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

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Update No: 313  (25/01/07)

2007 opened uneasily in a very similar fashion to 2006. Last year Russia cut off oil supplies to Ukraine for a few days, and so to Western European countries. This caused an uproar.

Russia cuts oil transit across Belarus
In the New Year Russia shut off crude-oil supplies that flow by pipeline across Belarus to Germany, Poland and other parts of Eastern Europe, charging that the Minsk government was illegally siphoning off oil meant for the other countries. This was accepted as true by Belarus and led to the stoppage of supply. As in 2006, this was swiftly resumed.
The dispute between two erstwhile allies would, anyway, have had little immediate effect because the end-customer countries have strategic reserves for at least two months. But it is rekindling discussion in Europe about the reliability of Russia as a supplier of energy. "This shows us once again that arguments among various countries of the former Soviet Union, between suppliers and transit countries, mean that these deliveries are unreliable from our perspective," Poland's deputy economy minister, Piotr Naimski, said. Poland has long been suspicious of Russia's dominance of energy supplies on the continent, as it is of all things Russian. 
Belarus, led by authoritarian President Alexander Lukashenka, has poor-to-dreadful relations with the United States and Western Europe. It is unlikely to garner the kind of international sympathy that Ukraine, for example, enjoyed when Russia cut off its natural gas in a pricing dispute in January, 2006.
The convulsions over Russia's pricing of energy supplies to its neighbours also extend to Azerbaijan, which announced that it had halted the export of oil to Russia. Officials said they planned to divert the oil to power stations to replace Russian natural gas. Russia's position is straightforward and understandable. There is a market price for natural gas and that is what they ask for their product. They see no reason or obligation to subsidise client nations, including those who once were fellow-members of the USSR. The criticism led by Germany in this instance, was that in their dispute with Belarus, they cut off the supply without consulting or informing the west European end-user. That is unlikely to happen again. What is likely to happen is that Russia will put more steam into the building of the sub-Baltic pipeline that bypasses all the transiting nations that lie in between Russia and the Western Europeans. 
Russia doubled the price of natural gas for Azerbaijan on Jan. 1st, but the country refused to accept the rate of US$230 per 1,309 cubic yards, the price that Western European countries pay.
The disputes with Belarus and Azerbaijan, after Russian confrontations with Ukraine and Georgia, are likely to give new urgency to efforts in parts of Europe to diversify the supply chain and reduce dependence on Russia, one of the continent's most important suppliers. In 2004, it provided about 27 percent of the oil consumed in the European Union, according to the bloc.
For years, Russia and Belarus have been bound together by Moscow's provision of cheap energy in return for political loyalty. But the Kremlin appears to have tired of subsidizing Lukashenka, whose government could face an economic crisis brought on by higher energy costs.
The two countries have flirted with the idea of forming a political union, but Russia is interested only in absorbing Belarus as just another province, while Lukashenka has insisted on a union of equal states, an idea the Kremlin finds ludicrous.
The European Union's energy commissioner, Andris Piebalgs, said he wanted an "urgent and detailed explanation" as to why the pipeline carrying Russian crude was closed. European officials said Germany has enough oil in reserve to last 130 days, and Poland has enough for 70 days.
Russian officials said they were examining ways of rerouting oil. The network crossing Belarus also supplies the Czech Republic, Hungary, Lithuania and Slovakia.
It is strange that ten, even eight, years ago nobody had heard of Putin. Now 'Putin' and 'Russia' are as if synonymous. He epitomizes a certain idea of Russia - ruthless, indeed pitiless, but extra keen to join the modern world. 
To do that you have to grow. That is what Russia is indisputably doing.

