
a murderous grudge against such small fry as to order his death. especially just
before an EU-Russia summit in Helsinki. Moreover to kill him is to give him
excellent publicity; his book, "FSB Blowing up Russia," could now be
given wide publicity throughout the West, where the Kremlin does like to be
esteemed. The murky origins of Putin's rule could be dredged up yet again. As
one wag commented on Elvis Presley's death, "a very shrewd career
move." So it could turn out for Litvinenko.
Those who have studied Putin's career, however, would not rule it out. He has
ordered the killing of Chechen terrorists abroad before now and Litvinenko added
to his other sins in Kremlin eyes a newfound amity with Chechen exiles in
Ever since the horrific attack on him Russian émigrés in London have been
on edge. Litvinenko, who has said he knew he was on Moscow's "hitlist,"
became the first Russian immigrant to be targeted, and his friends and
colleagues have blamed the Kremlin, despite the fact that Moscow has rejected
the accusations as "sheer nonsense."
For Londoners, the attack on the former Russian spy, in broad daylight in the
midst of the hustle and bustle of their city, has changed the image of the
Russians who go there.
In the last decade London, promptly nicknamed "Moscow-on-Thames," had
attracted the Russian super-rich who gave the best parties in town, snapped up
the most expensive properties and sent their children to private schools.
Best-known of the 200,000 Russians who have moved to Britain is Roman Abramovich,
the multi-millionaire businessman and owner of Chelsea FC football club.
While the vast majority of Russians in London are middle-class professionals in
search of jobs and education for their children, a small number have come with
political baggage, resulting from their background and the roles they played
Akhmed Zakayev, the actor and former Chechen rebel commander, who arrived in
2002 and lived in the same street as Litvinenko, believes that Britain no longer
offers a safe haven for Russian dissidents.
"No Western leader objected to Putin about letting the security services
conduct special operations. The attack on Sacha (Litvinenko) was a direct result
of this complacency," Zakayev told The Times.
By far the most controversial figure to move to London was Boris Berezovsky, one
of the original Russian oligarchs, who amassed a fortune after the collapse of
Communism and fled Russia under the threat of prosecution for corruption. His
offices in Mayfair, central London, ringed by bodyguards and protection teams,
have become a magnet for opposition to Putin, with Litvinenko counted among his
most loyal allies. Berezovksky and Zakayev have themselves said that they
believe they are at the "top of the hitlist" of Russian émigrés in
Other former spies and dissidents who have made London their home include Oleg
Gordievsky, a British double agent smuggled out of Russia in 1985, and Vladimir
Bukovsky, who settled in Britain 30 years ago. Asked whether he was worried
about his safety, Gordievsky said: "What can I do? They can always get me
by shooting. But this is a small community in this country. We look after each
Bukovsky, however, took a dimmer view. "This is the return to the KGB era
with a vengeance," he told the Times. "Alexander Litvinenko was the
first victim, but he will not be the last."
The Daily Telegraph has carried a fascinating interview with Litvinenko, the
last he gave, which we reproduce in full:-
The Final Interview of a poisoned former spy
James Heartfield and Julia Svetlichnaja
The Daily Telegraph 25/11/2006
Death may have silenced Mr Litvinenko late on Thursday night but his testimony
lives on, most dramatically in a series of interviews he gave two academics from
the University of Westminster earlier this year. For a total of six hours, most
recently in the Hilton Hotel on Park Lane, Mr Litvinenko opened his heart to
Julia Svetlichnaja and James Heartfield and shared with them the story of his
life, from his birth in the Russian provinces to exile in London. Theirs was the
last proper interview he gave before his mysterious death and it throws a
completely new light on his past and, quite possibly, his fate.
The epitaph for Alexander Litvinenko might read "he was caught up in events
bigger than he understood". This ordinary boy from Voronezh never shone at
school, never went to university and ended up in the KGB only via his national
service in the Soviet army.
But by the time he ended his life, apparently the victim of radioactive
poisoning, he was a disillusioned exile in London, a defector who seemed unable
to plan for the future and whose conversation often darted from one subject to
another in bewildering fashion.
Among his closest friends was an exiled Chechen leader, his neighbour in
Finchley, and he admitted that Boris Berezovsky, another exile but in the past a
Kremlin kingmaker, had supported him financially. "Is this a crime?"
The one subject that caused him to lose his temper was that of his former
employer, and that of Mr Putin, the FSB, Russia's internal security service.
Criminals and gangsters, he called them.
It was not always thus. The young Litvinenko had been flattered to be recruited
into the Soviet-era KGB and had been a loyal officer for years. A promising
young officer working in counterintelligence, he was soon promoted and moved
into the more prestigious field of counter terrorism and the fight against
The early 1990s were a turbulent period for the KGB. Communism collapsed and
with it everything the KGB held most dear. But the KGB could also move with the
times. And it was determined to dominate the new Russian market economy, just as
it had the old Soviet Union.
