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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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REPUBLICAN REFERENCE

Area (sq.km)
17,075,400

Population
143,782,338

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

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

Currency 
Rouble

President 
Vladimir Putin



Update No: 293 - (27/05/05)

Rice and Bush come to town
Russia has been receiving a lot of Western attention of late, especially from the US. It is of decisive importance here that Condoleezza Rice, the new US Secretary of State, is a Russia expert, who can speak Russian and knows its history well.
She went to Moscow in April to prepare the way for Bush coming to town for the May 9th celebration of the 60th anniversary of Victory Day in 1945. This event had a highly charged significance in Russia - but also in a very different way among its neighbours. For the Russians Victory Day was the culmination of their greatest collective endeavour - the defeat of Nazi Germany. But for the Baltic states and many others it spelt a half-century of subjugation to the Soviet Union.
This difference of viewpoint became starkly obvious when Putin said that in 1945 '11 countries were liberated by the Red Army.' He also said that the collapse of the Soviet Union was 'the greatest geopolitical catastrophe of the twentieth century.' The events of 1989-91 were seen by the 11 countries in question and by the Balts as the true liberation - the greatest geopolitical deliverance in their history. 
Rice privately, and then Bush publicly, made it clear which side they were on in this clash of minds, indeed of mindsets. Bush said that the subjection of whole nations by the USR was one of the 'great wrongs of history.' He was speaking in Latvia, which he visited ahead of going to Moscow. He repeated the same message in visiting Georgia afterwards, whose president, Mikhail Saakashvili, the victor of the Rose Revolution in October 2003, refused to go to Moscow for the occasion in protest at the refusal of Russia to remove two military bases from his country. Since the US has a permanent military mission in Georgia, his stand and Bush's visit make it clear how his country is now aligned.
President Vaira Vike Freiburg of Latvia, as feisty a lady as Condi Rice herself, was the only Baltic president to attend the ceremonies in Moscow. But she made it quite clear that she and her Latvian country folk regard 1945 as a moment of infamy for them, when a new tyranny was imposed, nor a true liberation. Everyone but the Russians knows this to be the case.
Putin was clearly vexed by Bush's open defiance of diplomatic courtesy in speaking his mind on the subject at such a sacred occasion. The Russians lost 27 million people in the war, 11 million of them in the armed forces or doing forced labour. No one else paid anything like so heavy a price to defeat Nazism. And after all, nor did anyone else do so much to ensure that defeat. That is why Bush attended - and Vike-Freiburg too.

The reasons why Russia still matters
Actually there are other reasons why Bush needs to keep a dialogue open with Moscow. Russia, with the world's largest gas reserves by far and probably its second highest oil reserves, is the new energy power that matters post 9:11. After all 15 of the 19 responsible for carrying out that terrible event were Saudis!
Though it has less than one-tenth of the reserves of the Middle East, Russia is the world's biggest oil producer and its second-largest exporter (after OPEC). A gaggle of privatised firms control production. But Transneft (Russia's state pipeline monopoly) maintains a stranglehold on exports. This has led the oil producers to ally with Western companies in an effort to open up new export routes to China and elsewhere. Some of these risk causing environmental damage. 
Oil exports are for the crucial source of income and diplomatic power for Russia's government. Because of this, it has defied OPEC's attempts to control the worldwide price of oil. Most believe the government's persecution of Yukos, one of Russia's biggest oil companies - and its boss and major shareholder, Mikhail Khodorkovsky - is politically driven. The crackdown has scared investors, who are fleeing despite the surging oil price. A break-up of Yukos, which is now in sight, will put some of Russia's choicest oil-producing assets in state hands.
Russia is due to attract $83bn in FDI, in the next four years, according to expert opinion, the Centre of Macroeconomic Analysis and Short-term Forecasting, twice as much as in the previous fourteen years since the collapse of the Soviet Union. It is simply too big and alluring to ignore.
But then Russia is still a formidable military power too, with huge stocks of weapons, nuclear and other. It simply cannot be ignored. Bush is well aware of all this, as of course is Rice, forever at his elbow.

