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RUSSIA


  
  

 

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)

Books on Russia

REPUBLICAN REFERENCE

Area (sq.km)
17,075,400

Population
143,782,338

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

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

Currency 
Rouble

President 
Vladimir Putin



Update No: 308- (31/08/06)

Fifteen years on, wherefrom and wither Russia?
The collapse of the Soviet Union fifteen years ago happened in barely three months, actually three weeks in the main. By mid-September 1991 all the 14 non-Russian constituent republics had declared independence from Moscow, even while the Soviet Union itself was to retain a shadowy existence until the end of the year.
It was a comprehensive phenomenon, and much of what has followed, even until now, must be understood under the shadow of that mighty event, surely one of the most extraordinary in human history. 
The Soviet collapse, actually, did not happen over the last weeks of 1991: it continued throughout the 1990s. The USSR had had institutions - those of a party-state command economy - and they were systematically destroyed in that decade. Bad institutions perhaps; but better than no institutions. 
With all the post-Soviet states, there ensued a more or less complete lack of institutions, that have been derided, depleted or destroyed. Revolutionaries have a zeal for destruction, all of course to clear the decks for their creative project, which then turns out to be a disaster. 
They "created" 15 states where there had been one, none of which had adequate, or in some cases any, systems or networks for efficient governance. For most of former Soviet citizens, especially those in the Caucasus, where brutal wars broke out in and around Georgia, Armenia, Azerbaijan, North and South Ossetia and of course Chechnya, it was a bloody disaster. 
That great crisis has had many victims. But, it is worth remembering that it could have been much worse: there was little or no armed conflict in the Slav states of Russia, Ukraine and Belarus, only minor skirmishes as the Baltic states took early independence; a vicious but contained separatist struggle as Slav Transnistria declared effective independence from Moldova; and a good deal of violence and/or repression in central Asia, with the partial exceptions of Kazakhstan and Kyrgyzstan. 
All states have had to construct governing systems from the ruins of the Soviet ones - and these have varied from the comparative, Western-oriented success stories of Estonia, Latvia and Lithuania to the ghastly tyrannies of Turkmenistan and Uzbekistan.
There was also, however, in certain successor states and in Russia itself - for a while - a liberation of thought, speech, publishing and broadcasting (though a great deal of that had already been effected under glasnost, in the last years of Mikhail Gorbachev's leadership). These are not negligible advances. Visitors to Russia are often told: 'We lived well back then (in Soviet times), but it was a nightmare.'" Indeed: and a great many other people did not live well, even by low Soviet standards - though they did live more securely.

                                        ******
The 1990s, however, saw inter alia an economic meltdown. The 90s decade in the Slav states, as well as elsewhere, saw a comprehensive hollowing out of communism and the command economy. People's living standards were declining precipitously under Gorbachev; but then came a stark collapse of most of the population's living conditions, notably under the 'shock therapy' of Gaidar, and the privatisations of Chubais, to be consummated by the collapse of the rouble in 1998 and the destruction of the middle class.
Yegor Gaidar, Yeltsin's first premier, is a very intelligent and well-educated man, a highly sympathetic figure, certainly more to the liking of the West than any of his successors, mostly KGB cadres. But he fell under the spell of what Dennis Healey aptly called the sado-monetarists and the free marketers, who made life grimmer for the British in the early 1980s (and then again in the early 1990s), with the stern injunction that there was no alternative to it. Of course it would be absurd to compare the post-Soviet debacle with the effects of Thatcherism, which had its therapeutic side too.
The 1990s were the time of BMWs with tinted windows and of an oligarchic grabfest. But the oligarchs, unattractive as they were and are in the sheer scope and energy of their greed, were also not the problem. Once property was decommunised - the earnest and achieved aim of the radicals grouped round Gaidar, who as a united team served only one year in government at the start of the post-Soviet era - then there could be nothing other than a grabfest, and it was one that went on at every level and in every region. 
As the Princeton historian Stephen Kotkin puts it in the best short account of the period (Armageddon Averted): "Russia's was not, and could not have been, an engineered transition to the market. It was a chaotic, insider mass plundering of the Soviet era with substantial roots prior to 1991 and ramifications stretching far into the future." 
The 1990s ended with the termination of the Gaidar-Chubais project in the events of 1998, the collapse of the rouble and much else besides.