Putin says Russia's economic growth hits 6.9% in 2006
Russia's president said on December 29th that the nation's economy grew 6.9% in 2006, up 0.5% on 2005, highlighted other figures and praised the government's performance. Speaking following a cabinet session, Vladimir Putin said: "Economic growth hit 6.9% on 6.4% last year. We are keeping to schedule in our long-term plans." 
Putin said the stock exchange index grew 65%. "This is one of the highest indices in the world," he said, adding that basic welfare indicators were also favourable. Household incomes grew 11.5%, and pensions were raised by 5.3% in real terms, he said. 
Household real disposable money incomes in Russia reached 7.411.8 trillion roubles (US$274 billion) and household savings totalled 761.3 billion roubles (US$28 billion) as of July 1, 2006, according the Federal State Statistics Service. Average gross payrolls in June stood at 10,975 roubles (US$407) for the month, up 25.6% on June 2005. 
Under Russia's economic forecast for 2007 and forecast parameters until 2009, prepared by the Economic Development and Trade Ministry and approved by the government, household incomes are expected to rise 10.2% in 2007, 8.9% in 2008 and 8.2% in 2009, and real wages will grow 11%, 8.6% and 7.4% respectively. The forecast was prepared on the basis of projected average annual prices for Urals crude at US$61 per barrel in 2007, US$54 in 2008 and US$48 in 2009. Urals crude is currently trading at around US$58 per barrel. 
Putin added that fixed capital investment, both domestic and foreign, increased considerably, and that direct investment rose by 55.5%. "The government has played a central role in ensuring the sustainable development of the economy and the welfare sector," the president said, adding he hoped brisk growth would last into next year. 
Russia's fixed capital investment domestically and abroad is expected to increase by 28% in 2006, to US$158.5 billion, rising to US$195.8 billion in 2007, and US$264.9 billion by 2009, according to Finance Minister Alexei Kudrin. 
Foreign direct investment in Russia was US$20.8 billion, or 2.5% of the gross domestic product, in the first nine months of 2006, an almost eight-fold increase from 2000, the minister said in October. 
Other achievements this year highlighted by the president include the completion of bilateral talks on accession to the global trade body, the World Trade Organization (WTO), with main partners, the United States among them. 
Russia has yet to sign bilateral WTO protocols with Salvador, Guatemala and Costa Rica. The economics ministry expects to complete multilateral talks by mid-2007. 
Putin also cited the creation of the United Aircraft Building Corporation (UABC) as another example of progress. The UABC was set up to consolidate the country's main aircraft construction assets and to raise the national aircraft industry's competitiveness, especially ahead of Russia's accession to the WTO. 
A new state-run Development Bank, which will begin work in the second half of 2007, is a project designed as the main financial tool of state support for struggling small businesses, high-tech projects and non-mineral exports, and will thereby diversify an economy too reliant on energy exports, Putin said. 
Russia's Stabilization Fund, set up to accumulate windfall oil revenues, which have been a driving force behind the brisk economic performance, has now hit US$83.2 billion as of December 1st and foreign currency and gold reserves have reached US$299 billion. 
"All this allows us to look to next year with confidence and make new plans to promote economic growth, raise the country's potential and the well-being of our citizens," Putin said. 

The fall guy again
Every authoritarian regime needs a scapegoat; there is no doubt who it is in Putin's Russia. 
Putin is obviously no forgiving Christian. In a highly political case of justice, he chose the Christmas period as the ideal time to persecute anew his bete noir, Mikhail Khodorkovsky, already in prison for an eight-year stretch for fraud and tax evasion. No clemency for him.
A fresh judicial investigation is under way into money laundering that he and his former CEO and fellow prisoner, Platon Lebedev, allegedly engaged in when they headed Yukos, the most successful and transparent oil company in the history of Russian capitalism. That is the rub. It was showing up all the others for the crooked outfits they are - and was headed by a pair of Jews to boot.
Moreover, Khodorkovsky was developing political ambitions, as if he was living in the US and was a Rockefeller, an oil tycoon or dynast moving into politics, and on the make. He overlooked the sinister side of the Kremlin, a grave oversight for anyone aspiring to high office in Russia - and he was perhaps for 2008 aspiring to the presidency no less, or at least the sponsorship of the democratic opposition a la Soros, Dangerous terrain indeed.
Russian prosecutors question Khodorkovsky in new criminal probe, his lawyer says
Khodorkovsky was questioned on December 27th as a suspect in a new criminal inquiry. His lawyer, Yuri Schmidt, said Khodorkovsky, the former head of the Russian oil giant Yukos, was questioned on suspicion of involvement in money-laundering - allegations he dismissed as politically motivated. 
Khodorkovsky, once Russia's richest man, had been serving an eight-year sentence on fraud and tax evasion charges in a prison in Krasnokamensk, in eastern Siberia, 5,000 kilometres (3,000 miles) east of Moscow. He and his business partner, Platon Lebedev, were moved to a detention centre in the regional capital, Chita, in mid-December. 
"The new case is a continuation of selective justice aimed at applying moral and physical pressure on Mikhail Khodorkovsky, further destruction of Yukos and the confiscation of assets," Schmidt said in a statement posted on a Web site for Khodorkovsky supporters. 
He said prosecutors alleged Khodorkovsky was involved in laundering illegal oil revenues through his Open Russia foundation. Schmidt said that Khodorkovsky refused to answer questions, arguing that the investigators were dependent on the Kremlin and were incapable of conducting an unbiased probe. 
"Khodorkovsky believes that the new case is a political farce," Schmidt said in a phone interview from Chita. Supporters of Khodorkovsky say his imprisonment, and the dismantling of his oil empire, is part of a Kremlin-driven campaign to eliminate political rivals and boost state control of Russia's key energy sector. 
In a separate case, the Moscow City Court rejected on December 27th an appeal from Yukos lawyer Svetlana Bakhmina to suspend her six-year prison sentence on embezzlement and tax evasion charges, the court said in a statement. Bakhmina, who has two young sons, has been jailed since her December 2004 arrest. No clemency there either.