Its tactics were ruthless and Litvinenko was expected to show no qualms about
achieving its aims. One was to protect and even recruit potential businessmen
for the new Russia. And protecting them meant getting rid of their rivals too.
Now in his 30s, he was responsible for recruiting murderers. He would play on
their psychological weakness to win them over.
"So if somebody was the victim of a crime, like his daughter was raped, you
would offer to let them take revenge on the perpetrator," he told us at
home in his kitchen earlier this year. "This was how we recruited
Now, too, he made his first real acquaintance with the Chechens, a tough people
from the North Caucasus who were also major players in the new Russian economy.
Litvinenko both cooperated with them and was involved in the campaign to cut
them down to size, when they were perceived as a threat.
Increasingly, his department focussed on "solving" problems. For
example, as a favour to a senior former colleague in debt to money-lenders from
elsewhere in the Caucasus, he was told to arrest the creditors and execute them.
Officially, this was justified as part of the struggle against separatists.
By the mid-90s a new class of "oligarchs" was seizing control of the
country's main assets, especially its oil and gas, and becoming fabulously
wealthy in the process. As for Litvinenko, he was more and more involved in
settling scores for his masters.
"Our department worked on the so-called "problem principle": the
government had a problem and we had simply to deal with it," he explained.
One target he was ordered to destroy was another security officer who had blown
the whistle on some of the FSB's nefarious activities, Mikhail Trepashkin.
Another he was told to kidnap, to trade for FSB officers taken hostage by
Chechens was a prominent Chechen businessman based in Moscow.
By 1997 his department, ostensibly in charge of the fight against organised
crime, was, in his words, "responsible for illegal punishments or so-called
extra-legal executions of "unsuitable" businessmen, politicians and
other public figures. In parallel, the department blackmailed the same targets
In our many hours of conversation with Litvinenko he did not strike us as one
given to introspection, or even capable of analysing his own motives or actions.
But when he was told to kill one of the country's then most powerful - and most
controversial - businessmen, Boris Berezovsky, something changed.
"When I got the order to kill Boris Berezovsky, I was told that the reason
was that he had too much money and too much power," he recalled.
We asked Litvinenko why he disobeyed that order. He refused to elaborate.
"People ask me what is my relationship with Berezovsky," he said.
"Yes, we are friends and he helped me financially, for which I am
Once a patron of Mr Putin, Mr Berezovsky is now an exile in the UK, one the
Kremlin would like to extradite to Russia for trial on alleged fraud charges,
which he denies.
From his new home Mr Berezovsky wages an active political struggle against his
former protégé. But Litvinenko told him to temper his rhetoric and warned him
of the likely consequences if he failed to do so.
"I warned him recently that he cannot talk about changing the political
regime in Russia by force but he ignores me," he said. "They will get
him. He is not careful enough."
But, by defying the FSB leaders, Litvinenko set in motion the events which led
to his fleeing to Britain. He was himself arrested for supposedly leaking
classified information in 1999, released in court but immediately taken into
custody before being freed on parole. It was then that he made his escape, via
Turkey, to Britain. Mr Berezovsky, he said, had promised to help settle him in
Here he published a book about the mysterious bombings of Russian blocks of
flats that helped provoke the Chechen war of 1999. But once he had revealed the
inner workings of the FSB and he himself was no longer part of the system, his
usefulness to Mr Putin's critics was over.
He lived a curious afterlife among his fellow countrymen abroad. His Finchley
home, he told us, was bought for him by Mr Berezovsky but more recently
relations between the two had cooled. He was also more and more frustrated that
the world was not listening to his story.
Bizarrely, he even became an ally of the local Chechen diaspora, one that in
Moscow he had viciously persecuted in the 1990s for the FSB.
"Wasn't Alexander one of those who was involved in killing the Chechens?'
we asked Akhmed Zakayev, the former actor and now Chechen foreign
minister-in-exile, when we all met in the bar at the Park Lane Hilton.
"Yes, but he is our friend now', Mr Zakhayev replied. Litvinenko beamed. We
both felt sorry for him. This former FSB enforcer now seemed completely lost in
In the end he was just an ordinary Soviet soldier who had risen through the
ranks, far beyond his natural abilities, and into a world which took brutal
advantage of him but had no role for him once he had served its purpose.
The Litvinenkos' home was always very hospitable. His wife, Marina, would serve
tea before discreetly leaving the room. Alexander was extremely proud of his
young son and how well he was settling in England and good at Judo, like his
His stories were full of extravagant conspiracies, hardly surprising when he had
lived in the middle of so many himself. He was still very interested in the
world of Russian espionage and was hoping to earn a living as an intelligence
analyst, hinting that he was privy to the secrets behind many big scandals, some
of them from as long ago as the Cold War.
We talked to Litvinenko to pursue our academic research into Chechens in Moscow.
But he always wanted to return to the subject of the conspiracies that
fascinated him. Eventually, one of those conspiracies caught up with him.
