Russia 100504

Basic Political Developments Prime-Tass: MAJOR EVENTS LATER THIS YEAR

o May 11–12: Russian President Dmitry Medvedev to visit Turkeyo May 13–14: Brazilian President Luiz Inacio Lula da Silva to visit Russiao May 17–18: Meeting of Russian–Ukrainian intergovernmental

commissiono May 21: Meeting of EurAsEC prime ministerso May 21: Prime ministers of Customs Union member-states to consider

agreement on creation of common marketo May 29: Meeting of CIS prime ministerso May 30: Russia–EU summit in Russia

Steel Guru: Moscow and Kyiv to expand interregional cooperation in electricity - Mr Nikolai Azarov Ukrainian Prime Minister said "The Ukrainian and Russian sides are preparing a host of important documents that will be signed during the Russian president's visit to Ukraine on May 17th 2010."PTI: India acquires Russian oil company, says Govt - India has acquired a Russian oil company and bought equity stake in an oil field project in Venezuela through consortium route, the Rajya Sabha was informed today.

Warsaw Business Journal: Tupolev crew not informed of fog Turkishnews.ru: Russia and Turkey to discuss the issue of oil bypassing the

Bosporus and the Dardanelles Rusoro putting brakes on $25 million Venezuela investment plans for 2010 VE-DAY

o According to Komsomolskaya Pravda newspaper, more and more state leaders are planning to arrive in Moscow to attend the celebration of the 65th anniversary of Victory over Nazism. In particular, Chinese leader Hu Jintao has officially confirmed his intention to come to Moscow, the newspaper says. Earlier German Chancellor Angela Merkel, Czech President Vaclav Klaus, French President Nicolas Sarkozy and Italian Prime Minister Silvio Berlusconi confirmed their visits.

o Itar-Tass: Medvedev to present City of Mil Glory certificates to 5 citieso RUVR: Final night training of 65th Victory Parade to be held on May 6o Itar-Tass: Aircraft takes part in final drill of victory parade on Red Squareo RUVR: Harbin hosts Russian compatriots conferenceo Itar-Tass: RF compatriots in China seek to preserve historical heritageo RUVR: Moldovans accuse president of disrespect to memory of war

heroeso Moscow Times: Not Much Victory on Victory Day

Itar-Tass: FMs to discuss RF-Belgium bilateral relations in Moscow Tue - Relations between Moscow and Brussels during Belgium's European Union (EU) presidency, which is due to begin on July1, will be discussed here on Tuesday by Russia's Foreign Minister Sergei Lavrov and Steven Vanackere, Belgium's acting Minister of Foreign Affairs. Vanackere arrives in the Russian capital instead of

Premier Yves Leterme, who has postponed his visit to Russia, planned for May 4-5, in view of the Cabinet's resignation over the political crisis.

Itar-Tass: Greek PM invites Putin to visit Greece - Putin and Papandreou discussed current aspects of trade and economic cooperation, including financial and energy interaction, and agreed that the exact date of the Russian prime minister’s visit to Greece would be determined through diplomatic channels, the government press service said.

RIA: Drugs: nearly 200 kilograms of Afghan heroin seized in Russia (FSKN) Itar-Tass: Sakhalin rescuers offer BP to send pollution control ship RUVR: Sakhalin’s Centurion Group offers to curb Gulf of Mexico oil spill RUVR: US says ready to sign adoption treaty with Russia in few months CNN: U.S. official: Russia still allowing adoptions by Americans IANS: Iran to launch two satellites with Russia in 2010 RIA: Government to withdraw 6 air carriers from state-run Russian Technologies

– paper: The government will withdraw six air carriers from the state-owned hi-tech corporation Russian Technologies (Rostekhnologii) to invest in the leading Russian air carrier Aeroflot aiming to increase its capitalization, a business daily on Tuesday quoted a Russian Economy Ministry official as saying.

Interfax: Strong healthy nation is needed to reclaim Russian spaces – Patriarch Kirill - As the birth rates grow, the Church Primate hopes that our vast spaces will be inhabited by our people rather than strangers with alien culture and alien faith

Itar-Tass: Some Dagestan districts remain without communications after attack RIA: Eleven police injured in grenade attack on S. Russian police station

(Update) Newsru.com: In Chechnya, two militants from the armed gang of Hussein Gakaev

arrested, two more eliminated BNS: Flight testing of Russia's fifth-gen fighter continues Russia Today: Civil service still not an alternative to army Wall Street Journal: It's Prokhorov to the Rescue! - Russian Billionaire Who's

Buying the NBA's Nets Has Worked Magic Before; a Broken Biathlon Team International Relations and Security Network: Militarily Defining Post-Soviet

Space – by Dr John CK Daly Itar-Tass: Flash floods leave 7 Irkutsk reg settlements without electricity Itar-Tass: 39 schoolchildren hospitalised with food poisoning in Russia south Russia Today: 04 May, 2010 in Russian Newspapers

o Rossiyskaya Gazeta: The Forbes encyclopediao Kommersant: In dispute over islands, farms will be ceded - The

government is forced to pay citizens for land given to China RUVR: Press review Russia Today: Schwarzenegger likes his busts from Russia Financial Times: Sky's the limit for Russia's social climbers

National Economic Trends Prime-Tass: PMI: Signs of stronger manufacturing sector recovery in April Bloomberg: Russian Manufacturing Rose to Highest Level Since July 2008 Reuters: Rouble rises, bolstered by strong oil

Reuters: Russian bank balances rise to 554.2 bln rbls Moscow Times: Turning the Loan Spigot On Moscow Times: Foreign Borrowing May Shrink by $13Bln, Domestic Debt Offer

May Rise RenCap: Russian banking sector Mar 2010 results RenCap: CBR drives money supply via FX interventions

Business, Energy or Environmental regulations or discussions Bloomberg: Norilsk Nickel, Razgulay, Polyus Gold: Russian Equity Preview Interfax: OGK-1 genco ups Q1 earnings 5% to 1.05 bln rubles Interfax: Sberbank looks to get Rusagro shares for $200 mln in IPO – paper Bloomberg: Deripaska’s SMR Said to Plan $200 Million IPO in Hong Kong Moscow Times: Glavmosstroi Bankruptcy Suit Shelved - The Moscow

Arbitration Court has shelved a suit by Infosphere Ltd. to push Oleg Deripaska's Glavmosstroi into bankruptcy.

SteelOrbis: EU quota utilization levels of Russia and Kazakhstan SteelOrbis: ThyssenKrupp to supply 4,000 mt of coated steel profiles to Moscow Bloomberg: RenCap Aims to Add Units in Egypt, Tanzania, Uganda (Update1) Moscow Times: Short-Term Real Estate Market May Grow, Report Says Moscow Times: Novolipetsk's Lisin Says Russia Over-Regulates Aton: Rostechnology's buys an additional 12.12% stake in KAMAZ Financial Times: Aeroflot seeks to ditch poor Soviet-era image Moscow Times: Is There a Panacea for Tax Issues of Foreign Pharmaceutical

Companies? Russia Today: Advertising recovery underway BNE: Corporate funding in Q1 - mixed messages, mixed fortunes – by Guy

Norton in Moscow Moscow Times: For the Record

o Tesoro said Friday that it was buying Eastern Siberia Pacific Ocean crude, or ESPO, for $2.50 a barrel less than other grades of oil, which is pushing the price for Alaska crudes lower. (Bloomberg)

o Avangardco Investments Public, Ukraine’s largest egg producer, was almost two times oversubscribed at the price of $15 a Global Depositary Receipt, two people who worked on the sale said Friday. (Bloomberg)

Activity in the Oil and Gas sector (including regulatory) News.am: Dates of gas delivery to Armenia unclear - It’s been already a week

that Russian incoming gas to Armenia is cut due to landslides in Georgian Kazbegi region.

Oil and Gas Eurasia: Russian Energy Ministry To Propose Tax Breaks For Small Fields

Oil and Gas Eurasia: Putin Sets Zapolyarnoye-Purpe Oil Pipeline in Motion Bloomberg: Urals Discount Widens as Russia Boosts Output: Energy Markets Oil and Gas Eurasia: TNK-BP Begins Infill Drilling At Van-Yeganskoye Offshore: LUKOIL, Astrakhan agree joint Caspian program

Gazprom Bloomberg: Gazprom May Buy Naftogaz for 5% of Own Shares, Kommersant

Says Businessday: Gazprom refutes allegations it wants to scuttle trans-Saharan gas

project Messenger.com.ge: Gazprom increases Turkmen and Azeri gas purchase

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Full Text Articles

Basic Political Developments

Prime-Tass: MAJOR EVENTS LATER THIS YEARhttp://www.prime-tass.com/news/show.asp?topicid=0&id=478030

May 11–12: Russian President Dmitry Medvedev to visit TurkeyMay 13–14: Brazilian President Luiz Inacio Lula da Silva to visit RussiaMay 17–18: Meeting of Russian–Ukrainian intergovernmental commissionMay 21: Meeting of EurAsEC prime ministersMay 21: Prime ministers of Customs Union member-states to consider agreement on creation of common marketMay 29: Meeting of CIS prime ministersMay 30: Russia–EU summit in Russia

Steel Guru: Moscow and Kyiv to expand interregional cooperation in electricityhttp://www.steelguru.com/news/index/MTQ0MDc1/Moscow_and_Kyiv_to_expand_interregional_cooperation_in_electricity.html

Tuesday, 04 May 2010

Interfax reported that Russia and Ukraine plan to sign a number of documents on electricity and border area cooperation.

Mr Nikolai Azarov Ukrainian Prime Minister said "The Ukrainian and Russian sides are preparing a host of important documents that will be signed during the Russian president's visit to Ukraine on May 17th 2010."

He said that "We will sign a protocol today that sets out the various areas of economic life in Ukraine and Russia."

One of the documents to be signed at the meeting is a memorandum on cooperation between the Russian Regional Development Ministry and the Ukrainian Regional Development and Construction Ministry on interregional and border area cooperation.

The sides also plan to sign a memorandum on cooperation between Inter RAO UES, Energorynok and Ukrinterenergo and a memorandum of cooperation between RusHydro and Ukrgidroenergo.

(Sourced from Interfax)

PTI: India acquires Russian oil company, says Govthttp://www.ptinews.com/news/638175_India-acquires-Russian-oil-company--says-Govt

STAFF WRITER 13:11 HRS IST

New Delhi, May 4 (PTI) India has acquired a Russian oil company and bought equity stake in an oil field project in Venezuela through consortium route, the Rajya Sabha was informed today.

Minister of State for Petroleum and Natural Gas Jitin Prasada said during Question Hour, "we have recently acquired a Russian oil company named Imperial Energy through ONGC Videsh. Apart from this we have acquired 18 per cent equity share in a Venezuelan field project through consortium mode."

Prasada said Oil India Ltd, Indian Oil Corporation and OVL are the shareholders in the 18 per cent stake.

The minister said the recent discovery of an oil reserve in Barmer by the government would help in meeting 25 per cent of the nation's current oil production.

Warsaw Business Journal: Tupolev crew not informed of foghttp://www.wbj.pl/article-49449-tupolev-crew-not-informed-of-fog.html?typ=pam

4th May 2010

Polish military meteorologists only found out about the worsening weather over Smolensk at 8:25 am on April 10.

But Rzeczpospolita reports that the Polish authorities even then failed to relay that information to the crew of the doomed Tupolev-154M, the government plane that ended up crashing in a forest near the airport, killing president Lech Kaczyński and 95 other officials and dignitaries.

Just ahead of the crash, Polish authorities received this information from a Russian meteorological station: "visibility over Smolensk up to 500 meters, sky obscured."

Source: Rzeczpospolita

05/04/2010 Turkishnews.ru: Russia and Turkey to discuss the issue of oil bypassing the Bosporus and the Dardanelles

GOOGLE TRANSLATION

http://www.turkishnews.ru/news/2028.html

Offers of "Transneft" about the transportation of oil to bypass the Straits of Bosporus and the Dardanelles will be discussed during the visit of President Dmitry Medvedev in Ankara on 11-12 May, the head of "Transneft" Nikolay Tokarev journalists on Friday.

May 4, will be held in Ankara on a working group on 5-6 May in Ankara held an intergovernmental commission, which will be debated this issue, and on May 11-12 during Medvedev's visit to Ankara this issue will move to the next level, "- said Tokarev.

