Books on Russia
Update No: 308- (31/08/06)
Fifteen years on, wherefrom and wither Russia?
The collapse of the Soviet Union fifteen years ago happened in barely three
months, actually three weeks in the main. By mid-September 1991 all the 14
non-Russian constituent republics had declared independence from Moscow, even
while the Soviet Union itself was to retain a shadowy existence until the end of
It was a comprehensive phenomenon, and much of what has followed, even until
now, must be understood under the shadow of that mighty event, surely one of the
most extraordinary in human history.
The Soviet collapse, actually, did not happen over the last weeks of 1991: it
continued throughout the 1990s. The USSR had had institutions - those of a
party-state command economy - and they were systematically destroyed in that
decade. Bad institutions perhaps; but better than no institutions.
With all the post-Soviet states, there ensued a more or less complete lack of
institutions, that have been derided, depleted or destroyed. Revolutionaries
have a zeal for destruction, all of course to clear the decks for their creative
project, which then turns out to be a disaster.
They "created" 15 states where there had been one, none of which had
adequate, or in some cases any, systems or networks for efficient governance.
For most of former Soviet citizens, especially those in the Caucasus, where
brutal wars broke out in and around Georgia, Armenia, Azerbaijan, North and
South Ossetia and of course Chechnya, it was a bloody disaster.
That great crisis has had many victims. But, it is worth remembering that it
could have been much worse: there was little or no armed conflict in the Slav
states of Russia, Ukraine and Belarus, only minor skirmishes as the Baltic
states took early independence; a vicious but contained separatist struggle as
Slav Transnistria declared effective independence from Moldova; and a good deal
of violence and/or repression in central Asia, with the partial exceptions of
Kazakhstan and Kyrgyzstan.
All states have had to construct governing systems from the ruins of the Soviet
ones - and these have varied from the comparative, Western-oriented success
stories of Estonia, Latvia and Lithuania to the ghastly tyrannies of
Turkmenistan and Uzbekistan.
There was also, however, in certain successor states and in Russia itself - for
a while - a liberation of thought, speech, publishing and broadcasting (though a
great deal of that had already been effected under glasnost, in the last years
of Mikhail Gorbachev's leadership). These are not negligible advances. Visitors
to Russia are often told: 'We lived well back then (in Soviet times), but it was
a nightmare.'" Indeed: and a great many other people did not live well,
even by low Soviet standards - though they did live more securely.
The 1990s, however, saw inter alia an economic meltdown. The 90s decade in the
Slav states, as well as elsewhere, saw a comprehensive hollowing out of
communism and the command economy. People's living standards were declining
precipitously under Gorbachev; but then came a stark collapse of most of the
population's living conditions, notably under the 'shock therapy' of Gaidar, and
the privatisations of Chubais, to be consummated by the collapse of the rouble
in 1998 and the destruction of the middle class.
Yegor Gaidar, Yeltsin's first premier, is a very intelligent and well-educated
man, a highly sympathetic figure, certainly more to the liking of the West than
any of his successors, mostly KGB cadres. But he fell under the spell of what
Dennis Healey aptly called the sado-monetarists and the free marketers, who made
life grimmer for the British in the early 1980s (and then again in the early
1990s), with the stern injunction that there was no alternative to it. Of course
it would be absurd to compare the post-Soviet debacle with the effects of
Thatcherism, which had its therapeutic side too.
The 1990s were the time of BMWs with tinted windows and of an oligarchic
grabfest. But the oligarchs, unattractive as they were and are in the sheer
scope and energy of their greed, were also not the problem. Once property was
decommunised - the earnest and achieved aim of the radicals grouped round Gaidar,
who as a united team served only one year in government at the start of the
post-Soviet era - then there could be nothing other than a grabfest, and it was
one that went on at every level and in every region.
As the Princeton historian Stephen Kotkin puts it in the best short account of
the period (Armageddon Averted): "Russia's was not, and could not have
been, an engineered transition to the market. It was a chaotic, insider mass
plundering of the Soviet era with substantial roots prior to 1991 and
ramifications stretching far into the future."
The 1990s ended with the termination of the Gaidar-Chubais project in the events
of 1998, the collapse of the rouble and much else besides.
The saviour to the rescue?
Vladimir Putin, who inherited the mess in 1999-2000, is perhaps the most
popular politician in his own country in the world. He won by getting over 70%
of the popular vote last year; and his ratings in the polls are even higher now,
after his successful handling as host of the St Petersburg summit of the G8 in
June, which has put Russia right back in the geopolitical spotlight. He is the
reverse of Gorbachev, the darling of the West, but (for the vast bulk of his
compatriots) the bane of Russia.
He has been enormously lucky, but he has had the great quality of successful
politicians of making the most of his luck. He has benefited from four quite
The first was that the chaos of the 1990s was beginning to sort itself out. New
powers, very substantially based on Soviet models (the quote from the anonymous
Putin aide, "the solutions are half Soviet", is very apposite here)
had settled into place. The division of property had been made - and though it
could be unpicked (was, in the case of Mikhail Khodorkovsky's vast holdings, and
may still be further), it is at least a basis for a functioning economy.