The ghost of Litvinenko
A book has come out in revised form that is aimed directly at the legitimacy of the Putin Kremlin, Blowing up Russia: terror from within. It is co-authored, being by Alexander Litvinenko and a historian, Yuri Felshtinsky, based in the UK since 1978. There is much more interest this time than last time in 2002, because the former was assassinated last year, in what was widely assumed to have been a state execution. 
It reiterates charges by now well-known that the successors to the KGB, the FBI, engineered the deaths of more than 300 in apartment block bombings in September, 1991, allowing Putin to win popularity by starting the Second Chechen War in December and to succeed Yeltsin the next year. 
Litvinenko is unlikely to dent Putin's popularity seriously. Russians are concerned about bread and butter issues, not political shenanigans in the Kremlin. Some might even admire Putin for his ruthlessness here, if he had a hand in it, which is not at all likely. Nor is it that he had a hand in Litvinenko's death. Not that it will have been entirely in vain. It gives historians of the future new evidence to weigh up Putin and assess his record. 
There are certain revelations of interest here. There was an owner of a small food-distribution shop in one of the apartment blocks blown up who was from the North Caucasus, Alhemez Gochiyaev, but was a Karachai, not a Chechen. He was accused of the bombing at first, but was a hardly plausible suspect and the charges were dropped. He agreed to collaborate with the authors from hiding. 
Three Duma members who began to investigate the matter and the bombings generally have been killed, two shot, Sergei Yushenko and Vladimir Golovlyov, and one poisoned, Yuri Schekochikhin. But there is no solid proof that the FSB were responsible. Russia has become so lawless anyone could have been.
The most suspicious incident of all remains the 'training exercise' carried out in Kazan just after the bombings. Local police discovered explosive materials being put in the basement of an apartment block by men who turned out to be FSB agents, a fact not denied by the organization. Its head, Nikolai Patrushev, said that it was an experiment to
test local reactions. But then the story was changed. One thing is for sure - the bombings stopped. 
The FSB is after all the heir to a long line of secret police forces that carried out many a clandestine, sanguinary operation in their time, such as the assassination of Mayor Kirov of Leningrad in the city in 1934, that set off Stalin's great purges. Kirov was very popular, the one real rival to the dictator. Disposing of him and blaming it on a common criminal killed two birds with one stone. Few historians doubt that it was done directly on Stalin's orders.
Putin is a different personality. Those with a strong interest in him winning could have done it for him without his knowledge. But he must have long since suspected this. He perhaps prefers not to think about it. Two things are for sure, no trial of Chechen terrorists has taken place indicting them for the deadly deeds; (and they have never been backward beforehand about claiming responsibility for ghastly outrages). The bombings were just a little too convenient for the Kremlin to have been accidental.

                                           ******

There has emerged on the scene a very different challenger to Putin than a failed oligarch or a dead spook:- 

Kasparov makes Putin play defence
By Michael Mainville, THE WASHINGTON TIMES, December 28th, 2006 
In his 20 years at the top of the professional chess world, Garry Kasparov was known as a risk-taker, a relentless aggressor who loved to throw his opponents off balance. A year after his retirement, Mr. Kasparov is still taking risks, but against a very different kind of opponent. 
Mr. Kasparov, 43, has thrown himself into the murky and sometimes dangerous world of Russian politics. A fierce opponent of President Vladimir Putin, Mr. Kasparov has become the driving force behind a movement to unite opposition forces ahead of Russia's 2008 presidential election. 
In the process, he has been threatened, his offices have been raided and he has even been struck on the head with a chessboard by a disgruntled former fan. 
"I'm discovering that politics, especially in Russia, is very different from chess," Mr. Kasparov said. "The rules can change. You think you're playing chess but you're actually in the casino." 
Mr. Kasparov burst into the chess world in 1984 as a 21-year-old protégé challenging the reigning world champion, Anatoly Karpov, in a match to be won by the first to win six games. 
After a disappointing start, he battled Mr. Karpov to a seemingly endless series of draws and eventually began to whittle away at the champion's lead. Then, in the most controversial finish to a competitive match ever, the World Chess Federation (FIDE) called off the contest, citing the two players' health. 
The competition had gone on for six months and Mr. Karpov had lost 22 pounds. The decision to cancel infuriated Mr. Kasparov, who went on to win a rematch the following year, and he began a long feud with FIDE that eventually led him to set up a rival chess association. 
Like many other Russians, Mr. Kasparov had hoped after the end of Soviet rule in 1991 that Russia was on the path to becoming a Western-style democracy. But since Mr. Putin came to power in 1999, he said, he has come to fear for the future. 
"Frankly, at the end of the 1990s, I thought it would be all right, that the country would flow into a better system and things would improve automatically. And then Putin arrived," Mr. Kasparov said. 
"I was more and more concerned about what was happening in my country, so I decided to use my energy, my strategic thinking and my ability to analyse situations to change something. Maybe not a great deal, but still something." 
Mr. Kasparov decided that his best strategy was to try to unite Russia's fractured opposition movements -- from left-wing populists to liberal intellectuals -- under one banner. 
He organized a conference, dubbed "The Other Russia" and timed to coincide with the meeting of Group of Eight leaders in St. Petersburg in July. It was the largest gathering of prominent opposition figures in Moscow in years.

