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RUSSIA


  
   

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 346,520 310,000 259,600 16
         
GNI per capita
 US $ 2,140 1,750 1,690 100
Ranking is given out of 208 nations - (data from the World Bank)

REPUBLICAN REFERENCE

Area (sq.km)
17,075,400

Population
145,470,197

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

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

Currency 
Rouble

President 
Vladimir Putin

  

Background:
The defeat of the Russian Empire in World War I led to the seizure of power by the communists and the formation of the USSR. The brutal rule of Josef STALIN (1924-53) strengthened Russian dominance of the Soviet Union at a cost of tens of millions of lives. The Soviet economy and society stagnated in the following decades until General Secretary Mikhail GORBACHEV (1985-91) introduced glasnost (openness) and perestroika (restructuring) in an attempt to modernize communism, but his initiatives inadvertently released forces that by December 1991 splintered the USSR into 15 independent republics. Since then, Russia has struggled in its efforts to build a democratic political system and market economy to replace the strict social, political, and economic controls of the communist period. 

Update No: 276 - (01/01/04)

The elections to the Duma have produced an expected result in a big win for the pro-government bloc, United Russia, on 37%, even while the communists have shrunk in size to 12%, putting them barely ahead of the Liberal Democratic Party of Russia on 11.7%. The new party, Rodina, or Motherland, led by Sergei Graziev, did well at the communists' expense, with covert support by the Kremlin, many suspect. The other important parties have remained in single figures, and the two genuinely liberal ones, Yakoblev and the Union of Right Forces, failed to reach the 5% threshold for representation on the party list. Yet the communists are the great losers, down from 40% in 1996, their high point. Their day looks over for good, relying as they have done on a greying support group of older citizens.
The result does not necessarily mean that any tampering with the count took place. The elections were "free, but not fair," says the Organisation for Security and Cooperation in Europe. The huge resources available to the unity bloc and its privileged access to the media account for a lot, as does the exclusion from the now state-run TV of nearly all the other parties and the extraordinary popularity of Putin, albeit that even the opinion polls are now government property. His ratings are now over 80%, making him a virtual certainty for re-election in March.
There are solid reasons for his popularity all the same. The economy is booming and a new middle class is forming that numbers 30 million people, some 20% of the population. The younger generations are generally optimistic that they can join it, except some unfortunates and those in the army, especially if sent to Chechnya. 
Russia is even basking in official esteem for its economic performance, although with considerable reservations now after the vendetta against Yukos intensified with the arrest of its chief, Mikhail Khodorkovsky. It was given the prized accolade of Baa3 status for its bonds and implicitly its economy by the rating agency, Moody's Investors Service, in early October. The arrest came later in the month.
With an excellent economic record, a fiscal surplus, a reduced foreign debt around 21% of its US$412bn GDP, rates of growth of 6-7% annually since 1999, a trade surplus of US$45bn in 2003 and a renewed interest in the country by foreign investors, with US$7.7bn net capital flowing into Russia in the first half of the year, the new rating, conferring investment grade status on the country for the first time, seemed thoroughly justified. Russia was increasingly seen as a success story, even if the World Bank in its annual report warned that the success was unduly premised on high oil prices. The real test would come when they fell.

The Yukos affair
In fact the test has come much sooner, thanks to the arrest on October 25th of Mikhail Khodorkovsky and the freezing of his assets or those under his wing in Yukos, 44% of its shares, later reduced by the public prosecutor to 39% to exclude outside investors. Platon Lebedev, the other key figure in the history of Yukos, had been already arrested in June. The Moscow stock market, a star performer beforehand, fell heavily on the announcement and has not really rallied since. Net capital outflows totalled US$2.4bn in the third quarter. 
A massive question mark hangs over the Russian economy, which subsequent acts by the authorities have done nothing to dispel, particularly the submission for investigation by local officials of drilling licenses given to Yukos in the very different conditions of the late 1990s. Foreign oil companies are naturally apprehensive that they might be next on the list. The reality that foreign investors can now be clear about, is that in Russia, politics and political interests come first, economics and international business are altogether a lower priority.
It is no help that Steven Kukes, the new head of Yukos, is under a cloud for alleged bribery when he was at TNK in the 1990s. A Canadian company is making the claim at a most inconvenient time for Yukos, whose troubles seem endless. The allegation was publicised just after the election result. There is no doubt who is in charge in Russia and who is taking a back-number now.