The saviour to the rescue?
Vladimir Putin, who inherited the mess in 1999-2000, is perhaps the most popular politician in his own country in the world. He won by getting over 70% of the popular vote last year; and his ratings in the polls are even higher now, after his successful handling as host of the St Petersburg summit of the G8 in June, which has put Russia right back in the geopolitical spotlight. He is the reverse of Gorbachev, the darling of the West, but (for the vast bulk of his compatriots) the bane of Russia.
He has been enormously lucky, but he has had the great quality of successful politicians of making the most of his luck. He has benefited from four quite different developments. 
The first was that the chaos of the 1990s was beginning to sort itself out. New powers, very substantially based on Soviet models (the quote from the anonymous Putin aide, "the solutions are half Soviet", is very apposite here) had settled into place. The division of property had been made - and though it could be unpicked (was, in the case of Mikhail Khodorkovsky's vast holdings, and may still be further), it is at least a basis for a functioning economy. 
Second, that economy functions, at present, on a vast surge in the oil price - a "boon" that will be accursed if it stops structural reforms, as it seems to be doing - but for the moment, a great boost to Putin, and to the standard of living of Russians.
And third, Putin and his closest aides were KGB men who had fewer inhibitions about the use of force in Chechnya than had the Yeltsinites, and thus felt themselves free to pursue a war of terrible attrition until today's unmistakable, if tenuous, victory.
And fourth is the yearning of the Russians for stability. This is always supposed to be a particularly Russian trait explaining the much vaunted love of autocracy, but which is more sensibly explained by a general human desire for predictability and security in life. 
Because of the four elements above, the Russian president has been able to give this security and to preside over a renewal and expansion of the middle class; and to benefit from the support of Russians, who see in him a reliable ruler - one even able to reverse some of the national humiliations (as many see it) of the Gorbachev and Yeltsin years, as attested by his robust performance at the St Petersburg summit, when Bush unwisely chose to enter into a battle of wits with a man far cleverer than himself (see last issue). 
All of this is a cause for satisfaction on the part of Russia's rulers, and of a moderate relief on the part of the people. But it will not remain a good story if Putin's clamp on democratic choice, and on the news media tightens further. 
The institutions of a free and feisty parliament, a clean and independent judiciary and varied and inquiring news media all still wait to be created - and though the substructure for doing so is the most promising it has been since the days of Mikhail Gorbachev, there is little sign that any of that has priority. 
On the contrary: the signs are that a solidly pro-Putin parliament has been levered into place by extensive use of Kremlin money, arm-twisting and news media control; that the judiciary is corrupted, most of all by its continuing subservience to the state, wherein the latter's interests are engaged; and that the news media are stifled.
Maybe one step backward before two steps forward. But maybe three steps backwards before thrice steps to the diagonal - Russia is never in the foreseeable future going to like the West. 

Chechen Parliament Hails Putin 
The pro-Moscow elite in Grozny, installed in the wake of the war, demonstrate its loyalty to the Russian president at every turn. In a surprise move, the parliament of Chechnya voted in early August to call for a change in the Russian constitution to allow President Vladimir Putin to stand for a third term in 2008, an idea he has firmly rejected himself. 
The resolution, passed unanimously by the assembly in Grozny, appealed to other legislatures and political movements in Russia and called on the lower house of the Russian federal parliament, the State Duma, to initiate legislation that would amend the present constitutional ban on a president serving more than two terms. "President Putin took on this country at the most difficult moment in its history," Dukvakha Abdurakhmanov, speaker of the Chechen parliament, told his colleagues. "Political turmoil and legal chaos reigned and the country was in economic ruins." Putin's achievements in overcoming these problems entitled him to seek another four-year term, said the speaker. 
The resolution was drafted at the request of Chechnya's pro-Moscow president Alu Alkhanov. It was also supported by the most powerful figure in the republic, Prime Minister Ramzan Kadyrov, without whose approval the parliament would almost certainly never have pursued the idea. "We can see how the authority of the Russian state is growing in the international arena, and we can see how much attention the president pays to the regions of Russia, including the Chechen Republic," said Kadyrov. 
Most commentators have seen the resolution as a carefully staged act of political theatre which has as much to do with portraying Chechnya in a positive light, as with Putin's actual political future.
Russian politicians and parliamentarians have expressed doubts about the resolution. Mikhail Yemelianov, a member of the pro-government party Edinaya Rossia, said, "Both from a political and legal point of view, there is no sense in changing the constitution. As for the political position, President Putin has expressed his view more than once, saying he has no intention of changing the constitution and extending his term." Putin himself told French television recently, "There cannot be a stable situation in the country if we destabilise the basic law of the state." 
The key point for most observers has been not the substance of the resolution but where it came from. "It is precisely because of the controversial character of this proposal that the laws of politics dictated that it had to be initiated by the 'most troubled' region in the Russian Federation, the Chechen Republic," said Marina Litvinovich, adviser to Russian opposition politician and former world chess champion Garry Kasparov. 
Litvinovich noted that a related suggestion to hold a referendum on a third term for Putin had come from North Ossetia, another troubled region and the location of the Beslan school tragedy. "That means that even in these regions [the message is that] there are no complaints against Putin," she said. 
"The current political elite was born as a result of PR," agreed political analyst Sergei Markedonov. "Public relations is a substantial part of its political strategy. Chechnya is being presented as an oasis of peace in the North Caucasus. Militant leaders Shamil Basayev and Abdul-Khalim Saidullayev are dead, and an amnesty has been declared which they are already rushing to call a political success.
"In this PR construction, a special role is assigned to the regional authorities in Chechnya, who are portrayed as the most consistent strategic partner of the Kremlin." As a result of this, said Markedonov, when Putin leaves office, it is very possible there will be a re-think of Moscow's strategy in Chechnya - and this could work against Kadyrov and his team. 
"Putin is the creator and political patron of the policy of 'Chechenisation'," said Markedonov, referring to Moscow's promotion of loyal Chechen officials to govern the republic. "For Kadyrov and his comrades-in-arms, it is very important that Putin's powers should be extended for as long as possible. There is a danger for them - even though it's a hypothetical one - that with the arrival of a new leader, the priorities of Chechen policy will be changed."
However, it is not only parliamentarians who consider Putin the best option for Chechnya. Some ordinary people say they are comfortable with Putin, fearing that if defence minister Sergei Ivanov becomes the next president, he will turn to the Russian security establishment to govern Chechnya and "Chechenisation" will be abandoned.
Others are less forgiving, blaming Putin for what they have suffered since the start of the second military campaign in Chechnya in 1999. 
"For many Chechens, Putin personifies absolute evil," said literature teacher Usam Bakayev. "People are hoping that when he leaves, the policy will change even a little."
Bakayev said that the local leadership would be best advised to "keep silent, because the majority of the population is against Putin serving a third term. By calling for this, the authorities are discrediting themselves in the eyes of their own people."
Shahman Akbulatov, head of the Nazran office of the Memorial human rights organisation, agreed, saying, "Those in power don't care that ordinary people in the republic regard Putin as a killer."
"Politics in Chechnya is remarkable for its high degree of personalisation," said Chechen political analyst Edilbek Khasmagomadov. "So a change in leader entails a re-division of both power and property."
Khasmagomadov said that if a replacement for Ramzan Kadyrov is found, he is likely to come from the prime minister;s own entourage. "That's why Ramzan Kadyrov is more afraid of his own circle than competition from outside," he said. "And it's already becoming noticeable that the entourage is getting fed up with its leader and his unpredictable, authoritarian actions."