· © 2006 Julia Svetlichnaja & James Heartfield.
Gazprom vice-president replaced with KGB officer
This is an ominous prophecy. Is Russia really going back to the bad old
There is mounting evidence that it is, less to Stalinism than Leninism of the
NEP period, with a top-heavy market economy in state hands, tolerating trade and
small-to-medium enterprises in private hands, while having a very repressive
Thee is mounting evidence that
A sinister portent here is that a political appointment has been made to the
number two job in Russia's key company, Gazprom. This was the practice in early
Bolshevik days. A commissar, apparently number two and subordinate, was always
breathing down the neck of top administrators, generals or whatever.
Aleksandr Riazanov, vice president of the Russian natural gas giant Gazprom was
fired because of his independence and reticence in fulfilling orders. Riazanov
was replaced with Valeri Golubev, former KGB officer and a close acquaintance of
president Putin. The parallel is exact.
The new vice-president will handle issues in the Community of Independent States
(CSI) area, the organization representing all former USSR states, except for the
three Baltic states.
Golubev, a career man in Sankt-Petersburg, just like president Putin, was named
in the position without any further comments or explanations. The St Petersburg
clan is tightening its grip on the Russian economy.
Gazprom intends to force higher prices for the natural gas delivered to Russian
neighbouring countries, and for this reason is accused of serving as a weapon
against those former Soviet states, who fail to give due deference to Moscow.
Russia Signs Key Trade Deal With U.S., Paving Way to WTO Membership
It is not only in energy that Russia matters, but in trade right across the
board. Russia and the United States signed a key trade agreement on November
12th, removing one of the last major obstacles to Moscow's 13-year journey to
join the World Trade Organization (WTO).
The deal, inked on the sidelines of a gathering of Pacific Rim economies, is a
powerful vote of confidence in Russia the largest economy still outside the
149-member WTO and signals its integration into the global trading system.
It also marks a bright spot in the two countries' relations that have been
marred by disagreements over Iran's controversial nuclear programme and
Washington's fears of a roll back of democratic freedoms under Russian President
Vladimir Putin. "I am very pleased to be here today to have the opportunity
to celebrate this very important milestone as Russia moves one important step
closer to becoming a member of the WTO," said U.S. Trade Representative
Susan Schwab. "Russia belongs as a full-fledged member of the WTO,"
she said. "We look forward to continuing these efforts to improve the
economic and commercial ties between our two nations."
Russia's Trade and Economic Development Minister German Gref called the deal a
"historic step the last step that signifies the return of Russia to the
market principles of the world economy." As part of the deal, Gref said
that Russia had pledged to cut import tariffs on a range of goods including
aircraft, computer technology, agriculture and machinery. Speaking after the
signing ceremony Gref defended those concessions. "I think we found the
necessary balance. On all positions that were sensitive for us we found a
The two countries also managed to overcome the high-profile question of Russia's
shaky record on protecting intellectual property rights. Pirated films, music
and software in Russia cost U.S. companies nearly US$1.8 billion in 2005. Schwab
said that while talks with Russia on the piracy question would continue at the
stage of multilateral negotiations, she expressed satisfaction with Russia's
progress: "We believe that the bilateral agreement is very good."
Russia-US protocol-good background for settling issues-Putin
Putin and Bush were both present in Hanoi at the signing of the long-awaited
agreement, which may mark a new point of departure in bilateral relations
between Russia and the US, which have been strained of late. Putin thanked the
US president for the constructive approach of the American side to the talks on
Russia's accession to the WTO and pointed to the importance of the protocol,
signed on November 19th, completing the bilateral talks both for the two
countries and the entire world community.
"We had worked on it for five years, and the process has been successfully
accomplished today," Putin said on Sunday at the meeting with Bush, noting
that the period of work on the agreement "was difficult and lengthy".
"I'd like to emphasize that this would not have been possible if not for
goodwill and professionalism as well as business-like approach to the
greatest-possible extent," he added. "This would not have been
possible without the US president's political will," the Russian leader
"I agree with you, George, that this document will create a favourable
background for settling all questions, including burning international
problems," Putin added. "It will also create good conditions for trade
both with our partners as well as for mutual trade," he stressed.
Order to merge banks with Vnesheconombank seen
A draft directive on entering shares in CJSC RosExImBank and OJSC Russian
Development Bank into the charter capital of Vnesheconombank will be submitted
to the government in the first quarter of 2007, the Russian Economic Development
and Trade Ministry said on its industrial and technological development plan,
New Europe reported.
The banks will be merged as part of the effort to create a new Development Bank
in Russia. A draft memorandum on the Development Bank's financial policy will be
submitted to the government at the same time, the ministry said. Russian
President, Vladimir Putin, was the first to announce that a Development Bank
with charter capital of US$2.5 billion was being set up. "We plan to
establish a development bank with capital of US$2.5 billion very soon,"
Putin said in January this year. Russian Economic Development and Trade
Minister, German Gref, said at a meeting of the government's competition council
in October that Vnesheconombank, RosExImBank and Russian Development Bank would
form the core of the new bank. Agencies have agreed that Vnesheconombank will
continue to act as the government's foreign debt agent and to handle centralized
foreign economic operations while performing the Development Bank's functions.
