Books on Russia
Update No: 303- (27/03/06)
Putin's reign has coincided with a pick-up in the Russian
economy. But this is primarily due to buoyant energy prices on world markets.
Even if these continue into the medium term, there are various disturbing
Demographic catastrophe unfolding in Russia
The most important of all is that Russia's population is projected to decline by
about 1 million people per year over the next couple of decades. This means that
it could be halved by 2075, or even by 2050, if the rate of emigration continues
to rise, and if disease, notably AIDS, remains rampant.
The number of abortions is higher than that of live births. No greater
indication of the despair afflicting a broad swathe of the population could be
manifest. People fear to bring children into the ravaged country that is Russia.
This point is not quite appreciated abroad. The media talk of Russia's economic
boom and new-found oil wealth. But as in Saudi Arabia only a very small section
of society benefits. It is much more a question of 'trickle-out,' than
Russia's economy and society were, indeed, ravaged by the 'shock therapy' of the
early 1990s and then the collapse of the rouble in the late 1990s, which wiped
out the burgeoning middle class. A true expert on the subject is investigative
journalist Alice Politovskaya (who was nearly poisoned when she tried to cover
the Beslan tragedy in September, 2004). When she was asked at a PEN club meeting
in London in October 2004 whether the proportion of the population in Russia
that was destitute was "30% or nearer 70%?" she replied it was 95%. By
Western standards this is undoubtedly true.
Stepping up immigration
As the former capital of a great empire, Russia can have recourse to
immigration as a recompense for declining numbers of ethnic Russians at home.
Moscow is increasingly eager to attract immigrants to fill gaps in the country's
labour pool, especially low-paying and menial jobs. The changes would seem to
have the added benefit of increasing the Kremlin's political leverage with CIS
Recent changes in Russia's citizenship legislation, initiated by President
Vladimir Putin, have helped encourage a significant number of Kyrgyz and Central
Asians to seek a permanent place in Russia. The changes make it possible for all
former Soviet citizens who have legal residency status to be eligible for
fast-track Russian citizenship. In addition, Russia's Federal Migration Service
announced in late last year that it would seek to legitimise up to 1 million
illegal migrants from the CIS in 2006. If it can keep this rate of immigration
up, then it could yet stabilize the size of the population at around 145
ENSURING ENERGY SECURITY
A) Russia leader of the G8
Meanwhile energy is the name of the economic game. Russia, with its vast
energy reserves and comparatively small population, is the world's natural swing
exporter of oil, as it already is of natural gas. Moreover, it has had a long
experience in atomic and nuclear power.
The G8 session of energy ministers, with their colleagues from China, India,
Mexico, Brazil and South Africa, and spokesmen for the World Bank, OPEC and IAEA,
has become a dress rehearsal for the forthcoming G8 summit in St. Petersburg in
July. The world leaders are planning to adopt a programme for building a global
system of energy security.
This is how Minister of Industry and Energy Viktor Khristenko described the
recent session. He also noted that "the quality of life of the entire world
community directly depends on the reliable access to energy," and this is
why there is a need for a "common approach to the task of ensuring global
The ministers adopted a final statement on the results of the session, which
supports Russia's main points:
a) It is necessary to secure mutual and fair access to energy markets.
b) Energy security is the same for consumers and producers: the stability of
supplies and the effective protection of the environment.
c) Third countries have the right to develop atomic power engineering, but they
should be subject to international control and should not violate the regime of
nuclear weapons non-proliferation.
B) Growth in energy consumption
The ministers emphasized that the 21st century is bound to see a
considerable growth in the world consumption of energy. They recognized that a
future global fuel-and-energy system would require a huge investment into the
production, transportation and procession of energy resources.
President Putin believes that the world energy market will feel the benefits
from Russia's major energy projects very soon. "Russian companies are
already carrying out projects of strategic importance for genuinely
strengthening the global energy security system. We are looking at the
development of the major Shtokman gas field. Intensive work on the construction
of the North European Gas Pipeline is now underway. We are working on a project
to lay a pipeline from Eastern Siberia to the Pacific coast, with a branch to
the People's Republic of China."
C) Gearing up for July
The president said Russia would prepare specific proposals on energy
security for the July G8 summit and is prepared to support major projects
An important result of the G8 meeting in Moscow is the official support for
atomic power engineering as the most accessible alternative to non-renewable
hydrocarbon resources. The ministers discussed the prospects of nuclear power
engineering, and a number of future scenarios, using Iran as an example. They
came to the conclusion that nuclear power engineering is very promising,
especially for developing economies.