The politics of the affair
The reason for the arrest was indubitably political. Yukos is rated the most transparent and best run company now after its renovation by Khodorkovsky. It was his political ambitions that irked the Kremlin, and certain of his business ones too, not his alleged financial misdemeanours, common to all the oligarchs in the shady 1990s. There is now a huge question mark over the merger of Yukos and Sineft, headed by Roman Abromovich, who apparently met Putin and agreed to scupper the deal unless it is reshaped along acceptable lines. That this may lose him US$1bn does not seem to be preventing him from complying with Kremlin requirements - 'easy come, easy go'!. He at least understands how Russia is ruled, something that Khodorkovsky has learnt too late.
Then there is the little matter of taxation, at whose minimisation Yukos had shown itself adept, as had Sibneft. Yukos paid an effective income tax rate of 13% last year and Sibneft 12%, well below the statutory rate of 24%, thanks to deft exploitation of tax loop-holes. These were to be stopped as of January 1st. This will make the sort of dividend pay-out, made in November, of US$2bn, of which US$730m was earmarked for Khodorkovsky himself, by Yukos no longer possible. The post-tax returns of BP and others are likely to be hit too. The oil companies are perceived as having had an easy ride for too long.
One thing that is being erroneously said in the Western media is that oligarchs do not intervene in politics. They have to and do, but on the government side if they want to stay in business. They mostly do the obvious of backing United Russia, like Mikhail Fridman, the head of oil giant TNK, funding pro-government candidates. They do what is expedient in their business affairs too, to keep in with the Kremlin.
By contrast Khodorkovsky was behaving as if he lived in a Western country, not Russia. He has been funding the two main non-communist opposition parties, Yakoblev and the Union of Right Forces, both highly Western in ideology, in direct violation of the pact made at Putin's accession. This was that the oligarchs stay out of politics in exchange for their enrichment through the notorious sale of state assets, being left obscure. The last thing the other moguls want is for their role in 'the sale of the century' in the mid-1990s to be revisited by the public prosecutor, as the affairs of Yukos now are. Hence their only tepid support for Khodorkovsky in his ordeal, Anatoly Chubais, who is not a mogul, but the salaried head of United Energy Systems, being the exception that proves the rule. 
Indeed, Khodorkovsky made it clear that he had long term designs on the presidency itself, declaring his intention to disengage from Yukos altogether in 2007, on his forty-fifth birthday, in time for the presidential election after next in 2008, when Putin's second term expires. He is debarred by the constitution from standing for a third term. Khodorkovsky seemed to think Russia is politically like the US. He saw himself as a kind of Russian Rockerfella, able to move easily from leading an industry into leading a country. He must have changed his mind by now. 
The campaign before election of the lower house of parliament, the Duma, on December 7th gave an ideal moment for moves to make an example of Khodorkovsky under consideration no doubt for some while, highly agreeable to Russian opinion. The jailing of Russia's leading tycoon is obviously popular with the public. The ratings of the pro-government bloc, United Russia, in the polls. leaped up to 34% in early December just at the right time. This was a marked change on May, when it only had 9% to the communists 22%. The pro-government forces and their allies on most bills, the LDPR and the Agrarian Party, should enable the government to obtain a majority in the next Duma, with perhaps 280 deputies on whom they can rely, on key occasions. It will remain a rubber-stamp of the Kremlin.

Behind the scenes
In fact action against the oligarchs had been urged on Putin for some time by many in the Duma and in the public at large, not to speak of his own entourage. Putin's behaviour is governed by more than just personal considerations for his own future to curry favour with the electorate. He is acting in the current situation in the interests of a powerful constituency, that of the old KGB hands, of which he is one himself. As he has said himself: "There are no ex-KGB members."
The Putin presidency has seen a massive comeback by the 'chekists' or the 'siloviki,' as they are now known. A coalition spanning the Federal Security Service (FSB), the domestic successor to the KGB, the military and the police has become the dominant force in Russiasn politics and the economy in the 2000s. The trend began a decade beforehand under Yeltsin, with the proportion of siloviki rising twelve fold in the period since then within the political system
More than half of Putin's informal politburo consists of people from the former KGB, whereas Gorbachev's actual politburo was composed of Soviet-style politicians, some of whom, it is true, had graduated to their Kremlin eminence after an apprenticeship in the KGB in the provinces, such as Gorbachev himself and Eduard Shevardnadze, the former Soviet foreign minister and now president of Georgia. 
Both were of course reformers, as were many KGB personnel in those days. The KGB, indeed, in its Brezhnevite prime had those with a wide range of opinions from Reaganites to diehard communists or Soviet patriots. These days it is different. The more independent-minded KGB officers left for the private sector in the early Yeltsin years when the KGB was formally disbanded. Between 1991 and 1993 some 300,000 KGB operatives left the service to join the private sector as security personnel, some 20,000 or so ironically working for the firms of the oligarchs, such as Yukos. Today the diehard Soviet types are left holding the fort.
The influence of the siloviki has been spreading from the FSB and the army to the economic ministries, media and telecommunications and is penetrating every corner of social life. Four out of twelve deputies in the ministries of economic development, industry and telecommunications are linked to the special services. 
There is of course a cynical interpretation of current developments that is widely prevalent. According to this viewpoint, Putin's appointees are likely to favour ideas of state-dominated industry for ideological and self-interested reasons. They are likely to be disgruntled that they missed out on the opportunity to share out the riches of Russia's natural resources among their clientele, as Yeltsin's did before them, receiving fabulous kickbacks in the process. Hence the relish at the prospect of turning on the oligarchs and going 'back to basics.' If the assets of the first privatisation could be renationalised, what a field day would open up for a second sell-off, with a new class of beneficiaries!
Putin is not likely to go along with such a programme, but a power struggle is unfolding in the Kremlin all right between the reformers loyal to the Yeltsin- era dispensation and the siloviki. The head of the presidential administration, Alexander Voloshin, has resigned in protest at the arrest of his old ally, Khodorkovsky. He was a key intermediary between the Kremlin and the Family. His successor, Dmitry Medvedev, an old protégé of Putin's from St Petersburg, has also surprisingly expressed reservations about present developments. The prime minister, another intimate of this nexus in the mid-1990s, Mikhail Kasyanov, has done the same. Putin himself as the former official in charge of foreign investment in St Petersburg must have reservations of his own.
But the temptation to make an example of Khodorkovsky has proved paramount. This thorn in Putin's flesh had to be removed, while the move finds resonant echoes of support in both the inner councils of power and among the population at large.

