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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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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: 296- (26/08/05)

Russians and Chinese in joint military exercises
On August 18th-25th Russia and China held joint military exercises for the first time. Some 10,000 forces were engaged, air, naval and military, 8,000 Chinese troops and 1,800 Russian ones. Peace Mission 2005, launched from Vladivostok, involved manoeuvres in the Yellow Sea and off the Chinese coastal province of Shandong. The Mission was avowedly preparing the way for joint action against the ubiquitous threat of "terrorism, extremism and separatism."
The mention of 'separatism' is an apparent reference to Taiwan, where there is growing support for formal independence. That statement, the inclusion of an amphibious assault in the exercises and the use of long-range bombers capable of carrying nuclear weapons have caused concern in Taiwan, and among some regional experts. The Russians refused the proposal that the exercises should take place in the Taiwan Straits, not wanting to offend Taipei. However, a mock amphibious invasion took place, enough to alarm the Taiwanese.
But there was more to the 'Peace Mission' than that. In the first place the display of awesome air might was clearly designed to impress the Chinese with Russia's new bombers and fighters, notably the Tu-95 "Bear" and Tu-22m3 "Backfire" bombers, capable of delivering both nuclear and conventional weapons. These are now for sale. The PLA Air Force has made considerable progress of late in modernising its fighter wings by buying advanced Russian aircraft, but its bombers are often antiquated Soviet-era planes. China is Russia's largest arms buyer; and it wants it to remain so even after the EU, as it is about to do, lifts its ban on member countries' arms sales to Beijing.
Russia and China may go on to conduct joint military exercises on a regular basis, Defence Minister Sergei Ivanov said on August 24th. "This is possible, but we have not made any plans yet," the minister told journalists upon arrival in Qingdao. He said he did not rule out that such exercises might be conducted regularly, but added he did not think this should be done annually.
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The main point of the exercises, however, is clearly directed against the US and its dominance in Asia. In July at a meeting of the Shanghai Cooperation Organisation, which brings together these two with Kazakstan, Kyrgyzstan, Tajikistan and Uzbekistan, they demanded dates for the withdrawal of US forces from military bases in Central Asia. US influence in the Western Pacific, they would like to hope, is on the wane. 

Reaction of Rumsfeld and others in the US
In his usual nonchalant form, U.S. Defence Secretary Donald Rumsfeld said that he was not concerned about the Russian-Chinese exercises, despite the fact that they included an amphibious landing in eastern China, not far from Taiwan. U.S. experts on the region have differing views on the Secretary's comment.
At a Pentagon news briefing August 24th, during the second week of the exercises, Secretary Rumsfeld indicated that he was not at all concerned about the two huge powers expanding their military cooperation through joint exercises. "I don't find it notable," he said. "It is just a fact that countries get together and engage in various types of exercises. We are obviously observing what's taking place, but I didn't see anything in that that was threatening to Taiwan or anyone else."
Secretary Rumsfeld said that the United States frequently holds military exercises with a variety of countries, including Russia, and that the Russia-China exercises should not be seen as anything out of the ordinary.
But China expert Daniel Blumenthal of the conservative American Enterprise Institute, a Washington research organization, takes a very different view. He says the exercises are notable for several reasons. "I think the exercises are quite notable," he explained. "There's a few points of context. One is the rapid growth in Chinese military power. The second is its refusal to renounce the use of force against Taiwan. The third is its statements with Russia recently about getting U.S. forces out of Central Asia. So, I think, in that context, these exercises are quite notable." Mr. Blumenthal says China is involved in a serious effort to counter U.S. influence in Asia, and these military exercises with Russia are part of that, which is probably true, if not very significant.
At the more liberal research organization the Brookings Institution, however, Michael O'Hanlon agrees with Secretary Rumsfeld's conclusion that the China-Russia military exercises are not notable. "I think he had it exactly right, both in terms of the politics and the substance," said Mr. O'Hanlon. "The politics of this are, don't get too excited because if you do you're going to make Russia and China feel even more desire to have these sorts of things because they're going to feel the United States is not giving them their sovereign right to maintain their militaries and work with their neighbours and friends the way we ourselves do here. So, it would have been an mistake, given that the exercise didn't harm anybody, it would have been a mistake for Mr. Rumsfeld to object to it too strenuously, or for that matter, even a little."
And on the substance, Mr. O'Hanlon says Russia is not likely to actually fight beside China in any future conflict, so the joint exercises are not relevant in that sense. But he is concerned about any further increase in Russian arms sales to China. 
In addition, Daniel Blumenthal at the American Enterprise Institute says the exercises are further evidence that Russia and China are finding that they have similar critical views of one of the key policies of the Bush administration. "Russia and China are finding common cause in the sense that neither one very much likes the U.S. strategy of spreading democracies, and so they're finding common cause here in countering what they see as too much U.S. influence," said Mr. Blumenthal.
Secretary Rumsfeld doesn't see it that way. He knows that both Russia and China are extremely uneasy about the world's only superpower ringing the globe with military bases to enable rapid response scenarios. But he referred reporters to his department's annual report on China, issued in July, which said that the country is working intensively to modernize its military, is changing the military balance in Asia, and is making preparations to expand its military reach beyond its home region.