One of the most vigorous proponents of the nuclear power alternative was US
Energy Secretary Samuel W. Bodman. He had his own program in Moscow - to reveal
the new US strategy designed to enhance energy security in the US and the rest
of the world. The strategy is being referred to as the Global Nuclear Energy
A US-Russian rivalry is obviously emerging in the sphere of nuclear power
engineering. At the same time, such major components of the Russian and American
programs as nuclear weapons non-proliferation, ecological safety and
accessibility of nuclear materials to a broad range of consumers enable the two
countries to bring their positions closer together and avoid excessive rivalry.
Russia made it clear that it will defend its positions on fuel markets. Viktor
Khristenko said the concept of energy security includes the guaranteed demand
for its oil and gas abroad. This does not fully coincide with the Western
strategy. In February, US President George W. Bush called on his compatriots to
give up their addiction to oil and focus on the development of alternative
energy sources. The strategy of the EU is to reduce its growing dependence on
the supply of energy carriers, particularly from Russia.
Generally, the G8 energy meeting had a positive outcome, but the contradictions
it revealed on some problems will be rather hard to remove. Russia is engaged in
difficult talks on joining the Energy Charter, primarily with the EU. Russia has
signed the Charter, and is negotiating the transit protocol to it, according to
EU representatives insist on Moscow joining the Energy Charter, largely because
it prohibits the signatories to reduce energy supplies even in case of a price
dispute. The EU is clearly trying to protect itself against the situation that
developed last December and January around Ukraine and Moldova.
D) Charter not ratified
Russia signed the Energy Charter in 1994, but the State Duma has yet to
ratify the document. The protocol on transit has become a stumbling block: the
West insists on third countries' access to gas pipelines on Russian territory.
Khristenko stressed that the transit protocol is the Charter's backbone.
"The talks are not easy, but they are going on," said he. "If
there is progress, the Charter will be ratified."
Optimistic official estimates aside, the Moscow session has shown that building
a global energy system is a formidable challenge. G8 members have different
interpretations on many problems related to energy security. But at the same
time, a consensus is possible and will have to be reached.
Feared deputy Chechen PM appears on rise
There is still the running sore of Chechnya. Russian troops withdrew from
Chechnya in 1996 following a two-year botched war, but rolled back in 1999 after
Chechen incursions into a neighbouring province, and apartment building
explosions blamed on the rebels.
Major offensives in Chechnya ended by mid-2000 but insurgents and troops still
clash in small skirmishes. Separatists attack Russian troops and law-enforcement
officers with booby-traps and land mines.
The Kremlin-backed prime minister of war-battered Chechnya said on February 28th
that he was stepping down to give way to the widely-feared head of a shadowy
security service, the ITAR-Tass news agency has reported.
The news confirmed perceptions that deputy prime minister and youthful strongman
Ramzan Kadyrov was consolidating power ahead of an expected move into the
presidency. Outgoing prime minister Sergei Abramov and Chechnya's president
offered conflicting explanations for Abramov's stepping down, raising questions
about a possible power struggle within the Moscow-backed administration of
Chechyna, where separatist rebels have fought Russian troops for most of the
past dozen years.
Chechen President Alu Alkhanov said that the prime minister was stepping down
for health reasons. But hours later, Abramov said he was stepping down to give
way to Kadyrov, the son of a Chechen president who was assassinated after
winning a Kremlin-approved election that was widely regarded as fraudulent.
Expectations have been high that Kadyrov would succeed Alkhanov on October 5
when he turned 30, the minimum age for a president under Chechen law. Taking
over the prime minister's job would be a stepping-stone to the presidency, which
Alkhanov is supposed to occupy for several more years.
"The decision of Sergei Abramov to leave his post as head of the republic's
government was an unpleasant surprise for me," Kadyrov said in a statement.
"I regret it because (he) ... did much for the restoration of the
Abramov denied the president's explanation of his resignation.
"I was surprised to learn that my resignation was connected with my health.
It's not so," the news agency quoted him as saying. "I submitted the
statement about my resignation on condition that the government of the Chechen
Republic would appoint the current deputy prime minister, Ramzan Kadyrov."