Second, that economy functions, at present, on a vast surge in the oil price - a
"boon" that will be accursed if it stops structural reforms, as it
seems to be doing - but for the moment, a great boost to Putin, and to the
standard of living of Russians.
And third, Putin and his closest aides were KGB men who had fewer inhibitions
about the use of force in Chechnya than had the Yeltsinites, and thus felt
themselves free to pursue a war of terrible attrition until today's
unmistakable, if tenuous, victory.
And fourth is the yearning of the Russians for stability. This is always
supposed to be a particularly Russian trait explaining the much vaunted love of
autocracy, but which is more sensibly explained by a general human desire for
predictability and security in life.
Because of the four elements above, the Russian president has been able to give
this security and to preside over a renewal and expansion of the middle class;
and to benefit from the support of Russians, who see in him a reliable ruler -
one even able to reverse some of the national humiliations (as many see it) of
the Gorbachev and Yeltsin years, as attested by his robust performance at the St
Petersburg summit, when Bush unwisely chose to enter into a battle of wits with
a man far cleverer than himself (see last issue).
All of this is a cause for satisfaction on the part of Russia's rulers, and of a
moderate relief on the part of the people. But it will not remain a good story
if Putin's clamp on democratic choice, and on the news media tightens further.
The institutions of a free and feisty parliament, a clean and independent
judiciary and varied and inquiring news media all still wait to be created - and
though the substructure for doing so is the most promising it has been since the
days of Mikhail Gorbachev, there is little sign that any of that has priority.
On the contrary: the signs are that a solidly pro-Putin parliament has been
levered into place by extensive use of Kremlin money, arm-twisting and news
media control; that the judiciary is corrupted, most of all by its continuing
subservience to the state, wherein the latter's interests are engaged; and that
the news media are stifled.
Maybe one step backward before two steps forward. But maybe three steps
backwards before thrice steps to the diagonal - Russia is never in the
foreseeable future going to like the West.
Chechen Parliament Hails Putin
The pro-Moscow elite in Grozny, installed in the wake of the war,
demonstrate its loyalty to the Russian president at every turn. In a surprise
move, the parliament of Chechnya voted in early August to call for a change in
the Russian constitution to allow President Vladimir Putin to stand for a third
term in 2008, an idea he has firmly rejected himself.
The resolution, passed unanimously by the assembly in Grozny, appealed to other
legislatures and political movements in Russia and called on the lower house of
the Russian federal parliament, the State Duma, to initiate legislation that
would amend the present constitutional ban on a president serving more than two
terms. "President Putin took on this country at the most difficult moment
in its history," Dukvakha Abdurakhmanov, speaker of the Chechen parliament,
told his colleagues. "Political turmoil and legal chaos reigned and the
country was in economic ruins." Putin's achievements in overcoming these
problems entitled him to seek another four-year term, said the speaker.
The resolution was drafted at the request of Chechnya's pro-Moscow president Alu
Alkhanov. It was also supported by the most powerful figure in the republic,
Prime Minister Ramzan Kadyrov, without whose approval the parliament would
almost certainly never have pursued the idea. "We can see how the authority
of the Russian state is growing in the international arena, and we can see how
much attention the president pays to the regions of Russia, including the
Chechen Republic," said Kadyrov.
Most commentators have seen the resolution as a carefully staged act of
political theatre which has as much to do with portraying Chechnya in a positive
light, as with Putin's actual political future.
Russian politicians and parliamentarians have expressed doubts about the
resolution. Mikhail Yemelianov, a member of the pro-government party Edinaya
Rossia, said, "Both from a political and legal point of view, there is no
sense in changing the constitution. As for the political position, President
Putin has expressed his view more than once, saying he has no intention of
changing the constitution and extending his term." Putin himself told
French television recently, "There cannot be a stable situation in the
country if we destabilise the basic law of the state."
The key point for most observers has been not the substance of the resolution
but where it came from. "It is precisely because of the controversial
character of this proposal that the laws of politics dictated that it had to be
initiated by the 'most troubled' region in the Russian Federation, the Chechen
Republic," said Marina Litvinovich, adviser to Russian opposition
politician and former world chess champion Garry Kasparov.
Litvinovich noted that a related suggestion to hold a referendum on a third term
for Putin had come from North Ossetia, another troubled region and the location
of the Beslan school tragedy. "That means that even in these regions [the
message is that] there are no complaints against Putin," she said.
"The current political elite was born as a result of PR," agreed
political analyst Sergei Markedonov. "Public relations is a substantial
part of its political strategy. Chechnya is being presented as an oasis of peace
in the North Caucasus. Militant leaders Shamil Basayev and Abdul-Khalim
Saidullayev are dead, and an amnesty has been declared which they are already
rushing to call a political success.
"In this PR construction, a special role is assigned to the regional
authorities in Chechnya, who are portrayed as the most consistent strategic
partner of the Kremlin." As a result of this, said Markedonov, when Putin
leaves office, it is very possible there will be a re-think of Moscow's strategy
in Chechnya - and this could work against Kadyrov and his team.