Playing to the gallery
For populist reasons as well as raisons d'etat, then, Putin is trying to distance himself as much as he can from the tycoons. He can now point to his having seen off two moguls, namely Gusinsky and Berezovsky, and a third in Khodorkovsky, who, after being incarcerated for months in a cell with three other prisoners, is unlikely, the Kremlin must be hoping, to want to hang around Russia even if he should be released next year. These three magnates are all Jewish. The only non-Jewish Russian mega-tycoon, Vladimir Potanin, a son of the Soviet elite who became banker to Russia's new government departments, has never been targeted. It is true that Lebedev, who was arrested in June, is not Jewish, but the move against him was widely interpreted as being directed against Khodorkovsky, rightly, as it now seems.
Yavlinsky has accused the Kremlin of creating a 'capitalism with a Soviet face.' Actually Putin is also tapping into an older Russian tradition, 'capitalism with an anti-semitic face,' such as led Tsarist police to connive at pogroms in the 1900-10s. Khodorkovsky is easy enough to depict as almost a caricature of a scheming Jewish tycoon, bent on taking over Russia and ready to use any devious tricks to succeed.
This is the great unmentionable in this whole affair. Chubais, as head of the largest Russian utility, UES, and as the leading light in the Russian chamber of industrialists and businessmen and its current spokesman, would not want to put the matter in this light. Nor would any other of its Jewish participants, only too well aware of what a can of worms they would be opening up in the process. Nor of course would Putin or any government spokesperson for the same reason. Nor, indeed, any of his Western backers, such as Bush and Blair. But the incipient campaign against the oligarchs to woo electoral support has the whiff of a government-inspired pogrom for all that.
The anti-semitic slant to the campaign against the oligarchs has been evident from the outset. The Jewish widow of Andrei Sakharov, the renowned physicist and Soviet dissident, namely Yelena Bonner, talked of the "obvious anti-semitic coloration of the campaign against Gusinsky and Berezovsky" when she was addressing a UN conference in 2001. She was unusual in doing so at the time; but then neither she nor her husband were exactly mealy-mouthed.
Today members of the Duma talk of 'the rootless cosmopolitans' and 'the foreigners in our midst.' Everybody in Russia knows who is meant. But Westerners are characteristically more squeamish or slow on the uptake. 
Six of the seven biggest oligarchs are Jewish in origin, Abramovich, Berezovsky, Gusinsky and Khodorkovsky, plus Piotr Aven, head of the Alfa conglomerate, and Mikhail Fridman. Of these six the first three already live abroad with excellent connections to Israel. The UK newspaper, Business, in its November 2/3 issue, revealed that Khodorkovsky has transferred control of his US$7.5bn stake in Yukos, with full voting rights and the right to receive dividends to Leonid Nevzlin, a billionaire and an oligarch, former president of the Russian Jewish Congress and also a big shareholder in Yukos, who moved to Israel in September. What is significant is that, whatever their exact roles, his most trusted allies are Jewish, a fact that will not be lost on Russian observers of the saga.

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AGRICULTURE

Russia to harvest over 67m tonnes of grain last year

Last year Russia harvested 67-70m tonnes of grain, Deputy Prime Minister and Agriculture Minister, Alexei Gordeyev, said, Interfax News Agency reported.
"The grain crop, cleaned, will be within the bounds of our prediction of 67-70m tonnes," Gordeyev said during a working visit to the Tambov region. Firmer figures will be forthcoming in the near future, he said. The State Customs Committee released figures about the harvest in November, Gordeyev said. They indicated that the grain crop when weighed in at 71.5m tonnes, bunker weight (neither dried nor cleaned). The committee numbers were 1% less than earlier published agriculture ministry figures. "This is mostly due to differing grain calculations done at farms," he said.

Russia to rebuild and expand grain export potential

Russia will still have the opportunity to export grain over the next few years even though the country has sustained a drop in the gross harvest of grain and its export, Razgulyai-UKRROS President, Igor Potapenko, said in a speech at the first session of the World Grain Conference in Barcelona on November 4th, Interfax News Agency reported. 
More than 200 representatives from nearly 30 countries participated in the conference. "Russia can rebuild and expand its export potential, first of all due to the rise in grain production in the Central region, and also in the Urals and Siberia," Potapenko was quoted as saying. According to him, measures to expand and strengthen the export infrastructure have been taken in Russia in recent years. Razgulyai-UKRROS introduced a grain terminal in Azov a few months ago, which is designed to hold 33,000 tonnes of grain and load up to two million tonnes of grain each year.
Russia shipped almost 16m tonnes of grain in the last agricultural year. According to an expert estimate, 2003's exports will not exceed 5 million tonnes.
Potapenko was the only representative from the countries of the former Soviet Union who was invited to make a speech at the conference. "This recognises Russia's full-fledged participation in the grain market," he said.