The Interfax news agency quoted the head of the Chechen parliament as saying it
fully supports Kadyrov becoming prime minister.
There are wide reports in Chechnya of civilians being kidnapped or improperly
detained by security forces, and allegations that police torture suspects to
extract confessions. Chechens and human rights group say Kadyrov's security
forces are responsible for human rights violations. He has an evil reputation
for cruelty and ruthlessness. No doubt his Russian masters who much have
orchestrated this, are well pleased with his assumption of new powers.
United Nations High Commissioner for Human Rights Louise Arbour told reporters
in Moscow that abuse by security forces is the central problem holding back the
restoration of civil society in Chechnya.
Abramov was named prime minister in March 2004 and survived an assassination
attempt several months later. The prime minister was seriously injured in
November in a car accident. There was wide speculation that the accident was an
assassination attempt. Officials dismissed the prospect.
Bypass the UN on Iran
"The US and its European allies remained at odds with Russia and China
over Iran... as Britain proposed new talks and sanctions backed by force if
necessary," the Associated Press reported on March 21st. Senior diplomats
from six key nations "could not overcome Russian and Chinese opposition to
tough action in the Security Council."
The US has urged Europe for years to join in a tougher approach toward Iran,
which would begin by referring Iran to the UN Security Council. The Security
Council is indeed the natural address for imposing binding, multilateral
sanctions on an aggressor nation that threatens international security. This is
the chief purpose of the United Nations, according to its charter, and over a
decade after the end of the Cold War it is reasonable to sincerely attempt to
employ the UN as it was meant to operate.
Now that Europe seems finally to be on board with the US, however, the obvious
danger was that two other nations with veto power in the Security Council,
Russia and China, would render the new transatlantic consensus meaningless.
Russia and China cannot, of course, be assumed to be have Western interests in
mind or to act as responsible members of the community of nations. Russia has
been Iran's chief supplier of nuclear technology. China is a major Iranian
trading partner. But most importantly, Russia (increasingly) and China are led
by dictatorial regimes that see themselves in competition with Western power,
and as potentially threatened by Western demands regarding democracy and human
It is often asked why Russia - with its own war against Muslims in Chechnya
raging and its proximity to Iran - does not seem inordinately concerned about an
Iranian bomb, and has recently broken ranks with the Quartet by inviting Hamas
for talks. Surely, the Russians need no lectures about the dangers from militant
Islamists, the thinking goes.
There is no point, however, in second-guessing Russia's interpretation of its
own interests. The question is whether the West will hold itself hostage to the
whims of nations whose policies and agendas bear little relationship to its own
There is another way
Russia and China should be told by the US and Europe that, while working
through the Security Council is clearly the first and most appropriate course of
action, the threat from Iran requires concerted diplomatic, economic and perhaps
military measures regardless. If Moscow and Beijing joined in, sanctions would
be that much more effective, but it is possible that draconian measures by
Washington, London, Paris and Berlin and many other like minded capitals might
be sufficient to raise the price of Teheran's nuclear project so high that it
would be abandoned.
Sanctions remain a long-shot effort to change Iran's course. Much of the
international community, it seems, either quietly assumes that Iran will obtain
the bomb, or that military measures will be necessary. We've become used to the
sanctions option being either too little or too late.
What is clear is that lowest common denominator sanctions of the sort Russia and
China might accept will be insufficient - unless, perhaps, these countries face
a choice of joining in an international effort or being bypassed entirely.
The standard must be what the situation demands, not what Russia and China will
agree to. Speed and toughness, which are critical to induce Iran to back down,
should not be sacrificed to obtain an unrealistic degree of international
consensus. If the US and Europe have linked all diplomatic, trade and cultural
ties with Iran to the abandonment of its nuclear programme, it will do Iran
little good that Russia and China have not.
GM-Avtovaz restarts assembly line
The GM-Avtovaz joint venture restarted its assembly line recently, the company
told Interfax News Agency reported.
The company said the line, which was stopped on February 9th due to "a
shortage of parts," would be working two shifts as it did prior to the
shut-down. The company's press office did not name the companies that had
stopped supplying components or their reasons for doing so.
The Federal Industry Agency's (Rosprom) press service told Interfax that Avtovaz
stopped supplying engines for Chevrolet Niva cars because GM and Avtovaz could
not agree on their price. Boris Aleshin, head of Rosprom, is on the Avtovaz
board. "Production will resume once the price has been agreed," the
press service said.