"Putin is the creator and political patron of the policy of 'Chechenisation',"
said Markedonov, referring to Moscow's promotion of loyal Chechen officials to
govern the republic. "For Kadyrov and his comrades-in-arms, it is very
important that Putin's powers should be extended for as long as possible. There
is a danger for them - even though it's a hypothetical one - that with the
arrival of a new leader, the priorities of Chechen policy will be changed."
However, it is not only parliamentarians who consider Putin the best option for
Chechnya. Some ordinary people say they are comfortable with Putin, fearing that
if defence minister Sergei Ivanov becomes the next president, he will turn to
the Russian security establishment to govern Chechnya and "Chechenisation"
will be abandoned.
Others are less forgiving, blaming Putin for what they have suffered since the
start of the second military campaign in Chechnya in 1999.
"For many Chechens, Putin personifies absolute evil," said literature
teacher Usam Bakayev. "People are hoping that when he leaves, the policy
will change even a little."
Bakayev said that the local leadership would be best advised to "keep
silent, because the majority of the population is against Putin serving a third
term. By calling for this, the authorities are discrediting themselves in the
eyes of their own people."
Shahman Akbulatov, head of the Nazran office of the Memorial human rights
organisation, agreed, saying, "Those in power don't care that ordinary
people in the republic regard Putin as a killer."
"Politics in Chechnya is remarkable for its high degree of personalisation,"
said Chechen political analyst Edilbek Khasmagomadov. "So a change in
leader entails a re-division of both power and property."
Khasmagomadov said that if a replacement for Ramzan Kadyrov is found, he is
likely to come from the prime minister;s own entourage. "That's why Ramzan
Kadyrov is more afraid of his own circle than competition from outside," he
said. "And it's already becoming noticeable that the entourage is getting
fed up with its leader and his unpredictable, authoritarian actions."
Getting one's own back against Washington; Chavez comes to town
The Kremlin is deeply vexed at the way the US has taken to interfering in
its own backyard, as it sees it, namely the Near-Abroad of Central Asia, the
Caucasus, Ukraine and Moldova. The Baltic states are a different story, whose
conquest by the Russians was a geopolitical necessity in 1940, but a vast
The sequence of 'colour revolutions' has enraged the gremlins of the Kremlin no
end, in Georgia, Ukraine and Kyrgyzstan, toppling their stooges one by one. They
are convinced it was all Washington's doing, with NGOs being the nefarious tools
of the Bushites.
Now they are getting their own back, welcoming Venezuelan President Hugo Chavez,
deeply unpopular in Washington for his support of Castro, for a three-day visit
to Russia in the off season of early August, good for many a Machiavellian deal.
He made it clear it was a "working visit" by commencing in Volgograd
and Izhvesk (seat of Russia's arms industry) before reaching Moscow.
Equally, his Russian hosts took care to advertise that the last thing they had
in mind was planting a hedgehog in the American underbelly, as Soviet premier
Nikita Khrushchev used to say. That of course was exactly what they were trying
to do, bearing out the dictum of UK journalist Claud Cockburn that he never
believed anything about any government's policy until it was officially denied.
Naturally, a string of Russian commentators hastened to insist to anyone who
cared to lend an ear in Washington that there was "nothing personal, just
business" in the Kremlin's new odyssey in the Western Hemisphere - unlike
in the Soviet era.
However, it is highly unlikely Washington accepted at face value these
protestations of innocence. A US State Department spokesman expressed concern
that the developing ties between Russia and Venezuela had implications for
"regional stability" in Latin America and warned that such ties would
not be good for Moscow or Caracas.
What really incensed Washington was that by the time Chavez came to Russia on
August 2, Venezuela already had a US$52 million agreement with Russia to supply
100,000 Kalashnikov assault rifles and munitions, as well as two agreements
worth US$474.6 million for construction in Venezuela of a plant to produce
AK-103 assault rifles, along with another to produce 7.62-millimeter bullets.
And while Chavez was in Moscow, the two countries signed a contract for the
delivery of 38 Mi-17V-5 helicopters, which combine transport, gunship,
reconnaissance and rescue capabilities, and Mi-35M fire-support helicopters, as
well as an agreement for the supply of Su-30MK2 multi-role fighter aircraft.
Russian Defence Minister Sergei Ivanov estimated the contracts were worth more
than US$1 billion.
Venezuela has also shown interest in the purchase from Russia of Amur-class
submarines, Tor-M1 and Osa-10 air-defence missile systems, infantry fighting
vehicles and other equipment worth US$3 billion. Considering Russia's total arms
exports during 2005 amounted to US$6 billion, it is possible to put into
perspective the huge significance of Venezuela to the Russian arms industry.