The Transnistria connection
There is a new startling - and decidedly sinister - development coming to light here. This is in the breakaway republic from Moldova, Transnistria, ruled by a Stalinist tyrant with a lugubrious name, Igor Smirnov, and an even more lugubrious regime. He achieved the unique feat four years ago of winning elections in certain areas by 103%!
The republic makes a living out of smuggling, particularly out of the arms trade. It is closely tied to Russia, which still has a big military base there; indeed, it is Europe's largest arsenal of illegal arms. It is not clear whether the Russian beneficiaries of the obvious corruption, that has for fourteen years permitted this monstrous regime to sell arms from Russian military stockpiles, include the Kremlin itself, or an out of control military establishment. Clearly the pay-off must be substantial indeed. Apart from the biological and chemical weaponry traded, there are scores of Alazan rockets. They are being held at a former Soviet base, Kolbasna, which has 50,000 tons of weapons, including artillery shells, mines and anti-aircraft missiles, making it the largest such stockpile in Europe.
The Alazan is a slender rocket, 4ft 7in long, with a range of eight miles and a 'radioactive' warhead, deemed the ideal terrorist weapon by experts. 
In 2003, according to a report in the London Sunday Times of May 8th, it emerged that at least 38 Alazans were fitted with warheads containing up to 400g of ceasium-137 and strontium-90. If they fell into terrorist hands. say specialists, they could cause devastation for miles once detonated in a big city centre. There would be contamination over a wide area, with a death toll in the hundreds of thousands - a human-contrived tsunami.
The Sunday Times, in a brilliant exercise of investigative journalism, sent a reporter posing as a middleman for an Islamicist terrorist organisation to see if it was possible to procure an Alazan. It was, for $200,000, not such a vast sum and well within the reach of al-Qaeda and the like. The intermediary on the Transnistrian side was a certain 'Dimitri,' who spoke fluent English with an American accent. The price was non-negotiable; but the other conditions of its sale were eminently negotiable.

Russia and EU unveil partnership
Russia and the European Union have unveiled a broad-ranging partnership accord at a summit on May 17th that represents an attempt to reinvigorate relations after a troubled year. As the bloc swelled last year with eight new members from the former Soviet Union, the EU's policy is seen to have become more assertive vis a vis Russia.
The meeting in Moscow was the first since a stormy summit last autumn at The Hague, when Russia accused the EU of fomenting street protests in Ukraine and partnership negotiations fell apart. EU officials say they do not want another breakdown and are ready to sign a less-than-perfect accord, hoping to nail down outstanding issues in the months ahead.
The partnership should benefit both sides: The EU will get a forum to launch economic co-operation with an energy-rich partner that is hungry for Western investment, yet the agreement signed on May 17th comes against the backdrop of a lingering EU-Russia perception gap. "Many Russian leaders now view the EU as a hostile power that is expanding into Russia's traditional sphere of influence," says Charles Grant, director of the Centre for European Research, a London think-tank, in a recent paper on the EU's relations with its eastern neighbours. "The EU, meanwhile, has become increasingly concerned about Russia's eroding democratic standards and weak regard for human rights."
In a statement prior to the summit, European Commission President Jose Manuel Barroso said he wanted relations to be taken to a "new and higher level." Barroso is hoping the signing of a long-delayed partnership accord, setting out four "common spaces" between Russia and the 25-member bloc, will provide the necessary momentum.
The wide-ranging pact encompasses security, economic and humanitarian issues and aims to enhance co-operation in transport, energy and regional conflict resolution as well as harmonising legal standards and promoting trade and investment.

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AUTOMOBILES

Russian plants' car sales down 9% in Q1


Russian automobile manufacturers cut car sales by 9.1% year-on-year to 235,850 vehicles in the first quarter of 2005, AO Avtoselkhoz-mash-Holding, which analyses the automobile market in Russia and the CIS, said, Interfax News Agency has reported.
OAO AvtoVAZ sold 162,469 automobiles in January-March this year (down 9.7% from January-March 2004), with production of 165,688 automobiles; OAO GAZ, OOO Sal Series Automobile Plant and OOO GAZ Automobile Plant sold 10,270 vehicles - down 39.77%, with production of 10,027 vehicles; KAMAZZ companies sold 9,250 (up 0.57% with production of 8,536 units); OAO UAZ - 5,791 units (down 37.47%, with production of 6,740 units), and OAO Izhmash-Avto - 10,127 automobiles.