The head of Russian pipeline monopoly said that at the present time, Turkey, Italy and Russia is seriously at variance in the estimates of the volume of oil to the Black Sea basin by 2015. It is estimated Russia, we are talking about 132-136 million tons, according to Turkey - about 200 million tons, and the assessment of Italy - about 148 million tons.

Tokarev said that, for example, the idea of Turkey lies in the fact that 110 million tons to supply the strait, and everything above that amount - the pipeline Samsun-Ceyhan pipeline. "The project will be economically feasible if oil through the straits of Bosporus and the Dardanelles will be translated into the pipe (ie, the Samsun-Ceyhan pipeline and the Burgas-Alexandroupolis) and will be restricted or full waiver of transportation on the Straits", - said Tokarev. In the same strait proposed to leave only the transportation of oil of about 60 million tons.

Pipelines Samsun-Ceyhan oil pipeline and the Burgas-Alexandroupolis designed to carry oil overland to bypass the congested Straits of Bosporus and Dardanelles.

Samsun-Ceyhan oil pipeline with capacity of 60-70 million tons of oil annually, which is expected to start in 2011, will connect the Black Sea and Mediterranean ports of Turkey. Project is implemented by the Turkish Calik Energy and Italy's Eni. Late last year, it was decided that the Russian companies Rosneft, Transneft and Sovkomflot will also participate in the project.

Trans-Balkan oil pipeline Burgas-Alexandroupolis capacity of 35 million tons with a possible expansion to 50 million tons will be from the port of Burgas on the Black Sea port of Alexandroupolis on the Aegean Sea. The project is implemented to Russia, Bulgaria and Greece. Ministry of Energy last year expressed fears that the controversy in Bulgaria with other participants of the project may jeopardize it. However, in December following the meeting of Russian-Bulgarian intergovernmental commission the Ministry of Energy announced that Bulgaria is interested in implementing energy projects with Russia, including the Burgas-Alexandroupolis.

Tokarev said earlier that "Transneft" to discuss with partners from Turkey, Italy and Greece, the possibility of combining projects Samsun-Ceyhan oil pipeline and the Burgas-Alexandroupolis and the creation of a unified international consortium for the management of both pipelines. Source: www.rian.ru

Published: Monday, May 03, 2010Bylined to: VHeadline Venezuela News

Rusoro putting brakes on $25 million Venezuela investment plans for 2010http://www.vheadline.com/readnews.asp?id=91327

VHeadline Venezuela News reports: In today's (Monday 5/3) editions, the Caracas newspaper El Mundo, quoting a source close to the company, claims that Russian-owned (Canadian) gold miner Rusoro is putting the brakes on $25 million investment plans for 2010 which were to have been used for expansion and development of its privately-owned mining operations at El Callao in south-eastern Venezuela.

The situation is perhaps diffuse considering that Rusoro is involved in a 50/50 Russia-Venezuela socialist joint venture agreement (VenRus) while also operating a number of privately-owned gold mines in the same region with separate conditions for each structure.  It is Rusoro's Vancouver-based private operations that are most acutely affected by the current impasse which is said to have been a contributory factor to last week's resignation of Rusoro's Vancouver-based president George Salamis, who is being replaced by Russian entrepreneur Andre Agapov.

Production costs are said to be prohibitive for development of the first stage of the three-year, $200 million project as a direct result of a Central Bank of Venezuela (BCV) resolution which obliges privately-owned gold miners to sell 60% of their production to the BCV at seriously disadvantageous (foreign exchange controlled) prices even if the companies have a minority shareholding participation by the Venezuelan State.The exchange rate regime is said to make the purchase of external equipment and supplies onerous and as a direct result the company has seen fit to curtail operations in El Callao since last December including the lay-off of most of company's 800+ employees at the mine.Rusoro had resumed some operations at El Callao in January after the government announced the new controlled exchange rate (Bs.F 4.20/$) on January 8, but it has survived mostly "on air" since then because of production costs other than those defined by the BCV must necessarily be covered on the parallel exchange market where the US$ has at times reached Bs.F 8.00/$ resulting in a production costs in the region of $700-$600 an ounce where gold was selling on international markets as late as last Friday at $1,178.30 an ounce.

Rusoro has been seriously affected by the BCV decision to increase the percentage of national gold sales to the State and has asked the BCV director Jose Khan to modify the schedule to return mining to viability so that it may resume its operations.Khan has since returned to head the Ministry of Basic Industries & Mining (Mibam) -- replacing Rodolfo Sanz -- but has ignored undertakings givern directly to Rusoro directors and to the company's employees in El Callao last December to urgently review the situation which puts the jobs of more than 800 people in jeopardy.Despite what are described as excellent relations between Russia and Venezuela, Rusoro has not achieved a satisfactory response from Khan although they are hoping to achieve similar terms to those already in force with regard to the socialist 50/50 VenRus joint venture partnership between Rusoro and the Venezuelan State which reduces obligatory sales to the BCV to just 25%.VHeadline Venezuela Newsnews.desk@vheadline.com

VE-DAY

According to Komsomolskaya Pravda newspaper, more and more state leaders are planning to arrive in Moscow to attend the celebration of the 65th anniversary of Victory over Nazism. In particular, Chinese leader Hu Jintao has officially confirmed his intention to come to Moscow, the newspaper says. Earlier German Chancellor Angela Merkel, Czech President Vaclav Klaus, French President Nicolas Sarkozy and Italian Prime Minister Silvio Berlusconi confirmed their visits.

Itar-Tass: Medvedev to present City of Mil Glory certificates to 5 cities

http://www.itar-tass.com/eng/level2.html?NewsID=15088310&PageNum=0

04.05.2010, 02.23

MOSCOW, May 4 (Itar-Tass) - President Dmitry Medvedev is to present the certificates of Cities of Military Glory to another five cities at a ceremony in the Kremlin on Tuesday. The leaders the cities, war veterans, and young people have been invited to the ceremony.

The five are Volokolamsk outside Moscow, Bryansk, regional center, Nalchik, the administrative center of the Kabardino-Balkar Republic, Vyborg, the second-populous city in Leningrad Region, and Kalach on-the- Don, a city in Volgograd Region.

The President of the Russian Federation signed respective Decrees on March 25. There are now 27 Cities of Military Glory in Russia.

RUVR: Final night training of 65th Victory Parade to be held on May 6http://english.ruvr.ru/2010/05/04/7264309.html

May 4, 2010 10:02 Moscow TimeThe final training of the 65th Victory parade will be held on the Red Square in Moscow on the night from Saturday to Sunday. Almost 160 armored vehicles and about 20 aviation groups of Russia's Air Forces will take part in the training.   

Itar-Tass: Aircraft takes part in final drill of victory parade on Red Square

http://www.itar-tass.com/eng/level2.html?NewsID=15089156

04.05.2010, 11.51

MOSCOW, May 4 (Itar-Tass) - The final night drill of troops that take part in a military parade in Moscow on the occasion of the 65th anniversary of victory in World War II will begin at 10.00 pm Tuesday.

Infantry and motorized troops supervised by the Moscow Military District Commander Colonel-General Valery Gerasimov will be marching down Russia's main square tonight, Sergei Vlasov, spokesman for the troops' commander, told Itar-Tass. The drill involves servicemen of military academies and other military schools, several battalions, including a paratrooper battalion, marines and interior ministry troops of the Russian Federation, the spokesman said. Unlike the previous rehearsals Air Force will take part in the troops drill tonight.

A total of 10,500 servicemen of different kinds of troops will take part in the night rehearsal, including teachers and students of military academies and their colleagues from other military schools, more than 420 representatives of Mozhaisky Military Space Academy, five battalions from the 98th paratrooper division, a marine battalion and servicemen of the interior ministry troops.

The troops' march will be followed by motorized troops that number 159 pieces of military hardware, including war time tanks T-34, self-propelled guns SU-100, armored vehicles "Tigr", tanks T-90, armored carriers, self-propelled launching installations, air defense missile/gun systems "Pantsir".

RUVR: Harbin hosts Russian compatriots conferencehttp://english.ruvr.ru/2010/05/04/7266511.html

May 4, 2010 10:35 Moscow Time The Chinese city of Harbin is hosting the Conference of Russian compatriots residing in China. The main theme of the conference is to keep the Russian historical heritage. Held

on the even of the 65 the anniversary of the Victory over Nazism the forum includes a number of memorial events in particular laying flowers at the monument of the Soviet soldiers who liberated the North East of China from Japanese invaders. Also during the conference a new book called "The Russian in China" will be presented. 

Itar-Tass: RF compatriots in China seek to preserve historical heritage

http://www.itar-tass.com/eng/level2.html?NewsID=15088487&PageNum=0

04.05.2010, 06.49

HARBIN, May 4 (Itar-Tass) - The study, search for and preservation of Russian historical heritage constitute the main subject of discussion at the Russian compatriots' fourth conference that opened here on Tuesday.

The conference has been organized by the Coordinating Council of Compatriots in China and the Russian Club in Harbin under the auspices of the Embassy of the Russian Federation to the People's Republic of China (PRC).

Representatives of various public organizations, scientists, historians, diplomats, as well as Russian clergymen from Beijing, Shanghai, Harbin, Guangzhou, Urumqi, and Hong Kong are taking part in the conference, the theme of which is "Russian Historical Heritage in China: Problems of Study, Protection, and Popularization in the Light of the 65th Anniversary of the Great Victory ".

RUVR: Moldovans accuse president of disrespect to memory of war heroeshttp://english.ruvr.ru/2010/05/04/7266470.html

May 4, 2010 10:33 Moscow TimeIn Moldova a group of citizens has initiated a lawsuit against acting President Mikhai Gimpu, ITAR-TASS reported. According to them, Gimpu has discredited the memory of the soldiers who were killed fighting Nazism during the Second World War. "We were indignant at Gimpu's statement that he would not go to the Victory parade in Moscow because the defeated has nothing to do there", a representative of the initiative group Ruslan Popa said.  According to him, Gimpu has equaled the Moldavian people to the nations who fought on the side of for Nazis.

Moscow Times: Not Much Victory on Victory Day http://www.themoscowtimes.com/opinion/article/not-much-victory-on-victory-day/405290.html

04 May 2010By Alexei Bayer

Russia is a divided nation, bitterly split in a variety of ways: rich and poor, rulers and ruled, nationalists and Westernizers, modern Moscow and the dreary, Stone Age provinces. But even 65 years after World War II, most of its 140 million citizens come together on May 9 to mark victory over Adolf Hitler. As a friend observed, it is the only true national holiday left.

This is why Russians of all political stripes bristle whenever their country’s sacrifice is questioned or when a more nuanced alternative to the black vs. white official interpretation of the war is offered.

Russians were outraged when U.S. President Barack Obama in his inaugural address referred to the earlier generations of Americans who helped defeat fascism. To them, Obama’s phrase, designed to rally Americans to meet the challenges of the future, seemed another attempt to diminish Russia’s role in the past.

But what is really being celebrated on May 9? A military victory should benefit the winner, but in the Soviet Union it was by no means true. Soldiers who fought their way into Germany were given a carte blanche to loot. I remember the numerous “trophy” vacuum cleaners and record players that I saw while growing up in the 1960s and 1970s. Moscow’s consignment stores were filled with prewar luxury items of German provenance.

But that was the only prize for the victors. In the United States, those who fought in World War II and worked on the home front are called “the Greatest Generation.” Their Soviet contemporaries were, by contrast, “the Miserable Generation.” Born in the meager years after the Bolshevik Revolution, they came of age during the brutal collectivization and famine of the early 1930s and spent their youth under Josef Stalin’s terror. Hitler’s invasion then mowed down their entire generation.

The postwar years were no picnic, either. Hopes that victory abroad would bring greater freedom at home were promptly dashed. Russian prisoners of war were not greeted as heroes but sent to labor camps. Civilians who had been under German occupation were treated with suspicion. Entire nationalities were deported. After the war, there was abject poverty, rationing and renewed purges. Even after Stalin’s death, most never knew what it meant to be free or safe, travel, own property, have a choice of food and consumer goods or live in a decent apartment.

Then came the collapse of the Soviet Union. Those who were able to travel abroad for the first time returned home shocked. Visiting Germany or Japan and contrasting their prosperity with poverty and backwardness at home, they wondered who had really won the war. In Eastern Europe, seeing the disdain for the Soviets and desire to join the German-dominated West, they asked themselves who was the real occupier.

Hitler’s forces murdered millions of Russians, but Stalin’s military strategy — which seemed to be designed to kill as many on his own side as possible — greatly aided Hitler

in his task. By most estimates, Russia lost at least five times more people than Germany did, but no one even bothered to get the exact number, let alone find out their names.