Getting one's own back against Washington; Chavez comes to town
The Kremlin is deeply vexed at the way the US has taken to interfering in its own backyard, as it sees it, namely the Near-Abroad of Central Asia, the Caucasus, Ukraine and Moldova. The Baltic states are a different story, whose conquest by the Russians was a geopolitical necessity in 1940, but a vast embarrassment subsequently.
The sequence of 'colour revolutions' has enraged the gremlins of the Kremlin no end, in Georgia, Ukraine and Kyrgyzstan, toppling their stooges one by one. They are convinced it was all Washington's doing, with NGOs being the nefarious tools of the Bushites.
Now they are getting their own back, welcoming Venezuelan President Hugo Chavez, deeply unpopular in Washington for his support of Castro, for a three-day visit to Russia in the off season of early August, good for many a Machiavellian deal. He made it clear it was a "working visit" by commencing in Volgograd and Izhvesk (seat of Russia's arms industry) before reaching Moscow. 
Equally, his Russian hosts took care to advertise that the last thing they had in mind was planting a hedgehog in the American underbelly, as Soviet premier Nikita Khrushchev used to say. That of course was exactly what they were trying to do, bearing out the dictum of UK journalist Claud Cockburn that he never believed anything about any government's policy until it was officially denied.
Naturally, a string of Russian commentators hastened to insist to anyone who cared to lend an ear in Washington that there was "nothing personal, just business" in the Kremlin's new odyssey in the Western Hemisphere - unlike in the Soviet era. 
However, it is highly unlikely Washington accepted at face value these protestations of innocence. A US State Department spokesman expressed concern that the developing ties between Russia and Venezuela had implications for "regional stability" in Latin America and warned that such ties would not be good for Moscow or Caracas. 
What really incensed Washington was that by the time Chavez came to Russia on August 2, Venezuela already had a US$52 million agreement with Russia to supply 100,000 Kalashnikov assault rifles and munitions, as well as two agreements worth US$474.6 million for construction in Venezuela of a plant to produce AK-103 assault rifles, along with another to produce 7.62-millimeter bullets. 
And while Chavez was in Moscow, the two countries signed a contract for the delivery of 38 Mi-17V-5 helicopters, which combine transport, gunship, reconnaissance and rescue capabilities, and Mi-35M fire-support helicopters, as well as an agreement for the supply of Su-30MK2 multi-role fighter aircraft. Russian Defence Minister Sergei Ivanov estimated the contracts were worth more than US$1 billion. 
Venezuela has also shown interest in the purchase from Russia of Amur-class submarines, Tor-M1 and Osa-10 air-defence missile systems, infantry fighting vehicles and other equipment worth US$3 billion. Considering Russia's total arms exports during 2005 amounted to US$6 billion, it is possible to put into perspective the huge significance of Venezuela to the Russian arms industry. 
It is the first time Russia has gained a solid foothold in the Latin American market, which has been traditionally a US preserve. President Vladimir Putin sought to calm US sensitivities by saying in Chavez' presence: "Our military-technical cooperation is not meant to spite other countries. It is aimed at reviving Russian economy and raising the living standards of the people." 
Venezuela, in essence, is procuring the Su-35 fighter aircraft to replace its existing squadron of F-16 aircraft, after the ban imposed on May 15 by Washington on all arms sales to Venezuela for allegedly having an intelligence-sharing relationship with Iran and Cuba, which, in the opinion of the US, are states sponsoring terrorism. In other words, Washington sought to turn the screws on Chavez and make him crawl, while Moscow swiftly stepped in to hold his hand, making a good pile of money in the bargain. 
The Russian-Venezuelan arms deal is a slap in the American face whichever way one looks at it. Moscow has paid back Washington its US$3.8 billion deal in June to sell 48 F-16 aircraft to Poland. Ivanov explained the Russian calculus in uncompromising terms. 
As far as Moscow was concerned, arms supplies to Venezuela didn't violate international law as there were no legal restrictions on arms exports to Venezuela, and "Venezuela is not on any sanctions or restricted regime list and has unhindered rights to procure arms from any country," he said. 
The Russian Foreign Ministry was no less adamant. It explained that Russia was acting within the ambit of international law and relevant Russian legislation; the arms deal fell within the purview of "relations between two sovereign states"; and it was based on the free play of market forces and derived out of commercial advantages. 
No matter the Russian explanation, what worries Washington even more is the near-certainty that it is a matter of time before Russian arms exporters fan out into the entire Western Hemisphere. Chavez has opened the floodgates for Russian arms exports to the United States' strategic back yard. 
Rosoboronexport, Russia's state-controlled arms exporter, was on record in April as holding talks on military hardware supplies with a number of countries in Latin America, including Cuba. 
The Venezuela example may well repeat in a host of other countries - Russian arms exporters promptly exploiting the fractures in the United States' political relations with its South American neighbours. This puts an enormous responsibility on the United States' "neighbourhood diplomacy". Economic sanctions, as an instrument of diplomacy, may simply have to be phased out of the US repertoire in the Western Hemisphere. 
The emerging dimensions of the Russian-Venezuelan cooperation in the energy sector bring this home with telling effect. Leading Russian energy companies, including Gazprom, LUKoil, Zarubezhneftgaz and Tekhnopromexport, have been active on the Venezuelan market. Last August, Gazprom won a tender for the Rafel Urdaneta natural-gas project and was granted licenses for prospecting and developing gas fields in the Gulf of Venezuela with an estimated capacity of 100 billion cubic meters. 
Chavez revealed during his visit to Moscow that Venezuela sought Russian participation in the construction of an 8,000-kilometer, US$20 billion pipeline connecting Venezuela with the Atlantic coast via Brazil and Rio de la Plata. Venezuela also signed an agreement with Russia for construction of a pipe-making plant. 
Venezuela's imports of goods and services from the US for its oil industry, work out to US$5 billion. Chavez is determined to reduce the current level of dependency on US corporations. This generates export opportunities for Russia's oil-engineering industry. 