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AVIATION & SPACE

Budget airlines entering Russian market

At least two budget airlines are expected to enter the St Petersburg market just as the city's Pulkovo aviation company splits into an airport and an airline this summer, the RBC News Service reported.
The airlines hope the separation will allow for a more flexible and productive cooperation with St Petersburg's airport. Aeroflight, a newly formed German airline, is offering a service between St Petersburg and four German cities which started on May 1st, Cornelia Weisspflug, the company's spokesperson said.
Budget operator, Germania, said it may also initiate flights to the city in time for the summer season, pending Pulkovo's cooperation.
Both Aeroflight and Germania tend to offer tickets cheaper than traditional operators such as Lufthansa, although the German-based mainstream airline said it was not worried about increased competition from budget firms.
Both budget and regular operators say Pulkovo's high costs and significant limitations in space and infrastructure impede their expansion on the local market.

Russia set to launch first Belarusian satellite

The first Belarusian satellite BelKA [Belarusian Spacecraft] is to be launched into orbit on 5 December, the Belarusian embassy in Moscow has said, RIA News Agency reported.
The Russian Dnepr booster rocket [civilian version of intercontinental ballistic missile RS-20; SS-18 Satan in NATO classification] is to take the satellite to an altitude of 510-515 km. The spacecraft will be used to carry out geodetic, cartographic and meteorological surveys for five years.
BelKA is a Belarusian spacecraft for remote sensing of the Earth being developed by the Russian Space Corporation Energiya on the order of the Belarusian Academy of Sciences and based on the universal space platform Viktoriya.
The satellite's cost is estimated at about US$9m, which is approximately 10 times cheaper than American satellites of the same type. The payback period of the spacecraft is six months, the embassy said.

Russia to participate in development of new Boeing plane

US Boeing is becoming partially Russian. Russians will participate in the development of the new Boeing 787 passenger aircraft. The Moscow-based design bureau is Boeing's biggest overseas division of this kind, RBK TV, Moscow reported.
The mass production of the new aircraft should to start in two years. Boeing's specialists expect that 3,500 planes worth US$400bn will be sold over 20 years. As many as 200 planes have already been ordered. 
Depending on its modification, Boeing 787 will carry from 220 to 300 passengers. Due to the use of new materials, it will be 15 per cent more efficient than other planes of the same class.
Russia is becoming a full-fledged and very important partner in creation of the plane of the future, the first composite aircraft in history of civil aviation, the dream liner. Russian enterprises will participate in its development and production of titanium parts. The number of titanium parts in that plane will be unusually high for a civil aircraft, Sergey Kravchenko, vice president of aircraft-building, said.

Russian helicopter maker to be privatised this year

The Russian government has included the M.L. Mil Moscow Helicopter Factory and the Stupinskoye mechanical engineering production association in the list of joint-stock corporations scheduled for privatisation this year. This is announced in a resolution by the Cabinet of Ministers signed by Prime Minister, Mikhail Fradkov, Interfax-AVN Military News Agency web site reported.
The decision was taken in compliance with the Russian President Decree "On the open joint-stock company 'Oboronprom Amalgamated Industrial Corporation'."
Under the government resolution, these two businesses are to be added to the defence-sector part of the list of federally-owned open joint-stock companies earmarked for privatisation in 2005. 

Russia developing new aircraft carrier

The Russian navy is launching a project to develop a new aircraft carrier, the navy's commander-in-chief Admiral of the Fleet, Vladimir Kuroyedov, said, Interfax News Agency reported.
"We are beginning work to develop a new aircraft carrier in 2005. Construction is to begin after 2010," Kuroyedov said.
He declined to answer the question about how many aircraft carriers the navy will have, saying: "The more, the better."
"We are launching this development project and involving leading experts to find out the parameters [of the vessel], which materials and weapons we'll need and how many aircraft carriers should be built," he said. 
Kuroyedov earlier told journalists that the navy is planning to put the new carrier into service in the Northern Fleet by 2016-17. Another carrier will be built for the Pacific Fleet, he said. "Deck aviation has a good future. A new multi-purpose aircraft will be created in a few years," Kuroyedov said.
The Russian navy currently has only one heavy aircraft-carrying cruiser, the Admiral Kuznetsov. The ship (Project 11435) was supplied to the navy in 1993 and is capable of carrying up to 52 aircraft, including Su-33 fighters and Ka-27 helicopters. It is also equipped by the Granit [Granite] ship-to-ship missile system, the Kashtan [Chestnut] rocket and artillery complex and the Klinok [Blade] anti-aircraft missile system. The ship has two engines with the capacity of 50,000 horse powers each and can reach the speed of 32 knots.
The Admiral Kuznetsov is 302.3 m long and 72.3 m wide. Its draft is 9.14 m, standard displacement - 43,000 tonnes and endurance - 45 days. Its crew consists of 1,960 men. The air wing numbers 626 pilots and technicians.