Russia didn’t lose the war, but it didn’t win it, either. At the premiere of Nikita Mikhalkov’s self-aggrandizing pseudo-Hollywood war epic “Burnt by the Sun 2,” some 6,000 members of the Russian political, business and showbiz elites arrived to the Kremlin in German luxury cars and sanctimoniously praised the Great Victory. Now, 65 years on after the smoke has cleared, they seem to have been the only victors.

Alexei Bayer, a native Muscovite, is a New York-based economist.

Itar-Tass: FMs to discuss RF-Belgium bilateral relations in Moscow Tue

http://www.itar-tass.com/eng/level2.html?NewsID=15088229&PageNum=0

04.05.2010, 00.46

MOSCOW, May 4 (Itar-Tass) - Relations between Moscow and Brussels during Belgium's European Union (EU) presidency, which is due to begin on July1, will be discussed here on Tuesday by Russia's Foreign Minister Sergei Lavrov and Steven Vanackere, Belgium's acting Minister of Foreign Affairs. Vanackere arrives in the Russian capital instead of Premier Yves Leterme, who has postponed his visit to Russia, planned for May 4-5, in view of the Cabinet's resignation over the political crisis.

A high-level diplomatic source told Itar-Tass in Brussels, "The visit of Belgian acting Minister of Foreign Affairs will be made in accordance with a pre-planned programme. In particular, while in Moscow, he will meet with Russian Foreign Minister Sergei Lavrov."

The source emphasized that the Premier's working visit "has not been cancelled. It has been postponed to a later date" in view of the complex political situation in the kingdom. Originally, it was announced that the visit would be made on Brussels' initiative aimed at promoting dynamic development of political and economic contacts with Russia.

The two Foreign ministers are expected to have a dialogue in Moscow on the entire spectrum of Russo-Belgian relations, including those in trade, economic, investment, scientific, technical, and cultural fields.

Itar-Tass: Greek PM invites Putin to visit Greece

http://www.itar-tass.com/eng/level2.html?NewsID=15087998&PageNum=0

03.05.2010, 21.22

MOSCOW, May 3 (Itar-Tass) -- Greek Prime Minister George Papandreou invited his Russian counterpart Vladimir Putin to make a working visit to Greece at any convenient time.

The invitation was passed to Putin during a telephone conversation on Monday initiated by the Greek prime minister.

Putin and Papandreou discussed current aspects of trade and economic cooperation, including financial and energy interaction, and agreed that the exact date of the Russian prime minister’s visit to Greece would be determined through diplomatic channels, the government press service said.

Papandreou visited Russia in February of this year. Russian-Greek cooperation on major gas and oil pipeline projects dominated his talks with Putin.

The visit took place amidst a severe financial crisis in Greece that had forced its government to cut expenditures, and the European Union worrying that the Greek problems might have a negative impact on the whole euro zone and even cause its collapse.

Priority at the talks was given to the implementation of major joint projects - the South Stream has pipeline and the trans-Balkan Burgas-Alexandroupolis oil pipeline.

The Russian government believes that the implementation of these projects based on balanced respect for the interests of the producing countries, transit countries and end users will enhance energy security in Europe and boost cooperation and mutual understanding between Russia and the European Union.

Putin and Papandreou also discussed a wide range of bilateral political, trade, economic, energy, investment, military-technical, cultural and humanitarian cooperation.

They touched upon international issues as well, including Russia-EU and Russia-NATO relations, Cypriot settlement, and prospects for cooperation within the Black Sea Economic Cooperation Organisation.

Relations between the European Union and Russia are of a strategic nature and based on common interests, Papandreou said back then.

“Relations between the EU and Russia are strategic and based on the common interests of the two sides in the political and economic spheres. Interdependency and mutual complementariness of the EU and Russia, especially in the fields of energy and economy, are widely recognised. In addition, Russia is the biggest suppliers of energy resources to the EU,” the prime minister said in an exclusive interview with Itar-Tass ahead of his trip to Moscow.

According to Papandreou, cooperation between the EU and Russia develops within an institutional framework and covers a wide range of issues within “four common spaces” the decision on the creation of which was made during Greek presidency in 2003.

“Greece absolutely agrees with the priorities determined by Spain, the current EU president, to implement the ‘roadmaps’ for the ‘four common spaces’,” he said.

“As a EU member state, Greece supports further strengthening of relations between the EU and Russia, and the conclusion of a new cooperation agreement aimed at expanding areas and possibilities for cooperation between the two countries,” the prime minister said.

Speaking of Russia-NATO relations, he said Greece had invariably and consistently supported cooperation between the alliance and Russia even in the most critical of the times.

“NATO and Russia are countering many common security threats and challenges. We support a deeper political dialogue and practical cooperation. We particularly value Russia's cooperation in the efforts aimed at stabilising the situation in Afghanistan and think that there are prospects for enhancing it,” he said.

“It is vitally important to build confidence between NATO and Russia. I personally feel optimistic,” Papandreou said.

He expressed confidence that his talks in Moscow would confirm the “excellent” level of relations with Russia.

According to Papandreou, thousands of Greeks living in Russia are a “precious link” between the two countries. “We are proud that they succeed in public life in Russia, in science and arts. In parallel, Greece has received in recent years numerous Russian citizens who work and facilitate the progress of our country,” he said.

The prime minister stressed, “The Greek state and the Greek people consider Russia a close friend and strategic partner, with whom we share approaches and goals on a score of regional and international issues.”

However, he believes that bilateral economic relations do not yet match the actual possibilities of the two countries despite the high level of political contacts.

“I believe we should work together in order to improve them, which seems to be absolutely realistic. Despite the economic crisis, we should undertake initiatives to promote mutual investments, develop strategic cooperation, make economic agreements and develop interaction in areas where our countries have comparable advantages, such as tourism,” he said.

RIA: Drugs: nearly 200 kilograms of Afghan heroin seized in Russia (FSKN)

http://fr.rian.ru/russia/20100504/186618822.html

GOOGLE TRANSLATION

Dossier: The fight against drugs 04/05/2010 11:00

Nearly 200 kilos of Afghan heroin seized in the last two weeks in different regions of Russia by the Russian Service of Drug Control (FSKN), announced Tuesday RIA Novosti spokesman FSKN.

"During major operations launched in the regions of Perm (Urals), Omsk (Siberia), Moscow and Khanty-Mansiysk (Siberia), we've disrupted distribution routes of Afghan heroin. The seizures a volume of nearly 200 pounds and sufficient for the production of more than 40 million of single doses show that the drug continues to be produced in laboratories in Afghanistan, "said the agency interlocutor.

According FSKN nearly 3.5 million Afghan farmers now cultivate opium poppy, its cultivation having increased 40 times since 2001. Nearly 95% of opium produced in Afghanistan.

According to data provided by the head of Russian health authorities Gennady Onishchenko, nothing in 2009 Afghanistan produced 800 tons of drugs. This country remains the main supplier of drugs to Russia, the Russian population spending 17 billion dollars a year to its purchase.

Itar-Tass: Sakhalin rescuers offer BP to send pollution control ship

http://www.itar-tass.com/eng/level2.html?NewsID=15088512

04.05.2010, 07.22

VLADIVOSTOK, May 4 (Itar-Tass) - Sakhalin rescuers are prepared to send the pollution control ship Centurion to eliminate the spill of oil in the Gulf of Mexico.

The ship, built in Japan under a special order, can collect 583 tonnes of oil from the sea surface area in the oilspill area in a single operation. The vessel can reach the Gulf of Mexico within two weeks.

A suggestion to this effect came on Tuesday from Konstantin Taranov, deputy general director of the Sakhalin-based professional emergency rescue company, the Centurion

Group, whose offer to participate in the efforts to cope with the oilspill off the US shores, was addressed to the British Petroleum Company, the oil platform of which had exploded on April 20, 80 km off the shores of Louisiana. Oil had begun to gush out of the well immediately, forming a huge oil slick with an area of up to1, 500 square kilometers.

According to information from an Itar-Tass correspondent in the US, efforts to eliminate the aftermath of the environmental disaster are involving 76 ships, five aircraft, and about 1,100 specialists. Thousands of US National Guard troopers and additional machinery are being sent to their help.

RUVR: Sakhalin’s Centurion Group offers to curb Gulf of Mexico oil spillhttp://english.ruvr.ru/2010/05/04/7262965.html

May 4, 2010 09:28 Moscow TimeRussia’s Sakhalin-based search-and rescue Centurion Group has offered to help curb the Gulf of Mexico oil slick. In the first place they would provide British Petroleum with an oil-skimmer. The British Petroleum-run Deepwater Horizon oil rig sank off the Louisiana coast on the 22nd of last month following a powerful explosion that caused a 36-hour fire. The incident resulted in a large oil slick that has reached the Louisiana coast and is now approaching the shores of Florida and Alabama. Ecologists estimate the damage done at billions of dollars. British Petroleum said it would make up for all expenses on doing away with the emergency. The British company is now considering the proposal of Sakhalin’s rescue workers. 

RUVR: US says ready to sign adoption treaty with Russia in few monthshttp://english.ruvr.ru/2010/05/04/7262906.html

May 4, 2010 09:26 Moscow TimeThe US has expressed readiness to sign an agreement with Russian on adopting each other's orphans. A high ranking official of the US State Department told reporters that the authorities in Washington will start working on the document immediately. He added that this work may take several months.

In late April, the US and Russia decided to set up a joint working group to elaborate the treaty. The Russian authorities have already submitted its draft of the treaty to the US colleagues.     

The issue gained urgency after recent incidents in which Russian-born orphans were badly mistreated by their American foster parents. 

CNN: U.S. official: Russia still allowing adoptions by Americanshttp://edition.cnn.com/2010/US/05/03/russian.adoptions/?hpt=T2

From Charley Keyes, CNN May 4, 2010 -- Updated 0056 GMT (0856 HKT)

Washington (CNN) -- A senior State Department official said Monday that Russian authorities continue to approve U.S. adoptions despite some public sentiment there to call a complete halt.

"There are several different moods, I think, in Russia. There is some popular opinion for ending all adoptions to the United States," the official said.

"There appear to be some [Russian] courts that have decided adoptions won't go forward," the official said. "But on Friday I met with 10 [American] families in Moscow who had just got their immigrant visas to bring their adopted children to the United States. They all got through the process in Moscow and in various other cities. One person had three different court appearances and got a tongue-lashing, but that makes judges somewhat akin to ... the United States."

The official, who insisted on anonymity because of the sensitivity of U.S.-Russian talks, participated in a conference call with journalists to discuss his meeting in Moscow last week. A follow-up session is set for Moscow a week from Wednesday.

The latest uproar and the high-level meetings were prompted by a Tennessee woman who sent the young Russian boy her family had recently adopted back to Russia unaccompanied.

The senior State Department official said Russians understandably are upset that 18 Russian children have been killed by their adoptive parents since the early 1990s and 17 of those cases involved Americans.

"There are some who say, 'My God, even one death in the hands of Americans is too many. Seventeen is really too many. We should stop everything until we are comfortable that not another single Russian child will be killed in the United States,' " the U.S. official said. "So there are conflicting views in Russia."

He said one possible provision of a new U.S.-Russia agreement would allow earlier and more frequent sharing of information both before and after adoptions. He said some American couples don't see details of a child's medical and psychological condition until a court appearance for final adoption approval.

The Russians presented the United States with a draft proposal of an agreement on Saturday, but the U.S. official said final agreement could be months away. One Russian proposal would have independent follow-ups with each adoptive family after the family returns to the United States.

IANS: Iran to launch two satellites with Russia in 2010http://www.thaindian.com/newsportal/sci-tech/iran-to-launch-two-satellites-with-russia-in-2010_100358053.html

May 4th, 2010 - 11:47 am ICT by IANS –

Tehran, May 4 (IANS) Iran is working on a plan to launch two communication satellites with Russia by the end of this year.During the Moscow visit of Iran’s Minister of Telecommunication Reza Taqipour in April, a memorandum of understanding was signed between Taqipour and his Russian counterpart Igor Shchegolev for broader cooperation in the field of telecommunication.

Mohammad Hosseinpour, a senior advisor to Taqipour, told Mehr News Agency Monday that if everything went according to the plan, the two telecommunication satellites would be launched by year-end, Press TV reported.

The new satellites, which are designed to reduce telecom traffic between Russia and Europe, will be equipped with filming applications and data-image transmission sensors.