Moreover, Venezuela currently accounts for 15% of US crude-oil supplies. But Chavez is keen to develop alternative markets, including China. Herein lies the strategic significance of the proposed pipeline project. 
During Chavez' visit, a Gazprom subsidiary also clinched the deal to develop Venezuela's gas industry. The scheme will outline a strategy for the medium- and long-term development of Venezuela's gas sector and will include the country's mineral base and an outlook for its development, the forecast of gas demand and plans for gas production, transportation, distribution, storage and refining. 
Again, details have emerged of Russia building a hydroelectric project in southwestern Venezuela costing US$900 million. Putin estimated, "The potential private investment of Russian companies [in Venezuela] may reach hundreds of millions, billions of dollars." 
What distinguishes Russia's ties with Venezuela on the one hand and US-Georgia or US-Ukraine relations on the other is that while a broad similarity exists in geopolitical terms, there is a sharp divergence in their actual content. Russia-Venezuela cooperation is self-sustaining, complementary and mutually beneficial, unlike the United States' relations with the countries of the post-Soviet space, which are politically motivated insofar as the United States' "partners" are far from solvent in economic terms and will remain recipients of US assistance for the foreseeable future. 
Also, unlike the US predicament with "colour revolutions" in the post-Soviet space, Russia can confidently visualize that Latin America is politically stable. That is to say, Latin America's "left" turn is not by any means leading the continent to upheavals and revolutions. The left-leaning governments in Latin America have come to power through constitutional means and democratic elections. Thus the political situation is becoming "stable", and no conflict needs to be expected (except if US diplomacy deliberately works to destabilize leftist regimes in the region). 
Left-leaning in Latin America is viewed in Moscow as a process rooted in the Cuban revolution and will, therefore, retain a strong aversion toward US hegemony. Also, Latin America finds itself as having more than one category of left, and the situation is compounded by quarrels among its political elites. But still there is not a tremendous amount Washington can actually do to alter Latin America's swerve to the left. As well, while Latin America's left turn is real, all the same, Moscow sees the current "reddening" of Latin America as vastly different from the continent's heritage in the second half of the last century as a "red continent". Proletarian internationalism, of course, is a thing of the past. 
Furthermore, Moscow sees the "era of 21st-century socialism" (as Chavez once described it) as an altogether new brand of socialism fuelled by a combination of the plunder of local resources by transnational corporations; unfair distribution of the local national wealth, injustice, poverty and underdevelopment caused by the rapacious local elites; and Washington's shortsighted diktat. Thus even the radical socialism expounded by Chavez stems from the ideals of independence leader Simon Bolivar, and actually puts forward a capitalist path of state development. 
The scenario on the whole offers a conducive framework for post-Soviet Russia to cooperate. On the economic front, Chavez wants to get away from the neo-liberal model and to resist globalisation. Chavez' program has an uncanny resemblance to Russia's own approach in its search for striking a balance among the market, the state and society. As Chavez put it once, "We need to bring the invisible hand of the market and the visible hand of the state together in an economic system where there is as much of the market as possible and as much of the state as necessary." 
Chavez' approach would, arguably, ring familiar in Putin's Russia - "Private property, privatisation and foreign investment are still guaranteed, although within the overall limit of the overriding interests of the state, which will keep under its control strategic sectors, the sale of which would mean a partial transfer of national sovereignty," as Le Monde Diplomatique magazine summed up the complex and nuanced Chavez brand of socialism. 
Thus, despite the low-key approach to Chavez' Russia visit, the fact remains that Moscow regards him as a charismatic leader who is shrewd enough to play with contradictions and interests. The Kremlin cannot but be acutely conscious that Russia has some Soviet-era inheritance in Chavez' Venezuela. 
The broad empathy revealed itself for a moment in public, when at the joint news conference with Chavez, Putin dwelt on what drew Russia and Venezuela close together. He said in measured tone: "We are actively cooperating in the international arena and believe that the world order should be firmly based on international law. We are in favour of a multipolar world. And certainly we shall support Venezuela in its legitimate aspirations to take a place as a non-permanent member of the UN Security Council." 
Chavez responded by expressing his appreciation for the Russian helping hand "for having liberated us from, shall we say, a blockade". Later, however, at a public function in Moscow while unveiling a bust of Simon Bolivar, Chavez was explicit about the "blockade" he had in mind. 
"It seems that the United States is destined to fill the entire world with misery while speaking in the name of freedom. This is happening in Iraq, in the Middle East, in Latin America. The United States' empire is the biggest threat that exists in the world today - an irrational, blind, stupid giant who does not understand life, who does not understand the world, who does not understand human rights." 
Moscow's support of Chavez' Venezuela is bound to annoy the US. But just as the US did not think it necessary to consult Russia on its actions in Russia's near abroad, Moscow would aim at making a point without allowing that to ratchet up the level of mutual annoyance with Washington or resorting to rhetoric. That will need delicate fine-tuning and cool-headedness, which today's Kremlin is adept at. 
Clearly, Russia is not desperate for money at the moment. Washington is bound to assess that in Russia's return to Latin America, foreign policy is in the foreground. But Washington would see that it was quite different from the Soviet forays into Latin America. The Soviet Union never counted money when it came to support for political interests. But not so Putin's Russia, even if at times it may mix the two aspects and sow seeds of confusion in the minds of onlookers. 
On balance, Russia can be expected to act carefully and pragmatically, without openly challenging the US, whose influence, Monroe Doctrine or not, continues to be great in Latin America. As a Russian wit remarked, Moscow has shown that it can eat beluga caviar with pancakes with George W Bush and a week later drink vodka from a Cossack sabre with Hugo Chavez.