Putin dusts off military image, flies in bomber 
Putin is keen to burnish his military image, not just as a strategist, but as a worthy participant. On August 16th, just two days before 'Peace Mission 2005,' he flew in Russia's most potent bomber to take part in the launch of cruise missiles in the Arctic north, refurbishing the military aura he cultivated when he first came to power, reported Oleg Shchedrov of Reuters. 
The TU-160, or Blackjack, took Putin to major naval exercises in Russia's frigid north, just days after the country's second most senior admiral accused the navy of bungling the rescue of seven submariners. They were eventually rescued with British help, a stark contrast to the refusal to accept foreign assistance to save the sailors of the doomed Kursk submarine five years ago. The navy had to turn to British experts and equipment to save the seven men on board a mini-submarine which had become entangled deep underwater off Russia's Pacific coast. In a rare admission, navy chief of staff Admiral Vladimir Masorin said poor training and discipline were to blame for Russia's own bungled efforts to save the men, although not having the necessary heavy equipment would seem more relevant.
News agencies said the 52-year-old Putin would have had to endure two and a half times the force of gravity when the bomber broke the sound barrier on its way to watch the firing of cruise missiles near Vorkuta, 2,000 km north of Moscow. Putin was accompanied by two other TU-160 bombers, one of which fired the missiles, the latest of a series of periodic tests. Russia has 15 such bombers capable of carrying nuclear bombs and cruise missiles up to 6,000 km.
Interfax quoted Lieutenant-General Igor Khvorov, one of the pilots, as saying before the take-off that they would perform a risky low-level pass 200 metres (yards) above ground at a speed of 900 km per hour.
Putin, a little known former KGB spy formerly, has long used well-publicised trips with the military to help boost his image as a dynamic leader, notably when he took over the top Kremlin job from an ailing Boris Yeltsin in 2000. Before his election in March 2000, Putin made a surprise visit to Chechnya on New Year night, 2,000, to meet troops fighting separatist rebels. He later made another trip to Chechnya in an SU-27 fighter jet.
Soon afterwards, he became the first Russian leader to go underwater in the Arctic in a nuclear submarine. But that trip was soon overshadowed by the Kursk disaster, when a similar submarine sank together with 118 crew during military exercises. The botched attempt to save the Kursk put the spotlight on the poor state of the military Russia had inherited from Soviet Union -- something Putin has vowed to reform. 
With the help of Russia's oil export windfall, the military has started to buy new weapons. The military budget is being boosted by 22% this year. However, critics say the extra cash has not been accompanied by structural reforms to turn the armed forces into an effective modern army, whose problems have been underlined by a string of recent mishaps. Last year, for instance, a furious Putin watched two failed attempts in as many days to launch intercontinental missiles. The navy is evidently in no better shape.

Putin flexes his muscles in the regions
Putin has much to worry about as regards domestic security, with regular terrorist attacks in Moscow and in the regions. He has used the issue to overhaul Russia's federal system of governance.
Until recently, the leaders of Russian regions were elected by direct popular vote. Now Russian law allows the Russian president to submit a candidate to a regional assembly 35 days before the term of the previous holder of the position expires. The assembly then has 14 days to consider the candidate.
If the assembly rejects the candidate, the president should then submit a new candidate within seven days. If the second candidate is rejected, the president has one month to carry out consultations and submit a new candidate or appoint an interim governor, but only for six months. The president has the right to disband the assembly, if it rejects the third candidate.
But Putin may be having second thoughts about this decision to cancel regional elections and appoint governors with only pro forma confirmation by respective parliaments. 
Just a year ago, the plan appeared to offer a perfect solution to the multiple problems of federalism, with its empowerment of regional leaders who build local support bases. Putin with his authoritarian instincts naturally never liked that arrangement; but in December 2002, he had after all reassured Russian voters that the system of elections would continue because it was enshrined in the constitution. 
Then last autumn Putin cited the Beslan tragedy as the pretext for scrapping this system, even if the "war-on-terror" justification was far from convincing. Opinion polls regularly confirm that more than 75% of voters would prefer to elect the head of their respective region and believe that their political rights have been infringed, as recorded by Ekho Moskvy on June 16th and the Levada Centre on July 1st. 
The regional elites, nevertheless, expressed broad support for this deepening of "managed democracy," not least because it granted governors an opportunity to keep their jobs beyond the two-term limit. In June, for example, Putin re-appointed Vladimir Chub as the governor of Rostov oblast, prolonging a term that started back in 1996. Even such a mainstream commentator as Vitaly Tretyakov has argued in Rossiiskaya Gazeta, June 23rd that legitimising this indefinite continuity of regional fiefdoms is one of Putin's most serious political mistakes.
This mistake results from a conscious choice for preserving "peace" in the regions by supporting the most loyal elite groupings, but this summer the Kremlin has been drowned by a flood of local feuds. Regional politics has turned out to be full of high drama and the contestants, instead of resolving their conflicts in the local arenas, now bring them to Moscow. They all claim absolute loyalty and seek to secure backing from various mini-groups in Putin's extremely closed "inner circle" by every available means. 
The problem is that it is only Putin who can make the final decision, since he refuses to delegate this responsibility either to his aides or to the "presidential envoys" in the seven federal districts, who are formally responsible for suggesting candidates. He knows how vital it is to keep power centralised in his hands. The Yeltsin years were an awful warning in that regard, when local potentates were actually encouraged to take over as much of the prerogatives of the centre as they could, with dire results.
But Putin apparently finds his new powers of arbitration much less pleasant than he thought when he initiated this strengthening of central control; he was embarrassingly late with finding a suitable person for Irkutsk Oblast, and now he has to deal with Kaliningrad, as Kommersant reported on August 15th, always a headache. Irritated by the amount of intrigue, he tried to order the local politicians to stop their bickering; but the vendettas he is dealing with cannot be stopped that easily. So in most cases he prefers to issue the incumbent a new mandate, even if that means preservation of such outrageously despotic regimes as Kirsan Iliumzhinov's in Kalmykiya and Murtaza Rakhimov's in Baskortostan.
Another and more serious problem is the distortion of the system's distribution of authority between the centre and the regions. In handpicking the leader, the Kremlin implicitly assumes responsibility for his performance (only St. Petersburg has a female governor, a true Putin loyalist for his own patch) -- and in most cases this performance is in reverse proportion to the proclaimed loyalty. This necessitates increased transfers from the federal budget in order to compensate for the financial "irregularities" -- but that only encourages further corruption, as Vedomosti reported on August 9th. 
Seeking to break this vicious cycle, Dmitry Kozak, the envoy in the Southern Federal District and one of the more capable administrators in Putin's team, suggested imposing direct financial management from Moscow for regions that depend on federal support for more than 80% of their budgets, reported Expert on July 25th. There is a rational point in this suggestion, experts agree, but generally taking the financial levers away from a governor appointed personally by the president is not going to improve the integrity of the system. 