It is the first time Russia has gained a solid foothold in the Latin American
market, which has been traditionally a US preserve. President Vladimir Putin
sought to calm US sensitivities by saying in Chavez' presence: "Our
military-technical cooperation is not meant to spite other countries. It is
aimed at reviving Russian economy and raising the living standards of the
Venezuela, in essence, is procuring the Su-35 fighter aircraft to replace its
existing squadron of F-16 aircraft, after the ban imposed on May 15 by
Washington on all arms sales to Venezuela for allegedly having an
intelligence-sharing relationship with Iran and Cuba, which, in the opinion of
the US, are states sponsoring terrorism. In other words, Washington sought to
turn the screws on Chavez and make him crawl, while Moscow swiftly stepped in to
hold his hand, making a good pile of money in the bargain.
The Russian-Venezuelan arms deal is a slap in the American face whichever way
one looks at it. Moscow has paid back Washington its US$3.8 billion deal in June
to sell 48 F-16 aircraft to Poland. Ivanov explained the Russian calculus in
As far as Moscow was concerned, arms supplies to Venezuela didn't violate
international law as there were no legal restrictions on arms exports to
Venezuela, and "Venezuela is not on any sanctions or restricted regime list
and has unhindered rights to procure arms from any country," he said.
The Russian Foreign Ministry was no less adamant. It explained that Russia was
acting within the ambit of international law and relevant Russian legislation;
the arms deal fell within the purview of "relations between two sovereign
states"; and it was based on the free play of market forces and derived out
of commercial advantages.
No matter the Russian explanation, what worries Washington even more is the
near-certainty that it is a matter of time before Russian arms exporters fan out
into the entire Western Hemisphere. Chavez has opened the floodgates for Russian
arms exports to the United States' strategic back yard.
Rosoboronexport, Russia's state-controlled arms exporter, was on record in April
as holding talks on military hardware supplies with a number of countries in
Latin America, including Cuba.
The Venezuela example may well repeat in a host of other countries - Russian
arms exporters promptly exploiting the fractures in the United States' political
relations with its South American neighbours. This puts an enormous
responsibility on the United States' "neighbourhood diplomacy".
Economic sanctions, as an instrument of diplomacy, may simply have to be phased
out of the US repertoire in the Western Hemisphere.
The emerging dimensions of the Russian-Venezuelan cooperation in the energy
sector bring this home with telling effect. Leading Russian energy companies,
including Gazprom, LUKoil, Zarubezhneftgaz and Tekhnopromexport, have been
active on the Venezuelan market. Last August, Gazprom won a tender for the Rafel
Urdaneta natural-gas project and was granted licenses for prospecting and
developing gas fields in the Gulf of Venezuela with an estimated capacity of 100
billion cubic meters.
Chavez revealed during his visit to Moscow that Venezuela sought Russian
participation in the construction of an 8,000-kilometer, US$20 billion pipeline
connecting Venezuela with the Atlantic coast via Brazil and Rio de la Plata.
Venezuela also signed an agreement with Russia for construction of a pipe-making
Venezuela's imports of goods and services from the US for its oil industry, work
out to US$5 billion. Chavez is determined to reduce the current level of
dependency on US corporations. This generates export opportunities for Russia's
Moreover, Venezuela currently accounts for 15% of US crude-oil supplies. But
Chavez is keen to develop alternative markets, including China. Herein lies the
strategic significance of the proposed pipeline project.
During Chavez' visit, a Gazprom subsidiary also clinched the deal to develop
Venezuela's gas industry. The scheme will outline a strategy for the medium- and
long-term development of Venezuela's gas sector and will include the country's
mineral base and an outlook for its development, the forecast of gas demand and
plans for gas production, transportation, distribution, storage and refining.
Again, details have emerged of Russia building a hydroelectric project in
southwestern Venezuela costing US$900 million. Putin estimated, "The
potential private investment of Russian companies [in Venezuela] may reach
hundreds of millions, billions of dollars."
What distinguishes Russia's ties with Venezuela on the one hand and US-Georgia
or US-Ukraine relations on the other is that while a broad similarity exists in
geopolitical terms, there is a sharp divergence in their actual content.
Russia-Venezuela cooperation is self-sustaining, complementary and mutually
beneficial, unlike the United States' relations with the countries of the
post-Soviet space, which are politically motivated insofar as the United States'
"partners" are far from solvent in economic terms and will remain
recipients of US assistance for the foreseeable future.
Also, unlike the US predicament with "colour revolutions" in the
post-Soviet space, Russia can confidently visualize that Latin America is
politically stable. That is to say, Latin America's "left" turn is not
by any means leading the continent to upheavals and revolutions. The
left-leaning governments in Latin America have come to power through
constitutional means and democratic elections. Thus the political situation is
becoming "stable", and no conflict needs to be expected (except if US
diplomacy deliberately works to destabilize leftist regimes in the region).
Left-leaning in Latin America is viewed in Moscow as a process rooted in the
Cuban revolution and will, therefore, retain a strong aversion toward US
hegemony. Also, Latin America finds itself as having more than one category of
left, and the situation is compounded by quarrels among its political elites.