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BANKING

Russia's VTB bank to go public in May 2007 

The Russian government hopes that the country's second-largest bank, VTB, will raise up to 120 billion roubles (US$4.6 billion) in a public share issue in May 2007, Minister of Economic Development and Trade, German Gref, said in Moscow December 21st, New Europe reported.
Half of the newly-issued shares in the second-largest bank would be expected to remain in Russia, while the rest would be placed on the international stock exchange, Gref said. After the initial public offering (IPO), VTB would not issue any additional shares until 2010, Gref said. The Russian government, which currently holds 100 per cent of VTB shares, would like the bank to develop into the largest public concern in Russia. A proportion of the shares would be sold to small shareholders, Gref said. The state's proportion after the bank went public would amount to at least 75 per cent plus one share. VTB holds 5.02 per cent of the shares in the European aeronautic and defence company EADS.

Russia world leader in banking sector growth

Russia's banking system is growing at the fastest rate in the world and 2006 was a record year for capital increases in the national financial system, Finance Minster, Alexei Kudrin, said recently, Interfax News Agency reported.
The system's capitalisation increased by 224 billion roubles and assets in the banking system grew by 3.6 trillion roubles to 13.4 trillion roubles, Kudrin said at a meeting with Russian President Vladimir Putin and members of the government. Thus, assets grew 37 percent in 2006, he said.
"We also hit such a high growth rate two to three years ago, but this is an all-time record. Our banking system is growing at such a rate that it is outpacing all other countries," Kudrin said. This is immediately reflected in a growth of individual loans and in the real sector of the economy, he said. Individual loans increased 50 per cent in 2006 and loans increased more than 25 per cent in the real sector of the economy. "This is reflected in an increased share of the financial sector in investments," he said.

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BILATERAL RELATIONS

India-Russia bilateral trade languishing at below US$3bn per annum 

Russia might have been one of India's oldest allies, but bilateral trade ties between the two countries is still a far cry from that with countries like US, China and Japan. 
It may come as a surprise to many but bilateral trade between the two nations is still languishing at just US$2.76 billion per annum. There have been quite a few silent changes in the recent past including the fact that India turned a net importer of goods in 2002-03. But a rather uncomfortable statistic exists in the fact that Indian exports into 
Russia in 2005-06 were actually lower than the exports in 1994-95. Clearly liberalisation in 1992 has not affected trade ties between the two states. 
With a 2010 estimate of US$10 billion set during Russian President, Vladimir Putin's, visit to India last year, the Confederation of Indian Industry has come up with a study on how to achieve the target. 
The study has called for higher diversification to value added products in India's export basket to Russia and has identified 20 products that hold promise. Chief among them are pharmaceuticals and textiles which grew marginally in 2005-06 but offer scope for exponential growth. Cotton T-Shirts for example suffered a 30 per cent decline in growth between 2000-06 but under the quota free regime, India is optimally placed to take advantage of the market. 
The study, which will be presented to External Affairs Minister, Anand Sharma, side steps the issue of a Comprehensive Economic Cooperation Agreement which is under consideration by a joint study group and focuses more on issues like opening up trade routes and non tariff barriers. 
"Issues like NTBs and trade routes need to be addressed for a CECA to be successful. If trade has to go up three fold from the current US$2.76 billion, then the North South corridor needs greater attention. Until a viable and shorter route for trade is worked out soon, higher growth rates in trade of goods will continue to be hampered," said a CII official. 
Energy engagement is another area where the two countries are poised to see greater cooperation. "While public sector energy companies have already made large investments in Russia, private sector companies now need to look at investments in downstream petroleum units in return for a stake in the petroleum refineries, which is mainly controlled by the government-owned enterprise in Russia," the study states. 
Russia may have fallen off the trade map for India in the last two decades but the industry is waking up to the opportunities that Asia's biggest country offers. "CECA with countries like Japan, EU and Russia is the way forward for India. As an industry looking at exports they not only offer us markets but also increase the chances of us moving forward on Non Agricultural Market Access at WTO," said CII President R. Seshasayee.