Let the Oligarchs earn their salt
A more "radical" solution was proposed by Konstantin Pulikovsky, the envoy in the Far Eastern Federal District, who suggested appointing Viktor Vekselberg, one of the richest entrepreneurs in Russia, the governor for Kamchatka. This extravagant idea is based on the experience with Roman Abramovich, the most famous of Russian "oligarchs," who a few years back got himself elected governor of Chukotka -- and has sponsored a few projects in the region that make a significant impact on everyday life of its population. The real political message, however, is that such disaster areas as Kamchatka need leaders who know how to make things happen, but do not need to steal the last kopek. Unfortunately, it is all but impossible to find such people among Putin's trusted cadre. Hence the logic of appointing a tycoon.
Both Pulikovsky and Kozak appear to be desperate, and if the former is unable to reverse the economic dislocation of his vast region, the latter cannot extinguish the brushfire of violent conflicts caused by the paralysis of the system of power. He submitted an honest report on the deteriorating situation in Dagestan; but Putin, paying a surprise visit to the region in mid-July, confirmed his confidence in the leadership of Magomed Magomedov, perhaps fearing that the slightest rock could sink this fragile boat, reported Ezhednevny zhurnal on July 18th. For the same reason, Mustafa Batdyev remains in charge of Karachaevo-Cherkessia despite public protests against the gangster style of business adopted by his family, reported Nezavisimaya Gazeta on August 10th.
With consolidation also in mind, Putin has recommended that the State Council of Russia's Chuvash Republic reelect Nikolai Fyodorov as Chuvash Republic's president, the Russian presidential press service, Prime-Tass, reported on August 17th. In a parallel move, Putin has recommended a regional assembly to endorse Valery Shantsev as governor of Russia's Nizhny Novgorod Region, said Alexei Gromov, the president's spokesman. Shantsev, born in 1947, has been the deputy mayor of the Russian capital of Moscow since June 1996.
Yevgeny Lyulin, chairman of the Nizhny Novgorod regional parliamentary assembly, said that the assembly was to consider Shantsev's candidacy on August 8th. Shantsev's candidacy was approved and he will replace Gennady Khodyrev, who had been the region's governor since August 2001. His removal from Moscow and the orbit of Moscow City Hall is doubtless a key attraction of the appointment.

No regional governor could win presidential election - survey 
Putin, then, is succeeding in turning Russia's incumbent provincial governors into placemen, totally under his control. The advantage here is that none of them would be capable of winning the next presidential elections in 2008, according to a survey cited in a popular daily on August 22nd. Experts told Noviye Izvestia that the results of the study conducted by the Russian Center for Public Opinion Studies (VTsIOM) were due to the Kremlin's constant efforts to drive regional elites to the periphery of political life. 
Sociologists asked respondents to assess the performance of governors according to the following criteria: how successful he or she had been in addressing social problems, tackling economic issues, and fighting crime. Respondents were also asked to name the governor they believed was an example to others. 
Aman Tuleyev, the governor of Kemerovo region, a large coal-mining region in Asian Russia, Mayor of Moscow Yury Luzhkov, Mintimer Shaimiyev, the president of the Volga republic of Tatarstan, and Alexander Khloponin, the governor of the northern Krasnoyarsk Territory, appeared to be the most popular. 
Leonty Byzov, the head of analysis at VTsIOM, said Tuleyev had outdone Luzhkov, as Moscow was disliked in the country because people said it existed on the rest of Russia's money. Tuleyev, on the other hand, was working hard for Russia. 
Roman Abramovich, the governor of oil-rich Chukotka in Russia's Far East, is extremely unpopular in Russia because he is seen as a typical Russian "oligarch," one of several business tycoons who got rich in dubious privatisation deals the 1990s and are now hated for this. According to the survey, the majority of Russians wonder why he has not been put in jail with ex-Yukos oil major founder Mikhail Khodorkovsky. 
According to Byzov, Shaimiyev is popular as he is seen as President Vladimir Putin's favorite. Moreover, in the 1990s he managed to check ethnic tensions in Tatarstan and prevented a major conflict there similar to the one in Chechnya. 
Therefore, Byzov concludes, there are no future national leaders among today's regional governors. The provincial political elite has grown weaker and is unable to nominate a strong candidate to succeed Putin, the expert said. An experienced regional governor could have emerged as a national leader. However, the reform of the Federation Council, the upper house of parliament, designed to weaken governors, has made even the most popular of them unknown in the country.

The real worry is the capital
There is one exception that proves the rule. The region, if one can call it that, that Putin really worries about is Moscow, which remains under the control of Mayor Yuri Luzhkov, whose loyalty has always been questionable. Luzhkov is known to all throughout Russia. The spectre of a "colour revolution" has retreated during this summer, but the fearful Kremlin worries that it could suddenly reappear right at its gates; and the outcome would be decided by the unreliable capital and mayor. 
Seeking to weaken Luzhkov's grasp on power, Putin, as we have seen, appointed his deputy, Valery Shantsev, to the governorship of Nizhny Novgorod, resolving with the same "master-stroke" the local power conflict, according to Rosbalt on August 6th. Luzhkov, however, is focused on the forthcoming elections to the city parliament, assuming that a clean victory would make it extremely hard for Putin to replace him with a "man from St. Petersburg."
By no means a "revolutionary," Luzhkov understands all too well that the system of power has turned rotten beyond the Soviet standard. The all-powerful president is helpless to prevent the gathering storm; but the shrewd Moscow mayor expects to survive it -- and join the yet unknown winner. 

Personal safety in question
Putin's allies are worried about not just his political, but also his personal, safety. They are confident of his health about which he is very careful, training regularly in the gym. But they fear an accident in Russia's far from safe transport system, even at its pinnacle serving the Kremlin. An accident in the course of his travels is the one eventuality that they fear could end his presidency abruptly, as it did the career of Alexander Lebed, the general and governor of the region, in Krasnoyarsk several years ago. 
Putin is not above removing police chiefs in this regard, after his old remit as a former head of the FSB. On August 10th Putin signed an order dismissing the chief of police, Vladimir Valkov, in Siberia's Altai Krai. The Prosecutor-General's Office said the dismissal was connected to the death on August 7th of Altai Governor Mikhail Yevdokimov in an automobile accident. The prosecutor's office said Valkov had not provided Yevdokimov with adequate security. 
Yevdokimov died when his car veered off a highway and hit a tree near the town of Biisk, some 3,000 kilometers southeast of Moscow. The driver of the vehicle and a bodyguard were also killed. Yevdokimov, a well-known comedian elected governor last year, was buried on August 10th.
For the first time in the history of Russian civil aviation, authorities made a decision to temporarily stop the flights of all airlines of the same model - Il-96, a regular for the Kremlin, as it so happens. On August 22nd, Rostransnadzor (state agency, which supervises the transport) banned flights of Il-96-300 "due to multiple malfunctions of the braking and hydraulic systems." 
Fourteen aircraft from five air carriers were grounded, including two planes that serve the president of Russia. In September, the presidential Il-96-300PU, which was making a test flight before Vladimir Putin's visit to South America, could not take off from the Lisbon airport Portela de Sacavem. There were rumours about a bird getting into the engine; however according to the official version the flight was delayed because of the wrong reading of sensors which showed that the engines were not ready for takeoff. Another incident with the presidential jet occurred in Turku earlier this year.
The producers of the Ils consider the action of Rostransnadzor as excessive. Krasair and DAL are counting the losses and Aeroflot announced that before the end of summer schedule it can lose up to US$20 million. But matters of state outweigh commercial considerations.