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AUTOMOBILES

Nissan signs agreements for right to sell Infiniti 


Japan's Nissan has signed three dealership agreements for the right to sell and service Infiniti cars in Russia, Nissan Motor RUS said in a press release. Agreements were signed with the companies Jenser (Moscow), Avtospetscerter (Moscow) and Avtoprodiks (St. Petersburg). All three companies are already Nissan dealers. Nissan Motor RUS General Director, Toru Saito, signed the agreements on behalf of the company. Construction of dealerships is already underway on Leninsky Avenue and on the intersection of the Outer Moscow Ring Road and Novorizhsky Chausse in Moscow, and in Primorsky Avenue in St. Petersburg. The press release also states that the launch of the Infiniti in Europe will only start in 2008, therefore the three Russian companies will be the first dealers of this model in Europe. An official presentation of the Infiniti will take place at the Moscow International car show at the end of August - start of September 2006, New Europe reported.

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ENERGY

Total to produce 1m tonnes of oil at Kharyaga 

Total E&P Russia, the operator of a project to develop the Kharyaga field in Nenets autonomous district, plans to produce one million tonnes of oil at the field in 2007, Total E&P Russia Production Director, Michel Pick, said, Interfax News Agency reported.
"If transport opportunities are provided, by 2010 we plan to increase production to 1.5 million tonnes per year, after which production volumes will fall sharply," he said. 
Total E&P human resource department Director, Maria Zubova, told Interfax that in 2006 the company plans to produce less than one million tonnes of oil at Kharyaga, which corresponds to the capacity provided by Transneft (RTS: TRNF). 
Transneft will provide pipeline capacity of seven million barrels (about one million tonnes) for the Kharyaga field in 2007.