After launching its first domestically-designed satellite, Omid (Hope), in February last year, Tehran has unveiled three new satellites and a satellite carrier.

Iran is one of the 24 founding members of the United Nations Committee on the Peaceful Uses of Outer Space (UNCOPUOS), which was set up in 1959.

RIA: Government to withdraw 6 air carriers from state-run Russian Technologies – paperhttp://en.rian.ru/business/20100504/158862961.html

11:5104/05/2010

The government will withdraw six air carriers from the state-owned hi-tech corporation Russian Technologies (Rostekhnologii) to invest in the leading Russian air carrier Aeroflot aiming to increase its capitalization, a business daily on Tuesday quoted a Russian Economy Ministry official as saying.

Alexei Uvarov, the head of the ministry's property department, told Vedomosti that the Transport Ministry had prepared a draft of the presidential decree. The national flag carrier, in turn, will issue additional shares to be acquired by the state.

Originally, Rostekhnologii was due to become Aeroflot's key shareholder. Uvarov did not elaborate why the Transportation Ministry called off the plan.

An unnamed source in the Transport Ministry told Vedomosti that air service is a non-core activity for Rostekhnologii, so the government decision was justified.

Aeroflot is to receive Vladivostok Avia, Saratov Airlines, Sakhalin Airways, Rossiya, Orenavia, as well as Kavminvodyavia.

Experts predict the state share in Aeroflot was unlikely to grow dramatically.

"The state's share will hardly to exceed 70%," Vedomosti daily quoted Ingosstrakh Investment analyst Evgeny Shago as saying. The government currently holds 51% in Aeroflot.

"The government plans to increase Aeroflot's capitalization, then offer its shares to investors," Vedomosti quoted Uvarov as saying.

Uvarov said that at a further stage the government will list Aeroflot's stocks at some foreign stock exchange (currently they are traded on MICEX and RTS exchanges).

Uvarov said there is around 4% of Aeroflot shares in free circulation. The figure would probably grow to 25%-30%.

Rostekhnologii and Aeroflot officials have not commented on the deal.

MOSCOW, May 4 (RIA Novosti)

04 May 2010, 12:02

Interfax: Strong healthy nation is needed to reclaim Russian spaces – Patriarch Kirillhttp://www.interfax-religion.com/?act=news&div=7221

*** As the birth rates grow, the Church Primate hopes that our vast spaces will be inhabited by our people rather than strangers with alien culture and alien faith

Belgorod, May 4, Interfax – Patriarch Kirill of Moscow and All Russia stresses the importance of solving Russia's demographical problems and improving nation's health.

"What's the good of having economy, if our nation is sick? How will we reclaim these boundless spaces, vast lands, not only in European part of Russia, but in Siberia as well?" the Primate said at organizational meeting of the Belgorod branch of the World Russian People's Council.

He reminded that birth rates had recently grown in Russia.

"We hope this tendency will be stable and our people rather than strangers with alien culture and alien faith will inhabit our vast lands inherited from God and our hardworking

forefathers and this greatest treasure – our land – will be cultivated by descendants of those who merged it to the great Russian state," Patriarch Kirill said.

Itar-Tass: Some Dagestan districts remain without communications after attack

http://www.itar-tass.com/eng/level2.html?NewsID=15088794

04.05.2010, 09.50

MAKHACHKALA, May 4 (Itar-Tass) -- Several highland districts remain without the mobile communication, as well as the special communication lines in Dagestan after a bandit raid, the press service of the republican Interior Ministry told Itar-Tass on Tuesday.

“Overnight to Monday a group of 10 gunmen attacked a gas distribution hub near the village of Kakashura in the Karabudakhkent district. They broke into a broadcasting tower covering several Dagestani districts and fired at the transmitters from submachine guns,” the press service said.

As a result of the bandit raid several law enforcement and civil agencies were cut of the communications, including the republican Interior Ministry and Emergency Situations Ministry, Kaspiygazprom-Makhachkala, Dagsvyazinform, Beeline.

RIA: Eleven police injured in grenade attack on S. Russian police station (Update)http://en.rian.ru/russia/20100504/158862757.html

11:3304/05/2010

MOSCOW, May 4 (RIA Novosti) - Eleven police officers were injured in a grenade attack on a police station in Russia's North Caucasus republic of Ingushetia, investigators said on Tuesday.

An unknown assailant attacked a police station on the Kavkaz federal highway near Nazran, the largest city in the republic, using a grenade launcher late on Monday. No one was reported killed.

"As a result of the attack, 11 police officers sought medical assistance," investigators said. Earlier reports said seven officers had been injured.

Ingushetia has seen an upsurge of militant violence lately, with frequent attacks on police and officials.

The Kremlin has pledged to wage "a ruthless fight" against militant groups, but also acknowledged a need to tackle unemployment, organized crime, clan rivalry and corruption as causes of the ongoing violence in the North Caucasus region.

Newsru.com: In Chechnya, two militants from the armed gang of Hussein Gakaev arrested, two more eliminated

http://www.newsru.com/russia/03may2010/antiterror.html

time of publication: May 3, 2010, 16:59 Last update: May 3, 2010, 17:00

In the village of Agishty in the Shali district of Chechnya, arrested two accomplices of armed gangs. Two residents of Argun themselves confessed that assisted the militias. According to the detainees, they delivered food members of the gangs operating under the leadership of Hussein Gakaeva, Rosbalt reported quoting the press service of the republican Ministry of Internal Affairs. Meanwhile, in the same region of Chechnya had previously been destroyed by two active members of the resistance of the same gang Gakaeva. The militants were killed by law enforcement agencies on the outskirts of the village Tevzana Vedeno district of the Chechen Republic, writes RIA Novosti. "In the mountain woodlands on the western outskirts of the village were seen two members of illegal armed group, who offered armed resistance and returned fire were destroyed. Personalities bandits set - they were villager Ruslan Musaitov born in 1984 and 28-year-old native of the village of Kirov Yurt Rasul Umarov, "- said in a statement posted on the site of the MIA. At the scene were found and seized two assault rifles and eight clips for them, and a Makarov pistol, unloading vest, over 200 rounds of ammunition and a passport in the name of one of the destroyed. Losses of personnel, who participated in the raid, not.

BNS: Flight testing of Russia's fifth-gen fighter continueshttp://www.brahmand.com/news/Flight-testing-of-Russias-fifth-gen-fighter-continues/3801/1/30.html

Last Updated: May 04, 2010MOSCOW (BNS): Russia's fifth-generation fighter aircraft PAK FA has undergone a fresh round of flight test near here last week.

The combat aircraft took to the skies from the Zhukovsky air base in southeast of Moscow on April 29, 2010, Arms-Tass reported. The aircraft was piloted by Sergey Bogdan, it said.

The PAK FA aircraft entered flight testing on January 29, 2010, by making its maiden flight over the sky of Komsomolsk-on-Amur city for nearly 45 minutes.

The aircraft since then has undergone a series of flight tests to validate its prowess.

The supersonic PAK FA with a range of 5,500 km is expected to enter service with the Russian Air Force in 2015. India, which is a partner in the project, intends to acquire 50 such fighters for its air force.

The aircraft, manufactured by Sukhoi Corporation, has been designed to compete with the US' F-22 Raptor and F-35 Lightening-II fifth-generation fighters.

The PAK FA has a take-off weight exceeding 30 tons. It has widely spread engines and two fins and its exteriors have been designed by using stealth technology.

The aircraft is equipped with the latest avionics, implementing functions of electronic 'autopilot', and state-of-the-art radar with a phase-locked antenna array. It also has an in-flight fuelling capability.

Russia Today: Civil service still not an alternative to armyhttp://rt.com/Top_News/2010-05-04/alternative-service-russia.html/print

04 May, 2010, 07:24

Civil service as an alternative to obligatory army duty has not been very popular in Russia.

The reasons for it are two-sided, with the sort of jobs a recruit has to engage in on one hand and the lack of legal regulations on the other.

Pavel and Vasily say their least favorite part of the job at the nursing home is washing and changing the clothes of the dead. There is little to enjoy in the alternative service they chose, but they believe it is better than holding a gun.

“The Bible says don't carry a weapon, and I don't. This way, I at least can be of some use to my country,” Vasily said.

All men who are serving at the same nursing home have religious beliefs. Russian law says you can avoid the army and opt for alternative service if you prove your religious or pacifist views.

But what if one does not have proof – just a clear understanding that they do not belong in the military?

Konstantin Mustafin's application for alternative service was rejected by officials. They said his arguments did not stand for his convictions. Kostantin went to court, lost the case, and he is now waiting for the judges to rule on his appeal.

“I do want to serve my country, but not in the military. My dad died at the age of 39 from brain cancer. He'd gone through constant bullying in the army, they beat him on the head all the time,” Konstantin said, explaining his unwillingness to serve in the military.

In Russia, the number of those who choose to serve the community rather than the army is less than 1 percent of all those recruited. Ever since the option was introduced six years ago, the number has been shrinking.

Twenty-one months of hard dirty work instead of twelve months in the military – community service is very unpopular in Russia. Many believe that looking after the elderly, or cleaning the streets, is unbecoming for a real man who wants to serve his country.

This is how a senior official explains the shrinking number of those choosing an alternative to the army:

“I think every young man from his childhood wants to experience life in the military, it's probably in their blood,” said Vasily Smirnov, head of the main recruiting department of the Russian Armed Forces.

It is certainly not in Konstantin's blood, who says his work as a teacher, which is what he is trained for, would do much more good for the country.

MAY 4, 2010

Wall Street Journal: It's Prokhorov to the Rescue! http://online.wsj.com/article/SB10001424052748704342604575222532661577678.html

Russian Billionaire Who's Buying the NBA's Nets Has Worked Magic Before; a Broken Biathlon Team

Just 19 months ago, the Russian Biathlon Union was about as beaten, broken and scandalized as a national sports organization can possibly be.

The only reason New York-area sports fans ought to care about this is the nature of what has happened since. While some challenges remain, Russia's biathlon team has essentially been fixed. And the man who fixed it so quietly, quickly and emphatically is Mikhail Prokhorov, the billionaire who has agreed to buy the flailing New Jersey Nets.

"There was a long way to go to professionalize that organization," Max Cobb, the executive director of U.S. Biathlon, said of the Russian outfit. From what he has seen, Mr. Cobb says, the turnaround has been dramatic. "He continues to have a very positive impact," he said.

Biathlon, for those who've forgotten, is that primarily European winter sport where athletes alternate between cross-country skiing and target shooting. It's also an event the Russians used to dominate: Until the Soviet Union collapsed, its teams had won every Olympic gold ever awarded in biathlon relay. Heading into the Vancouver Games, the Russian biathlon team was in shambles. In almost every respect—from talent and resources to technology and coaching—it had fallen far behind other nations. In 2007, the union's longtime president, Alexander Tikhonov, was convicted of plotting to murder a politician but was freed under a general amnesty program. Mr. Tikhonov has maintained his innocence.

To make matters worse, two months after Mr. Tikhonov stepped down as president, three of the team's top athletes tested positive for doping. In biathlon, a sport where it takes years to find and nurture gold-medal-winning talent, the situation looked dire. To be blunt, this team was so far gone it made the Nets, who finished 12-70 last season, look brilliant by comparison.

On paper, Mr. Prokhorov, whose fortune has been estimated at between $13.5 billion and $17 billion, isn't an obvious candidate to fix biathlon. He had only skied recreationally. But he was rich: In 1993, at the age of 28, Mr. Prokhorov took over the nearly bankrupt Norilsk Nickel company and turned it into one of the world's largest metal producers. A big component of his success was his ability to think differently and creatively: To improve distribution, he invested in new ships that could quickly transport nickel along an icy arctic route.

"That was his specialization," said Aleksei Selivanenko, head of sports-marketing agency Octagon Worldwide's Russian offices. "Whenever he is doing something, he brings some new wind, new thinking."

In November 1997, Mr. Prokhorov took over the CSKA Moscow basketball team—a unit that was left penniless after the fall of the Soviet Union and was all but defunct. Much has been made of Mr. Prokhorov's role in turning that team around: Now it's one of the winningest pro basketball teams in the world.

In 2007, Mr. Prokhorov was arrested in Courchevel, France, on suspicions of transporting prostitutes. He was never charged and says he did nothing wrong, but the incident was a blow to his reputation. Soon after, he sold 25% in Norilsk for as much as $10 billion. The sale meant he no longer had control over CSKA Moscow.