Putin in another disclaimer about a third term
Putin was elected president in March 2000. In March 2004 he was re-elected with over 71% of the vote. Putin, who remains popular among Russians, was widely speculated to look for ways to stay for a third term, which would be against the Russian Constitution. But he has once again diclaimed any such ambition.
On August 2nd he said that he could not remain president after 2008, since the Russian Constitution forbids him to do so, ITAR-TASS reported on the same day. "I might have wished (to remain president after 2008), but the Russian Constitution does not allow me to do it," Putin said at a press conference following a meeting with Finland's President Tarja Halonen.
He would almost certainly be re-elected a third time if he stood. Opinion polls consistently put him on or around 70% support. The Russian president is the only federal authority whose approval rating is positive, an opinion poll carried out by the All-Russian Public Opinion Research Centre showed, New Europe reported recently. 69% of respondents said they approved of Vladimir Putin's performance, against 70% in May. The president's disapproval rating dropped from 27% in February to 21% in June and July. 
The government's approval rating, by contrast, fell from 30% in May-June to 28% in July. 22% approved the performance of the State Duma lower house of parliament, and 61% said they disapproved. The federation council upper chamber's rating remained unchanged, with 24% approving of its performance and 47% disapproving. 
Putin still leads in opinion polls. In April and May, he was seen among the country's most trusted politicians by 40% of respondents, followed by 41% in June and July. He is followed by Emergency Minister Sergei Shoigu, with 13%, and Vladimir Zhirinovsky, leading of the Liberal Democratic party of Russia, who enjoyed 11% in May and 10% in April-June. Putin also tops the list of potential candidates for president.

Paper considers calls for third Putin term 
It is these findings that make it clear why calls for a change in the constitution to allow for a presidential third term continue to be made - and by influential organs at that. The leader of Russia's republic of Mari El, Leonid Markelov, proposed on August 21st amending the Russian Constitution to allow the Russian president to be elected three consecutive times for a term of between five and seven years, a popular daily, Nezavisimaya Gazeta, reported on August 22nd, according to RIA Novosti on the same day.
Nezavisimaya Gazeta asked politicians and political scientists to comment on who was behind such statements - the president or his inner circle. Georgy Satarov, the president of the Indem Foundation, a Moscow-based think tank: "I believe this is the president's initiative. A change to the terms is quite possible. The time needed to make constitutional amendments varies from country to country, and it could change in Russia too. But countries that respect their legal principles introduce such amendments to the constitution for the next president, not for the incumbent." 
Leonid Gozman, the deputy chairman of the political council of the Union of Right Forces (SPS): "Many people think such statements are attempts to make society expect a third term and look forward to it. The saddest thing is that such sentiments are quite widespread in society. In Russia, the idea that power needs to change hands is not so widely understood as it should be. This is the real problem." 
Gennady Gudkov, a deputy of the State Duma, the lower house of the Russian parliament, member of the security committee: "The initiative has not come from the president himself, but from people who owe their posts and offices to him, and they care about their positions more than anything else." 
Yulia Latynina, a political and economic commentator: "Most of these statements are due to the self-promotion of politicians who want to solve their problems. I think President Putin will secure a third time simply because this is the authorities' logic. Power in Russia is in essence authoritarian, and there are no other ways to hand over power: control must be maintained over it. I believe Putin has not made a final decision because he does not make decisions in advance. The decision will be made in the end and in a great hurry." 

ENERGY SUPPLEMENT

Gazprom begins North-European gas pipeline construction 
Gazprom, Russia's natural gas monopoly, began construction on the North-European natural gas pipeline (NEG) and plans to complete the first 100km through the Boksitogorsky area in the Leningrad region in six months, the daily Biznes has reported. 
With an estimated 55-million-metric-ton annual capacity, Gazprom will open a direct under sea route for Russian gas exports to Europe, which would allow it more flexible pricing and long-term and fixed-priced intermediary contracts. The article cites Arif Zeynalov, an analyst within the Zurich Capital Management investment company, as saying that Gazprom's Western partners, including E.ON and BASF (both German), currently resell natural gas at a higher interest margin. 
Gazprom is seeking independent operation in Europe under short-term contracts. It recently bought underground storage facilities in Britain, along with leasing storage facilities in several European countries, since it believes that NEG construction would guarantee increasing gas supply. 
Gazprom intends to complete construction on the project in 2008. However, project success depends on the development of the South Russian gas field in the Yamal Peninsula in West Siberia, with its estimated 688-billion-cubic-meter natural gas deposits and 35-45-billion-cubic-meter annual production capacity. The gas field is going to be the main supplier of gas for the North European gas pipeline. The company has already conducted exploration drilling in the area. 
The NEG project is estimated at US$7.8 billion, of which US$5.7 billion is to be allocated for the development of the South Russian natural gas field. Experts believe Gazprom will most probably try to finance construction by issuing loans. It will also lobby for help from one of its assets, Gazprombank, though it has yet to attract more investment into gas field development, the article said. 
Gazprom has recently stepped up efforts to enter the Sakhalin-2 consortium, owned by British oil company Shell, having proposed in return a stake in the Shtokmanovskoye field on the Barents Sea shelf, whose reserves are estimated higher than those of the South Russian natural gas field, but its operation would begin much later. Shell is therefore unlikely to wait and will opt to join the project.