State-controlled bank plans to sell US$10bn in shares
State-controlled Sberbank, Russia's largest bank by assets, is planning a US$10
billion share issue in an attempt to raise capital, Russian media reported on
October 24th. The share release, which would be the second-largest in the
country's history, was discussed on October 24th by the ruling board of Russia's
Central Bank. The capital would be raised through the creation and subsequent
sale of approximately 4.7 million new shares, newspapers said. Only
government-owned oil company Rosneft's US$10.6-billion initial public offering
in July would best the Sberbank issue in terms of raw size.
A smaller share release in 2001 raised the bank's capital by one-third. The
Central Bank currently controls 63 per cent of Sberbank's shares. In five to
seven years, the Finance Ministry has said, it aims to divest all of its stock
in the bank. For now, its aim is to pare its stake to a controlling packet, or
50 per cent. Founded in 1841, Sberbank was "the bank" in the Soviet
Union, when foreign trade deals were made through Vneshtorgbank (today Russia's
number two bank), and Soviet citizens had to put their money in Sberbank. To
compete today, however, analysts and bank officials say Sberbank needs to
increase the amount of capital at its disposal. The bank's falling rates of
capital are reflected in a three percentage-point drop - from 15.5 per cent to
12.4 per cent - in Sberbank's McDonough ratio over the last three years. The
ratio measures the amount of capital a bank has on hand versus its risk-adjusted
assets. The international minimum ratio is eight percent, but in general, the
greater a bank's McDonough ratio, the more protected it is against unexpected
losses. "It became obvious that the lack of capital could soon hold back
the bank's development," the business daily Vedomosti quoted a source close
to the Sberbank board of directors as saying.
A US$10 billion share release, which would increase Sberbank's capital by 25 per
cent, "would allow us to solve that problem for a few years," said
Sergei Vasilyev, chairman of the bank's ruling board, the National Banking
Council, Kommersant reported. The increased capital would also put the
government's credit organ in better position to finance loans for state-owned
monopolies like Gazprom, the world's number one gas producer, or electricity
utility Unified Energy Systems. Some in the industry, however, doubt the Central
Bank would be willing to let control of that organ slip out of its hands.
"The loss of the Central Bank's control over Sberbank will not under any
circumstances happen," MDM Bank managing director Andrei Kantorovich told
Ministry changes position on Bank of Development
The Russian Finance Ministry has changed its position on the concept of
establishing a Bank of Development, a source in the government said, Interfax
News Agency reported.
The idea so far was that the Bank of Development would be established based at
Vnesheconombank (VEB) and then the Russian Bank of Development and Roseximbank
would join it. Along with the functions and tasks of the Bank of Development,
VEB would continue working with the foreign debt and servicing centralized
foreign and economic operations, the source said.
This concept for the bank was approved by the finance ministry earlier and
Finance Minster Alexei Kudrin sent a draft corresponding report addressed to the
Russian president to the government in August, the source said. However, during
interagency agreement meetings that took place in the first half of October,
finance ministry representatives announced a radical change in their position.
The ministry wants to establish a Vnesheconombank of the Russian Federation as
the debt agency in the form of a state corporation and the project to establish
the Bank of Development should be implemented at the Russian Bank of Development
and Roseximbank, the ministry said.
"The finance ministry has not discussed setting up a debt agency for the
last six months, after a decision was made to keep these functions at the Bank
of Development. Therefore, such a radical change in its position, approved of by
all agencies, should not cause any bewilderment," the source said.
The idea to set up a debt agency was not discussed during the most recent
meeting of a working group of the National Banking Council on upgrading the
system of state-owned banks, the said. Representatives of the Central Bank,
finance ministry, economic development and trade ministry, Federal Financial
Markets Service (FFMS) and the governmental apparatus took part in the meeting,
the source said.
Fitch assigns Sberbank's Eurobond rating
Fitch Ratings has assigned SB Capital S.A.'s US$750 million notes issue, due
November 2011, a final Long-term rating of BBB+, the agency said in a press
release, New Europe has reported.
The notes will finance a senior unsecured loan to Sberbank - Savings Bank of the
Russian Federation (Sberbank), rated Issuer Default BBB+ with a Stable Outlook,
Short-term F2, Individual C/D and Support 2, Fitch said.
Fitch puts NWT on rating watch evolving on acquisition of PTT
Fitch Ratings has put Russia-based OAO Northwest Telecoms' (NWT) Issuer Default
rating (IDR) of 'B+' and National Long-term rating of A(rus) on Rating Watch
Evolving (RWE), the international ratings agency said in a press release, New
This follows its announcement to acquire 100 per cent of Petersburg Transit
Telecom (PTT), an alternative backbone operator in the city of St. Petersburg,
the release read. NWT announced that its board agreed to proceed with an
acquisition of 100 per cent of PTT from Telecominvest for an undisclosed price.