In 2008, as the founder of private investment fund Onexim Group, Mr. Prokhorov was looking for another team to finance and lead. Russian Olympic Committee president Leonid Tyagachev publicly campaigned for Mr. Prokhorov to take over the biathlon

union. Mr. Prokhorov was unanimously elected president and took control in October 2008.

Two people familiar with the Russian sports system said the idea was that if he could turn the team around and salvage a good performance in Vancouver, he might be able to repair his public image and gain favor with the Kremlin. Mr. Prokhorov declined to be interviewed for this article.

Sergey Kushchenko, who had worked with Mr. Prokhorov for years as head of Norilsk Nickel's sports-projects department, has been a big part of the biathlon-rebuilding effort. After Mr. Prokhorov offered Mr. Kushchenko a job as executive director, the two men put together a 10-year plan to improve the biathlon union without disrupting the team too much before the approaching Vancouver Olympics.

Before Mr. Prokhorov took over, Russian biathletes had to arrange their own travel, buying tickets and obtaining visas for various international competitions. Messrs. Prokhorov and Kushchenko discovered there were situations where some athletes were stuck at home because they couldn't get out of the country. Team coaches found themselves saddled with managerial duties that distracted them from coaching.

To improve all of those issues, Mr. Prokhorov hired "team managers" to free up athletes and coaches to focus on their sport. He gave coaches and staff members contracts, which improved morale, according to people familiar with the team, and created more stability.

The biathlon union also created an antidoping commission that tightened controls over team doctors and communicated more with the national antidoping program to help eliminate positive tests.

What Mr. Prokhorov did to help the team may not be as telling as what he didn't do. He was so mindful of drastically overhauling the chemistry of the team so close to the Olympics that he left most of the team coaches in their jobs.

Although the Vancouver Olympics weren't kind to the Russian team, the biathletes became a surprising point of departure. They won two gold medals—one in the women's 4x6-kilometer relay and the men's 15-km mass start. It won a silver in the women's 12.5-km mass start and bronze in the men's 4 x 7.5-km relay. The sport accounted for two of the country's three golds and nearly a quarter of all its medals.

"Honestly, our biathlon team came back from Vancouver with head high," said Evgeny Dzichkovsky, a reporter with the Sport-Express in Moscow. "They were the only ones who were beyond criticism."

Now, the focus is on 2014, when Russia hosts the Winter Games in Sochi. Messrs. Kushchenko and Prokhorov have started a new mass recruiting program that involves genetic testing of young athletes to determine their potential. The team is also planning a coaching shuffle that they hope will bring in new talent and help revitalize the team.

At the moment, the Nets are barely better off than the Russian biathlon team 19 months ago. The Nets almost had the worst record in NBA history. They haven't had a winning record since 2006 and has the NBA's worst attendance numbers. The team has been hemorrhaging anywhere from $20 million to $30 million a year, according to the team's current owner, Bruce Ratner, who, after a seven-year fight has both the funding and the necessary approvals in place to build a more profitable arena in Brooklyn.

Mr. Ratner says some of the team's woes on the court were intentional—the Nets unloaded some talent to create salary room for an unusually star-studded free-agent market that includes marquee players like LeBron James and Dwyane Wade. What the Nets do in free agency will determine, to a great extent, their success in the NBA.

When the NBA was vetting Mr. Prokhorov last fall, a person familiar with the discussions said one big question was whether he could put together a winning team in the NBA while operating under the league's salary controls. When he built CSKA Moscow, he primarily used his fortune to sign better talent than the competition.

Mr. Kushchenko thinks Mr. Prokhorov will be successful in New Jersey, despite his inability to buy any players he wants. "It's a big mistake to think that Mikhail Prokhorov spends unlimited money," said Mr. Kushchenko.

He adds that Mr. Prokhorov's greatest skill is improving everything around the field of play, while letting coaches and general managers figure out what to do with athletes. "Money is a tool to create thoughtful, professional staff," he says. "His style is to invite the best professionals from this or that field, and create a sophisticated, detailed system, use modern technologies and be sure to bring the project to a positive result."

Nets fans, wherever they may be hiding, had better hope so.

—Richard Boudreaux and Matthew Futterman contributed to this article.

Write to Reed Albergotti at reed.albergotti@wsj.com

3 May 2010

International Relations and Security Network: Militarily Defining Post-Soviet Spacehttp://www.isn.ethz.ch/isn/Current-Affairs/Security-Watch/Detail/?lng=en&id=115693

Governments with foreign military bases tend to shy away from publicity about their colonial outposts, and recent events in the post-Soviet space shine an unwelcome spotlight on US and Russian military establishments, John CK Daly writes for ISN Security Watch.

By John CK Daly for ISN Security Watch

The US Manas Transit Center in Kyrgyzstan and Russia’s lease extension on Ukraine’s historic port of Sevastopol are presently earning much unwanted attention, which is serving to agitate the local populations in both countries.

Furthermore, Belarus President Alyaksandr Lukashenko, who provided sanctuary to ousted Kyrgyz President Kurmanbek Bakiyev, has used the opportunity to berate Russia for failing to pay for its early warning missile base near Baranavichy and a Russian navy communication base near Vileyka.

While the Manas facility remains the sole US military base in Central Asia outside of Afghanistan, Russia in fact has a number of facilities scattered across the former USSR. In an era of rising nationalism, Russia and the US will pay a high political price to maintain these bases.

Manas, asset or liability?

Resentment against the Manas Transit Center and Washington’s cozy leasing arrangements with Bakiyev’s corrupt regime was a substantial element in the popular unrest that eventually deposed him.

Pentagon concern about maintaining its access to Manas at any cost has already produced congressional inquiries in Washington centering on shady fuel deals the US Department of Defense (DoD) signed for the facility.

On 12 April, House of Representatives Subcommittee on National Security and Foreign Affairs Chairman John Tierney requested documents related to fuel supply contracts for Manas and the Bagram air base in Afghanistan from the DoD, the Department of State, the FBI, Red Star Enterprises, Ltd., and the Mina Corporation.

Opening hearings 10 days later, Tierney observed, “We are left with the fact that both [former Kyrgyz president] Akayev and President Bakiyev were forcefully ousted from office amid widespread public perception that the U.S. had supported the regimes' repression and fueled - no pun intended - their corrosive corruption.”

The Pentagon's Defense Logistics Agency has acknowledged awarding $1.4 billion in no-bid contracts to Red Star Enterprises, Ltd., and Mina Corporation, beginning with the Akayev administration.

The Manas air base was established in December 2001, and companies controlled by Akayev’s family were soon awarded contracts to provide fuel for US military aircraft using the facility even as the rent remained a relatively low $2 million annually.

After Akayev was ousted by the March 2005 ‘Tulip Revolution,’ the Pentagon reached a similar fuelling arrangement with companies connected to his successor’s inner circle, while last year the rent was increased to $67 million. In July 2009, Mina Corporation signed an annual agreement with the DoD to provide up to $239 million in fuel.

During a 22 April congressional subcommittee hearing on the issue, Professor Eugene Huskey, a political science professor and director of Russian studies at Stetson University in Florida,  said, “Difficult decisions have to be made in wartime, but our embrace of the Bakiyev regime in Kyrgyzstan was far tighter than it needed to be in order to retain our basing rights in the country.

“The Manas air base granted President Bakiyev a kind of 'get‐out‐of‐jail free card' with the US. Not only did the United States help to enrich his family with lucrative contracts from the base, but in most cases we were willing to overlook the brutality that had driven the opposition and the broader population to the point of desperation,” he said.

It is estimated that companies headed by Bakiyev’s son Maksim were skimming as much as $8 million per month from the fuel deliveries. While the new Kyrgyz provisional government under Rosa Otunbaeva has indicated that the lease for Manas will be extended another year, the furor over the DoD’s fueling contracts is certain to roil both Bishkek and Washington for some time.

Johns Hopkins Central Asia-Caucasus institute scholar Erica Marat told ISN Security Watch: “Manas turned into a central issue shortly after the 7 April events when Russia showed its support of the provisional government and the US was slow to react. Even the strongest supporters of cooperation with the US inside the provisional government, including Otunbaeva and Defense Minister Ismail Isakov, shied away from expressing their pro-US and pro-western views as Manas and the US [appeared to be] sources of strength for Bakiyev, who tried to instigate more chaos in the days following his ouster.”

For now, Marat said, the issue is on hold, and “the provisional government prefers not to make any major decisions until it gains legitimacy.”

The future of Manas will depend on who comes to power following October presidential and parliamentary elections.

Most political leaders realize that without a US presence in the country, Russia interest may also decline, Marat said. But they also see “anti-US rhetoric as a source for easy popularity among the local population […] it is very difficult to de-link the US and Manas from Bakyiev and corruption among local public, with good reason.”

Less spotlight on Russian bases

Largely overlooked in the international media is the fact that Russia also had an airbase in Kyrgyzstan. The Kant airbase was established in 2003 and was Russia’s first foreign military base established since the 1991 collapse of the USSR.

Unlike Manas, Russia pays no rent for the facility. While the Kant facility is about one-quarter the size of Manas, it is still highly useful to the Kremlin. During the recent disturbances in Kyrgyzstan, the base allowed Russia to sent 150 paratroopers to protect its citizens.

Even further out of the Kyrgyz spotlight is the Russian navy’s telecommunications station in Kara-Balta, much less its Karakol anti-submarine weapons testing base on Lake Issyk-Kul.

If Russia gloated over Washington’s Manas discomfort, its own post-Soviet basing arrangements came under scrutiny during the chaotic 27 April vote in the Ukrainian Parliament to extend for another 25 years the Russian navy Black Sea Fleet’s lease on the deepwater port of Sevastopol, due to expire in 2017. In return, energy-starved Ukraine would get discounted natural gas from Russia.

The session erupted in fistfights and smoke bombs on the parliament floor. Thrown on the defensive, Russian Prime Minister Vladimir Putin said that Russia would pay a high price for Sevastopol, noting that the rent and gas discounts over a decade would total $40 billion, enough to build several military bases.

In Belarus, Lukashenko used Putin’s remarks and the opportunity of providing sanctuary to Bakiyev to draw attention to the Kremlin’s miserly approach to Baranavichy and Vileyka, complaining that Minsk is paid “zero rubles, zero kopecks and zero dollars.”

Besides its facilities in Kyrgyzstan and Belarus, Russia also maintains a missile tracking radar station in Qabala, Azerbaijan; the 102st military base in Gyumri, Armenia; peacekeeping forces in Abkhazia and South Ossetia; space radar facilities in Gulshad, Kazakhstan; the 171st aviation command in Karaganda, Kazakhstan; the Operational Group of Russian troops in Transnistria, Moldova; the 201st Motorized Rifle Division in Kulyab and Kurgan-Tube, Tajikistan; and a space radar station in Nurek, Tajikistan.

Redrawing the Eurasian map

Speaking to ISN Security Watch about Russia’s ongoing military presence across post-Soviet space, University of Kent Senior Fellow Roger McDermott said: “Russian basing strategy is based upon two essential factors. First, there are clear geostrategic plans, aimed at prolonging the Russian ‘footprint’ in the former Soviet space, which denies the more obvious long-term rise of China. Additionally, there is a calculation in Moscow that Obama is weak, or at best ‘idealistic,’ and while he makes declarations that seem fantastic to Russian policymakers, this provides ample opportunity for Moscow to redraw the Eurasian map. Obama, in Moscow's view, is playing into the long-term aspirations of the Kremlin. America, if this is correct, must expect policy problems ahead."

Kyrgyzstan proves the exception to the rule of Russia seeking new bases; in all other cases the facilities date back to Soviet times and the Russians never left. The biggest single difference between the US and Russian military presence is that Washington is much more willing to be financially generous.

While the Pentagon will remain fixated on Manas as long as Afghanistan remains a high US priority, as the brief August 2008 Russo-Georgian conflict proved, Russia’s legacy of post-Soviet military bases can come in very handy.

While there are few certainties in the post-Soviet space, it is obvious that Washington will have to develop a new paradigm if it is to maintain its presence in Central Asia, while for Russia, with the notable exception of Ukraine, it is business as usual.

That, and Lukashenko’s check is most likely not in the mail.

Dr John CK Daly is a non-resident Fellow at John Hopkins Central Asia-Caucasus Institute in Washington, DC.