Ministry waiting for Gazprom proposal on Shtokman 

The Russian Economic Development and Trade Ministry is waiting for a proposal from Russian gas giant Gazprom on the make-up of the consortium that will develop the Shtokman field, Deputy Economic Development and Trade Minister, Kirill Androsov, said, Interfax News Agency reported.
This issue is on the agenda for a meeting of the Gazprom board of directors, Interfax quoted him as saying. At the same time it has not been decided when the board of directors will consider this issue. According to Androsov, Gazprom plans to decide on its partners in the near future. The short list of contenders for the project includes five companies: Norway's Hydro and Statoil, US companies Chevron and ConocoPhillips and France's Total. Gazprom plans to choose two-three participants from this list. The Shtokman gas condensate field is one of the largest in the world. It is being prepared for development with an eye on subsequently supplying liquefied natural gas to the US and other countries.

ITERA trebles H1 earnings 

Itera trebled net profit to Russian accounting standards year-on-year to 960 million roubles in the first half of 2006, the energy company said in its financial report. Revenue fell 20 per cent year-on-year to 12.256 billion roubles and costs more than halved to 6 billion roubles from 13.2 billion roubles, but gross profit jumped 220 per cent to 6.2 billion roubles and pretax profit was up 130 per cent to 1.3 billion roubles. Operating profit grew just 33.6 per cent year-on-year to 1.522 billion roubles in the first half of 2006 due to considerable growth in commercial expenses, which rose to 4.2 billion roubles from 11 million roubles. The report also says that Itera had to pay 683,000 roubles during the first half of 2006 following a tax inspection, compared with 42,000 roubles in additional tax in the same period of last year, New Europe reported.

Siberian oil supplies to China grow 23% in January-July year-on-year 

Russia shipped 23% more oil to China via the Trans-Siberian Railroad over the first seven months of 2006 than in the same period last year, Russian rail officials said recently, the Russian News and Information Agency reported. 
In January-July 2006, the amount of Russian crude sent to China through the border station of Zabaikalsk had increased 50% year-on-year to 30.87 million barrels. 
Work is currently under way to improve infrastructure on an alternative Trans-Siberian track, via Naushki. Some 8.08m bbl of China-bound crude passed along the route in the first seven months of this year. 
Russian oil shipments to China are expected to reach a total of 88.2m bbl in 2006, up from last year's 55.86m bbl. 
China so far receives Russian oil by rail only. The energy-hungry economy will be able to import more crude from Russia when state oil pipeline monopoly Transneft completes the Siberia-Pacific pipeline project. The pipeline is slated to pump up to 1.6m bbl/d of crude from Siberia to Russia's Far East, which will then be sent on to China and the Asia-Pacific region. 
Deputy Prime Minister Alexander Zhukov said during a visit to China last November that Russia would seek to almost triple its crude deliveries from 2004 to its rapidly developing neighbour to reach 301,200 bbl/d in 2006. 

Russia's Lukoil Eyes Zonguldak for US$3 Billion Oil Refinery 

After taking a giant leap in oil transportation with the Samsun-Ceyhan pipeline, Turkey has become the focus of interest for major oil refining companies.
The decision by Turkey's Calik Energy to undertake a US$4.9 billion investment in a Ceyhan refinery with a yearly capacity of 15 million tons together with its Indian partner, Indian Oil, prompted Russian giant Lukoil to take action, reports Trend. 
After applying to the Energy Market Regulatory Agency (EPDK) for a licence in July, Lukoil chairman, Vagit Alekperov, met the agency's head Yusuf Gunay. 
The Russian company wants to establish a refinery with a capacity of 8-10 million tons in Zonguldak, a Turkish province along the western Black Sea coast region, but Alekperov declared the realization of this US$3-billion investment depends on the appropriation of land and tax discounts. 
The project is expected to take five years to complete, and its future will be determined following detailed talks with the government. 
At a joint press conference with Alekperov, EPDK head Yusuf Gunay said that in the past month alone they have handled applications for future investments totalling more than US$9 billion, including Lukoil. 
Turkey currently has a refinery deficit of nearly 20 per cent and imported approximately six million tons of oil last year to meet the country's demand for oil, Gunay said, "It's estimated the deficit for oil products will exceed 15 million tons in line with the increasing demand for diesel oil over the next decade. This deficit can be recouped through either imports or by an increase in Turkey's refinery capacity." 
Alekperov stated talks for possible financial partnerships will be held after technical and economic calculations for the project are complete; discussions which have yet to start. He added they chose Zonguldak for its proximity to Turkey's major cities, namely Istanbul and Ankara. 
After informing press members that they also plan to start operations in the distribution sector, the Lukoil chairman said, "Oil stations with the Lukoil logo will be opened by September. We've started to transport supplies from our refineries in Bulgaria and Romania." 
Alekperov added "Lukoil will increase competition (in Turkey's oil market) as a company that operates at all stages, from the well to the oil pump at the station. Tough competition will bring fairer prices." 
Lukoil's chairman asked Prime Minister, Tayyip Erdogan, for his support for the project when he visited him together with Energy Minister, Hilmi Guler.