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ENERGY

Gazprom Neft, Chevron set up JV to develop projects in Russia

Gazprom Neft and US oil company Chevron have set up North Taiga Neftegaz, the Russian company said in a press release. Gazprom Neft owns 30 per cent of the joint venture and it was registered in the town of Noyabrsk, in the Yamalo-Nenetsk Autonomous District. However, the Russian company subsequently plans to increase its share to a controlling stake, Interfax News Agency reported.
Gazprom Neft and Chevron plan to implement a number of joint projects in Russia.
"Recently Gazprom Neft and Chevron have been working jointly to evaluate, explore and develop various promising projects in Russia. Chevron is satisfied with the results of this work to date," Sergei Kuznetsov, director for government and press relations at the Chevron Moscow office, told Interfax.
"In order to develop cooperation between the two companies, several promising areas of activity were noted and the company North Taiga Neftegaz was set up to coordinate the joint work of the two companies in the area of developing technically and economically beneficial projects," he said.
"Chevron highly values its existing working relationship with Gazprom Neft, which is one of the leading oil and gas companies in Russia. Gazprom Neft and Chevron have enormous respect for the professional experience and potential developed by both companies in their technical and commercial operations. The joint work currently being carried out demonstrates the confident position of our companies, which are trying to set up a profitable and mutually beneficial business," the Chevron representative said.

ConocoPhillips increased stake in LUKoil to 20%

US oil company ConocoPhillips increased its stake in Russian oil major LUKoil to 20 per cent by the end of 2006, according to the US company's report for the third quarter last year, New Europe reported. 
As part of a strategic alliance between ConocoPhillips and LUKoil, the US company acquired over 11 per cent of LUKoil common shares at an auction in 2004. According to the conditions of a shareholder's agreement, ConocoPhillips gradually increased its share in the LUKoil capital to an agreed threshold of 20 per cent. As part of their strategic alliance, on July 1st 2005 LUKoil and ConocoPhillips set up the Naryanmarneftegaz joint venture to develop hydrocarbons in Timan-Pechora oil province. LUKoil's stake in Naryanmarneftegaz amounts to 70 per cent, and ConocoPhillips - 30 per cent.

Russian oil production up 2.1% in Jan-Nov, gas - 2.5%

Oil production in Russia increased 2.1 per cent year-on-year to 438.7 million tonnes in January-November 2006, the industry and energy ministry's press service said. Gas production amounted to 596.1 billion cubic metres in January- November 2006, up 2.5 per cent from the same period of 2005, New Europe reported.
Average daily oil production in November increased to 1.331 million tonnes from 1.324 million tonnes in October. The leading producers of oil and gas condensate in the period were LUKoil, Rosneft, TNK-BP, Surgutneftegas, and Gazprom Neft, the statement read. Oil exports to countries outside the Commonwealth of Independent States amounted to 193.3 million tonnes in the first eleven months of 2006, down 1.1 per cent. Oil exports to the CIS in the reporting period amounted to 33.25 million tonnes, down five per cent. 

Exxon Neftegas finishes 1st phase construction of Sakhalin I 

Exxon Neftegas, the operator of the Sakhalin I project, has finished construction on all the main instillations in the first phase of the project, CJSC Sakhalin Projects, Rosneft's operator for shelf projects, said in a press release, Interfax News Agency reported.
The cost of the first phase of Sakhalin I, approved at the last meeting of the Authorised State Body for the project, was US$6.5 billion. The onshore drilling unit Yastreb and the Orlan offshore rig were built and brought on stream during the first phase of the project. An export oil pipeline was also built, a coastal technological complex to prepare products at the Chayvo field, an export terminal at the Port of DeKastri and a dock for loading tankers was also built during the first phase. Sakhalin I began producing oil and gas from the Chayvo field and delivering it to the domestic market in October 2005. Oil exports began in September 2006. Until the launch of the coastal technological complex to prepare products, products were prepared on a small scale at a temporary complex. The completion of construction on the main facilities during the first phase of construction, including launching the coastal technological complex, will enable production to reach its projected level of 12 million tonnes a year, or 250,000 barrels per day. Each member of the Sakhalin I consortium is selling oil under its own name. Aframax class tankers that have a capacity of up to 100,000 tonnes (720,000 barrels) are delivering the oil on a year-round basis. Oil is considered sold once it reaches its destination. ExxonMobil has a 30 per cent stake in Sakhalin I, Rosneft - 20 per cent, Japan's SODECO - 30 per cent and India's ONGC - 20 per cent.