The GM-Avtovaz board decided at a recent meeting to resume car production on
February 21st. "General Motors, Avtovaz, and the European Bank for
Reconstruction and Development (EBRD) reached an agreement to resume production
at the plant on February 21st," the company said in a statement. General
Motors and Avtovaz each own 41.6 per cent of the joint venture's common shares,
and the EBRD has 16.8 per cent of preferred shares.
Avtovaz is not planning to review the format of its cooperation with General
Motors in the context of the joint venture this year, a source in the company's
management told Interfax.
The source said that during the joint venture's board meeting, the parties
agreed to raise prices for the components which Avtovaz supplies to the joint
venture. The source did not say how much the components would now cost and
whether this would affect prices for the Chevrolet Niva and Chevrolet Viva cars
that the joint venture produces. But "for the year to come, all (other)
parameters of cooperation will be unchanged," the source said.
Avtovaz is not, for example, planning to buy GM out of the venture, the source
said. Rosprom's press service, too, has told Interfax that Avtovaz is not
thinking of buying GM out.
Igor Yesipovsky, the new director general at Avtovaz, said at the beginning of
February that the car plant's management intended during February to decide on a
development concept for GM-Avtovaz. "Relations between Avtovaz and the
joint venture show that something is not right," Yesipovsky said. He said
that if the enterprise was lucrative and if there was any point developing it,
then its partners would want to get to grips with the situation.
But Warren Browne, managing director of General Motors in Russia and the CIS,
told reporters in the middle of February that GM's joint venture with Avtovaz
was a good example of cooperation between American and Russian car makers. The
joint venture does not have any debts, it has a positive cash flow and it pays
dividends, Browne said.
GM-Avtovaz said on its web-site that it would be putting retail prices for the
Chevrolet Niva up 3,500 roubles from February 22. The basic model will go up
from 318,000 roubles to 321,500 roubles and the top range model from 350,000
roubles to 353,500 roubles. A representative of the joint venture declined to
comment in detail when asked by Interfax whether the price rise was connected
with the higher component prices. Meanwhile, the All-Russian Automobile Alliance
(AVVA), an Avtovaz subsidiary, has reduced its stake in the parent company's
capital to 30.43 per cent from 32.35 per cent, Interfax reported recently.
AVVA reduced its share of common shares to 35.95 per cent from 38.21 per cent.
Avtovaz owns 85.9 per cent of AVVA, 50 per cent of TsO AFK and 51 per cent of
IFK. AVVA owns 10 per cent of TsO AFK. Vnesheconombank owns just over seven per
cent of the Russian auto maker and about 16 per cent is held by private
shareholders, while around 1.5 per cent is federally owned.
Airbus, Russia in talks on US$25 billion jet
Airbus the world's biggest builder of commercial jets, is studying the
possibility of Russia's participation in future programmes to build Airbus
planes as a full-fledged partner on the basis of shared risks, Interfax News
Agency reported, citing the Airbus's representative office in Moscow.
"Airbus has already submitted a proposal to the government and the Russian
aviation industry, which envisions wide Russian participation in designing and
producing the new A350 plane and partnership in a programme to turn
narrow-bodied Airbus passenger planes into cargo planes," the release read.
"Airbus considers Russia a prospective market and forecasts that, in the
next 20 years, Russian airlines will need more than 600 planes with an overall
cost of US$46 billion to satisfy the expected increase in the number of flights
and replacements of out-dated aviation technology," the release said.
The turnover of cooperation programmes with Russia could exceed US$800 million
over 10 years. In addition, there are grounds to assume that annual turnover of
US$110 million will already be reached in 2007, the company said.
The programmes include numerous research projects, design work, the purchase of
materials, deliveries of plane parts and wide cooperation in certification
The accord would generate about US$ one billion a year in revenue for Russian
companies through 2030, including US$20 billion for the development of a new
passenger plane, US$ three billion in parts orders for Airbus's new A350
airliner and US$ two billion for converting single-aisle passenger planes into
cargo carriers, Airbus Senior Vice President, Axel Krein, told reporters in
Aeroflot, the biggest airline in eastern Europe and once the operator of the
world's largest plane fleet, is seeking proposals for 22 long-haul aircraft and
plans to announce next month whether it will buy Airbus's A350 model or Boeing's
The Moscow-based carrier has said it may sign an option for a further 12
airplanes, a total package valued at about US$ three billion. Airbus's proposal
may sway Aeroflot's decision, Aeroflot Deputy Chief Executive Officer, Lev
The Russian government owns 51 per cent of Aeroflot, which is run by CEO, Valery
Okulov, son-in-law of Putin's predecessor, Boris Yeltsin.