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AVIATION & SPACE

Moscow design bureau develops systems for super-small spacecraft

The Moscow-based Tekhnomash central research and development technology institute has been developing cutting-edge display systems for super-small spacecraft, the Russian Agency for Control Systems press service told Interfax-Military News Agency on 5th December. 
"The new units, developed by Tekhnomash with the help of the nanotechnologies, allow for designing unique devices. For instance, identification systems for super-small spacecraft are currently under development. Similar devices, may be employed in surveillance and acquisition systems," a press service official said. 
According to him, the institute has already mastered the technology of producing photon chips, based on opalescent matrices. "At present, the objective is to introduce new technologies to mass production," the source said. He noted that photon chips were considered to be a cutting-edge material. "The technology of producing photon chips as opalescent matrices, developed by the institute, is one of the best in Russia and the world," the press service official said. 
According to him, this technology may be used to manufacture artificial opals, employed in the goldsmithery. "At present, the volume of products is not large, but there is a feasibility of launching this process into mass production," the press service said.

Russian aircraft firm views trainer project for China as "high priority"

The Yakovlev Design Bureau will go on creating a draft project of a trainer aircraft for the Chinese corporation AVIC-II [Aviation Industries of China] in 2004, a reliable source in the bureau told Interfax-Military News Agency on 4th December.
"Recently the parties have signed a statement on the completion of another stage of the draft project of a new trainer aircraft. The draft project is not complete and will be developed further in 2004," the source said. He said that China had submitted its requirements for trainer and combat trainer aircraft. "So far the Yakovlev Design Bureau has not done much work for China but the job might get very large in the future," he said. He emphasized that Chinese experts had appreciated the job done by Russian designers. "The final design will probably be made jointly with the Chinese," the expert said.
He clarified that the 2001 contract on the design of a Chinese trainer does not stipulate the terms but implies step-by-step work with an acceptance statement signed at each step. He also said that the Chinese contract is a high priority for the Yakovlev Design Bureau. "At the MAKS 2003 air show [Moscow International Aerospace Show] the parties considered such further cooperation options as a combat trainer aircraft, a short-range airliner with 116 to 174 seats, general-purpose planes, and remote-controlled aerial vehicles. Both firms plan to delegate experts into a joint committee to come to real terms on these issues," the source said.

Aeroflot receives 5th Airbus from Hamburg

Russian flag carrier, Aeroflot, was expected to receive another A-319 passenger airliner from the Airbus aircraft delivery centre in Hamburg on November 12th, New Europe reports.
In 2003-2004, in the framework of restructuring its fleet of foreign aircraft, Aeroflot is planning to introduce 21 Western-made planes. Presently, Aeroflot's fleet includes 25 foreign-made passenger liners.

Russian air force to procure ten new SU-34 attack aircraft

Up to ten new Su-34 attack aircraft will be fielded with the Russian air force in late 2005 or early 2006, Air Force Commander-in-Chief Vladimir Mikhaylov told Interfax-Military News Agency in Novosibirsk on 28th November.
"The aircraft will be built at the Novosibirsk-based Chkalov Aircraft Production Association (NAPO)," he said. According to him, half of these planes will be added to the inventory of the air force and air defence forces, deployed in the Siberian Military District. 
"We will find the money to procure these aircraft. The Su-34 is an expensive aircraft, but the security of our homeland is worth it," Mikhaylov said. He said that NAPO and the Russian Defence Ministry will sign a relevant agreement on manufacturing the new aircraft in Moscow on 15th December. 
He also noted that the Su-34 was a multi-purpose aircraft, fitted with excellent avionics. The Su-34 is considered to be one of the priorities for the Russian Air Force. According to a number of experts, the aircraft's avionics allow it to be regarded as a fifth-generation aircraft. The new aircraft is expected to replace Tu-22M3 long-range bombers, as well as some of the Su-24M tactical bombers. The Su-34 boasts a considerable modernization potential. In addition to the bomber and the fighter/bomber modifications, new versions of the Su-34, in particular a reconnaissance aircraft and a jamming aircraft, are being developed.

Soyuz to be ready for launch in Plesetsk in 2004

The Soyuz rocket will be modernised and the infrastructure for Soyuz launches from the Plesetsk spaceport will be ready in 2004, the director of the Russian Aerospace Agency, Yuri Koptev, said, Interfax News Agency reported.
He said Soyuz rockets would be modernised, in particular for launches from the Kourou spaceport in French Guiana. Russia and France signed an agreement on the matter recently. The Russian Aerospace Agency and the European Space Agency will soon sign another two agreements for Soyuz launches from Kourou, Koptev said.
He noted that the Soyuz-Kourou agreements with France and the European Space Agency have had a positive effect on signing contracts for the launches of foreign commercial satellites from the Baikonur spaceport. "We have signed five contracts on commercial launches from Baikonur recently, and a telecom satellite for Israel will be launched from Baikonur," Koptev said.
This year, the Russian Aerospace Agency "will continue close cooperation with the Defence Ministry in designing fundamental elements of aerospace machinery," he said. The work will be done in line with a ten-year armament programme.
Meanwhile, Koptev said he does not think it is possible to launch manned spacecraft from Kourou for now. "Our firm position is that manned spacecraft can be launched in line with Russia's international space commitments, including the ISS project, only from the Baikonur spaceport," Koptev said.
He said launches from other spaceports could be done based on the need to make some projects commercial or increase European participation in them. The budget for launches from Kourou has not been formed and participants in the project are considering the enlargement of their shares, Koptev said. "No definite decisions have been made. There are only general estimations and discussions," he noted.
Koptev is also concerned about the problem of safety, which would arise in launches of manned spacecraft from the spaceport in French Guiana.
"The launch will be done above the ocean and we will need a lot of sea-based search and rescue means," he stressed.