Itar-Tass: Flash floods leave 7 Irkutsk reg settlements without electricity

http://www.itar-tass.com/eng/level2.html?NewsID=15088598

04.05.2010, 08.32

IRKUTSK, May 4 (Itar-Tass) – Seven settlements in Russia’s Irkutsk region have been left without electricity supply because of flash floods on the Chuna River, sources from the regional department of the Russian Ministry for Emergency Situations told Tass on Tuesday.

A total of 2,288 people live in these settlements, including 766 children, they said. Vital functions of the settlements have not been disrupted, as all houses, five schools, seven kindergartens and five cottage hospitals have stove heating. There are enough foodstuffs in local supermarkets, the sources added.

Itar-Tass: 39 schoolchildren hospitalised with food poisoning in Russia south

http://www.itar-tass.com/eng/level2.html?NewsID=15088683&PageNum=0

04.05.2010, 09.14

VOLGOGRAD, May 4 (Itar-Tass) - A total of 39 school students have been hospitalised with food poisoning in Russia’s Astrakhan region, the regional department of the Rospotrebnadzor consumer rights watchdog told Tass on Tuesday.

Sources said lab tests have already confirmed 23 dysentery cases. Earlier the regional centre of the Russian Ministry for Emergency Situations reported that 36 children were hospitalised on April 30 with food poisoning after having lunch at school in the settlement of Tuzuklei. On May 2 their number grew to 39.

All children are aged between ten and 14, and all of them live in Tuzuklei. Their condition is satisfactory.

Russia Today: 04 May, 2010 in Russian Newspapershttp://rt.com/Top_News/Press/eng.html

Rossiyskaya Gazeta: The Forbes encyclopediaLeonid Radzikhovsky

Forbes Magazine has published another list of the Golden Hundred - a list of Russia’s 100 richest people.

The zealous enthusiasm of the public subsided long ago; the dish has become familiar and stale. This is the seventh list - a lucky number. The first came out in 2004.

Kommersant: In dispute over islands, farms will be cededThe government is forced to pay citizens for land given to China

Dmitry Shcherbakov (Khabarovsk)

Kommersant has learned that the federal authorities agreed to offer compensation for the losses endured by owners of land on the islands of Bolshoy Ussuriysky and Tarabarov on the Amur River, which were given to China between 2004 and 2008. For a number of lots, the rights for land compensation have been confirmed by the courts. However, it is not yet clear as to whether or not the government (or Russia’s Finance Ministry) is prepared to pay the citizens who suffered from a foreign policy decision for the losses they endured as a result of not being able to access their land on what became foreign islands.

RUVR: Press review http://english.ruvr.ru/2010/05/04/7270524.html

Topic: Russian Press (33 documents)

May 4, 2010 11:40 Moscow Time

According to Komsomolskaya Pravda newspaper, more and more state leaders are planning to arrive in Moscow to attend the celebration of the 65th anniversary of Victory over Nazism. In particular, Chinese leader Hu Jintao has officially confirmed his intention to come to Moscow, the newspaper says. Earlier German Chancellor Angela Merkel, Czech President Vaclav Klaus, French President Nicolas Sarkozy and Italian Prime Minister Silvio Berlusconi confirmed their visits.

President Dmitry Medvedev has ordered the Defense Ministry to work on the social maintenance of the Black Sea Fleet in Sevastopol, Rossiyskaya Gazeta reports. In April Russia and Ukraine signed an milestone agreement which extends the stay of the Russian fleet in Ukraine till 2042 with possible prolongation of this term. The agreement has put an end to all the controversial statements about the future of the Russian fleet base in Ukraine. 

When visiting the Franz Josef land of in the Arctic region Russia's Prime Minister Vladimir Putin personally fixed a putting a satellite collar of Russian radio-based satellite navigation system GLONASS system on a polar bear, Vremya Novostei newspaper reports.  Putin's trip to Russia's North is part of the state program on better control over Russian Arctic territories.

The newspaper notes that the Russian Prime Minister seems to be collecting extreme experiences. Earlier he had tried the roles of a submariner, a pilot of a supersonic jet. He also went down to the bottom of the Lake Baikal in a bathyscaph and met tiger in the taiga forest.  

 In recent decades the popularity of the First of May holiday in Russia has not changed, RBK daily said citing the recent survey conducted by All Russian Center of Public Opinion Studies .  Traditionally the holiday of Labor is marked by two thirds of Russians of all age groups.

Russia Today: Schwarzenegger likes his busts from Russiahttp://rt.com/Top_News/2010-05-04/schwarzenegger-busts-russia-putin.html/print

04 May, 2010, 11:16

We all know Arnold Schwarzenegger as a movie star, famous politician and bodybuilder, but the California governor has also a Russian flavor to his art collection. Among his possessions are some quite unexpected things.

St. Petersburg bronze caster Aleksandr Chernoshchekov is preparing to send his bronze sculpture across the Atlantic to none other than California Governor Arnold Schwarzenegger.

“Schwarzenegger is very popular in Russia, many kids don’t know the US President’s name, but they for sure know Schwarzenegger. I felt the same, and when I realized there was an opportunity to make a connection with Schwarzenegger via a friend, I seized the opportunity,” Chernoshchekov says.

In fact, Chernoshchekov has for years been sending Arnie old Soviet leaders, hand delivered by Russian bodybuilding teams. The first was the Soviet founder.

“He liked Lenin's bust very much, and later in a letter he wrote that this bust always gives him a charge of energy, so he keeps it in his office rather than in the museum. Since then, we presented him every year with busts of Stalin, Gorbachev, Yeltsin, all key political leaders,” Vladimir Dubinin, President of the Russian Bodybuilding Federation, says.

It has been a pleasure for him to do it Chernoshchekov says, though it has also been tough for him to get Putin's features right.

“It’s very challenging work. A few artists tried and failed. I accepted only this piece, I like it. Mr. Putin looks very good here,” Dubinin observes.

Schwarzenegger inspired Chernoshchekov as a young artist, but even though he has never been able to meet his most famous muse, he has heard that the Austrian former bodybuilder has taken a shine to the sculptures.

“You might have had a childhood dream and one day it comes true. I don’t expect anything special of it, but the fact itself that it’ll happen is probably the most important thing for me now. And the opportunity to just stand right next to Schwarzenegger,” Chernoshekov says.

It is said that Arnie likes to talk to some of his Russian busts. Sooner or later the man who created them may be able to sculpt his own meeting with Governor Schwarzenegger too.

Financial Times: Sky's the limit for Russia's social climbershttp://www.ft.com/cms/s/0/7e703da0-5714-11df-aaff-00144feab49a.html

By Courtney Weaver in Moscow

Published: May 4 2010 03:00 | Last updated: May 4 2010 03:00

High above the traffic on Moscow's congested MKAD expressway, Mikhail Farikh, a 50-year-old electronics entrepreneur, is doing figure-of-eights and other manoeuvres with his Robinson 44 helicopter as red-faced drivers seethe on the road below.

Two decades of economic growth in Moscow have made the traffic a modern nightmare, yet members of the elite, such as Mr Farikh, have always been able to approach it in a uniquely capitalist spirit.

For the equivalent of $25,000 (€18,950, £16,400), any businessman has for years been able to affix a migalki , or flashing blue siren, to his roof and speed through traffic.

The migalki 's growing ubiquity is taking a toll on its usefulness, however. So, in the spirit of one-upmanship that characterises Russia's super-rich, wealthy businessmen are investing in helicopters, which they view as the migalki of the next generation.

Mr Farikh has built a helipad on his Moscow office building, even if his plan to use his helicopter to commute every day remains thwarted by strict laws forbidding flying over Moscow - a cold war relic. But he is convinced that change is on the way.

"When a person flies he achieves a new level of freedom, a freedom the government doesn't think our people need," the businessman said. "The laws will change only because pilots like us are organising pickets and lobbying the government."

Though the Kremlin no longer has to worry about rogue German pilots touching down in Red Square its picture of modern-day free skies is even more terrifying than the chaos on the ground.

"Our people are simple and very stubborn," Vladimir Putin, the prime minister, remarked. "As soon as they receive permission, everyone will be flying by broomstick and by saucepan and nothing will be able to be done about it."

Russia's Federal Air Transport Association has begun changing the country's federal aviation laws for all regions outside Moscow, a baby step for the reluctant government.

Legislation is being drafted that would give private pilots the right to take off when they please, simply by giving notice, as opposed to waiting for the go-ahead from authorities, which can take 24 hours.

While the government postponed the legislation's start date from April to November on concerns it did not meet proper safety requirements, aviation experts said it was the first step in the right direction.

Mikhail Kazachkov, chairman of the Helicopter Industry Association, compares it to the liberalisation of Russia's mobile phone network.

Dmitry Peskov, a spokesman for Mr Putin, said the government would wait and judge whether the new legislation proved effective and only afterward re-evaluate the flight ban over Moscow.

"You cannot just introduce the freedom to fly over a city of 12m people . . . You first have to establish an effective set of rules to ensure no one is in danger and see how the liberalised regime being introduced all over the country works," he said.

"No one would want air traffic in the skies of Moscow endangering the people underneath."

While the government has put considerable effort into rebuilding Russia's beleaguered helicopter industry, it has also had to contend with a darker image of the sector, spawned by the country's many high-profile crashes.

Last year the governor of Irkutsk and the Kremlin's envoy to the state Duma were killed with deputies in separate crashes.

Yet on a recent Sunday, these statistics did little to discourage a group of pilots and pilots-in-training at Aviamarket, a regional Moscow helicopter school, who sipped champagne as they waited to go up with a visiting instructor.

Sergei Filonov, director of Aviamarket, said there was a steady rise in interest since opening it as one of the region's first helicopter institutes in 2003. "People have started looking at them not just as a lifestyle, but as a mode of transport."

National Economic Trends

Prime-Tass: PMI: Signs of stronger manufacturing sector recovery in Aprilhttp://www.prime-tass.com/news/show.asp?topicid=58&id=478045

MOSCOW, May 4 (PRIME-TASS) -- April showed tentative signs of a stronger manufacturing sector recovery, London-based VTB Capital said in its PMI report released Tuesday.

The overall improvement in business conditions was the strongest in nearly two years, driven by higher new orders, rising output and a resumption of employment growth, VTB Capital said.

The seasonally adjusted headline PMI, a composite index that reflects changes in new orders, output, employment, supplier performance, and input stocks in the manufacturing sector, rose to 52.1 in April from 50.2 in March. The latest figure was the highest since May 2008, VTB Capital said.

“The headline number was supported by improvements in the output, new orders and new export orders sub-indices,” Dmitri Fedotkin, an economist at VTB Capital, commented on the survey. “Most encouragingly, however, the employment index rose to 51.2, pointing to the first monthly rise in employment since March 2008. At the same time, concerns were raised by the significant intensification in price pressures, with the input prices index rising to 67.0 and output price index rising to 57.1, the highest since August 2008,” Fedotkin said.

The VTB Capital Manufacturing PMI is derived from a monthly survey of 300 purchasing executives in Russian manufacturing companies and has been conducted since September 1997.

VTB Capital plc is a London-based subsidiary of Russia's second largest bank, government-controlled VTB Bank. VTB Capital was previously known as VTB Bank Europe.

End

04.05.2010 08:30

Bloomberg: Russian Manufacturing Rose to Highest Level Since July 2008http://www.businessweek.com/news/2010-05-04/russian-manufacturing-rose-to-highest-level-since-july-2008.html

May 04, 2010, 12:16 AM EDT

By Paul Abelsky

May 4 (Bloomberg) -- Russian manufacturing growth jumped in April to the highest level in almost two years as orders rose and companies resumed hiring, VTB Capital said.

The Purchasing Managers’ Index rose to 52.1 last month, from 50.2 the previous month, the bank said in an e-mailed statement released today. The index, based on a survey of 300 purchasing executives, signals expansion when it rises above 50.

“The overall improvement in business conditions was the strongest in nearly two years, driven by higher new orders, rising output and a resumption of employment growth,” the bank said in the report. “Exports were a key source of new order growth, registering the fastest increase in over two years.”

Higher raw material prices, improving global sales and accelerating domestic demand are prompting companies including OAO Chelyabinsk Zinc, Russia’s largest producer of the metal, and carmaker OAO AvtoVAZ to boost output. Gross domestic product may grow as much as 4 percent this year, after contracting a record 7.9 percent in 2009, the Economy Ministry estimates.

Russian industrial production rose at a faster pace in March than in the previous month, advancing an annual 5.7 percent after a 1.9 percent gain in February. Output may expand 2.5 percent this year, according to the Economy Ministry.