The RWE will be resolved once details, such as the transaction's price, are
revealed. The deal is expected to be closed in 2007, and will have to be
approved by the regulator, and AGMs of NWT and Telecominvest. According to NWT,
PTT reported revenues of US$57 million and EBITDA of US$31 million in 2005 and
revenues of US$35 million and EBITDA of US$18 million in 2006. No debt figures
were made available. Fitch said it will be a cash acquisition. Fitch said this
acquisition makes strategic sense for NWT as it will become the owner of the
largest backbone network in the city of St. Petersburg, its largest and most
affluent geographical market. At the moment NWT critically depends on PTT
services to carry its traffic across the city as it lacks its own backbone
Rosoboronexport closes deal to buy 66% in VSMPO-Avisma
Russia's state arms trader Rosoboronexport has closed the deal to buy a 66 per
cent stake in VSMPO-Avisma Corporation, the world's biggest milled titanium
producer, Rosoboronexport head Sergei Chemezov said on November 7th, New Europe
Asked whether Rosoboronexport plans to increase its stake to 100 per cent,
Chemezov said, "this is not required. A controlling stake - 51 per cent -
will suffice. If we have acquired 66 per cent, we'll remain with the 66 per cent
Shareholders of VSMPO-Avisma elected at an extraordinary meeting on November 7th
four representatives of Rosoboronexport to the board of directors, the company
said in a press release. The board is made up of seven members and
Rosoboronexport representatives have the majority on the board.
The new board includes Chemezov, his deputy Alexei Aleshin, CEO and Deputy
Director General of Oboronimpex, Mikhail Voevodin, Director General of Gas
Technology and Investment and Director General of Oboronimpex, Mikhail Shelkov.
VSMPO-Avisma Director General, Vladislav Tetyukhin, was also elected to the
board, along with Vasily Besedin, Avisma technical director and Nikolai Melnikov,
director general of planning and production management at VSMPO-Avisma.
Chemezov was elected chairman of the board of directors.
VSMPO-Avisma is planning to carry out an IPO in 2007, despite the fact that the
company's majority shareholder has changed. "The IPO is still part of the
company's plans. It will not take place this year. Next year we will seriously
think about the IPO," Tetyukhin said. "The re-evaluation of the
company will take place closer to the IPO," he said.
Chemezov said that during preparations for the IPO the company's board of
directors might receive one independent member. He said that this would more
than likely be a foreigner.
VSMPO-Avisma plans to exceed its production target two per cent in 2006,
Tetyukhin told journalists. He said that this year the company plans to produce
23,500 tonnes of titanium and titanium products, instead of the 23,000 tonnes
planned earlier. The company plans to produce 27,000 tonnes of titanium and
titanium products in 2007.
LUKoil could boost oil production 6.2% in 2006
LUKoil plans to produce 24.6 million tonnes of oil in the fourth quarter of
2006, the company said in a third-quarter financial report. LUKoil produced a
total of 71.134 million tonnes in the first nine months of 2006. The company
could produce 95.734 million tonnes in 2006, which is 6.2 per cent more than in
2005. LUKoil expects to produce 3.9 billion cubic metres of gas in the fourth
quarter, New Europe reported.
The company produced 9.983 billion cubic metres of gas in the first nine months
of the year. Total gas output could grow 80 per cent from last year to 13.883
billion cubic metres in 2006. LUKoil boosted revenue to Russian accounting
standards 20.1 per cent year-on-year in January-September to 549 billion roubles,
the oil major said in its third-quarter financial statement. The company said
that revenue grew on the back of higher oil and oil product sale prices and
volumes. Revenue in the third quarter grew 15.9 per cent from the second quarter
to 199.9 billion roubles, mainly due to higher exports and domestic sales.
Piebalgs, Boyko see smooth flow of gas toward EU market
EU Energy Commissioner, Andris Piebalgs, and Ukrainian Fuel and Energy Minister,
Yuri Boyko, during their meeting in Brussels on October 18th, reaffirmed
bilateral energy cooperation and repeated promises that gas supplies to Europe
from Ukraine should be adequate this winter. With memories still fresh of a
price dispute that led to Russia switching off supplies to Ukraine last January
triggering gas interruptions in several EU Member States, Piebalgs and Boyko
also discussed Kiev's relations with Moscow. Russia supplies 25 percent of the
EU's gas, New Europe reported.
"They discussed gas supplies and again they assured that there isn't going
to be any interruption of supply this winter," Ferran Tarradellas Espuny,
the spokesman for the EU energy commissioner, told New Europe on October 19. He
noted that Piebalgs and Boyko also addressed Ukraine's relations with Russia
because "certainly this relationship is essential, but they did not talk
The Ukrainian side confirmed that "the reserves of their deposits are at 23
billion cubic metres which should be enough to ensure that gas will available
even if there is certain interruption of supplies from Russia due to a hard
winter," Tarradellas Espuny said.