Novatek to use 18% of net profit for interim dividends 

Russia's largest independent gas producer Novatek is planning to use about 18 per cent of net profit to pay out interim dividends for the first half of 2006, Leonid Mikhelson, the company's CEO, said, Interfax News Agency reported.
Novatek is to hold an extraordinary shareholders' meeting on September 11th on the payment of interim dividends for the first half of 2006, the company said in a statement. The list of shareholders with the right to take part in the meeting was be taken from the register on July 31st. The company said in a statement that the Novatek board of directors confirmed a recommendation to shareholders on the size of interim dividends at a meeting on August 7th. Dividends will be calculated based on Novatek's report to Russian accounting standards, the statement said. Novatek net profit to Russian accounting standards in the first quarter 2006 amounted to 3.249 billion roubles, up 37 per cent year-on-year. In 2005 the Novatek dividend payout was 18 per cent of net profit, which amounted to 15.178 billion roubles. As reported earlier, Gazprom, acting through ZGG GmbH, has signed a preliminary agreement with Levit and SWGI Growth Fund (Cyprus,), the main shareholders in Novatek, to acquire at market value up to 20 per cent of the two companies' Novatek shares in circulation, Gazprom said in a statement. Novatek is planning to establish a subsidiary in St. Petersburg. This is envisioned in a cooperation agreement that St. Petersburg Governor, Valentina Matvienko, and Mikhelson signed in St. Petersburg. Novatek is planning to take part in implementing investment projects in St. Petersburg. 

Gazprom to buy Gazpromneft stake from YUKOS 

Gazprom has made an offer to YUKOS to buy the oil company's 20 per cent stake in Gazprom Neft for 1.3 billion Euro-1.9 billion Euro, Interfax News Agency has reported.
Motivating its evaluation of the stake in the letter, Gazprom cited the purchase of a stake in LUKoil by ConocoPhillips in 2004. The sources could not explain why Gazprom drew the parallel with the ConocoPhillips-LUKoil deal, noting that this analogy was not evident from the extensive letter. Group Menatep CFO, Tim Osborne, estimated this package at three billion - four billion Euro at a YUKOS creditors meeting on July 21st. YUKOS acquired the stake in Sibneft, which is now called Gapzrom Neft, in a failed merger between the two companies. The company Springtime Holdings Limited, representing the interests of ConocoPhillips, won the auction for a 7.59 per cent stake in LUKoil, with a bid of 1.988 billion Euro, in September 2004. Immediately following the tender, the companies also signed a shareholder agreement entitling ConocoPhillips to increase its stake in LUKoil to 20 per cent. ConocoPhillips called a tender to purchase 2.4 per cent in LUKoil's charter capital to increase its share in the Russian oil major to 10 per cent as early as in 2004. ConocoPhillips's proposal implied the purchase of the LUKoil shares at a price lower than the market one but equivalent to the price it paid for the government's shares, i.e. 30.76 Euro per share, or 123.04 Euro per ADR. This prompted analysts to conclude that the offer was meant for certain sellers with which a preliminary agreement had been reached.

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FOREIGN COOPERATION

Putin, Chavez build "natural partnership" 

Venezuela's populist President, Hugo Chavez, met Russian President, Vladimir Putin, in the Kremlin recently to cement a new era of military, economic and political cooperation, New Europe reported. 
After a three-day visit charged with anti-US invective and praise for his hosts, Chavez said he was "filled with determination" to consolidate a strategic alliance with Russia, which he said had helped break a US military embargo on the South American state. 
Putin in turn called Venezuela a "natural partner" and praised the steady development of bilateral ties in a wide range of spheres. On the back of new deals in energy and arms procurement, Russian investment in Venezuela could run into billions of dollars, he said.
Joint actions in the United Nations had also proved fruitful in the past and Russia would back Venezuela's intention to become a non- permanent member of the U.N. Security Council, Putin added. 
Bilateral trade in 2005 jumped more than 60 per cent to US$77 million, according to the Kremlin, and is expected to rise rapidly as the sides expand ties in defence and oil and gas exploration. During the visit, agreements were signed with Russia's Lukoil company to develop two oil fields in Venezuela, which has some of the world's largest deposits. 
New projects are also planned in the mining and ore processing industries, road, rail and air transport, machine-building, banking and finance. Iran's nuclear programme and the situation in the Middle East were also on the agenda, together with efforts to combat international terrorism and drugs trafficking. Moscow and Caracas shared a "similar or identical position" on most international problems, Kremlin officials said. 
As Chavez toured defence plants in Russia, Defence Minister, Sergei Ivanov, confirmed the sale to Venezuela of 30 Sukhoi Su-30 fighter- bombers and 30 military helicopters in a deal worth more than US$ one billion. 
Venezuela last year ordered more than 100,000 AK-103 rifles, a modification of the AK-47 Kalashnikov assault weapon. 
Its socialist government wants to make the weapon under license as it moves to train and arm up to two million reservists against a feared US invasion plan. 
Washington dismisses the invasion claim as absurd and says the hundreds of millions of dollars paid to Russia could be better spent on improving life for ordinary Venezuelans. 
Chavez thanked Putin and the Russian government for their efforts that helped to "break the US policy of disarming Venezuela completely." Cooperation in oil and gas exploration was another key topic. Chavez was to meet with Russian oil company representatives to discuss construction of the world's longest pipeline running 8,000 kilometres across South America.