Transneft lays about 530km of ESPO pipeline in 2006 

Transneft welded about 530 kilometres of the East Siberia - Pacific Oil Pipeline (ESPO) this year, the Project Management Centre, a Transneft subsidiary, said on December 28th, New Europe reported.
The construction is underway between Taishet and Ust-Kut in the Irkutsk region and Tynda and Skovorodino in the Amur region. "Apart from laying the pipeline, the company prepared for future work: storage facilities and operation bases were created and ways of transportation of materials and equipment were considered," the press release quoted from Centre General Director Anatoly Bezverkhov. "Thus, in early 2007 we will quickly start extending the ESPO on the basis of feasibility studies made and approved this year." The company will focus on laying the pipeline and building pumping stations and the Kozmino special seaport on the Primorye territory next year. A feasibility study of the first extension between Ust-Kut and the Talakan field has been approved, while feasibility studies of the Tynda-Aldan and Talakan-Aldan segments and the Kozmino special seaport will be assessed early next year. It was reported earlier that Transneft planned to lay about 1,250 kilometres of the pipeline in 2007.

Ministry predicts Russian oil and gas production will grow 

The Russian Economic Development and Trade Ministry is forecasting that oil production in Russia will grow to 512 million tonnes in 2010, the ministry said in an adjusted social and economic forecast for 2007-2009, Interfax News Agency reported. 
Oil output is forecast at 480.4 million tonnes in 2006, at 492 million tonnes in 2007, at 500 million tonnes in 2008 and at 507 million tonnes in 2009. Oil exports are forecast at 251.5 million tonnes in 2006, at 262 million tonnes in 2007, at 269 million tonnes in 2008, at 274 million tonnes in 2009 and at 271 million tonnes in 2010. Petroleum exports are forecast at 103.5 million tonnes in 2006, at 103.5 million tonnes in 2007, at 102 million tonnes in 2008, at 101 million tonnes in 2009 and at 105 million tonnes in 2010. Prices for Urals crude are expected to be US$61 per barrel in 2007, US$56 per barrel in 2008, US$52 per barrel in 2009 and at US$50 per barrel in 2010.
The ministry is also forecasting that Russian gas production will grow to 722 billion cubic metres in 2010, the ministry said in an adjusted social and economic forecast for 2007-2009.
Gas production is forecast at 655 billion cubic metres in 2006, 668 billion cubic metres in 2007, 683 billion cubic metres in 2008 and at 705 billion cubic metres in 2009. Gas exports are forecast at 202.5 billion cubic metres in 2006, at 200.8 billion cubic metres in 2007, at 208.5 billion cubic metres in 2008, at 218.4 billion cubic metres in 2009 and at 223.4 billion cubic metres in 2010.
The average contract gas price, including the CIS, is forecast at US$248.6 per 1,000 cubic metres in 2007, and at US$267.2 per 1,000 cubic metres for the non-CIS. The average contract price is forecast at a respective US$237.6 and US$251.3 per 1,000 cubic metres in 2008, at US$226.1 and US$236.5 in 2009, and at US$213.4 and US$221.5 in 2010.

Gazprom will supply gas to Moldova at a price of US$170 in 2007 

Gazprom will supply gas to Moldova at a price of US$170 per 1,000 cubic metres in 2007, Sergei Kupriyanov, an official Gazprom spokesman, said after talks with a Moldovan delegation on December 26th, Interfax News Agency reported.
"We have finished talks with Moldova. We have agreed to change over to a net back price [for calculating transportation costs] against the average European price in 2011," he said. "We will provide for a smooth transfer. Moldova will pay US$170 per 1,000 cubic metres in cash in 2007, 75 per cent of the net back price on the European market in 2008, 80 per cent in 2009 and 90 per cent in 2010," Kupriyanov said. "We will also increase the stake in Moldovagaz and will get a gas distribution grid," he said. Moldova will not only pay cash for Russian gas, but will also pay with assets, Alexander Medvedev, head of Gazprom Export and a deputy Gazprom CEO, said at a press conference on December 26th in Moscow. He also said that prices will take into account the Russian export duty. Gazprom currently supplies gas to Moldova at a price of US$160 per 1,000 cubic metres.

Gazprom discussing direct gas deliveries to Greece 

Gazprom is discussing the possible development of direct gas supplies to Greece through the alternative supplier Prometheus Gas S.A., the Russian gas giant said in a press release. Gazprom CEO, Alexei Miller, and President of Prometheus Gas, Dimitris Copelouzos, met in Moscow on December 20th to discuss plans and prospects of further cooperation in supplying natural gas to the Greek market with the participation of the joint venture Prometheus Gas, the release said, Interfax News Agency reported.
The main buyer of Russian gas in Greece is the Greek state gas corporation DEPA.
Prometheus Gas is a joint venture between Gazprom Export and Copelouzos Group. It is the main builder of a number of energy facilities in Greece. However, with the liberalisation of the Greek gas market, it now has the possibility to supply gas to consumers by taking over some contracts of Greek gas monopoly DEPA.
Gazprom Export supplied around 2.4 billion cubic metres of gas to Greece in 2005. It plans to supply 3.1 billion cubic metres a year until 2016 and around seven billion cubic metres a year after 2016.
Greece does not produce any of its own gas. Gazprom supplies 100 per cent of the pipeline gas Greece imports, which is 82 per cent of the country's total need for this fuel. Gazexport supplied around 2.5 billion cubic metres of gas to Greece in 2005. The remaining demand is covered through liquefied natural gas (LNG) imports from Algeria.