VEB, Development Bank, Roseximbank to unite
A Russian Bank of Development with charter capital of US$2.5 billion is expected
to be set up by the end of 2006, Economic Development and Trade Minister, German
Gref, told reporters in Moscow, according to Interfax News Agency reported.
The new bank will likely be a union of Vnesheconombank (VEB), the current
Russian Bank of Development and Roseximbank, he said. Other banks could also
join the union, he said. Vneshtorgbank (VTB) will not be included on a list of
banks for consolidation, Gref said in answer to a question. "A Russian Bank
of Development will be set up this year with a capitalisation of at least US$2.5
billion that will carry out export and import operations and invest in foreign
assets," Gref said. Various ways of consolidation are under discussion, but
the main one being discussed is a merger of VEB, the current Russian Bank of
Development and Roseximbank, Gref said.
He did not comment on who would head the bank. "This will be a new, large
institute of development that will work according to special legislation with a
relatively large potential," he said. "If this potential isn't enough,
we are ready to capitalise the bank to such an extent that it will
develop," Gref said in speaking of government support for the new bank.
Alfa Bank worth US$3.5bn but excludes sale
Alfa Bank shareholders are not discussing the sale of the bank to a strategic
investor nor are planning an initial public offering (IPO), Mikhail Fridman,
head of Alfa Group, the bank's parent company, and the bank's main shareholder,
said at a press conference at the Interfax central office. "An IPO is not
right for today. We have internal resources to develop the business," he
said. If you use those multipliers that are used to assess the value of the
banking business, for example in Ukraine, then Alfa Bank is worth at least
US$3.5 billion, Fridman said.
Alfa Bank will borrow no more than US$ one billion this year, Alfa Bank's Rushan
Khvesyuk said. He added that Alfa's corporate-banking business will probably
grow 30 per cent this year, more than the industry average of 20 per cent to 25
Alfa Bank plans to invest US$125 million in its retail-banking business this
year, the lender said. Moscow-based Alfa Group is a company with interests
ranging from telecommunications to oil and is run by Fridman. He is Russia's
second-wealthiest man, worth US$11.4 billion, according to a list of the
country's rich published by Finans business magazine recently.
Alfa is also considering teaming up with Sistema to bid for fixed-line phone
operator Svyazinvest should the government sell it this year as planned, Fridman
said. "It's possible we would," Fridman replied when asked whether
Alfa might make a joint offer with Sistema, which controls Mobile TeleSystems,
Eastern Europe's biggest mobile phone company.
Vladimir Yevtushenkov, Sistema's president and billionaire owner, said on
February 8th the company is seeking a partner to bid for Svyazinvest. Sistema
would consider combining with Alfa, company spokesman, Alexey Kurach, said.
Alfa-Bank boosted its assets tentatively 40 per cent in 2005 to US$9.84 billion,
the bank said. Net profit grew 11.1 per cent to more than US$170 million in
2005, from US$153 million in 2004. Alfa-Bank's credit portfolio grew 45.6 per
cent to US$5.97 billion in 2005.
Equity increased 23 per cent to US$870 million from US$707 million during the
year. All figures are subject to adjustment, the bank said. Alfa-Bank was
Russia's third biggest bank by assets at the end of the third quarter of 2005,
according the Interfax-100 ranking of the country's biggest lending
institutions, compiled by the Interfax Centre for Economic Analysis.
Norilsk shares up after Polyus plans to sell 20% of Gold Fields
Norilsk Nickel shares grew two per cent after Polyus, the gold mining unit that
is to be spun off from Norilsk, said it is selling its 20 per cent of South
Africa's Gold Fields, the world's fourth biggest gold producer, Interfax News
There are currently three Norilsk representatives on the Gold Fields board.
Polyus had revenue to International Accounting Standards (IAS) of US$462 million
in 2005. At the start of this year, a number of investment banks issued
participation notes and certificates for Norilsk Nickel's ADR holders who will
receive Polyus shares after Polyus has been spun off. This grey market values
Polyus at US$ 6.5-7.0 billion.