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CREDIT RATINGS

Moody's upgrades LUKoil, outlook stable

Moody's Investors Service upgraded LUKoil's senior implied rating to Ba1 from Ba2. At the same time, the rating agency has upgraded to Ba2 from Ba3 LUKoil's senior unsecured issuer rating, Moody's said in a press release, New Europe reported.
The issuer rating is notched to reflect the relatively high, albeit reducing, level of secured and subsidiary debt within the group, which would put unsecured holding company creditors in a weaker position to secured subsidiary creditors. All ratings have a stable outlook. Moody's said the upgrade primarily reflected the ongoing solid underlying performance of LUKoil; the company's position as Russia's largest oil company; and gradual improvements in LUKoil's operational performance and efficiency.

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ENERGY

LUKoil to invest over 120m Euro in Teboil

Russian oil major LUKoil is to invest over 120m Euro in the Finnish company Oy Teboil Ab over a 10-year period, according to material distributed at a press conference held by LUKoil President Vagit Alekperov in St Petersburg, Interfax reported. In particular, investment in 2005 will amount to over 10m Euro. According to the statement, investment will be aimed at expanding the retail network, increasing the capacity of a motor oil plant, increasing sales of liquefied gas and increasing small-wholesale sales of furnace oil. The statement also said that LUKoil President Vagit Alekperov was expected to meet with management from Oy Teboil Ab and Suomen Petrooli Oy. LUKoil-Finland, which is part of the LUKoil Group, has bought shares in the Finnish companies Oy Teboil Ab and Suomen Petrooli Oy, as a result of which its has received control of these companies. The LUKoil statement said the deal cost US$160m and has been approved by the European Commission. The main activities of the 2 Finnish companies is managing a network of 289 filling stations and 132 diesel pumps, wholesale oil product sales and production and the sale of lubricating oil. "The main result of this deal will be LUKoil's entry onto the Finnish oil product market. The company plans to receive additional profit from supplying ecologically clean EU-590 diesel to Finland, produced at a new hydrocracking unit at Perm Oil Refinery," LUKoil said in a statement at the time.

Gazprom and EGAS launch committee for joint projects

Russian gas monopoly Gazprom and Egypt's National Gas Holding Company (EGAS) have decided to form an advisory committee to discuss possible joint projects, Interfax News Agency has reported.
The decision was reached during a meeting in Cairo between a Gazprom delegation, led by Alexander Ananenkov, the Russian gas giant's deputy DEO, Egyptian Petroleum Minister Sameh Fahmy and senior EGAS officials, Gazprom's press office said.
Gazprom has said it is considering joining the US$560m Arab gas pipeline project to deliver natural gas from Egypt to consumers in third countries, including Syria, Lebanon and Cyprus.
Meanwhile, Egyptian Ambassador to Russia Raouf Saad said on April 15th that Egypt believes that Russia will provide its equipment and technologies to help advance the Egyptian gas sector.
Saad admits that Egypt does not have enough gas and does not intend to import gas from Russia but added that Russia might help Egypt by supplying equipment and send its specialists to the region. "Russia, particularly Gazprom has extensive experience in building gas pipelines. And we attach great importance to an exchange of great experience in this area," Saad added. He noted that if Russia were interested in the gas sector of Egypt then it would be highly beneficial to both countries.