Piebalgs and Boyko also discussed the condition of Ukraine's gas transportation
network. They stated their intention to integrate the Ukrainian energy system
with the European one by end of 2007. Piebalgs and Boyko signed a Joint Report
on the implementation of a Memorandum of Understanding on Energy cooperation
between Ukraine and the EU, Tarradellas Espuny said. Ukraine and the EU signed
the MoU on December 1, 2005.
Alyona Gromnitskaya, press-secretary of the Ukrainian minister of fuel and
energy, told New Europe transportation of gas, prices and European energy
security are key subjects in the relations between Ukraine and Russia and
between Ukraine and the EU. "We have to reconstruct our gas system, but we
have now a programme about the modernisation and reconstruction of our
system," she said telephonically from Kiev on October 17.
Ukraine pursues a policy of diversification of energy resources that includes
gas supplies from Russia and Turkmenistan, Gromnitskaya said. But she admitted
that a project, opposed by Moscow, to extend the Odessa-Brody oil pipeline to
Plock in Poland to transport Caspian crude to Europe has been put on the
backburner for now. She said it would all depend on Ukraine's negotiations with
Kazakstan and Azerbaijan to secure oil supplies and on talks with consumers in
She also said she is confident there will not be a repetition of last January's
price dispute between Russia and Ukraine. "Europe can be calm because there
won't be any problem with gas transportation through the territory of
Ukraine," she said. The government of Ukrainian Prime Minister Viktor
Yanukovich has helped rebuild strategic relations between Kiev and Moscow and
negotiations over next year's gas prices are continuing, Gromnitskaya said,
adding that final prices would be decided in late November or early December.
Yanukovich announced earlier that he had agreed with the Russian natural gas
monopolist Gazprom for continued supplies of the fuel from Russia to Ukraine for
the price of US$135 per 1,000 cubic metres, compared to a European market price
Anatoly Hritsenko, minister of defence, attacked the tentative energy deal,
saying "it (the natural gas agreement) absolutely is not in the national
Ukrainian interest." He accused Yanukovich of continuing the Ukrainian
government's long-established tradition of insider dealing with the Russian
natural gas industry, and of avoiding badly-needed diversification of energy
But the spokeswoman for the Ukrainian fuel and energy minister told New Europe
Ukraine's national interests are the current government's top priority. "We
try to correct these mistakes which were conducted in Ukraine by the policy of
the first government," Gromnitskaya said.
She said that while friendly relations between Russian President Vladimir Putin
and Yanukovich certainly don't hurt, it is economic factors that dictate the
terms of gas price negotiations between Kiev and Moscow. "We can assume
that their relationship will play a key role to achieve the best price and
nothing else. Not any special attitude from Mr. Putin to Mr. Yanukovich. Maybe
they have a friendly relationship and we can recover our ties with Russia. There
were a lot of problems in our relations (with Russia) but now we have a lot of
professionals in our government that can improve our initiative and make
economic arguments in negotiations that serve our national interest," she
Gromnitskaya also dismissed as "untrue" a report from Vedomosti
newspaper on October 16 that promises from Kiev to "help" Russian
companies acquire stakes in Ukrainian aircraft production and utilities framed
an August deal that left the price of Russian gas to Ukraine unchanged till
Political disputes between Ukrainian government officials are common in the
current government with pro-Russia and pro-western ministers often at odds over
policy issues. A multi-party treaty signed in June to avert a constitutional
crisis created a compromise government by including most of the country's
widely-split political factions, and so has left the government generally
incapable of action.
Political instability and the uncertainty of Russia-Ukraine gas contracts are a
cause of concern for the EU, analysts say. Moreover, Russia's willingness to
give Yanukovich a preferential US$135 deal could be seen as a signal to
Ukrainians that they are better off with Russia-compliant, anti-NATO leaders
than with pro-western ones. And they are more likely to stay warm.
Foreign investment increases 41.9% in January-June
Russian President Vladimir Putin has noted the ever-increasing foreign
investment in the Russian economy. "The growth amounted to 41.9 per cent in
the first six months of 2006," the president said at a meeting on the
implementation of investment projects in St. Petersburg, New Europe reported.
"Experts believe that in future the growth of investments will exceed GDP
growth several-fold," Putin said.
About 94 per cent of investors who work on the Russian market evaluate their
business as successful and plan to expand it in Russia, Putin said, citing a
corresponding poll. This investment plank needs to be constantly increased and
actively work with investors, and not let agreements fall apart, he said.
"Facilities in St. Petersburg are in their own way a business card for
investment cooperation," Putin said. He said a huge amount of resources has
been invested in the St. Petersburg economy. "The volume of financing is
huge. There haven't been so many resources in St. Petersburg's recent past -
more than 300 billion roubles," he said.