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FOREIGN DEBT

Foreign debt grows 4.4% to US$268.6bn in 9 months

Russia's foreign debt rose 4.4 per cent in January-September 2006 to US$268.6 billion from US$257.4 billion, the Central Bank reported on its website. 
Government debt fell 33.5 per cent to US$54.7 billion from US$82.3 billion and accounted for 20.4 per cent of total foreign debt, down from 32 per cent. Banking sector foreign debt increased 56.7 per cent to US$78.5 billion from US$50.1 billion, with debt on loans rising 54.8 per cent to US$53.4 billion from US$34.5 billion. The debt of non-financial enterprises rose 8.4 per cent to US$135.5 billion from US$125 billion in the nine months. This debt accounted for more than 50 per cent of total foreign debt for the first time ever: it represented 48.6 per cent of total foreign debt on January 1 and 50.4 per cent on October 1. In the third quarter, the foreign debt of non-financial enterprises fell for the first time in recent years - by US$ seven billion or 4.9 per cent. This debt stood at US$142.5 billion on July 1. Debt fell on loans - by US$3.7 billion to US$102.5 billion; and on liabilities to foreign investors - by US$3.6 billion to US$15.5 billion.

Moscow, Pyongyang negotiate on North Korea's debt

The Russian and North Korean Finance Ministries held negotiations on cancelling North Korea's debt to Russia in Moscow in late December 2006, Yevgeny Anoshin, a spokesman for Russian-North Korean intergovernmental commission Co-Chairman, Konstantin Pulikovsky, said, Interfax News Agency reported.
"The only thing I can confirm is that negotiations on this issue did take place," Anoshin said.
Preparations for a session of the Russian-North Korean intergovernmental commission for technical and economic cooperation are underway now for the first time in the past six years, he said. "It will take place in Moscow roughly in March, and the key problem that complicates relations between the two countries, which is North Korea's large debt, will be raised at that session," he said.
A number of Russian media reported citing South Korean press that Russia had agreed to cancel 80 per cent of North Korea's US$ eight billion debt. According to Moscow-based diplomatic sources cited by South Korean media, an agreement on this score was reached in December and its details should be agreed upon before March.

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FOREIGN RELATIONS

Yushchenko, Putin discuss energy, relations, and trade 

Russian President Vladimir Putin arrived on December 22nd in Kiev for talks with the Ukraine leadership on energy, bilateral relations, and trade. Putin met with his Ukrainian counterpart, Viktor Yushchenko, in private discussions, and was scheduled to participate later in expanded talks with other senior Ukrainian officials, Deutsche-Presse-Agentur (dpa) reported. 
The general goal of the Putin's working visit was "to deepen trust and predictability between our two nations," according to a Russian Foreign Ministry statement. 
Yushchenko in remarks to the media, signalled Ukrainian interest in improving contacts with its giant northern neighbour, saying in part "I am confident that with good will the sides (Ukraine and Russia) can find ways of resolving a whole host of issues." 
Personal relations between the two leaders have been icy. During Ukraine's Orange Revolution, Putin openly supported Yushchenko's opponent. The Russian leader's last visit to Ukraine was in March 2005. 
The talks on December 22nd were, according to their official agenda, the most ambitious ever planned between Putin and Yushchenko. 
Putin also was set to meet with Yushchenko's main opponent in Ukrainian politics, pro-Russian Prime Minister, Viktor Yanukovich, the premier told reporters. 
Russian media identified the probable main topic of the talks as energy, focusing on Russian fuel deliveries to Ukraine, Russo- Ukrainian coordination on deliveries of Russian oil and gas to Europe via Ukrainian pipelines, and cooperation between both countries' atomic energy industries. 
Aleksei Miller, CEO of the Russian natural gas monopolist Gazprom, was a possible member of the Russian delegation and could participate in the Putin-Yushchenko talks, Interfax reported. 
Shortly after his first meeting with Putin, Yushchenko said talks had centred on establishing a joint plan for issues Moscow and Kiev would prioritize during the next two years. The priority areas include standardising border regulations, resolving legal conflicts stemming from the presence of Russia's Black Sea Fleet in the Ukrainian port of Sevastopol, cooperation in aerospace development, and promotion of joint high-tech projects. 
Both Putin and Yushchenko prior to the meetings had declared their intention to discuss possible cooperation on both countries' accession to the World Trade Organisation. Putin in addition said he planned to push Yushchenko to reveal Ukraine's terms for joining a customs union with Russia and Belarus. 
The two Presidents according to Yushchenko touched on the subject only indirectly, their discussions being limited to making reduction of tariff barriers and improved transportation links a priority area for cooperation over the next two years. 
Yushchenko made no public reference to discussions with Putin on the recent death of Turkmenistan's authoritarian leader, Saparmurad Niyazov, as had been predicted by Ukrainian media. 
The two presidents were scheduled to sign agreements on travel law between their two countries, protection of intellectual property, and cultural cooperation. 
Russo-Ukrainian relations have been rocky for nearly two years, since Ukraine's Orange Revolution installed a pro-Europe government with Yushchenko at its head. 
Since then Kiev and the Kremlin have been at odds over a host of issues including natural gas pricing, basing of Russia's Black Sea Fleet in the Ukrainian port Sevastopol, accession to the WTO for both countries, and possible Ukrainian membership in NATO. 
Yushchenko on December 21 described the often tense and sometimes openly hostile relations between his government and Putin's as "far from ideal."