Transneft boosts investment in BPS construction

Russia's pipeline company Transneft, which controls all pipelines in Russian territory, and Barclays Capital concluded a deal on April 15th, Prime-Tass News Agency reported.
Under the deal, Transneft will invest an extra 250m Euro in the construction of the third unit of the Baltic Pipeline System (BPS). In view of the favourable demand and supply situation in the market, Transneft made a decision to borrow 250m Euro, in contrast to the original intention to get a 200m Euro loan. The loan will be repayable in 3 years in 3 tranches upon expiry of a 2-year grace period at 115 basis points above Libor. Transneft chief Semyon Vainshtok said interest on the loan would be paid on a monthly basis from the moment funds are received. The syndicate involves ABN AMRO, Bank Austria, Citibank, Commerzbank, Fortis, ANG Bank, LBSachsen, Mizuho, Societe Generale, Sumitomo Mitsui Banking Corporation, Bank of Tokyo-Mitsubishi Limited, WestLB, BAWAG, Landesbank Rheinland Pfalz, SEB AB, UFJ Bank, Investkredit and State Bank of India.
Transneft said the deal "aroused considerable interest from the international banking community." It said that as many as 19 foreign banks offered to lend more than 400m Euro in total.

Surgutneftegas increases production estimate for 2005

Russian oil company OAO Surgutneftegas has increased its production forecast for 2005 by 500,000 tonnes to 63.7m tonnes, New Europe reported recently. The company disclosed its new production forecast in its annual report. Surgutneftegas published a different forecast in its report for the fourth quarter 2004 in mid-February - 63.21m tonnes. In 2004 Surgutneftegas produced 59.4m tonnes of oil, up 10% from 2003. The company is not changing its gas production forecast - it remains at 14.3bn cubic metres. According to the report, in 2005 the company will bring four new fields in Khanty-Mansiisk autonomous district on-stream - Syn-Yeganskoye, Tundrinskoye, Verkhne-Nadymskoye and West-Sakhalinskoye). The company is to launch 5 oil wells at the Talakan field in Yakutia and continue construction of an industrial base. The company plans to launch a total of 878 new production wells, compared to 887 in 2004.

LUKoil and ConocoPhillips look to wrap up JV deal

Russian oil major LUKoil plans to wrap up a deal creating the joint enterprise RusCo with ConocoPhillips for working the Timano-Pechora oil and gas province, LUKoil President, Vagit Alekperov, said, New Europe reported recently. 
LUKoil will hold 70% in RusCo and ConocoPhillips 30%. Plans are for RusCo to be extracting up to 10m tonnes of oil by 2008. The oil extracted by the joint venture will be piped to the LUKoil terminal in the town of Barandei by the Barents Sea, and thence by tanker to the international market. By 2007, LUKoil will have increased the terminal's capacity to 12m tonnes a year, with ConocoPhillips involved in the project designing and financing. The terminal's current capacity is 1.5m tonnes, and should increase to 1.8m tonnes this year.

Russia records 3.5% oil production boost in Q1

Russia raised gas production 2.7% year-on-year to 172.656bn cubic metres in January-March 2005, the Fuel and Energy Complex Central Dispatch Department said recently. The country produced 59.98bn cubic metres in March alone, the department said, Interfax News Agency reported.
Russian gas monopoly Gazprom produced 143.563 bn cubic metres in the first 3 months, down 0.8% year-on-year, including 49.827bn cubic metres in March. Vertically integrated oil companies produced 12.48bn cubic metres in the first 3 months and 4.3bn cubic metres in March.
Surgutneftegas produced 3.86bn cubic metres and 1.31bn cubic metres respectively, Rosneft - 3.06bn cubic metres and 1.08bn cubic metres and TNK-BP - 2.27bn cubic metres and 785.6bn cubic metres.
Novatek, one of the largest independent gas companies, produced 4.579bn cubic metres of gas in the first quarter (2.28bn cubic metres in March). Other producers turned out 12bn cubic metres in January-March, including 3.37bn cubic metres in March. Production of oil and gas condensate in Russia in January-march 2005 amounted to 114.266m tonnes, which was 3.5% more than in the same period in 2004.
In March Russia produced 39.479m tonnes of crude. Gas production in the first quarter amounted to 172.656bn cubic metres, which is 2.7% more than in 2004. In March the country produced 59.98bn cubic metres of gas. Exports of Russian oil to outside the Commonwealth of Independent.