These resources are coming from different sources of financing - from the city
budget, the federal treasury and from private investors, Putin said. He reminded
the St. Petersburg authorities that the federation helps to fulfil the city
budget. "So when you talk about financing from the city budget, we won't
forget that we provide for significant aid in fulfilling it," he said.
EBRD to double investment this year
The European Bank of Reconstruction and Development is planning to double the
volume of investment in projects in Russia this year, to a total of 2.2 billion
Euro, Bruno Balvanera, the head of the mission of the EBRD in Saint Petersburg,
told journalists on November 14th , New Europe reported.
"In 2005 investment in projects in Russia amounted to 1.1 billion euros. In
2006 we plan to double this figure," he said, pointing out that since the
EBRD has been in Russia the bank has invested 7.5 billion euros in various
Balvanera was quoted as saying the EBRD is planning to develop cooperation with
Russia in four areas: infrastructure, energy supply, support for the private and
financial sectors. The head of the EBDR office in Russia added that the bank is
planning to cooperate with UES Russia in power generation and distribution.
Moscow, Tel Aviv have trusting relations
The atmosphere in Russian-Israeli relations has improved, Russia President,
Vladimir Putin, said. "Relations between Russia and Israel are in an
absolutely new state, becoming a lot more trusting," Putin told Israeli
Prime Minister, Ehud Olmert, in the Kremlin on October 18th. Putin said Olmert's
predecessor, Ariel Sharon, "had played an enormous role in raising
Russian-Israeli relations to such a high level."
"We empathise with what happened to Ariel Sharon, of course, but we hope
that our relations with the new Israeli leadership will be no less businesslike,
warm and dynamic," Putin said, New Europe reported.
The Russian president highly commended the role of ethnic Russians in improving
Russian-Israeli relations. "We believe - not without reason - that the
(Russian citizens who emigrated to Israel) are an enormous asset that could
further improve relations between our two countries," Putin said.
"Attitudes have changed radically in Russia to those who emigrated to
Israel. We see these people as our compatriots who moved from Russia and former
Soviet republics and settled permanently in Israel," he said.
Concerning economic ties between the two countries, Putin welcomed a growing
bilateral trade, which has nearly hit a US$ two billion mark. "We are in
consultations on political issues and our cooperation is broadening even in the
sensitive military-technical cooperation sector, including on the markets of
third countries," the Russian president said.
Olmert also said he hopes that Russia will take steps to prevent its weapons
from falling into the hands of radical Middle East groups. The Russian side will
doubtless take steps to allay such concerns, Olmert said in an interview for
Interfax News Agency and the Kommersant newspaper on October 19th. He was
commenting on speculation in the Israeli media that Hezbollah could get hold of
Russian anti-tank weapons via Syria. Israel voiced its concern over the issue
and received detailed explanations from the Russian President and from Deputy
Prime Minister and Defence Minister Sergei Ivanov, Olmert said.
Russia and Israel have agreed to maintain contacts to prevent Iran from
obtaining weapons of mass destruction, Olmert said. "We and the Russian
side have reached an agreement that Iran must be prevented from obtaining
non-conventional weapons. We agreed that we will continue contacts to attain
this result," Olmert said, summing up the results of his visit to Moscow.
"Iran was the central issue in the talks with the Russian leadership,"
MINERALS & METALS
TMK to complete acquisition of Orsk engineering plant
Pipe Metallurgical Company (TMK), Russia's biggest pipe producer, expects to
close a deal to buy 75 per cent of the Orsk Engineering Plant in the Orenburg
region by January 31st, 2007, TMK said. TMK in August entered into an agreement
to buy the 75 per cent stake in the Orsk plant for US$45.5 million from the
Sinara group. Under the terms of the deal, TMK is supposed to pay this amount by
December 1st, and Sinara is supposed to transfer the shares to TMK by January
31st, New Europe reported.
The Orsk plant makes products for the oil and gas industry and for agriculture.
Its main products are joints for drilling pipes, spare parts for drilling pumps,
adapters for drill pipe string, couplings, hydraulic cylinders, gas tanks and
fire extinguishers. The plant increased production by 28.6 per cent in the first
eight months of 2006. The biggest increase in output was 39.9 per cent for
drilling joints, to over 118,000 sets. TMK is the second biggest producer of
steel pipes in the world and the third biggest producer of seamless pipes for
the oil and gas sector. The company produces an estimated 44 per cent of
Russia's steel pipes.