But still there is not a tremendous amount Washington can actually do to alter
Latin America's swerve to the left. As well, while Latin America's left turn is
real, all the same, Moscow sees the current "reddening" of Latin
America as vastly different from the continent's heritage in the second half of
the last century as a "red continent". Proletarian internationalism,
of course, is a thing of the past.
Furthermore, Moscow sees the "era of 21st-century socialism" (as
Chavez once described it) as an altogether new brand of socialism fuelled by a
combination of the plunder of local resources by transnational corporations;
unfair distribution of the local national wealth, injustice, poverty and
underdevelopment caused by the rapacious local elites; and Washington's
shortsighted diktat. Thus even the radical socialism expounded by Chavez stems
from the ideals of independence leader Simon Bolivar, and actually puts forward
a capitalist path of state development.
The scenario on the whole offers a conducive framework for post-Soviet Russia to
cooperate. On the economic front, Chavez wants to get away from the neo-liberal
model and to resist globalisation. Chavez' program has an uncanny resemblance to
Russia's own approach in its search for striking a balance among the market, the
state and society. As Chavez put it once, "We need to bring the invisible
hand of the market and the visible hand of the state together in an economic
system where there is as much of the market as possible and as much of the state
Chavez' approach would, arguably, ring familiar in Putin's Russia -
"Private property, privatisation and foreign investment are still
guaranteed, although within the overall limit of the overriding interests of the
state, which will keep under its control strategic sectors, the sale of which
would mean a partial transfer of national sovereignty," as Le Monde
Diplomatique magazine summed up the complex and nuanced Chavez brand of
Thus, despite the low-key approach to Chavez' Russia visit, the fact remains
that Moscow regards him as a charismatic leader who is shrewd enough to play
with contradictions and interests. The Kremlin cannot but be acutely conscious
that Russia has some Soviet-era inheritance in Chavez' Venezuela.
The broad empathy revealed itself for a moment in public, when at the joint news
conference with Chavez, Putin dwelt on what drew Russia and Venezuela close
together. He said in measured tone: "We are actively cooperating in the
international arena and believe that the world order should be firmly based on
international law. We are in favour of a multipolar world. And certainly we
shall support Venezuela in its legitimate aspirations to take a place as a
non-permanent member of the UN Security Council."
Chavez responded by expressing his appreciation for the Russian helping hand
"for having liberated us from, shall we say, a blockade". Later,
however, at a public function in Moscow while unveiling a bust of Simon Bolivar,
Chavez was explicit about the "blockade" he had in mind.
"It seems that the United States is destined to fill the entire world with
misery while speaking in the name of freedom. This is happening in Iraq, in the
Middle East, in Latin America. The United States' empire is the biggest threat
that exists in the world today - an irrational, blind, stupid giant who does not
understand life, who does not understand the world, who does not understand
Moscow's support of Chavez' Venezuela is bound to annoy the US. But just as the
US did not think it necessary to consult Russia on its actions in Russia's near
abroad, Moscow would aim at making a point without allowing that to ratchet up
the level of mutual annoyance with Washington or resorting to rhetoric. That
will need delicate fine-tuning and cool-headedness, which today's Kremlin is
Clearly, Russia is not desperate for money at the moment. Washington is bound to
assess that in Russia's return to Latin America, foreign policy is in the
foreground. But Washington would see that it was quite different from the Soviet
forays into Latin America. The Soviet Union never counted money when it came to
support for political interests. But not so Putin's Russia, even if at times it
may mix the two aspects and sow seeds of confusion in the minds of onlookers.
On balance, Russia can be expected to act carefully and pragmatically, without
openly challenging the US, whose influence, Monroe Doctrine or not, continues to
be great in Latin America. As a Russian wit remarked, Moscow has shown that it
can eat beluga caviar with pancakes with George W Bush and a week later drink
vodka from a Cossack sabre with Hugo Chavez.
Nissan signs agreements for right to sell Infiniti
Japan's Nissan has signed three dealership agreements for the right to sell and
service Infiniti cars in Russia, Nissan Motor RUS said in a press release.
Agreements were signed with the companies Jenser (Moscow), Avtospetscerter
(Moscow) and Avtoprodiks (St. Petersburg). All three companies are already
Nissan dealers. Nissan Motor RUS General Director, Toru Saito, signed the
agreements on behalf of the company. Construction of dealerships is already
underway on Leninsky Avenue and on the intersection of the Outer Moscow Ring
Road and Novorizhsky Chausse in Moscow, and in Primorsky Avenue in St.
Petersburg. The press release also states that the launch of the Infiniti in
Europe will only start in 2008, therefore the three Russian companies will be
the first dealers of this model in Europe. An official presentation of the
Infiniti will take place at the Moscow International car show at the end of
August - start of September 2006, New Europe reported.
Total to produce 1m tonnes of oil at Kharyaga
Total E&P Russia, the operator of a project to develop the Kharyaga field in
Nenets autonomous district, plans to produce one million tonnes of oil at the
field in 2007, Total E&P Russia Production Director, Michel Pick, said,
Interfax News Agency reported.
"If transport opportunities are provided, by 2010 we plan to increase
production to 1.5 million tonnes per year, after which production volumes will
fall sharply," he said.