Norilsk Nickel Shareholders registered as of January 1, 2006 will receive shares
in the new Polyus at a ratio of 1:1. The free float in Polyus shares will be 45
per cent, as for Norilsk Nickel.
Interros chief, Vladimir Potanin, and Norilsk Nickel Director General, Mikhail
Prokhorov, are the main beneficiaries of Norilsk Nickel and the future
independent Polyus. Polyus will receive 10 billion roubles and all of the
Russia-based gold mining assets of the existing Polyus, plus 20 per cent of
South Africa's Gold Fields from Norilsk Nickel. The new Polyus will receive
assets only - Norilsk Nickel will retain all liabilities.
Polyus Gold plans to list on one or more Russian exchanges in April this year
and to issue a level one ADR in May. The company thinks it will have enough
funding for its projects until 2008-2009, when it plans to start to raising an
estimated US$ one billion in capital. But Polyus is not planning an IPO this
side of 2010-2011 because its management has said it will not be disclosing its
value until then. Polyus plans in time to have its shares listed in New York or
Polymetal spins off exploration division
Polymetal, Russia's biggest silver producer and second largest gold producer,
has spun off its exploration division into separate companies, Interfax News
These subsidiaries will focus on a program of active geological exploration to
replenish the reserves of existing properties, create an additional raw material
base for existing mines, and acquire and study new promising properties,
Polymetal said in a press release. Polymetal has set up the Northern Urals
Exploration Co. in the Sverdlovsk region and Dukat Exploration Co. in the
Magadan region. Exploration of licensed properties in the Khabarovsk territory
is handled by Georazvedka.
Northern Urals Exploration will carry out initial exploration within the context
of licences received last year for the Galkinskaya and Katasminskaya properties,
which are next to the existing Vorontsovskoye mine, as well as the Fevralskoye
Dukat Exploration will aim to renew and expand the company's reserves in the
Magadan region by exploring the flanks of the Dukat deposit, the flanks and deep
horizons of the Lunnoye deposit, potential licence properties near existing
mines, as well as remote properties in the region. Georazvedka is carrying out
exploration work at the flanks and deep horizons of the Khakandzhinskoye
deposit, as well as within the bounds of a licence acquired at auction to study
the Khakarinskaya field.
Polymetal plans to carry out an initial public offering on the London Stock
Exchange in November 2006. The company aims to increase production of silver and
gold by 20-30 per cent by 2008 from the 18.9 million ounces of silver and
243,000 ounces of gold it produced in 2005. This growth is expected with
Severstal to spend 1.5bn roubles on Kuzbassugol
The Severstal Group will spend 1.5 billion roubles on developing coal production
at Kuzbassugol, which is part of ZAO Severstal Resource, the Kemerovo regional
administration's press service said, Interfax News Agency reported.
The investment comes as part of a new agreement on cooperation in 2006 between
Severstal Group and the Kemerovo regional administration.
Severstal Group Director General, Alexei Mordashov, and Kemerovo region
Governor, Aman Tuleyev, signed the agreement on February 9th. A total of 540
million roubles will be spent on ensuring safe working conditions at Kuzbassugol
enterprises. Another 76.8 million roubles will be spent on the social needs of
the company's workers and its pensioners.
Severstal also said it would raise the average salary miners receive by 20 per
cent in 2006. The agreement also stipulates that Severstal Group will take part
in the fulfilment of national priority projects in education, health care and
housing construction that are to be carried out in the Kemerovo region in 2006.
In particular, the company is expected to provide educational and medical
equipment to local schools and hospitals, improve the living conditions of
miners, take part in a programme to tear down dilapidated housing in
Anzhero-Sudzhensk and partially finance the construction of housing in
Berezovsky, where the company's coal enterprises are located. A total of 19
million roubles will be spent on these purposes. Another 11.5 million roubles
will be spent on carrying out social programmes in the Kemerovo region and the
city of Kemerovo itself. Anzhero-Sudzhensk will also receive 20 million roubles
to tear down dilapidated barracks. Severstal Group spent 4.2 billion roubles on
a similar programme to develop the region in 2005, which is three times the
amount it spent in 2004, Kuzbassugol's press service told Interfax.