FT Appraisal; Roman's tainted gains
The proposed sale by Roman Abramovich, the Russian oligarch, of his estimated US$10bn stake in the Sibneft oil company to Gazprom, the state-controlled gas group, looks like a neat way of settling accounts with his country, avers the Financial Times.
"He sails off into the sunset, free to buy yachts and football clubs, while the Kremlin virtually completes the renationalisation of Russia's core energy assets. Smiles all around, not least among the bankers involved, " says the FT. Actually, it is not as simple as that. Abramovich is being obliged to stand again for the governorship of Chukotka and continue to bail it out of its financial hole. He must regret the whim that made him become its governor in the first place.
The truth is far less pleasant, indeed, than the FT original account, both for Russia and for Abramovich, as the paper went on to say itself. This deal, if it goes ahead, will be the latest development in the untransparent privatisation of Russia's mineral wealth in the mid-1990s, of which Abramovich was a principal beneficiary. After selling the Sibneft assets for a song under former president Boris Yeltsin, the Kremlin is buying them back for a fortune under president Vladimir Putin. The wheel has come full circle, leaving Abramovich very rich and robbing Russia of money that might have financed schools and hospitals.
Strikingly, Abramovich has avoided the fate of Mikhail Khodorkovsky, founder of the Yukos oil group, who has been jailed for fraud and had his assets confiscated. Both men made their fortunes in similarly opaque ways. Khodorkovsky was punished because he dreamt of ruling Russia. Abramovich has had the sense to respect the Kremlin.
There may be even more to it. Khodorkovsky was always his own man. Abramovich is close to former president Yeltsin and his family. Exporting the Sibneft billions could be the Yeltsin family's way of taking out insurance against political change, perhaps in the 2008 presidential poll, when Putin must supposedly stand down.
The punishment of Mr Khodorkovsky now looks even more arbitrary than before. Putin could have dealt with the underpriced privatisations by a one-off supertax applied equally to the main beneficiaries. In return, he could have offered a statute of limitations and left the original deals in place. The oligarchs would have grumbled but they would have paid up. There would have been a rough-and-ready equality before the law. The principle of property rights, the foundation of a good business climate, would have been established, however imperfectly.
Now, arbitrary rule has triumphed. The victors are the Kremlin bureaucrats who have established, with Putin's support, that might is right. They have also made clear they want their share of the spoils, by taking top jobs in state-run industries.
However, the present Kremlin team have no guarantee the authoritarian power they have accumulated will remain in their hands. They worry about 2008. And they have nightmares about democratic revolts of the kind that swept Ukraine, however unlikely that may seem in Russia today. The forces released by communism's collapse have yet to play themselves out.

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AUTOMOBILES

GM CIS to increase car sales in Russia 


General Motors CIS, which represents the US company General Motors in Russia, plans to increase car sales through its official dealers by 130 per cent to 35,000 cars in 2005, GM CIS Director General, Jacek Gorski, said recently, New Europe reported.
"GM plans to sell 35,000 cars in Russia this year. Last year, we sold about 15,000," Gorski said, adding that these figures do not include the sales of cars produced at the joint enterprise GM-Avtovaz.
The potential to significantly increase car sales is attributable to the sales of Chevrolet produced by the South Korean company GM Daewoo Auto & Technology, he said.
Gorski also said that GM CIS plans to begin selling its renovated Opel Zafira and Opel Vectra models in Russia in the fall. He said that sales of the Opel Astra model would remain the same in 2005 as they were in 2004 due to a deficit in the number of models delivered to Russia.

Inchcape plans to expand into Russia and China

Inchcape the international car dealership group, is planning to motor into Russia through a joint venture, the Financial Times reported on August 2nd.
Peter Johnson, chief executive, said the group was in the process of identifying a number of local operators to help it tap into the increasingly lucrative market. "There are terrific growth opportunities, over the last 12 to 18 months the market has really developed," he said.
Inchcape initially plans to focus only on Moscow and St Petersburg.
Mr Johnson said any investment would not be significant and would follow the pattern set in Macedonia, Romania and Bulgaria, of building from a low base to freehold operations. The group also intends to increase its presence in China, through joint ventures in big cities such as shanghai, and is believed to be talking to the Shanghai Automotive Industry Corporation.
Inchcape's expansion plans follow a strong half year, with pre-tax profits in the six months to June 30th up from £86.2 to £104.8m. Sales increased 5% to £2.26bn.
Greece was the only European market that fell because of the difficult comparisons with sales during the Olympic year. All other markets grew, with Australia performing strongly on the back of record Subaru sales.

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AVIATION & SPACE

Government signs off 10-year space budget 

The Russian government recently announced approval of a 10-year space programme budget, the BBC reported. 
That budget will include funding for development of a reusable spacecraft to replace Russia's aging Soyuz manned launch vehicle.
Russian officials say they also want to start experiments testing whether it's possible for humans to make the flight to Mars. 
Under that plan, six volunteers will spend 500 days in a mock space module in Moscow. The BBC said more than 20 volunteers have already applied to take part in the experiment. 
Russia has been struggling to finance the International Space Station in the absence of the US space shuttle fleet. The Soyuz became responsible for all trips to and from the space station following the Columbia shuttle disaster in 2003. 
Although the new Russian 10-year space budget will total about US$10.5m (300bn roubles), it is less than what the United States spends annually on its space programme, the report said.

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BONDS

Bank for Development places Eurobonds 

Russian Bank for Development has floated a debut issue of Eurobonds worth US$170m, whereas initially it had claimed a loan worth US$150m, the bank's press service reported recently. The maturity date of the bonds is due in three years, and the coupon rate has been fixed at 6.5 per cent, New Europe reported.
Barclays Capital acted as the issue's lead manager. Placement was preceded by the bank's road show in Asia (Korea, Hong Kong, Singapore) and Europe (Switzerland, Germany Greece and Great Britain), when the bank's representatives held 62 meetings with potential foreign investors. Investors' bids exceeded the issue's initially planned volume and equalled US$400m. Seventy-two financial institutions, including leading foreign banks, assets management funds, pension funds, etc, took part in the floatation.

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CREDIT RATINGS

S&P upgrades Sibneft to BB-, outlook is stable 

Standard & Poor's Ratings Services said on August 8th that it raised its long-term corporate credit rating on Russia-based OAO Siberian Oil Co (Sibneft) to BB- from B+, following a review of the company's 2004 operating and financial performance and the relative clarification of its shareholding situation. The outlook is stable. At the same time, the national scale rating on Sibneft was raised to ruAA- from ruA+. "The rating action reflects Sibneft's strong financial and operating performance in 2004, when free operating cash flows of US$1.3bn - in the absence of dividends or any material acquisitions - helped to reduce net debt to only US$308m at end-December," said Standard & Poor's credit analyst, Elena Anankina. Following a court decision in July 2005, Sibneft's core shareholders have now regained control of 72 per cent of the company (up from 57.5 per cent), leaving OAO NK YUKOS with a stake of only 20 per cent. This provides further comfort that Sibneft should remain reasonably distant from the challenges faced by troubled oil company YUKOS, New Europe reported.