Total E&P human resource department Director, Maria Zubova, told Interfax
that in 2006 the company plans to produce less than one million tonnes of oil at
Kharyaga, which corresponds to the capacity provided by Transneft (RTS: TRNF).
Transneft will provide pipeline capacity of seven million barrels (about one
million tonnes) for the Kharyaga field in 2007.
Ministry waiting for Gazprom proposal on Shtokman
The Russian Economic Development and Trade Ministry is waiting for a proposal
from Russian gas giant Gazprom on the make-up of the consortium that will
develop the Shtokman field, Deputy Economic Development and Trade Minister,
Kirill Androsov, said, Interfax News Agency reported.
This issue is on the agenda for a meeting of the Gazprom board of directors,
Interfax quoted him as saying. At the same time it has not been decided when the
board of directors will consider this issue. According to Androsov, Gazprom
plans to decide on its partners in the near future. The short list of contenders
for the project includes five companies: Norway's Hydro and Statoil, US
companies Chevron and ConocoPhillips and France's Total. Gazprom plans to choose
two-three participants from this list. The Shtokman gas condensate field is one
of the largest in the world. It is being prepared for development with an eye on
subsequently supplying liquefied natural gas to the US and other countries.
ITERA trebles H1 earnings
Itera trebled net profit to Russian accounting standards year-on-year to 960
million roubles in the first half of 2006, the energy company said in its
financial report. Revenue fell 20 per cent year-on-year to 12.256 billion
roubles and costs more than halved to 6 billion roubles from 13.2 billion
roubles, but gross profit jumped 220 per cent to 6.2 billion roubles and pretax
profit was up 130 per cent to 1.3 billion roubles. Operating profit grew just
33.6 per cent year-on-year to 1.522 billion roubles in the first half of 2006
due to considerable growth in commercial expenses, which rose to 4.2 billion
roubles from 11 million roubles. The report also says that Itera had to pay
683,000 roubles during the first half of 2006 following a tax inspection,
compared with 42,000 roubles in additional tax in the same period of last year,
New Europe reported.
Siberian oil supplies to China grow 23% in January-July year-on-year
Russia shipped 23% more oil to China via the Trans-Siberian Railroad over the
first seven months of 2006 than in the same period last year, Russian rail
officials said recently, the Russian News and Information Agency reported.
In January-July 2006, the amount of Russian crude sent to China through the
border station of Zabaikalsk had increased 50% year-on-year to 30.87 million
Work is currently under way to improve infrastructure on an alternative
Trans-Siberian track, via Naushki. Some 8.08m bbl of China-bound crude passed
along the route in the first seven months of this year.
Russian oil shipments to China are expected to reach a total of 88.2m bbl in
2006, up from last year's 55.86m bbl.
China so far receives Russian oil by rail only. The energy-hungry economy will
be able to import more crude from Russia when state oil pipeline monopoly
Transneft completes the Siberia-Pacific pipeline project. The pipeline is slated
to pump up to 1.6m bbl/d of crude from Siberia to Russia's Far East, which will
then be sent on to China and the Asia-Pacific region.
Deputy Prime Minister Alexander Zhukov said during a visit to China last
November that Russia would seek to almost triple its crude deliveries from 2004
to its rapidly developing neighbour to reach 301,200 bbl/d in 2006.
Russia's Lukoil Eyes Zonguldak for US$3 Billion Oil Refinery
After taking a giant leap in oil transportation with the Samsun-Ceyhan pipeline,
Turkey has become the focus of interest for major oil refining companies.
The decision by Turkey's Calik Energy to undertake a US$4.9 billion investment
in a Ceyhan refinery with a yearly capacity of 15 million tons together with its
Indian partner, Indian Oil, prompted Russian giant Lukoil to take action,
After applying to the Energy Market Regulatory Agency (EPDK) for a licence in
July, Lukoil chairman, Vagit Alekperov, met the agency's head Yusuf Gunay.
The Russian company wants to establish a refinery with a capacity of 8-10
million tons in Zonguldak, a Turkish province along the western Black Sea coast
region, but Alekperov declared the realization of this US$3-billion investment
depends on the appropriation of land and tax discounts.
The project is expected to take five years to complete, and its future will be
determined following detailed talks with the government.
At a joint press conference with Alekperov, EPDK head Yusuf Gunay said that in
the past month alone they have handled applications for future investments
totalling more than US$9 billion, including Lukoil.
Turkey currently has a refinery deficit of nearly 20 per cent and imported
approximately six million tons of oil last year to meet the country's demand for
oil, Gunay said, "It's estimated the deficit for oil products will exceed
15 million tons in line with the increasing demand for diesel oil over the next
decade. This deficit can be recouped through either imports or by an increase in
Turkey's refinery capacity."
Alekperov stated talks for possible financial partnerships will be held after
technical and economic calculations for the project are complete; discussions
which have yet to start. He added they chose Zonguldak for its proximity to
Turkey's major cities, namely Istanbul and Ankara.