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MINERALS & METALS

RUSAL and ROSATOM Sign Memorandum of Cooperation

RUSAL, the world's third largest aluminium producer, and Russia's Federal Atomic Energy Agency (ROSATOM) have signed a memorandum of cooperation over plans to build facilities for aluminium production and energy generation, www.russianewswire.com reported.
The Memorandum outlines an agreement for pooling research into long-term investment projects, including the construction of new nuclear power stations and modernising existing facilities. Prospects for further cooperation are also included, within an overall program for developing nuclear power in Russia.
As a global leader and national champion in Russia's fast evolving and highly energy-intensive aluminium industry, RUSAL is an ideal partner in this venture. The company has the capability for securing a high level of investment and a stable consumption schedule - the two key factors vital in supporting Russia's plans for developing its nuclear energy industry.
RUSAL's strategy as a dual energy and metals company centres on boosting aluminium production to 5 million tonnes/yr, through both the expansion of present capacities and the construction of greenfield smelters assured by long-term energy supply contracts.
RUSAL and ROSATOM are to establish a joint Project Office to coordinate activities and deal with issues such as preparing a project feasibility study, the selection of possible sites and devising the terms of future cooperation. Following the completion of the necessary feasibility studies, the two parties will develop a scheme to deliver the project and finalise appropriate agreements.

Polymetal silver output down 8%, gold up 6% in H1 

Polymetal, Russia's biggest silver producer and second biggest gold producer, reduced silver production eight per cent year-on-year in the first half of 2006 to 8.523 million ounces. The company said that gold production rose six per cent to 116,000 oz. The results were in line with company forecasts, New Europe reported.
Silver production fell because the company mined lower-grade ores at the Lunnoye field. Gold production grew with the launch of the second stage of the Vorontsovskoye mine. Gold sales rose nine per cent to 116,000 oz at an average realized sale price of US$591/oz including a discount against LME prices, compared with US$422/oz a year earlier. The average realized sale price of gold was US$626/oz in the second quarter of 2006, compared with US$422/oz in the same period in the previous year. Silver sales fell 9 percent to 8.621 million oz at US$8.8/oz, compared with US$7.1/oz in the first half of 2005. The average realized sale price of silver was US$9.3/oz in the second quarter of 2006 compared with US$7/oz in the same period in the previous year. Ore extraction decreased 13 per cent to 1.221 million tonnes as open-cast mining fell 17 per cent while underground mining rose nine per cent. "The decrease in open-pit-mining was due to a temporary drop in mining work at Vorontsovskoye to prepare pit pumping and also due to the step-by-step completion of open-pit mining and the scheduled start up of underground operations at Lunnoye in 2007.

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TELECOMMUNICATIONS

VolgaTelecom Reports Financial Results and Economic Activity for 1H 2006

OJSC VolgaTelecom has reported its financial results and economic activity for 1H 2006, according to Russian Accounting standards (RAS), www.russianewswire.com reported.
Proceeds for the half-year amounted to RUR10 170.3 million - a growth rate of 99.6% compared to the same 2005 period. Telecommunication services income reached RUR9, 602.8 million (96.4%). (The index of revenue growth dynamics is explained by changes related to market liberalization in the long-haul communication sector and the non-availability of ILD and DLD communication income in the Company's proceeds, starting January 1, 2006).
The principal share in the revenue structure is the income from providing local communication services - 54.4% (RUR5, 223.5 million), income from intrazonal communication services - 13.9% (RUR1 334.1 million), income from traffic connections and transmission - 16.9% (RUR1 619.6 million), and that from value-added services - 10.3% (RUR991.5 million). 
The growth rate of expenses incurred in general activities for 1H 2006 amounted to 102.1%, and the total amount of expenses - RUR7 549 million. The biggest share in the expense structure is for, as usual, wage costs - 36.5% (RUR2 753 million). In the first half year the share of depreciation deductions increased to 18.8% (RUR1 418.2 million), interconnection expenses amounted to 4 % of the total (RUR299.8 million), and expenses for materials, for heating and electrical energy - 10.8% (RUR816.5 million).

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