Fitch upgrades Russia to BBB, outlook stable 

Fitch Ratings, the international rating agency, has upgraded the Russian Federation's Long-term foreign and local currency ratings to BBB from BBB- (BBB minus). The Country Ceiling has also been upgraded to BBB from BBB- (BBB minus) and ratings for the MinFin V and VIII bonds have been upgraded two notches to BBB from BB+. The short-term foreign currency rating has been affirmed at F3, New Europe has reported.

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ENERGY

Gazprom lists its bonds in Dublin

Gazprom, Russia's state-controlled gas monopoly, has for the first time, listed its bonds in Dublin instead of Luxembourg, which is struggling to cope with the additional workload created by the European Union's new prospectus directive, the Financial Times reported on July 19th.
Gazprom, Russia's biggest borrower, recently raised nearly US$1.9bn by means of two separate bond issues, lead-managed by Deutsche Bank and MCC of Italy.
People close to the transactions said the company had opted for Dublin because of a backlog of listing on the Luxembourg Stock Exchange, prompted by the July 1st adoption of the prospectus directive. It calls for more stringent disclosure from issuers, such as accounts prepared on the basis of International Financial Reporting Standards.
European corporate bond issuance rose to a two-year high in June, as companies rushed to the market before implementation of the new directive. The Luxembourg Stock Exchange said it registered 1,241 new securities in June, up from 775 in June 2004. Most of them were bonds.
But an official at the exchange said many companies had also waited until after July 1st to start new borrowing programmes in order to avoid having to review documentation after the rules had taken effect.
An official at the exchange said: "There is a bottleneck in Luxembourg - we're getting a lot of listings prospectuses right now. But a bottleneck is also a sign there are many securities waiting to be listed on the Luxembourg Stock Exchange."
The London Stock Exchange said it had experienced no delays. The Dublin exchange was unavailable for comment.

MegaFon profit doubles in Q1 

Cellular phone operator MegaFon said profit more than doubled in the first three months, Interfax News Agency reported. 
Net income was US$76.1m, 122 per cent more than the US$34.3m earned in the same period last year, the company said. Revenue rose 66 per cent to US$459.9m under US Generally Accepted Accounting Principles (GAAP).

Kazakstan, Russia sign oil production sharing agreement 

Russia and Kazakstan recently signed a US$23bn production sharing agreement to develop one of the Central Asian nation's largest oil and gas fields, Interfax News Agency reported. The shareholding structure will be 50:50. 
Executives from Russian oil firm Rosneft-Kazakstan Ltd and the Kazak national oil and gas company, Kazmungaz, signed the deal at a ceremony in the Kazak capital, Astana. Rosneft holds 25 per cent, and the Russian state company ZarubezhNeft (specialising in offshore drilling) holds an option for the remaining 25 per cent.
Russian President, Vladimir Putin, attended the signing ceremony along with his Kazak counterpart, Nursultan Nazarbayev. Putin was in Astana for a regional security alliance summit. The agreement is for 55 years, with up to 10 years to be spent on exploration and 45 on extraction, said Baktykozha Izmukhambetov, first deputy minister of energy and mineral resources of Kazakstan.
Over the term of the agreement, Kazakstan will earn more than 30bn Euro in taxes and other payments, Izmukhambetov said. The deal envisages equal investments in the Kurmangazy field, located offshore in the Caspian Sea, with an estimated 980m tonnes of known oil and gas reserves, said Izmukhambetov. Extraction of the oil and gas could begin in a decade. "We have worked on the Kurmangazy project since 2002. This is the completion of a huge amount of work," said Putin.
Kazakstan has vast oil and gas resources, located mainly in the western part of the Central Asian country. 
More than three-quarters of the total profits from the Kurmangazy field will go to Kazak government coffers, in contrast with other deals that have given the Kazak government much lower proceeds.
Primarily an international consortium led by Italy's Eni SpA is developing Kazakstan's largest field, Kashagan, with more than a billion tonnes of estimated gas and oil reserves.

Rosneft may invite foreign investor to Vankor 

Russian oil company Rosneft is considering attracting a foreign investor to develop the Vankor oil and gas field after the completion of exploration, planned for September 2006, Rosneft President, Sergei Bogdanchikov, said, Interfax News Agency in Krasnoyarsk reported recently. 
"A decision on the possible attraction of foreign investors will be reached after the completion of exploration of the field. We plan to complete this by September 2006," Bogdanchikov said. He said that France's Total and India's ONGC Videsh have already expressed interest in the Vankor field. The Rosneft chief also said that according to preliminary estimates, all investment expenditure on the project, including on transport infrastructure - the construction of pipelines, would amount to about 4.5bn Euro.
Bogdanchikov said that two routes are currently being considered for pipelines from Vankor - to Dikson in the north, or to Purpe or the so-called Tarasovsky hub in the south. He said that each route "has its plusses and minuses" and that a final decision would be reached in the second half of this year.

Gazprom acquires capacity in Humbly Grove gas storage 

Gazexport, the export arm of the worlds largest gas company Gazprom, recently announced that it signed a deal with Vitol SA to buy 53m therms (143 Million cubic metres) of capacity in the UK's newest gas storage facility at Humbly Grove, Interfax News Agency reported. 
According to a statement from Gazprom marketing and trading, the UK-based marketing and trading subsidiary of Gazprom, the five-year deal gives Gazprom access to approximately half of the facility's total storage capacity. The capacity will be managed by Gazprom marketing and trading to provide its UK and Northwest-European downstream and wholesale customers with more flexible and tailored gas service products.

VEB says no plans to offer funds for Trans-Siberia pipe 

Russia's Vnesheconombank (VEB) does not yet plan to fund a project to build the Eastern Siberia-Pacific Ocean pipeline, bank Chairman, Vladimir Dmitriev, said recently, Interfax News Agency reported. 
"As far as I know the concept has not yet been prepared, and the technical parameters of the project have not yet been approved," he said. At the same time Dmitriev said that Transneft is likely to finance this project based on the market attractiveness of one proposal or another. He also said that VEB is part of an interdepartmental working group working on the development of a concept for the construction of the pipeline. Transneft President Semyon Vainshtok said earlier that the company has approved a financing plan for the Eastern Siberia - Pacific Ocean oil pipeline, which will cost about 11.5 billion Euro to build.
"With a necessary investment of six billion Euro for the first phase, we have already found financing for eight billion Euro for a period of 15 to 20 years," Vainshtok said.