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FOOD & DRINK

Danone posts 44% jump in Russian dairy sales

Danone, one of the world's largest food producers, sold 123,398 tonnes of dairy products in Russia in 2004, up 44% from the previous year, the company said in a statement, Interfax News Agency reported.
Danone's plant in Chekhov, outside Moscow, produced 84,303 tonnes and its plant in Tolyatti made 20,940 tonnes. A part of the products was imported.
Danone invested more than US$1m in Russian agriculture in 2004. A new production line that will increase capacity to 250,000 tonnes by the end of 2005 was brought on stream at the Chekhov plant recently in the presence of Russian Agriculture Minister, Alexei Gordeyev, and Danone representative, Frank Riboud. Yoghurt and cottage cheese production reached 2,150 tonnes per week at the end of March. The company has invested a total of US$45m in the Chekhov plant. Danone controlled 11.5% of the Russian sour milk product market in 2004.

Moscow sells 20% stake in McDonald's for US$22m

The government of Moscow has sold its 20% stake in closed joint-stock company Moscow-McDonald's which runs all of the Russian capital's McDonald's restaurants, Mosnews reported recently.
The priority right to buy the shares was exercised by McDonald's Restaurants of Canada Ltd which owns the remaining stake in Moscow-Mcdonald's. The sum of the deal amounted to US$22m, the paper said. The property department of the Moscow government told the Vedomosti business daily that the shares of Moscow-McDonald's did not bring the government the desired profits. Additionally, the stake did not give the right to participate in the management of the company. The joint-stock company was established in 1988 and at that point the Moscow government owned 51% of the company. When Russian legislation was changed to remove the limits on foreign capital participation in joint venture capital, Mcdonald's Restaurants of Canada Ltd bought 31% of the shares from the Moscow government. The deal took place in 1996.

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FOREIGN DEBT

Russia will pay part of its Paris Club debt early

Russia will pay US$13bn in early June within the framework of the first tranche of an early payment of part of its debt to the Paris Club of creditors, Russia's Finance Minister, Aleksey Kudrin, said, Interfax News Agency reported.
Russia signed an agreement with the Paris Club countries to pay off US$15bn from Russia's US$43.1bn debt ahead of schedule. The payments are to be made from early June to 20 August. 
Some 65 per cent of the debt is denominated in Euros, some 22 per cent is in dollars and the rest in other currencies, Interfax quoted Kudrin as saying. Most of the debt was taken out in the Soviet era. 
Russia will save from US$500m to US$600m a year due to early paying off its debt, Interfax said, quoting Kudrin. Russia's savings due to this transaction will amount to US$400m in 2005 and to US$800m in 2006, Kudrin said.
In general, Russia will save some US$2.25bn in 2006-2008 that could be allotted to other purposes, including social and investment projects. Russia will save a total of US$6bn by 2020.
The interest rate of Russia's external debt amounts to R244bn in 2005, it is comparable with the spending for education, culture and health care, Interfax quoted Kudrin as saying. 
If Russia paid off its debts ahead of schedule at market prices, it would have to pay a premium of 12-13 per cent, Interfax said, quoting Kudrin. As Russia agreed to pay off its debt at face value, it received a discount in comparison to market prices.
"It will positively affect Russian investment climate, increase attractiveness of Russian securities, reduce the price of borrowings of private and corporate sectors," Interfax quoted Kudrin as saying. 
Russia will pay off its debt using the resources of the Stabilization Fund, and it will not affect macroeconomic parameters, inflation and the rouble exchange rate, Interfax said at 1306 quoting Kudrin. "We have accumulated the largest part of the sum today, and the payment to be made from June to August will not influence either exchange policy, or inflation, or other macroeconomic indices," Interfax quoted Kudrin as saying.
The Russian government does not exclude the possibility of paying off more of the country's external debts ahead of schedule, Interfax AFI said quoting Kudrin.

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MINERALS & METALS

Norilsk Nickel to spin gold mining assets

MMC Norilsk Nickel intends to spin its gold mining assets off as a separate company, the Arctic mining and smelting giant said recently. Norilsk Nickel owns 20% of South Africa's Gold Fields. The Polyus mining company runs its assets. The company said that the board of directors approved a plan of work to spin off these assets at a meeting, Interfax News Agency reported.
"If implemented, the proposed reorganisation should lead to the formation of a new large independent gold production company with significant potential for further growth and significant assets in Russia," the statement said. The preliminary stage of reorganisation will be the consolidation of all gold production assets (including a 20% stake in Gold Fields) in the company ZAO Polyus.
According to plan, the new company should receive a listing both on Russian and foreign exchanges "in the shortest time possible after the completion of reorganisation." The statement said, "The board of directors of Norilsk Nickel plans to structure the reorganisation in such a way that all Norilsk Nickel shareholders will have the right to receive one share in the company."
The Norilsk Nickel board of directors plans to reach a final decision on reorganisation in August 2005. In this case company shareholders will receive a detailed informative memorandum on the new company, so that they can discuss the reorganisation issue at an extraordinary shareholders' meeting, which may take place in September this year. According to the preliminary plan, the reorganisation may be completed at the start of 2006.