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BANKING

Foreign banks increase presence in Russia

Foreign banks still value the political stability and economic benefits that Russia now provides, and are increasing their presence in the country, seemingly unfazed by the turbulence caused by the YUKOS affair recently or by criticism from local banks, which are worried they will lose business to their foreign rivals. 
One foreign bank about to set up shop in Russia is Italy's Intesa, which had a subsidiary licensed to perform banking operation at the end of October. The Intesa subsidiary was due to open its doors before November is out. On November 11th, Credit Suisse opened an office in Moscow and said this might one day acquire subsidiary status, although that was not a pressing issue. And, on November 13th, Bankque Societe Generale Vostok (BSGV), a subsidiary of the Societe Generale group that has been working in Russia for 10 years, announced a major shift in its strategy, aimed not only at gaining more corporate clients but entering the retail banking market as well. 
BSGV plans within the space of a year to open 30 specialised retail outlets, 26 of them in Moscow, two in St Petersburg and one in each of Samara and Yekaterinburg.

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CONSTRUCTION

Russia to spend over R20bn in 2003 on rebuilding Chechnya

A total of R22,517m will be spent by the end of this year on rebuilding the Chechen Republic, ITAR-TASS News Agency has reported. This is the amount of funding required from budget and off-budget sources, the Russian minister for Chechnya, Stanislav Ilyasov, said on 2nd December as he opened a sitting of the government's commission for restoring the socio-economic sector of Chechnya.
In just the first nine months of this year R16.8bn were spent on restoration. The minister pointed out that the money came from the federal and republican [Chechnya's] budgets, and also from various other funds and off-budget sources. 
Chechnya's first deputy minister of economic development and trade, Mukhamed Tsikanov, reported that the federal restoration programme for the republic is 71 per cent complete. According to Ilyasov's office, the federal restoration programme in Chechnya is worth R3.5bn this year.

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ENERGY

LUKoil steps up oil product trade with South Africa 

Russian oil major, LUKoil, recently agreed with the South African company Calulo Investment, on the joint organisation of trade in oil products with not just South Africa, but the continent's south as a whole, Interfax News Agency reported. The company is not planning to register a special legal entity.
"Our operations lie in trade, without getting into assets," a LUKoil source said. The trading operations will be overseen from Geneva, where LUKoil has a subsidiary-Litasco SA, a major corporate operator for the company in moving oil and oil products to customers.
The source noted that the company is planning to extend its sphere of operations to Eastern and Western Africa. "There is a base for the development of these operations, and not just for selling goods, but also for buying. Expanding bunkerage is also planned."
"We have been working with South Africa for some time, shipments in particular, from this region will go to Singapore. However, there has been no oil product shipment stability, mainly spot contracts," the source said. "Many of the operations will involve oil products, but oil shipments are not ruled out," he added.
"Local African companies do not have sufficient experience with organising such operations, so we will impart certain trading know-how, including moving their products when it becomes necessary," the LUKoil source said.
"Work in this region is viewed as part of planned company trading-activity diversification," he added.

Russian oil company wins tender in Syria 

Russian oil major, Tatneft, based in the constituent republic of Tatarstan, has won a tender to develop oil block 1/27 in Syria, the company's press service reported quoting Tatneft Deputy General Director, Khamit Kaveyev.
There were eight unspecified companies bidding in the tender, he said. Tatneft will develop the block under a production sharing agreement [PSA]. The contract will be signed for 25 years, he said, Prime-TASS News Agency has reported.
"This event represents the company's breakthrough onto the foreign oil production market and its first foreign contract under a PSA. We will send a delegation to Syria soon to discuss the terms of the contract," Kaveyev said as quoted by the press service.
The final data on the reserves of block 1/27 will be known only after more detailed exploration has been carried out there, the company said.