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MINERALS & METALS

Severstal to invest 5bn roubles in no. 3 furnace

Russian steel concern, Severstal, plans to carry out a major overhaul of its number three blast furnace, at a cost of about five billion roubles, New Europe reported.
The Severstal press service quoted Technical Director, Alexander Stepanov, as saying that the project would take two and a half years. The project involves the construction of a practically new unit with a capacity of 1.7 million tonnes of pig iron per year, using modern equipment, which will improve the technological process, reduce the ecological impact and significantly improve labour conditions.
A concurrent engineering approach will be used for the project. In the near future the company will select a designer, general contractor and equipment suppliers. Dismantling of the furnace is set to start in the first quarter 2007.
Stepanov said that this large-investment project is being carried out to maintain fixed assets in blast furnace production, and to ensure pig iron supplies for future plans to smelt 9.5 million tonnes and 2.1 million tonnes of converter and electric steel respectively.
With the same aim in mind, blast furnace number four was re-launched in December 2005 after a major overhaul, and blast furnace number five - in October 2006.
The number three blast furnace has been in operation since 1962. The furnace was halted on December 28, 2006.

GV Gold joins Russian rush to list in London

GV Gold, Russia's eighth-largest gold producer, has become the latest Russian company seeking to raise about US$200m in an initial public offering in London and Moscow, the Financial Times reported on January 11th.
The company is the second Russian gold miner to announce plans to list in London. It remains unclear what percentage of its equity will be sold.
Polymetal, the precious metals company controlled by the colourful Russian billionaire and politician, Suleiman Kerimov, unveiled plans to raise more than US$500m with stock market listings in Moscow and London.
The rush of mining companies raising capital comes at a time when metal prices have suffered sharp falls from their record highs of last year.
The miner said the IPO would involve an offering of existing shares, in the form of ordinary shares and global depositary receipts (GDRs), by the company's principal shareholders, as well as through the issue of new shares to raise capital to fund the expansion of mine production. London is the main financial centre for trading GDRs.
"The initial public offering should enhance the international recognition of the company as well as contribute to the company's further growth," said Sergei Dokuchayev, GV Gold chairman.
GV Gold is little known in the gold industry.
It is a young company with a short history of mine production, and has only recently changed its name from Vysochaishy - so called after the company's main mining project, the Golets Vysochaishy open-pit mine, which is about 30km from Sukhoi Log, Russia's biggest gold deposit.
Mr Dokuchayev, chief executive Sergei Vasilyev, and fellow board members Valery Tikhonov and Natalya Opalova, together with Tatiana Zolotaryova and Vladimir Kochetkov, hold about 90 per cent of the company's shares.
Lenzoloto, a subsidiary of Russia's largest gold producer, Polyus gold, also holds a 7 per cent stake in the company.
Credit Suisse has been appointed sole global co-ordinator and book runner for the IPO.
Troika Dialog, Russia's largest private investment company, is acting as co-lead manager.
The company was founded in 1998 by Lenzoloto, which originally owned 51 per cent of GV Gold.
The other 49 per cent was originally held by Lanta-Bank, the Russian Bank, which has since sold its entire stake in the company.
Last year, GV Gold, which is located in Bodiabo, in the Irkutsk region, increased gold output by a third on the year to a modest 2.705 tonnes (86,967 ounces).
The company's gold reserves are estimated at 44.365 tonnes. It remains a comparative minnow compared with Polyus, which listed in London late last year and produced about 1m ounces in 2006. Reuters reported that GV Gold planned to raise gold output to 5 tonnes by 2009, or 85 per cent more than last year.
Other Russian resource groups that have had IPOs in the past year include Severstal and Chelyabinsk Zinc.

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