After informing press members that they also plan to start operations in the
distribution sector, the Lukoil chairman said, "Oil stations with the
Lukoil logo will be opened by September. We've started to transport supplies
from our refineries in Bulgaria and Romania."
Alekperov added "Lukoil will increase competition (in Turkey's oil market)
as a company that operates at all stages, from the well to the oil pump at the
station. Tough competition will bring fairer prices."
Lukoil's chairman asked Prime Minister, Tayyip Erdogan, for his support for the
project when he visited him together with Energy Minister, Hilmi Guler.
Novatek to use 18% of net profit for interim dividends
Russia's largest independent gas producer Novatek is planning to use about 18
per cent of net profit to pay out interim dividends for the first half of 2006,
Leonid Mikhelson, the company's CEO, said, Interfax News Agency reported.
Novatek is to hold an extraordinary shareholders' meeting on September 11th on
the payment of interim dividends for the first half of 2006, the company said in
a statement. The list of shareholders with the right to take part in the meeting
was be taken from the register on July 31st. The company said in a statement
that the Novatek board of directors confirmed a recommendation to shareholders
on the size of interim dividends at a meeting on August 7th. Dividends will be
calculated based on Novatek's report to Russian accounting standards, the
statement said. Novatek net profit to Russian accounting standards in the first
quarter 2006 amounted to 3.249 billion roubles, up 37 per cent year-on-year. In
2005 the Novatek dividend payout was 18 per cent of net profit, which amounted
to 15.178 billion roubles. As reported earlier, Gazprom, acting through ZGG
GmbH, has signed a preliminary agreement with Levit and SWGI Growth Fund
(Cyprus,), the main shareholders in Novatek, to acquire at market value up to 20
per cent of the two companies' Novatek shares in circulation, Gazprom said in a
statement. Novatek is planning to establish a subsidiary in St. Petersburg. This
is envisioned in a cooperation agreement that St. Petersburg Governor, Valentina
Matvienko, and Mikhelson signed in St. Petersburg. Novatek is planning to take
part in implementing investment projects in St. Petersburg.
Gazprom to buy Gazpromneft stake from YUKOS
Gazprom has made an offer to YUKOS to buy the oil company's 20 per cent stake in
Gazprom Neft for 1.3 billion Euro-1.9 billion Euro, Interfax News Agency has
Motivating its evaluation of the stake in the letter, Gazprom cited the purchase
of a stake in LUKoil by ConocoPhillips in 2004. The sources could not explain
why Gazprom drew the parallel with the ConocoPhillips-LUKoil deal, noting that
this analogy was not evident from the extensive letter. Group Menatep CFO, Tim
Osborne, estimated this package at three billion - four billion Euro at a YUKOS
creditors meeting on July 21st. YUKOS acquired the stake in Sibneft, which is
now called Gapzrom Neft, in a failed merger between the two companies. The
company Springtime Holdings Limited, representing the interests of
ConocoPhillips, won the auction for a 7.59 per cent stake in LUKoil, with a bid
of 1.988 billion Euro, in September 2004. Immediately following the tender, the
companies also signed a shareholder agreement entitling ConocoPhillips to
increase its stake in LUKoil to 20 per cent. ConocoPhillips called a tender to
purchase 2.4 per cent in LUKoil's charter capital to increase its share in the
Russian oil major to 10 per cent as early as in 2004. ConocoPhillips's proposal
implied the purchase of the LUKoil shares at a price lower than the market one
but equivalent to the price it paid for the government's shares, i.e. 30.76 Euro
per share, or 123.04 Euro per ADR. This prompted analysts to conclude that the
offer was meant for certain sellers with which a preliminary agreement had been
Putin, Chavez build "natural partnership"
Venezuela's populist President, Hugo Chavez, met Russian President, Vladimir
Putin, in the Kremlin recently to cement a new era of military, economic and
political cooperation, New Europe reported.
After a three-day visit charged with anti-US invective and praise for his hosts,
Chavez said he was "filled with determination" to consolidate a
strategic alliance with Russia, which he said had helped break a US military
embargo on the South American state.
Putin in turn called Venezuela a "natural partner" and praised the
steady development of bilateral ties in a wide range of spheres. On the back of
new deals in energy and arms procurement, Russian investment in Venezuela could
run into billions of dollars, he said.
Joint actions in the United Nations had also proved fruitful in the past and
Russia would back Venezuela's intention to become a non- permanent member of the
U.N. Security Council, Putin added.
Bilateral trade in 2005 jumped more than 60 per cent to US$77 million, according
to the Kremlin, and is expected to rise rapidly as the sides expand ties in
defence and oil and gas exploration. During the visit, agreements were signed
with Russia's Lukoil company to develop two oil fields in Venezuela, which has
some of the world's largest deposits.
New projects are also planned in the mining and ore processing industries, road,
rail and air transport, machine-building, banking and finance. Iran's nuclear
programme and the situation in the Middle East were also on the agenda, together
with efforts to combat international terrorism and drugs trafficking. Moscow and
Caracas shared a "similar or identical position" on most international
problems, Kremlin officials said.