Gazprom sees gas reserves up by 15,000 bcm by 2030 

The executive board of Russia's gas giant Gazprom has approved a plan for Russian sea shelf development until 2030, which envisions an increase of the company's natural gas reserves by 15,000bn cubic metres and oil reserves by 400 million tonnes, Gazprom said on 27th November, Prime-TASS News Agency has reported.
Next year, the company plans to develop a programme of sea shelf development.
In December, the company plans to prepare a plan of priority projects on the sea shelf for 2004-2006. According to the concept, Gazprom's operations should be focused on the development of the Shtokman, Obsko-Tazovskiy and Priyamalskiy gas-rich regions and Pechora oil-rich region.
Starting 2030, Gazprom plans to produce over 170bn cu.m. of gas and 20m tonnes of oil a year in these regions. Gazprom's overall gas output came to 523.793bn cu.m., up 2.3 per cent on the year.
Gazprom plans to start development of the Gulfs of Ob and Tazovskaya that comprise the Obsko-Tazovskiy region in 2009-2010. The region's known gas reserves exceed 800bn cu.m. By 2021, Gazprom intends to produce 82bn cu.m. of gas there annually. Gas production at the Shtokman field development on the Barents Sea shelf is projected to reach 69bn cu.m. a year starting 2018.
According to Gazprom, the Russian sea shelf's combined oil and gas reserves are estimated at about 90bn tonnes of fuel equivalent. Over 60bn tonnes of these is located in the Barents and Kara Seas. Gas reserves make up the bulk of these reserves and are estimated at 76,000bn cu.m.
At the same time, the Russian sea shelf oil and gas reserves are only 11 per cent explored, according to Gazprom.

Founders of Ukrainian, Russian gas consortium to meet in Kiev 

A meeting of the council of founders of the Ukrainian-Russian gas-transport consortium is to be held in Kiev shortly, ITAR-TASS News Agency learnt from the press-service of [the Ukrainian state oil and gas company] Naftohaz Ukrayiny, which is a member of the consortium.
At the meeting in Kiev, the sides plan to consider an expert report on whether putting the Ukrainian gas pipelines under the management of the consortium would make their management more effective, and a feasibility study for the construction of a gas pipeline from Novopskov [Luhansk Region] to Uzhhorod [Transcarpathian Region] to develop the Ukrainian gas-transport system and increase its capacity.
At a press conference on 5th December, Deputy Prime Minister Vitaliy Hayduk advocated creating a consortium on the basis of the Novopskov-Uzhhorod gas pipeline since it would not be expedient to transfer the gas-transport system to anyone to manage. The same day President Leonid Kuchma dismissed Hayduk for undisclosed reasons.
In St. Petersburg in June 2002, the presidents of Russia and Ukraine, Vladimir Putin and Leonid Kuchma, agreed to create a consortium for the management and development of the Ukrainian gas transport system, which could include Germany and other countries that consume Russian gas. Naftohaz Ukrayiny and Russia's Gazprom signed the consortium's foundation documents in November 2002.

Ownership is not important for new pipeline projects 

The ownership issue is not the key one in the development of the oil and gas sector's transport infrastructure, Russian Economic Development Minister German Gref told journalists when being asked about a possibility for private investors to have access to new pipelines' construction in Russia, RIA News Agency has reported.
"The form of ownership is not a matter of principal. The principal issues are the construction schedule and the need for the project, as well as ensuring the state's control functions and adherence to the antimonopoly legislation to secure access to the pipeline," Gref said.
The issue of private investors' access to pipeline construction is being widely discussed now and there are different opinions, he said. "This is my personal opinion that is not shared by everybody," Gref added.
"The state may provide investment for the pipeline construction. However, if we do not do it ourselves and do not let others do it, this will be a problem," he said.

Russian utility wants to export power to Pyongyang - South Korean report

A Russian state-run utility firm is negotiating with North Korea on exporting electricity to the energy-starved country, the Voice of Russia (VOR), said on the 27th of November, Yonhap News Agency has reported. 
The Unified Energy Systems, one of the world's largest electricity utilities, said it is ready to expand production volume to export electricity to the North and the two sides are engaged in talks, the VOR reported. 
During inter-Korean economic talks in Pyongyang early in November, North Korea demanded electricity assistance from South Korea and called for the establishment of a joint committee charged with helping the North ease its energy shortage. 
North Korea previously said it was being forced to reactivate its nuclear reactor in order to generate electricity, though reports from Washington suggest the power output from the North's only operational 5-MW nuclear reactor is negligible and would only be sufficient for the facility itself. 
Energy shortages are a serious problem for the North's moribund economy. The communist country has been relying on outside food aid since 1995 to help feed its 22m people.

UES launches phase 2 of Nizhnevartovsk power plant

United Energy Systems of Russia (UES) recently launched the second, 800-megawatt generating unit of the Nizhnevartovsk GRES state district power plant, which will boost low-cost electricity supplies to industry in the Urals and West Siberia. Russian Prime minister, Mikhail Kasyanov, and Anatoly Chubais, the UES chief executive, attended the opening ceremony, New Europe reported recently.
UES said three of its Tyumenenergo power utility's seven power stations were nearing the end of their days. It said 880 megawatts of capacity would be lost by 2006 and another 571 megawatts by 2007. Tyumenenergo spent more than three billion roubles on the Nizhnevartovsk plant's second unit, which doubles the station's existing capacity. The first 800-megawatt unit was introduced in 1993. The Nizhnevartovsk plant will join one of ten future wholesale generating companies to be set up during the power industry reforms.

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FINANCIAL NEWS

Russian gold and currency reserves reach new high

The gold and currency reserves of Russia have reach a new record high, Interfax News Agency has reported.
As at 28th November they totalled US$68.1bn, the foreign and public relations department of the Bank of Russia reported on 4th December.
The gold and currency reserves amounted to US$66.2bn as at 21st November. Thus, they increased by US$1.9bn over the week.