The drop in investment in 2006 can be attributed to the fact that Severstal
carried out extremely large investment programmes in 2005, mainly at the
Severnaya Concentrate Mill, which will begin working in August 2006, the press
Some 336 million roubles were spent on ensuring safe working conditions in 2005
and salaries were raised by 35.3 per cent and totalled an average 15,500 roubles
per month at the end of 2005.
The 2005 investment programme also allocated 73 million roubles for the social
needs of workers and pensioners and 67.5 million roubles to carry out social
programmes to develop Anzhero-Sudzhensk, Berezovsky and Belovo.
The agreement envisions that coal output at Kuzbassugol enterprises will total
four million tonnes in 2006 compared to 3.7 million tonnes in 2005. The
management structure of Kuzbassugol will also be transferred from Kemerovo to
Berezovsky, where the company's mines are concentrated and a concentrate mill is
being built. This is being done to move the management structure closer to
production and raise management efficiency.
Transneft to protect Russia's CPC interests
Transneft President, Semyon Vainshtok, believes that his company is ready to
protect state interests in the Caspian Pipeline Consortium if it receives
trustee management of Russia's 24 per cent stake in this consortium, Interfax
News Agency reported.
"At the moment participation in the CPC is humiliating for Russia. The
country has not received a cent for transiting oil through its territory. We
realize that it is a free ticket to war, but we are ready to protect Russia's
interests and change the situation," Interfax quoted him as saying at a
meeting with students at Tomsk Polytechnic University.
He said that CPC losses in its 4.5 years of existence amounted to about US five
billion, which has also prevented Russia from receiving revenue from its
participation in this project. However, Transneft is ready to send some of its
transport volume through the CPC, he said. "In 2005 Transneft increased
supplies of oil to the CPC from its transport system 500 per cent, this
indicates out ability to help," Vainshtok said. The CPC's
Tengiz-Novorossiisk pipeline, running 1,580 kilometres, links deposits in
Western Kazakstan with Russia's Black Sea coast. The multinational ownership
interest in the CPC is as follows: Russian Federation - 24 per cent, the
Republic of Kazakstan - 19 per cent, the Sultanate of Oman - seven per cent,
Chevron Caspian Pipeline Consortium Company - 15 per cent, LUKArco B.V. - 12.5
per cent, Rosneft/Shell Caspian Ventures Limited - 7.5 per cent, Mobil Caspian
Pipeline Company - 7.5 per cent, Agip International (N.A.) NV -2 per cent, BG
Overseas Holding Limited - two per cent, Kazakstan Pipeline Ventures LLC - 1.75
per cent, and Oryx Caspian Pipeline LLC-1.75 per cent. At the moment the Russian
stake in ZAO CPC-R, the CPC organizational structure in Russia, is managed by
the Federal Property Agency.
Rosneft to independently implement Vankor project
Russian oil company Rosneft believes it can independently develop the Vankor
field in Krasnoyarsk territory, without a foreign partner, Rosneft President,
Sergei Bogdanchikov, told journalists, New Europe reported.
"We thought about a partner when we thought that we would chose the
northern route to transport the oil from the project. The technological
complexity of transportation discouraged us, and we considered inviting a
partner," he said. "When it was decided to build (a pipeline) to the
south, then we saw that we would be able to develop the field ourselves,"
he said. However, Bogdanchikov said that he is not categorically rejecting the
possibility of a foreign partner for the Vankor project. "In principle, any
project is always open to partnership, especially if it has not reached full
capacity," he said. Bogdanchikov said that investment in the Vankor project
would amount to about US$ one billion this year and US$3.5 billion by 2008. The
Rosneft president said that unlike Vankor, the company is not ruling out
including a foreign partner in a project to explore and develop the Tuapse
depression in the Black Sea - which in this case is France's Total. "There
are problems there connected with ministry of defence regulations, nevertheless
we are not ruling out having a foreign partner in this project," he said.
India to repay US$1 billion to Russia
India has agreed to repay US$ one billion of debt to Russia, Economic
Development and Trade Minister, German Gref, said, Interfax News Agency
The final agreement is yet to be signed, Gref said, and Russia wants to sign the
document by March, when Prime Minister, Mikhail Fradkov, visits India. Russia
has agreed to invest the money that India will repay into the Indian economy,
Gref said during a visit to the country.