Manufacturing employment increased last month, ending a period of job-shedding that lasted almost two years, the longest stretch in the survey’s history, according to VTB Capital. The unemployment rate was unchanged at 8.6 percent in March after falling in February.

The central bank last week cut its benchmark interest rate for the 13th time in a year to a record-low 8 percent, warning that inflationary pressures in the second half may rule out further cuts.

Russian manufacturers last month saw input costs increase at the quickest pace since July 2008, leading to the fastest producer-price growth since August 2008, VTB Capital said.

--Editors: Tasneem Brogger, Chris Kirkham.

To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net.

To contact the editor responsible for this story: Chris Kirkham at ckirkham@bloomberg.net

2010-05-04 07:56 Reuters: Rouble rises, bolstered by strong oil http://www.iii.co.uk/news/?type=afxnews&articleid=7873124&subject=economic&action=article

MOSCOW, May 4 (Reuters) - The Russian rouble firmed versus the euro-dollar basket in early trade on Tuesday, driven by strong oil prices, and dealers said the trading was likely to be muted with many market players on holiday. By 0623 GMT, the rouble had gained 6 kopecks against the basket to 33.49, 9 kopecks away from the presumed central bank's floating boundary.The central bank tracks the rouble's moves within a floating corridor and shifts it by 5 kopecks after $700 million of interventions at each boundary. In the 32nd such step since mid-February, it moved the corridor to 33.40-36.40 roubles per basket last Tuesday, dealers said.Oil prices lent support, putting the rouble on an upside track after a three-day long weekend. Futures for Brent crude stayed close to 19-month highs touched on Monday.The rouble has the potential to strengthen towards the central bank's bid level of 33.40 roubles per basket given such oil prices, said Roman Pakhomenko, dealer at Lanta bank.Trading activity is expected to be below average as many players remain on holidays ahead of another three-day long weekend in Russia. Local markets will be closed on May 10."It is the beginning of the new month and anything can happen. We are likely to see a stronger rouble but the liquidity will be contracted as half of the traders are not at their work places," said a dealer at a Russian bank.Against the euro, the rouble gained almost 30 kopecks to 38.61, its strongest since late December 2008. But Russia's unit gave up 12 kopecks to 29.30 versus the dollar .

(Reporting by Andrey Ostroukh, editing by Mike Peacock) Keywords: RUSSIA ROUBLE/ (andrey.ostroukh@reuters.com, +7 495 775 12 42)

2010-05-04 08:14 Reuters: Russian bank balances rise to 554.2 bln rbls http://www.iii.co.uk/news/?type=afxnews&articleid=7873164&subject=economic&action=article

MOSCOW, May 4 (Reuters) - Banks' balances in their correspondent accounts at the Russian central bank rose to 554.2 billion roubles on Monday from 513.9 billion roubles in the previous session, the central bank said.

All figures are in billions of roubles

BALANCES May 4 April 30Total 554.2 513.9Moscow region 400.7 338.1

Banks' deposits at the central bank 576.7 536.3

NOTE - Correspondent account balances are an indicator of Russian banks' liquidity. Keywords: RUSSIA BALANCES/ (Moscow Newsroom, +7495 775 1242, moscow.newsroom@reuters.com)

Moscow Times: Turning the Loan Spigot On http://www.themoscowtimes.com/opinion/article/turning-the-loan-spigot-on/405289.html

04 May 2010By Kim Iskyan

The last thing that Russia’s tentative economic recovery needs is for the country’s banking sector to trip it up. Loan growth is flat in 2010 so far, and if banks don’t start lending soon, the economy may continue to struggle to grow as cash-starved companies hold off on investment and consumers defer purchases.  

So when Prime Minister Vladimir Putin forecast in front of the State Duma on April 20 that Russia’s banks would increase lending by as much as 10 percent this year, it wasn’t just an idle prediction. It was a fervent wish, firm order and threat all rolled into one.

The good news is that the Russian banking sector made it through the economic crisis even after it was hit by the powerful double whammy of plummeting commodities prices and the global credit crunch. The Central Bank floated the sector on an ocean of cheap cash and quietly and quickly tackled potential sources of systemic risk.

But while the banking sector has lived to see another day, it hasn’t done any favors for potential borrowers or for the economy as a whole.  

Banks and borrowers are finding themselves in a real conundrum. Banks are understandably hesitant to lend to potentially dodgy borrowers in what is still an uncertain economic environment. They don’t want to add to the mountain of bad loans that has increased nearly fourfold to 6.4 percent of total loans by the end of February, according to Russian accounting standards. Therefore, to be compensated for what they perceive as continued high levels of risk, banks are demanding interest rates that are higher than what potential borrowers can afford.

Until there’s a higher level of confidence among banks and in the economy as a whole, neither banks nor borrowers want to take the first step. Continued high unemployment and slow wage growth is dampening demand for retail loans, which account for just over

one-fifth of the total $525 billion in outstanding loans in the country’s banking sector. In the meantime, banks are building up cash cushions and plowing their liquidity into domestic bonds.

What should we do to escape the vicious circle? Borrowing costs have declined. The refinancing rate, an indirect but key determinant of lending rates, has been cut by 500 basis points over the past year, and it reached a historic low of 8 percent on Friday. In theory, this should inspire more borrowers to take the dive. Some may be waiting for a sign that rates have bottomed, but banks don’t often pass these types of cuts on to borrowers.

The government has long been trying to get banks to boost lending. Indeed, the string of rate cuts was kicked off last spring the day after Putin suggested that Central Bank head Sergei Ignatyev consider cutting rates. A few months later, Putin called on the heads of state banks to defer their vacation plans until they increased lending.

More recently, on April 8, the Central Bank announced that it would continue its crisis-driven policy of not requiring banks to increase provisions for restructured loans. The continuation of a liberal provisioning policy flies in the face of global standard industry practices and bodes ill for upgrading regulation later. Most tellingly, in mid-April Sberbank head German Gref — immediately after meeting with Putin — announced an across-the-board cut in rates for loans to retail customers and a reduction in commissions and fees, which will likely hit the bank’s profitability. Since Sberbank accounts for close to one-third of total loans outstanding, other banks will be forced to follow its example or else face sharp deterioration in market share.

The government’s role in the Russian banking sector is already outsized. Research by economist Andrei Vernikov for the Bank of Finland shows that the percentage of banking sector assets controlled by the state has risen from 36 percent in 2001 to 56 percent by mid-2009. Instead of embracing a free-market model for the banking sector, like most other former Soviet republics have done, Russia has been drifting toward the Chinese model of state control of leading banks. Any increased government involvement in the nuts and bolts of bank lending will accelerate this trend.

Is state control over the banking sector such a bad thing? Arguably, state control makes it easier for the government to support banks, which could reduce the likelihood of instability that could be a trigger of future banking crises. But at the same time, an increased government role in the banking sector produces dangerous distortions in the market. Private banks and private investment are the first victims. Increased levels of directed and politically influenced lending are an obvious consequence, invariably leading to higher levels of nonperforming loans and massive government-funded recapitalizations of floundering banks.

In addition, state banks may be forced to support politically motivated projects. The ambitious attempt last year by Sberbank to acquire a large stake in Opel was a good

example. The inefficient allocation of capital and the slow but steady crowding out of private capital undercuts healthy and productive market impulses.

In the end, when the government increases its intervention in the banking sector, the largest victim is the country’s sustainable economic growth.

Kim Iskyan is a director at Eurasia Group, a political risk consulting firm based in Washington.

Moscow Times: Foreign Borrowing May Shrink by $13Bln, Domestic Debt Offer May Rise http://www.themoscowtimes.com/business/article/foreign-borrowing-may-shrink-by-13bln-domestic-debt-offer-may-rise/405292.html

04 May 2010Bloomberg

The government may decrease foreign borrowing plans by $13 billion this year and increase domestic debt sales by the same amount, Deputy Finance Minister Dmitry Pankin said Friday.

The figures are still preliminary and will depend on the size of the budget deficit this year, he said in Sochi.

The government originally planned to cover half of its borrowing needs on the local market and half abroad, Pankin said earlier this month. Russia raised $5.5 billion last week in its first international bond offering since defaulting on $40 billion of domestic debt in 1998.

If Russia had delayed the debt sale by a week, it wouldn’t have gone ahead “because the market was gone,” Pankin said.

Russia is turning to domestic debt markets as declining yields and ruble gains make the market more attractive. The budget gap may reach between 6 percent and 6.8 percent of gross domestic product this year, compared with last year’s shortfall of 5.9 percent, the country’s first deficit in a decade.

Russia will cut plans to borrow abroad to $7 billion a year in 2011 and 2012, from $20 billion planned earlier, Pankin said April 24.

The deficit might shrink to “closer to 3 percent” of GDP in 2010, from 6.8 percent currently planned, if the price of oil stays above $70 per barrel and economic growth accelerates above 3.5 percent, he said.

RenCap: Russian banking sector Mar 2010 results

http://www.businessneweurope.eu/dispatch_text11607

Renaissance Capital, RussiaTuesday, May 4, 2010

Event: The Central Bank of Russia (CBR) has issued March statistics for the Russian banking sector, which show the following key trends:

• Assets edged ahead 0.7% MoM in March, following 0.4% negative growth in February.

• Equity in the sector shrank 0.3% MoM in March.

• The sector's total deposits added 2.3% MoM in March, on the back of 2.8% and 1.6% respective increases in corporate and retail deposits, on a monthly basis. CBR funding continued to shrink rapidly (26% MoM), and was down almost 52% YtD.

• Retail lending showed moderate 0.2% growth in March after 13 consecutive months of negative growth, and was down 8.7% YoY. Corporate lending stayed flat MoM and total loans, although increasing marginally in March, were down 1% YtD.

• The non-performing loan (NPL) proxy for the system reached 6.5%, from 6.4% a month earlier, as corporate NPLs were flat at 6.2%, while retail NPLs grew 8 bpts in March to 7.4%. Loan loss reserves slipped 8 bpts MoM to 11.9%, keeping NPL coverage at 184%, based on Russian standards.

Action: Slightly positive for the sector, in our view.

Rationale: We note the deposit growth on both the retail and corporate sides, and welcome the first signs of a turnaround in retail lending, which had seen no growth since January last year. Lending is still struggling, and we think it is likely to revive in 2H10. On the asset quality side, NPLs posted marginal growth MoM in March and seem to be close to their peak levels. A summary of the most important figures is presented in the table below.

RenCap: CBR drives money supply via FX interventions

http://www.businessneweurope.eu/dispatch_text11607

Renaissance Capital, RussiaTuesday, May 4, 2010

On 27 Apr, the Central Bank of Russia (CBR) released April statistics on monetary aggregates. As of 1 Apr, the money supply (M2) reached RUB16.0trn, rising 2.8% from a

month before. M2 expanded 32% compared with the same period a year ago. However, this sharp change is largely explained by a low base, due to money supply contraction during the gradual devaluation process in early 2009.

According to CBR methodology, the M2 aggregate does not include credit institution balances in the banking system.

However, occasionally during past months, M2 has fully tracked changes in the broad monetary base, which includes non-cash items such as correspondent accounts, bank deposits and OBRs. Moreover, expansion in those indicators is explained by the volume of FX interventions made by the CBR since the start of the year. The CBR injected around RUB450bn into the system in March, as it purchased $14.5bn and EUR0.4bn from the foreign exchange market.

Another factor that affects the monetary base is budget-related monetary emission, which was not massive due to the traditionally slow pace of budget spending before summer and, thereby, was fully offset by the contraction in commercial banks' liabilities with the CBR (down RUB750bn since the start of the year).

As a result, the M2-to-monetary base multiplier has demonstrated a steady decline in recent months, signalling lending stagnation. In line movements in monetary aggregates also indicate that a unit of monetary base does not produce more than a unit of money supply (click here to view The Russian banking system: What doesn't kill you... dated 26 Apr 2010).

On the one hand, the strong current account surplus points to a favourable liquidity environment in the Russian banking system in the near future. However, on the other hand, we do not see any significant inflation risks at least until 2H10, when we expect budget expenditures to be executed at a much faster pace.

Business, Energy or Environmental regulations or discussions

Bloomberg: Norilsk Nickel, Razgulay, Polyus Gold: Russian Equity Preview http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0I9Yg0gulD4

By Anastasia Ustinova

May 4 (Bloomberg) -- The following shares may have unusual price changes in Russian trading. Stock symbols are in parentheses and prices are from the previous close unless otherwise noted.

The 30-stock Micex Index retreated 1.3 percent to 1,436.04 in Moscow. The dollar-denominated RTS Index declined 1 percent.