Russian PM wants to double share of small businesses in economy

The share of small businesses in the Russian economy should stand at 40 per cent as against the current 20 per cent, Prime Minister, Mikhail Kasyanov, told students of the Academy of National Economy under the Government of the Russian Federation on 28th November, Prime-TASS News Agency has reported. 
The share of small businesses in the Russian economy is growing, but at too slow a pace, Kasyanov said. 
The government "does not always manage to provide the necessary support to small business to enable it to develop and increase its share in the economy," he added. 
Among the government's priorities is the development of a mortgage loan programme, which will allow for the expansion of house building and further steps towards diversification of the economy, Kasyanov noted. 
According to Kasyanov, next year almost R1bn will be allotted from the federal budget for house building.

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FOOD & DRINK

RusAl can factory signs deal with Baltika brewer

Rostar, an aluminium beverage can producer controlled by Russian Aluminium (RusAl), Russia's biggest aluminium company, signed a six-year deal worth US$270m to supply cans to Baltika, the country's biggest brewing company, New Europe reported.
The companies said at a joint press conference that the deal would cover half Baltika's needs for cans. The deal will make Baltika, which exports canned beer to 28 countries, more competitive on the domestic as well as international markets. Around 12% of the beer produced in Russia is canned, compared with 23-25% in Europe, so there is room for growth, the companies said. Baltika, one of the first Russian companies to can beer, has 30% of the domestic canned beer market, and Rostar already meets half Russia's entire demand for beverage cans. RusAl said it had invested more than US$200m in can production to date.

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FOREIGN ECONOMIC RELATIONS

Russia, Japan sign contract for scrapping decommissioned nuclear submarine

The first financial and technical contracts have been signed in Vladivostok for scrapping a Ch-304 nuclear submarine of the Viktor-3 class that had been decommissioned by the Russian Pacific Fleet. The work will be funded as part of the Star of Hope joint Russian-Japanese project, has been commissioned by the DalRAO federal enterprise based in Vladivostok and will be carried out by a local defence enterprise, Zvezda. On the Russian side, the contracts were signed by the heads of those enterprises, Nikolay Lysenko and Yuriy Shulgan, and on the Japanese - by the general director of the Japanese Foreign Ministry's technical secretariat, Mr Kawakami, the Japanese Consulate General in Vladivostok has told ITAR-TASS News Agency. 
The decision to scrap a nuclear submarine using funds provided by Russia and Japan was taken in February 2003, while an executive agreement on dismantling the nuclear submarine was signed in June during the visit of Japanese Foreign Minister Yuriko Kawaguchi to Vladivostok. There are 41 nuclear-powered submarines decommissioned by the Russian Pacific Fleet that are being stored in the Russian Far East (in Maritime Territory and Kamchatka). The Japanese government has allocated 20.4bn yen (about US$170m) to assist Russia in scrapping its nuclear weapons. Out of that amount, 4.2bn yen has been spent on building a plant for processing radioactive waste called Landysh [Russ: lily of the valley] at the Zvezda enterprise. It forms part of a set of facilities that ensure safe handling and temporary storage of radioactive waste and its subsequent transportation to permanent storage facilities. The construction of the facilities lasted seven years and was completed with financial assistance from the USA and Japan.

Bigger Russia-China trade on the cards

Sergei Tsyplakov, the Russian trade representative in China, recently announced that bilateral trade can expand by 15 per cent this year, Interfax News Agency reported.
"Growth might result from larger shipments of Russian raw materials and Chinese machinery and equipment," Tsyplakov was quoted as saying. Last year's trade was estimated to reach US$14bn, he added. "Russia will enlarge the supply of mineral fuel, crude oil, petroleum products, ferrous metals and timber," the trade representative said. China has stepped up shipments of machinery and equipment. According to Tsyplakov, shuttle trading will drop from the current US$10bn. "In the past, China thought it necessary to regulate the shuttle trade, but now it thinks that unorganised trade hampers the supply of quality goods of large Chinese companies to Russia," he said.

Nizhnekamskneftekhim buys Technimont equipment

Russia's Nizhnekamskneftekhim finalised a US$62m deal recently with the Italian company, Technimont, for equipment to make 120,000 tonnes of polypropylene a year. Nizhnekamskneftekhim Director General, Vladimir Busygin, said the company is looking to raise a bank loan for paying for the contract. It has also reached an insurance deal for the equipment's delivery and installation with an Italian firm, New Europe reported.
Busygin said that Nizhnekamskneftekhim plans to increase production capacity to 180,000 tonnes a year further on down the road. Nizhnekamskneftekhim inked a memorandum in July last year on cooperation in the setting up of polypropylene production with the Technimont and Basell (a BASF/Shell joint venture).
Technimont supplies the equipment and Basell technology, for making the product. The overall price tag for this project is estimated at US$120m, the recoupment period is 3-3.5 years.