Russia to clear US$12bn in debt to Paris Club in 6 mths
Russia is drafting proposals on repayment of US$11 billion to US$12 billion in
debt to the Paris Club and hopes to do this over six months, Interfax News
Agency reported, citing a source in the Finance Ministry.
The G8 may discuss the use of these funds to write off debt for the poorest
countries, he said. The source said the US$11 billion to US$12 billion would
clear almost all the Soviet-era debt to the Paris Club that can be repaid ahead
of schedule. Germany issued bonds for debt totalling six billion Euro. Payments
on these are tied to Russia's payments on its debt. The funds obtained from
early debt repayment could become the basis for increasing Paris Club member
contributions to the International Development Association, which is part of the
World Bank, and the International Monetary Fund, as part of initiatives to write
off debt to the poorest countries, the source said.
FOREIGN ECONOMIC COOPERATION
Moscow, Hanoi to expand trade, economic cooperation
Russia and Vietnam are determined to take their trade and economic cooperation
to a qualitatively new level. "The two countries' governments are expected
to negotiate the future of the VietSovPetro joint venture after 2010, when the
agreement that established this company expires," Prime Minister, Mikhail
Fradkov, said, New Europe reported.
The Russian and Vietnamese prime ministers will instruct the relevant ministries
to work on this, Fradkov told a news conference in Hanoi following talks with
his Vietnamese counterpart Phan Van Khai.
Russian companies to expand activity in Azerbaijan
A number of Russian companies will expand their activities in Azerbaijan,
Russian President Vladimir Putin, said. "We sell a significant amount of
oil and gas to Azerbaijan. I do not rule out that we will continue the sale of
hydrocarbons, but we proceed from the assumption that joint activities will
develop," Putin said at a press conference in Baku recently, New Europe
The Russian oil company LUKoil operates two fields in Azerbaijan, Putin said.
"It seems that their Azeri partners support this activity and I count on
this support," Putin said.
The Russian aluminium giant RusAl also plans to make significant investments in
Azerbiajan's metallurgy sector, he said. Putin also mentioned machine-building,
transport, agriculture and the power industry among promising sectors for
cooperation. In particular, Russia is considering priority ways of investment in
Azerbaijan's electricity sector, the reconstruction of existing facilities and
the construction of new ones, he said.
"I also deem interaction in the financial field important. Some of our
banks are negotiating with their Azeri operations there," he said.
Foreign investment up to US$27bn in 2005
Preliminary data shows that in 2005 the volume of foreign investments in the
Russian economy amounted to US$26.8 billion, Russia's Deputy Economy Minister,
Kirill Androsov, said recently, at the "round table" discussion in the
ministry. The volume of accumulated investments at the end of 2006 amounted to
US$96 billion. Androsov said that the largest volume of investments was made
into the manufacturing sector (26.6 per cent). The raw materials sector
attracted 21.5 per cent of total investments, Interfax News Agency reported.
Yakutia to help Polyus look for gold
The government of Yakutia will help gold producer Polyus, which is being
spun off by MMC Norilsk Nickel, to look for new areas in which to prospect for
gold in the mineral-rich Russian internal republic's south, New Europe reported.
Polyus, which acquired three gold mining assets in Yakutia last year, said in a
press release that the agreement was reached at a meeting with Yakutia's
Polyus said that in return it would make as much use as possible of local
workers and inputs when carrying out exploration and mining activities in the
republic. Polyus presented a medium-term programme for developing its assets in
Yakutia. This includes renovating a gold recovery plant at the Kuranakh group of
deposits, performing additional exploration at the Kyuchyus and Nezhdaninskoye
fields and upgrading the Nezhdaninskoye recovery plant to process ores mined at
Vyacheslav Shtyrov, the president of Yakutia, instructed the republic's
government to draft proposals to develop transport and energy infrastructure at
the Nezhdaninskoye field.
Polyus and the Yakutia government also decided to sign a gold industry
Polyus owns 99.2 per cent of the AldanZoloto gold producer in Yakutia, which
holds the Kuranakh licence, 50 per cent of South Verkhoyansk Mining Company (SVMC),
which holds the Nezhdaninskoye licence, and 100 per cent of Yakut Gold Company,
which holds the Kyuchyus licence. The Interros holding company owns 20 per cent
Polyus has gold reserves of 28.135 million ounces (just over 875 tonnes)
calculated to Russian standards in Yakutia.