Eurasia, AngloGold Ashanti unveil exploration alliance

Eurasia Mining Plc has agreed to an exploration alliance with AngloGold Ashanti, the worlds number two gold producer, covering gold and related mineral exploration and possible development projects in eastern Siberia, Interfax reported recently. 
Eurasia Mining said in a statement that AngloGold Ashanti will pay an entry fee of US$100,000 in recognition of Eurasia's past costs, and fund the first US$2m of exploration spending. Subsequent spending will be shared equally. 
AngloGold Ashanti will also have the right to purchase an additional 25% share from Eurasia following completion of any bankable feasibility study, when it can also take over as operator, the statement read. "This move is consistent with our strategy of investing in this prospective gold region through collaboration with companies with sound local experience, and confirms our confidence in the long-term future of the Russian gold mining industry. We are very pleased to be associated with Eurasia Mining as part of this strategy," said Richard Duffy, executive officer business development for AngloGold Ashanti. "This is a milestone agreement that combines our exploration management skills in the region with AngloGold Ashanti's resources and carries us into early stage projects that would otherwise be beyond our reach financially," Eurasia Managing Director Christian Schaffalitzky was quoted as saying. Eurasia Mining, which holds licences to explore precious metals on the Kola Peninsula and in the Urals, becomes AngloGold Ashanti's second partner in Russia. AngloGold Ashanti already owns a stake in Britain's Trans-Siberian Gold, which holds licences to a number of gold properties in Russia.

Norilsk Nickel net income increases in Q1

Russian metal group GMK Norlisk Nickel said recently that the net income calculated on Russian standards rose 36.4% to 15.34bn roubles in the first quarter 2005. For the first quarter of 2004, Norlisk Nickel earned 17.3bn roubles, New Europe reported.
At the same time, compared to January-March 2005, the company's net earnings climbed 36.4% - from 11.24bn roubles to 15.34bn roubles. MMC Norlisk Nickel Group produces nickel, copper, cobalt, palladium, platinum and other precious metals (gold, silver), selenium, tellurium, technical sulphur, hard coal and other materials for industrial needs.
MMC Norlisk Nickel is the world's largest producer of nickel and palladium and one of the largest producers of platinum. Its market share exceeds 10 per cent of copper production worldwide. Domestically, MMC Norlisk Nickel holds close to a 96 per cent market share of nickel, 55 per cent of copper and 95 per cent of cobalt production.
Norlisk Nickel is one of the leaders in the national economy - its enterprises account for 4. per cent of the Russian export. The share of Norlisk Nickel in the Russia's gross domestic product (GDP) is 1.9 per cent, and 2.8 per cent in the industrial output of the Russian Federation; that is 27.9 per cent of non-ferrous industry.
Norlisk Nickel and its subsidiary companies is the leading producer in Russia and one of the leading producers in the world of base and precious metals. MMC Norlisk Nickel Group is involved in prospecting, exploration, extraction, refining and metallurgical processing of minerals, production, marketing and sale of base and precious metals, and other minerals, generation of operational electrical and heating energy; and manufacturing of building and construction materials.