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FOREIGN INVESTMENT

Russia invests US$16.3bn abroad in January-September

Russian investment abroad amounted to US$16.349bn in January-September 2003, up 0.4% year-on-year, the state statistics committee said. Foreign investment in Russia totalled US$20.899m, up 61.9% year-on-year. Accumulated Russian capital abroad was at just US$3.918bn at the end of September 2003, 75% less than was invested in the nine months, while accumulated foreign capital in Russia topped US$53.6bn, New Europe reported.
Of Russia's accumulated investment abroad, US$2.75bn is in direct investment, US$71m is portfolio investment and US$1.097 is other investments. Russia's biggest investments in January-September 2003 went to Cyprus (US$4.657bn), the Virgin Islands (US$2.424bn), Lithuania (US$843m) and Switzerland (US$699m). The largest accumulated investment from Russia was with Belarus (US$657m), Iran (US$565m), the Netherlands (US$4.481m), Cyprus (US$430m), Liberia (US$227m) and Moldova (US$170m).

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MINERALS & METALS

Alrosa says Luo diamond project study to end soon

Russian mining firm, Alrosa, recently announced a feasibility study for the Luo diamond project that it is participating in may be ready by the end of 2003, Interfax News Agency reported. The Luo project involves the development of two diamond pipes, Camachia and Camajicu. Alrosa also holds a 55% interest in a project to construct a hydroelectric dam on the Chicapa River in Angola to feed the Catoca diamond mine, which the Russian group has been involved in since the early 1990s, with electricity. Alrosa President, Vladimir Kalitin had planned to visit Angola on November 9th to attend a ceremony dedicated to the start of the Chicapa project.

Government to auction Magnitogorsk steel shares

The Russian government is likely to sell its 23.76% voting stake (17.82% of the charter capital) in the big Magnitogorsk steel mill at a specialised auction at the end of 2003. "I think what will be one of the key sales that could happen if the Russian president signs a decree on strategic enterprises," Alexander Braverman, first deputy property minister, said recently, Interfax News Agency reported.
It is expected the sale of the government shares in Magnitogorsk will precipitate a major alliance or merger in the Russian steel industry, and that only two major players will remain on the Russian steel market before long. "The shares will probably be sold at a specialised auction," Braverman said.
Braverman went on to say the government has not shelved plans to sell its interest in Svyazinvest, the national telecoms holding. "As you know, plans exist to sell these shares, nobody has cancelled them. We are working on them, but it is up to the government to make a final decision," Braverman said. "If no decision is reached, the shares will be sold this year, perhaps the 25% minus two shares mooted for last year, or perhaps a slightly different quantity."
The sale of the Svyazinvest shares had to be called by the middle of November if these shares were to be sold at all - there have to be at least 45 days between the announcement of a sale and the sale results being announced. The Russian Federal Property Fund has already taken possession of the shares and theoretically they can be sold at any time, but the government has yet to say how or when they will be sold.
Russia plans to round off privatisation in 2008. "This does not mean that everything will be sold off by then. It means enterprises that perform no state function will be sold," Braverman said.
He said the state owned blocks of shares in a total of 4,035 joint stock companies, and less than a blocking stake in half of them. Most of the 717 stakes the government plans to sell in 2004 are minority stakes

Gold-enriching factory commissioned in Russian Siberia

The first phase of the Nezhdaninskiy ore-enriching combine has been commissioned in Tomponskiy Ulus [District] of Yakutia, sources in Yakutia's government told RIA News Agency.
The Nezhdaninskiy gold deposit is regarded as one of Russia's biggest. According to the plan, 180,000 t of ore will be extracted and 1.6 t of gold will be produced there in 2004. The development programme envisages the construction of a new open-cast mine and a gold-enriching factory as well as the rehabilitation of old mines.
The local gold is sulphuric, the government source went on to say. It means that the local factory produces concentrate, which is sent to a metallurgical plant in Chelyabinsk Region for processing and extraction of pure gold. 
In the future, the Nezhdaninskiy ore-enriching combine will produce up to 7-8 t of gold per year.

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NUCLEAR ENERGY

Russia building fast-breeder reactor at Urals plant

Russia is building a BN-800 fast-neutron reactor at the Beloyarsk nuclear power plant in Sverdlovsk Region at a cost of more than US$1bn, Aleksandr Rumyantsev, the atomic energy minister, said, Interfax-AVN military news agency web site has reported. 
The plant already has a commercial BN-600 fast-neutron reactor. Russia's first commercial BN-350 fast-neutron reactor was started in 1972 but stopped in 1999. Rumyantsev said Russia's fast-neutron reactors were unique and would be the backbone of the Russian nuclear power industry's development in the future.

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TRANSPORT

Russia's longest railway tunnel commissioned in Siberia

The Severomuysk tunnel, Russia's longest, has been commissioned on the Baykal-Amur Railway. 
Vladimir Khodiy, the Radio Russia correspondent gave the details: The commissioning document was signed at Severomuysk village, 300 km east of Baykal, on 30th November. The construction of the 15,343-metre-long Severomuysk tunnel started in the late 70s. It crosses a formidable mountain ridge at a depth of almost 1,000 m below the surface. 
The first train went through the tunnel two years ago. After that time was needed for finishing operations - to install water drains, ventilation ducts and seismic protection. After all, quakes measuring up to 10 on a 12-point scale occur here.
The opening of regular traffic through the tunnel was marked by a festive ceremony on 4th and 5th December.

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