As Chavez toured defence plants in Russia, Defence Minister, Sergei Ivanov,
confirmed the sale to Venezuela of 30 Sukhoi Su-30 fighter- bombers and 30
military helicopters in a deal worth more than US$ one billion.
Venezuela last year ordered more than 100,000 AK-103 rifles, a modification of
the AK-47 Kalashnikov assault weapon.
Its socialist government wants to make the weapon under license as it moves to
train and arm up to two million reservists against a feared US invasion plan.
Washington dismisses the invasion claim as absurd and says the hundreds of
millions of dollars paid to Russia could be better spent on improving life for
Chavez thanked Putin and the Russian government for their efforts that helped to
"break the US policy of disarming Venezuela completely." Cooperation
in oil and gas exploration was another key topic. Chavez was to meet with
Russian oil company representatives to discuss construction of the world's
longest pipeline running 8,000 kilometres across South America.
MINERALS & METALS
RUSAL and ROSATOM Sign Memorandum of Cooperation
RUSAL, the world's third largest aluminium producer, and Russia's Federal Atomic
Energy Agency (ROSATOM) have signed a memorandum of cooperation over plans to
build facilities for aluminium production and energy generation,
The Memorandum outlines an agreement for pooling research into long-term
investment projects, including the construction of new nuclear power stations
and modernising existing facilities. Prospects for further cooperation are also
included, within an overall program for developing nuclear power in Russia.
As a global leader and national champion in Russia's fast evolving and highly
energy-intensive aluminium industry, RUSAL is an ideal partner in this venture.
The company has the capability for securing a high level of investment and a
stable consumption schedule - the two key factors vital in supporting Russia's
plans for developing its nuclear energy industry.
RUSAL's strategy as a dual energy and metals company centres on boosting
aluminium production to 5 million tonnes/yr, through both the expansion of
present capacities and the construction of greenfield smelters assured by
long-term energy supply contracts.
RUSAL and ROSATOM are to establish a joint Project Office to coordinate
activities and deal with issues such as preparing a project feasibility study,
the selection of possible sites and devising the terms of future cooperation.
Following the completion of the necessary feasibility studies, the two parties
will develop a scheme to deliver the project and finalise appropriate
Polymetal silver output down 8%, gold up 6% in H1
Polymetal, Russia's biggest silver producer and second biggest gold producer,
reduced silver production eight per cent year-on-year in the first half of 2006
to 8.523 million ounces. The company said that gold production rose six per cent
to 116,000 oz. The results were in line with company forecasts, New Europe
Silver production fell because the company mined lower-grade ores at the Lunnoye
field. Gold production grew with the launch of the second stage of the
Vorontsovskoye mine. Gold sales rose nine per cent to 116,000 oz at an average
realized sale price of US$591/oz including a discount against LME prices,
compared with US$422/oz a year earlier. The average realized sale price of gold
was US$626/oz in the second quarter of 2006, compared with US$422/oz in the same
period in the previous year. Silver sales fell 9 percent to 8.621 million oz at
US$8.8/oz, compared with US$7.1/oz in the first half of 2005. The average
realized sale price of silver was US$9.3/oz in the second quarter of 2006
compared with US$7/oz in the same period in the previous year. Ore extraction
decreased 13 per cent to 1.221 million tonnes as open-cast mining fell 17 per
cent while underground mining rose nine per cent. "The decrease in
open-pit-mining was due to a temporary drop in mining work at Vorontsovskoye to
prepare pit pumping and also due to the step-by-step completion of open-pit
mining and the scheduled start up of underground operations at Lunnoye in 2007.
VolgaTelecom Reports Financial Results and Economic Activity for 1H 2006
OJSC VolgaTelecom has reported its financial results and economic activity for
1H 2006, according to Russian Accounting standards (RAS), www.russianewswire.com
Proceeds for the half-year amounted to RUR10 170.3 million - a growth rate of
99.6% compared to the same 2005 period. Telecommunication services income
reached RUR9, 602.8 million (96.4%). (The index of revenue growth dynamics is
explained by changes related to market liberalization in the long-haul
communication sector and the non-availability of ILD and DLD communication
income in the Company's proceeds, starting January 1, 2006).
The principal share in the revenue structure is the income from providing local
communication services - 54.4% (RUR5, 223.5 million), income from intrazonal
communication services - 13.9% (RUR1 334.1 million), income from traffic
connections and transmission - 16.9% (RUR1 619.6 million), and that from
value-added services - 10.3% (RUR991.5 million).
The growth rate of expenses incurred in general activities for 1H 2006 amounted
to 102.1%, and the total amount of expenses - RUR7 549 million. The biggest
share in the expense structure is for, as usual, wage costs - 36.5% (RUR2 753
million). In the first half year the share of depreciation deductions increased
to 18.8% (RUR1 418.2 million), interconnection expenses amounted to 4 % of the
total (RUR299.8 million), and expenses for materials, for heating and electrical
energy - 10.8% (RUR816.5 million).