MMK doubles net profit in 2004

Magnitogorst Metallurgical Combine (MMK), Russia's biggest steel mill, said consolidated US GAAP net profit more than doubled last year to US$1.232bn from US$608m in 2003, as rising domestic demand for the metal drove up prices, the company's financial report said recently, Interfax News Agency reported.
Based on US generally approved accounting principle, revenue jumped 58.5% to US$4.829bn, the report said. The cost of products sold (exclusive of depreciation and amortisation) soared to US$2.712bn in 2004 from US$1.681bn in 2003.
Income from operating activities rose to US$1.538bn from US$817m and income before tax and minority interest was up to US$1.621bn from US806m.
MMK earlier quoted Roger Mannings, head of KPMG's office for Russia and the CIS, as saying the GAAP audits transform companies wishing to float their securities on the American market.
MMK has already had its results for 2001, 2002 and 2003 audited to US GAAP, and has gained the opportunity to enter the American capital market, Mannings said.
MMK has also published results audited to international financial reporting standards (IFRS), which put consolidated net profit for 2004 at US$1.217bn up from US$630m in 2003.
IFRS revenue was US$4.829bn and profit from operations was US$1.487bn. Net profit to Russian accounting standards (RAS) grew 64.2% to 33.446bn roubles in 2004.
Revenue increased 50.7% to 133.544bn roubles. Management controls all of MMK's shares.
The mill's rolled steel output rose 0.3% to 10.3m tonnes last year.

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TELECOMMUNICATIONS

Russia ranks first in mobile communications growth

Russia is ranked first in the world in terms of mobile communications growth, Russian Communications Minister Leonid Reiman said recently, Mosnews reported. According to the official, by the end of 2005 the number of mobile phone users in Russia will amount to approximately 100m. Reiman noted that at the end of 1999 and the beginning of 2000 the number of mobile services' subscribers was less than 1m, and all owners of mobile phones were considered to be rich "new Russians."
Just 5 years later the number of mobile phone users in Russia has increased to 82m (as of March 1st, 2005), and 3-4m mobile phones are sold monthly.

Siemens kick-starts 3G offer

Siemens will offer third generations mobile telephone services in trial areas in Russia, Interfax News Agency reported recently. 
Third generation, or 3G, services will be offered in special business zones for technology companies that are being built in St Petersburg, Nizhny Novgorod and the Moscow region, the news service said, citing Raymond Armes, president of the company's Russian mobile communications and information department. Mobile TeleSystems and MegaFon, Russia's No 1 and No 3 mobile phone companies, and Sweden's Tele2, will be Siemens' partners in the project, Armes was quoted as saying.

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TRANSPORT

Russian yard completes second diesel submarine for China

The signing of the acceptance certificate on completion of work on the second diesel electric submarine (DES) - Kilo class [in the NATO classification], project 636, built to an order from China - took place at Admiralteyskiye Verfi Federal State Unitary Enterprise [FSUE] (St Petersburg) recently, Interfax-AVN Military News Agency web site reported 
According to the agency's source the first vessel was launched in June 2004. The third DES is under performance trials at the moment. The launching of the fourth and fifth submarines is planned for May and June-July 2005 respectively.
According to the contract, experts will have fulfilled the export order fully by the end of 2005, passing the DESs to the customer - the Chinese navy.
At the moment, Russia is building eight DESs of project 636 for a total price of US$1.6bn. A total of five submarines are being built at Admiralteyskiye Verfi, two at Northern Engineering Works FSUE production enterprise (Sevmash, Severodvinsk, Arkhangelsk Region) and one at Krasnoye Sormovo shipyard, a joint-stock company in Nizhniy Novgorod.
The modernized Kilo-class submarine has a surface displacement of 2,350 cubic metres [as received]. The length of the DES is 73.8 m, its width is 9.9 m. It develops a speed of up to 20 knots under water and can dive to a depth of 300 m. Its cruising capacity is 45 days and the crew consists of 52 people. The vessel is supplied with the Klub-S missile-torpedo system.
Admiralteyskiye Verfi specialize in designing, production and modernizing of civilian and military vessels of different types. The production capacities and equipment of the shipyard make it possible to build ships which meet international requirements. The surface ships department of the shipyard is mainly focused on building tankers.

Russia, Iran, Azerbaijan sign agreement on rail link

Russia, Iran and Azerbaijan have signed an agreement on constructing a railway section through Qazvin, Rasht, Bandar-e Anzali and Astara, RIA News Agency reported.
"A consortium has been set up for carrying out the project," a source in the Russian trade mission in Tehran said.
"It is planned that the railway link will be 375 km long and will mainly go through Iranian territory. A total of 15 km will go via Azerbaijan. Railway sections which have been lacking until now, will thus be constructed to link the three nations and to increase freight turnover," the source said.
"The project, which is expected to take about seven to eight years to implement, may cost US$600.5m," the source said. 
President of the Russian Railways joint-stock company, Gennadiy Fadeyev, signed the agreement on behalf of Russia.

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