Inprom boosts revenue 40% in January-September
Inprom, a Taganrog-based metals trader, increased sales by 39.5 per cent
year-on-year to 8.2 billion roubles in the first nine months of 2006. This is
equivalent to the company's sales in all of last year, Inprom financial
director, Alexander Larionov, said during a webcast recently, New Europe
The company expects a net profit of about 80 million roubles for the nine
months. Shipments in the nine months were up 34 per cent year-on-year to 500,000
tonnes, he said. Inprom's assets grew 54 per cent to 7.8 billion roubles, which
is three per cent more than the target. Net assets exceeded the business plan
forecast by eight percent. Director Genral Igor Konovalov attributed the growth
to a general improvement in solvent demands in the engineering, construction,
mining and energy sectors. He predicted that Inprom would top its business plan
targets for this year. "The reason for this confidence is the strong demand
from key metal-consuming sectors and relative price stability," Konovalov
said. Larionov said that one of the company's competitive advantages was its
network format, with a broadly developed range of metal processing services at
its own production and warehouse facilities.
Russia expects to renew EU steel deal by end 2006
Russia expects to renew its steel trade agreement with the European Union for
another year by the end of 2006, Vladimir Tkachenko, deputy head of trade
negotiations at the Russian Economic Development and Trade Ministry, told
reporters, New Europe reported.
Tkachenko said that talks with the EU about steel trade in 2007 were on going,
but there were some complications. He said the EU wanted a new steel agreement,
but there would be too much bureaucracy involved and that it would be better for
Russian to renew the existing deal.
In addition, steel producers from Russia and the EU had already agreed on the
parameters of next year's quota, Tkachenko said.
The EU might start setting autonomous quotas for Russian steel companies if a
new deal is not reached by the end of this year, Tkachenko said. "That
would not be as good for us" as the overall quota could be reduced,
depending what method of calculation is used, he said.
Russia raised crude steel output 7.2 per cent year-on-year in January-September
to 52.5 million tonnes, the Federal State Statistics Service (Rosstat) said.
onverter steel output rose 7.3 per cent to 31.164 million tonnes and electric
steel output grew 10.6 per cent to 11.078 million tonnes.
Steel production rose 4.6 per cent at Severstal, 9.2 per cent at Magnitogorsk
Iron & Steel Works, 10.1 per cent at Novolipetsk Steel (NLMK), 7.9 per cent
at Novokuznetsk Iron & Steel Works (NKMK), 3.7 per cent at Oskol
Electrometallurgical Combine, 34.6 per cent at West Siberian Iron & Steel
Works (ZSMK), eight percent at the Chusovoi Steel Works 5.4 per cent at
Chelyabinsk Iron & Steel Works and 0.2 per cent at Urals Steel but fell two
percent at Nizhny Tagil Iron & Steel Works, Rosstat data showed.
Russian zinc group to list in London
Chelyabinsk Zinc Plant, Russia's largest producer of zinc plans to list up to 40
per cent of its shares in London and Moscow as it becomes the latest Russian
company to seek funding in the international capital markets, the Financial
The announcement came as the price of zinc hit an all-time high.
Chelyabinsk aims to sell 35-40 per cent of new and existing shares. The final
terms of the agreement have not been set but market sources think the company
might raise about US$250m (£135m), valuing it at US$750m.
Sergei Moiseyev, chairman of Chelyabinsk Zinc, said the London listing was
"a key next step" in the evolution of the company's strategy. It would
help attract new shareholders, increase liquidity in the company's shares and
raise its international profile, he said.
Chelyabinsk's offering will be another big test of investor appetite for Russian
shares. Investors are becoming more selective about the initial public offerings
coming from the region. Uralkali, the potash fertiliser provider, aborted its
share offering amid signs that investors were unwilling to pay for aggressively
priced assets in IPOs.
Mr Moiseyev is confident about future prospects for the group, which has seen
its revenues soar this year thanks to rising zinc prices and increased output.
He said its assets were in good shape and the company was planning to buy more
zinc mines and smelters in the future. "I intend to consolidate this
industry, this is something that has not been done," he said.
Arkley Capital, a Russian investment fund that owns 90 per cent of the group,
will retain slightly more than 50 per cent after the share offering. Arkley is
wholly owned by three Russian businessmen, Vadim Shvetsov, Andrey Komarov and
Chelyanbinsk Zinc controls about 60 per cent of the Russian zinc market and
sells to Russian steelmakers such as Severstal and Novolipetsk, who use it to
galvanise metal. Its main asset is a zinc smelter in the Russian city of
Chelyanbinsk, which was built in 1935 and refitted with modern equipment three
Arkley Capital bought Chelyabinsk Zinc commodities trader, in 2003. Since then
Arkley has also bought Nova-Zinc, which owns the Akzhal zinc mine in Kazakstan.
From the start of next year, the mine will supply zinc ore to the smelter via a
In the first half of 2006 production jumped 33 per cent to 70,140 tonnes of
zinc. The group hopes to produce 150,000 tonnes of zinc in 2006 and to increase
annual output to 200,000 tonnes by 2009. The company is expected to generate
EBITDA of at least US$160m this year.
Credit Suisse is the sole bookrunner of Chelyabinsk's global offering, while
Alfa Bank, HSBC and Troika Dialog are co-lead managers.