Oil extraction in Russia reaches 40m tonnes 

Oil extraction in Russia in July amounted to 39.973m tonnes against 39.453m tonnes over the same period of 2004, the economic news agency with reference to the ministry of industry and energy said, Interfax News Agency reported.
At the beginning of the year, oil extraction amounted to 270.98m tonnes against 263.06m tonnes in 2004 while the oil export amounted to 124.67m tonnes against 114.13m tonnes in 2004. The oil export to far away foreign countries through the Transneft system reached 18.16m tonnes in July 2005 against 17.02m tonnes over the same period in 2004. Gas production in Russia in the first half of the year reached 372.91bn cubic metres or 3.79bn cubic metres more compared with the same index of 2004. Gas exports to foreign countries amounted to 92.212bn cubic metres or 8.802bn cubic metres. 

Stroitransgaz to build gas pipeline in Algeria 

Russian company Stroitransgaz and Algerian state-owned oil and gas company Sonatrac signed in Algeria a contract for the construction of the Souguer-Hadjret En Nouss gas pipeline, a representative of the Russian company in Algeria said, Interfax News Agency reported. 
From the Russian side, the vice president of Stroigransgaz, Leonod Bokhanovsky, inked the deal, Nikolai Rudevsky said. Under the contract, which is estimated at US$226m, the Russian company is to build a 273km long pipeline in the northwest of the country within 20 months. The aim of the project is to provide a thermal power plant, currently under construction in Hadjret en Nouss (Tipaza province), and nearby settlement with natural gas.

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FOREIGN DEBT

Russia to repay 40% of debt to France early 

Russia is to reduce its debt to France from 2.4bn Euro to 1.5bn Euro due to early debt repayments, the French embassy in Russia said in an official statement, Interfax News Agency reported.
According to the statement, on July 12th Finance Minister, Alexei Kudrin, and French Ambassador to Russia, Jean Cade, signed the corresponding agreement, which is a continuation of an agreement signed on May 13th, 2005 by the Paris Club and Russia, according to which Russia will repay up to 15bn Euro to its creditors ahead of schedule. The first payment to France, amounting to 818m Euro, was to be made in mid-July, the press release said.
Kudrin told journalists earlier that at the moment the Russian Finance Ministry is signing agreements with Paris Club members to repay debt early, on practically a daily basis. "Today (July 12) we signed an agreement with France, yesterday - with the US," he said. Russia and the Paris Club agreed on May 13th on the early repayment at face value of part of Russia's debt to the Club, amounting to US$15bn, from a total of US$40bn. Money from Russia's Stabilisation Fund will be used to make the payments.

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FOREIGN LOANS

EBRD board approves loans to Russian banks 

The board of directors of the European Bank for Reconstruction and Development (EBRD) has approved lending Renaissance Capital Bank an 830m rouble loan, the EBRD said recently. The loan will be used to finance the consumer credit portfolio, New Europe has reported.
Renaissance Capital Bank is a part of the financial group Renaissance Capital and specialises in consumer credits.
In the first half of 2005 Renaissance Capital Bank was 493rd in the size of assets in the Interfax-100 ranking of major Russian banks. The board has also approved two loans for US$30m and 300m roubles for Delta Credit, the EBRD said. Part of the US$30m loan will be syndicated and the other part will be directly extended by the EBRD. The EBRD will extend the 300m rouble loan in full. The credit line will allow the bank to launch a programme to issue rouble mortgage loans, the EBRD said. At the end of the first quarter 2005 Delta Credit, which specialises in mortgage crediting, was in 184th place in the Interfax-100 rating of Russia's banks.

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MINERALS & METALS

RusAl increases H1 aluminium output 1% 

Russia's RusAl raised output of primary aluminium and cast-house products by 1 per cent year-on-year in the first half of 2005 to 1.346m tonnes, Interfax News Agency reported.
Output of value-added cast-house products alone grew 17.6 per cent to 402,105 tonnes and accounted for 30 per cent of total output, up from 25.6 per cent a year previously, according to Interfax. RusAl said 68 per cent of the value-added output consisted of alloys, production of which grew 27 per cent to 275,000 tonnes in the half. RusAl increased alumina production 5.2 per cent to 1.6296m tonnes.
Bauxite production rose 8.8 per cent to 2.418m tonnes. The company increased US GAAP revenue more than 14 per cent year-on-year in the first half of 2005 to US$3bn. RusAl said revenue grew on higher output of value-added cast-house products and price growth on the London Metals Exchange in the first quarter of 2005. Revenue from sales abroad constituted 76 per cent of total revenue. The company did not disclose net profit or other financial results for the half. RusAl has said it is targeting revenue of US$5.5bn in 2005 as a whole.

Alrosa expects China to become major diamond buyer 

Russian diamond monopoly Alrosa expects China to become one of the largest purchasers of its products and is considering setting up its own list of site holders, Alrosa President, Alexander Nichiporuk, said speaking in the town of Mirny, New Europe reported.
"We're setting up our representative offices abroad; in particular, we're actively trading in Antwerp. A new representative office will open in Hong Kong soon. We will mainly use that office to trade on the Chinese market, which is the largest in terms of the capacity of the cutting industry and is growing rather quickly in terms of usage," Nichiporuk said. He noted that the situation on the diamond market will be prosperous in the near future and prices of raw materials are going to grow. "Demand is gradually increasing, and such large mines like Argyle in Australia are stopping production, overall extraction in Botswana is dropping, apparently, there's going to be a serious drop in South Africa, and large mines are not being built. Three mines were set up in Canada, but they're not very big. Therefore, the lack of raw products and the growing demand will lead to growing prices," Nichiporuk said.
Alrosa is also thinking about setting up a long-term system for buyers or so-called site holders, which would be compelled to buy diamonds if the company offered them for sale, Nichiporuk said. "This is a key principle for us. We feel that an independent sales network in the form of company representatives and site holders, which mainly purchase raw materials in Moscow and Yakutsk, will be the basis for the future sales strategy," Nichiporuk said.
Under a plan awaiting the European Commission's approval, Alrosa, which mines 23 per cent of the world's diamonds, would reduce rough diamond sales to De Beers by almost two-thirds by 2010, to US$275m.
Meanwhile, Alrosa is continuing to build the underground Udachny deposit, but has stopped financing the construction of the Aikhal deposit, Nichiporuk said.
Furthermore, he said Alrosa will still rely on its development in the diamond industry. "This is mainly projects in Nyurba region, the Nakynskoye ore field, building underground deposits and developing the Mirninsky GOK, where production volumes are growing. They will be the main volumes next year," Nichiporuk said.
The company considers the Momsky field as another promising facility. "Research has shown that there are five pipes there that are very promising. We need to work on new technological production that will help make this a new facility for the company," Nichiporuk said. 
Net profit at Alrosa to International Accounting Standards in 2004 increased 90 per cent year-on-year to 12.118bn roubles, the company's report said. A source at the company told said that this growth was due to an increase in the effectiveness of sales and favourable market conditions. Sales revenue in the reporting period increased 30 per cent to 77.949bn roubles.
Alrosa controls 23 per cent of the world diamond market. Alrosa shareholders include the Russian Federal Property Agency - 37 per cent, the Yakutia Property Ministry - 32 per cent, and eight districts in Yakutia own 8 per cent in total. According to official information, the company's workforce owns 23 per cent of shares.

Norilsk extends share exchange deadline 

Russian mining giant, MMC Norilsk Nickel, has held talks on attracting a three-year US$300m loan from a Western bank syndicate, banking sources said, Interfax News Agency reported.
One of the sources said the "leader (underwriter) has already been determined, but the credit agreement hasn't been signed yet and the terms of the contract are still being discussed."
Another source said the credit rate is expected to be at LIBOR +0.75 per cent. However, the first source said the rate could be lower than that level. Norilsk Nickel's press service did not comment on this issue and Dmitry Usanov, the company's head of investor relations, was also not available for comment.
Meanwhile, MMC Norilsk Nickel has extended the term of its additional third round for the exchange of RAO Norilsk Nickel shares for MMC Norilsk Nickel to July 31 2006 from August 1 2005, the company reported. The third round began on December 1 2004 and was due to end on May 31 2005. The exchange ratio was 1:1. The additional exchange is being held for all the shareholders that did not use their right to exchange in 2001-2002. The company said earlier that in the restructuring that took place in 2001-2002, the holders of over 3.2 million RAO Norilsk Nickel common shares, who were retired former employees, were for different reasons unable to exchange their shares for MMC Norilsk Nickel shares.
Norilsk Nickel produced 120,000 tonnes of nickel and 225,000 tonnes of copper in the first half of 2005, the company said in a statement. According to the statement, these figures are the preliminary consolidated production results of Norilsk Nickel's Arctic branch and Kola MMC, Interfax reported. The company produced 61,000 tonnes of nickel and 112,000 tonnes of copper in the second quarter of 2005 . 
Norilsk Nickel produced 122,000 tonnes of nickel and 222,000 tonnes of copper in the first half of 2004. Thus, nickel production fell 2,000 tonnes in the first half of 2005, while copper output grew by 3,000 tonnes. The company plans to produce 240,000-245,000 tonnes of nickel and 440,000-450,000 tonnes of copper in 2005.
The company is the world's largest nickel and platinum group metals producer. It produces 20 per cent of the world's nickel, 13 per cent of the cobalt, 3 per cent of the copper, 44 per cent of the palladium, 12 per cent of the platinum and 1.5 per cent of the gold.

MGOK spends US$250m on 10% of own shares 

Iron ore producer OAO Mikhailov GOK in Russia's Kursk district has spent US$250m as part of an offer to buy up 10 per cent of its own shares, Interfax News Agency reported, citing a source in the press service of the management company Metalloinvest. 
The MGOK board of directors decided to buy up 712,000 of the company's own shares at 9,700 roubles each. Applications to buy shares were accepted from May 27, to June 27 and deals were drawn up from June 28. MGOK charter capital amounts to 1,780,269 roubles, split into 6,240,808 common and 880,268 preferred shares with a par value of 0.25 roubles. "Although the deadline for drawing up deals has not ended, it is already possible to say that MGOK has carried out its offer, having spent US$250m on acquiring 10 per cent of its own shares," the source said.

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TELECOMMUNICATIONS

Cellphone subscribers up 4.6% in June 

Russia had 97.595m mobile phone subscribers at the end of June, up 4.6 per cent from the end of May, AC&M Consulting said in its monthly update, New Europe reported.
Experts said the June results surpassed even the most optimistic forecasts.
An expected drop in the number of subscribers who signed up during the New Year's campaign did not take place. The number of subscribers in Russia grew by 4.4m in June, up 500,000 from May. Mobile phone penetration, or the number of cellphones per 100 people, was 67 per cent, compared with 64.2 per cent at the end of May. Mobile TeleSystems (MTS) showed good results in Moscow, but was weak in the regions, the analysts said.
Megafon grew slightly in Moscow and the regions. VimpelCom gained the most new subscribers in Russia on the whole and in the regions, including St. Petersburg. "If the current trend remains, we predict that Russia will have 130m mobile phone subscribers in Russia by the end of 2005," the update said.

VimpelCom buys mobile operator in Sakhalin 

VimpelCom said it paid US$51.2m for control of a mobile operator in Sakhalin, opening up the oil-and gas-rich region to the company, it was reported by New Europe.
VimpelCom bought 84.4 per cent of Sakhalin Telecom Mobile, which holds licences for the Far East island, the company said in a statement. VimpelCom also paid US$5m for a 60 per cent stake in Sakhalin Telecom, a fixed-line alternative operator on the island, the statement said.

Siemens mobile devices sales up 

Growth in sales by the Russian division of Siemens Mobile Devices in 2004 amounted to 55 per cent, Mobile Devices chief, Clemens Joos, said recently at a press conference in Moscow. He said that in the world Siemens Mobile Devices is currently making a loss, Interfax News Agency reported. 
However, in 2006 the company hopes to turn this around following a deal with the Taiwan company BenQ. The merger of Siemens and BenQ mobile phone production business may be completed in fall 2005. According to Mobile Research Group analyst Eldar Murtazin, the disappearance of the Siemens brand will have a negative influence on company revenue, including in Russia.

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