OAO GMK Norilsk Nickel (GMKN RX): Copper dropped to a nine- week low in New York after China ordered banks to set aside more deposits as reserves, fueling concern that the lending curbs by the world’s biggest metals consumer will damp demand. Shares in Russia’s largest miner declined 1.4 percent to 5,642.59 rubles in Moscow.

OAO Razgulay Group (GRAZ RX): Sugar declined for a second straight session on concern that global production may exceed demand next year. The Russian sugar and grain producer fell 0.6 percent to 57.50 rubles.

OAO Polyus Gold (PLZL RX): Gold, trading at a five-month high, may drop as the dollar advanced on concern a 110 billion euro ($144.9 billion) rescue package for Greece won’t contain the region’s debt crisis. Shares in the country’s biggest producer of the metal fell 0.1 percent to 1,382.14 rubles.

To contact the reporter on this story: Anastasia Ustinova in St. Petersburg at austinova@bloomberg.net.

Last Updated: May 3, 2010 22:00 EDT

May 04, 2010 10:00

Interfax: OGK-1 genco ups Q1 earnings 5% to 1.05 bln rubleshttp://www.interfax.com/newsinf.asp?id=162432

MOSCOW. May 4 (Interfax) - The OGK-1 (RTS: OKGA) wholesale generating company raised net profit to Russian Accounting Standards 5% year-on-year in Q1 2010 to 1.05 billion rubles.

Sales revenue soared 31.3% year-on-year to 13.24 billion rubles, the genco said in a statement.

Pr

May 04, 2010 11:45

Interfax: Sberbank looks to get Rusagro shares for $200 mln in IPO – paperhttp://www.interfax.com/newsinf.asp?id=162464

MOSCOW. May 4 (Interfax) - Sberbank of Russia (RTS: SBER) has bid for $200 million worth of Rusagro shares in company IPO that could run from $245.5 million to $309.2 million total.

Renaissance Capital informed its clients about Sberbank's bid. It, Sberbank, Credit Suisse and Alfa Bank (RTS: ALFB) are the IPO organizers, the Vedomosti business daily writes. Sberbank is prepared to buy Rusagro shares "at any price within the price range," an employee at one of the organizers told the paper.

The holding set the price range for the IPO placement of common at $13.5-$17 per share. The price will be determined May 13.

Whether Sberbank's bid will be met "will depend on the distribution of shares after all bids are received," because "there can be no certainty the bank will receive paper for the entire indicated amount," Vedomosti cites a Renaissance Capital statement as saying.

Sberbank of Russia (RTS: SBER) is by far Rusagro's biggest creditor, accounting for 90% of the agricultural holding's credits as of April 1. The bank holds 50% of LLC GK Rusagro, which controls the group's assets, shares, the real estate and production capacity of five of seven of the group's sugar plants and the hog complex Belgorod Bacon, a memorandum to the IPO says.

Rusagro found Vadim Moshkovich was a minority shareholder in Sberbank.

Rusagro shareholder Matchzone Holdings Ltd will place the shares. The company plans to sell investors up to 18,188,742 shares, meaning IPO volume will run from $245.5 million to $309.2 million.

Matchzone will use some of the proceeds to subscribe to 11,377,909 additional Rusagro shares. Thus, the company will reap $153.6-$193.4 million from the IPO.

Rusagro is a major producer of sugar, packaged margarine and mayonnaise, and has Russia's fifth largest hog complex, along with integrated businesses that grow sugar beet and other agricultural crops, and controls roughly 360,000 hectares of land. It has 35 agricultural enterprises, seven sugar plants, OJSC Zhirovoi (Fats) Combine in Yekaterinburg, and a number of trading branches. Its sugar, crop farms, and hog facilities are sited in the Belgorod, Tambov and Voronezh regions.

Cf

Bloomberg: Deripaska’s SMR Said to Plan $200 Million IPO in Hong Kong http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ab_K3UcW78IQ

By Bei Hu and Hanny Wan

May 4 (Bloomberg) -- Strikeforce Mining & Resources Plc, a Russian molybdenum producer controlled by billionaire Oleg Deripaska, is gauging demand for an initial public

offering in Hong Kong that may raise as much as $200 million, said a person with knowledge of the plan.

The company, known as SMR, may start taking orders from institutional investors as early as next week, according to the person, who declined to be identified because the information isn’t public. BOC International Holdings Ltd., the investment banking unit of Bank of China Ltd., Deutsche Bank AG and Renaissance Capital are managing the sale, the person said.

Bankers will need to convince investors that SMR won’t mirror the 21 percent drop in Deripaska’s United Co. Rusal since its listing in January. Rusal, the first Russian company to sell shares in Hong Kong, may pave the way for as many as five Russian companies to list in the city by 2012, Elena Khisamova, head of equity capital markets at the investment banking arm of VTB Group, said last month.

“I don’t see any urgency to rush into this one,” said Alex Wong, asset management director at Ample Capital Ltd. in Hong Kong. SMR “probably won’t be too hot so to speak given how Rusal performed. These kind of stocks aren’t very well covered in terms of research.”

SMR produces more than 6 percent of the global supply of ferro-molybdenum which is used to make stainless steel. The company also owns a share in Buka Mining, which holds a development license for gold, silver and copper deposits in Mongolia, according to its Web site.

Individual Investors

SMR will be allowed to sell shares to Hong Kong individuals in the IPO, the person said. Concern over Rusal’s debt prompted the Hong Kong stock exchange to bar the world’s largest aluminum producer from marketing to retail investors.

SMR’s former Chief Executive Officer Geoffrey Cowley valued SMR at $700 million in 2008, when it was considering an IPO in Hong Kong. The company agreed to refinance $122 million of loans on March 1 with BNP Paribas SA, ING Groep NV, Royal Bank of Scotland Group Plc., Raiffeisen Zentralbank Oesterreich AG, and Alfa Bank.

Russian share sales have been “lamentable” for investors, with more than half of stocks sold over the past decade underperforming the market by more than 10 percent, the nation’s oldest investment bank Troika Dialog said March 3.

In only two years, 2000 and 2007, have stocks sold in initial or secondary public offerings outperformed the benchmark dollar-measured RTS Index, the bank said.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net Hanny Wan in Hong Kong at hwan3@bloomberg.net

Last Updated: May 3, 2010 22:07 EDT

Moscow Times: Glavmosstroi Bankruptcy Suit Shelved http://www.themoscowtimes.com/business/article/glavmosstroi-bankruptcy-suit-shelved/405262.html

04 May 2010Vedomosti

The Moscow Arbitration Court has shelved a suit by Infosphere Ltd. to push Oleg Deripaska's Glavmosstroi into bankruptcy.

The sides came to an out-of-court settlement on Glavmosstroi's debt, and the plaintiff requested that the proceedings be halted. A spokesman for Glavstroi, which owns Glavmosstroi, said the company had already paid the debt.

A bankruptcy suit was filed in June 2009 by Strom Holding, which afterward passed on the rights to the loan to Infosphere Ltd. Vedomosti could find no information on the firm.

Earlier, a source close to Glavmosstroi said the bankruptcy was initiated by entities connected with Glavstroi to protect itself from creditors — mainly from Alfa Bank, to which the builder owes some 2 billion rubles ($68 million). At the end of 2009, Glavmosstroi got a 2.1 billion ruble loan from Bank of Moscow that it used to pay Alfa Bank.

SteelOrbis: EU quota utilization levels of Russia and Kazakhstanhttp://www.steelorbis.com/steel-news/latest-news/eu-quota-utilization-levels-of-russia-and-kazakhstan-528887.htm

Tuesday, 04 May 2010 10:23:48

As of May 3, 2010, Russia utilized 31.7 percent of its steel quota of 3,184,445 mt allocated to it by the European Union (EU) for the current year, while Kazakhstan utilized zero percent of its allocated EU quota of 205,000 mt. According to the latest figures, Russia exported a total of 1,010,333 mt of steel products to the EU in the current year up to May 3, including 947,871 mt of flat steel products (i.e., 42 percent of the allotted 2,253,592 mt) and 62,462 mt of long steel products (i.e., 6.7 percent of the allotted 930,853 mt).

Specifically, Russia used 62.4 percent of its hot rolled coil quota (678,456 of the allotted 1,087,397 mt), 7.48 percent of its plate quota (21,603 of the allotted 288,922 mt), 28.35 percent of its alloyed CR and coated sheet quota (32,762 of the allotted 115,569 mt), and 9.64 percent of its wire rod quota (32,809 of the allotted 340,402 mt). Meanwhile, during

the period in question, Russia did not export any steel beams to EU countries, with its quota standing at 57,784 mt.

On the other hand, in the given period Kazakhstan did not supply any steel products to the EU.

* All numbers are based on figures released by official European Union sources.

SteelOrbis: ThyssenKrupp to supply 4,000 mt of coated steel profiles to Moscowhttp://www.steelorbis.com/steel-news/latest-news/thyssenkrupp-to-supply-4000-mt-of-coated-steel-profiles-to-moscow-528751.htm

Monday, 03 May 2010 04:50:37

Germany-based steel giant ThyssenKrupp Steel Europe AG announced on May 3 that it will supply around 250,000 m2 of ‘Hoesch Additive Floor' for 20 parking garages in Moscow, which is equal to 4,000 mt of zinc-magnesium coated steel profiles. The products will be delivered over the course of the next twelve months.

The 20 parking garages are part of the Narodny Garazh program, set up by the Moscow city government with the aim of solving one of the most urgent traffic problems facing the 10.5 million population city. According to officials, the city only has enough designated parking spaces for less than a third of the cars on Moscow's roads. The remaining 71 percent, i.e., around two million cars, have no official parking space.

By 2025, around 3.5 million additional parking spaces are to be created in Moscow, enough to meet projected traffic growth. Around 900,000 will be in the form of new parking garages. The 20 garages from the current contract for ThyssenKrupp Steel Europe are of different sizes and offer on average 500 to 1,000 parking spaces.

Bloomberg: RenCap Aims to Add Units in Egypt, Tanzania, Uganda (Update1) http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYywgF1Zk8Mg

By Nicky Smith

May 3 (Bloomberg) -- Renaissance Capital, Russia’s largest investment bank, may make acquisitions in Egypt, Tanzania and Uganda as it seeks to expand in Africa, Deputy Chief Executive Officer Andrew Cornthwaite said.

With the acquisition of Barnard Jacobs Mellet Holding Ltd.’s securities business RenCap, as the bank is known, has established itself in South Africa, Cornthwaite said in a phone interview today. This leaves Egypt, the second-largest market in Africa, where RenCap is seeking a deal, he said.

RenCap started its African business in 2007 and has operations in countries including Nigeria, Zambia and Kenya. The bank today said it agreed to pay 207 million rand ($28 million) for BJM Securities to grow in the continent’s largest capital market.

“We weren’t ignoring them,” Cornthwaite said, referring to South Africa and Egypt. “We were waiting for the right time to attack; we needed to be relevant before we came to South Africa.” Commenting on Egypt, he said “it’s not a question of when, it’s more a case of watch this space.”

“We don’t want to be just another player in the market,” Cornthwaite said. “We don’t want to be the number 10 broker in that country.” He declined to offer more details on its plans for Egypt.

The Moscow-based bank also wants units in Tanzania and Uganda, he said, adding that RenCap has “big gaps” in its sub- Saharan portfolio. He named Mozambique, Angola and Botswana.

Renaissance BJM Securities, as the new business in South Africa will be known, will seek to add staff to the existing business to grow its capital market knowledge, he said.

The firm will use its existing platform to serve clients while capacity to advise on initial public offerings will be developed, he said. RenCap will be an adviser on 20 of 23 IPOs that are scheduled for this year, according to Cornthwaite.

To contact the reporter on this story: Nicky Smith in Johannesburg at nsmith38@bloomberg.net

Last Updated: May 3, 2010 07:54 EDT

Moscow Times: Short-Term Real Estate Market May Grow, Report Says http://www.themoscowtimes.com/business/article/short-term-real-estate-market-may-grow-report-says/405282.html

04 May 2010By Irina Filatova

Temporary apartments, often used by foreign businessmen on business trips, are increasing in popularity on Moscow's real estate market, consulting company IntermarkSavills said in a report.

Moscow may see a boom in the segment of temporary apartments over the next two to three years, with the largest fraction being sold in the premium property market, said Dmitry Khalin, head of strategic consulting at IntermarkSavills.

Developers will also build more temporary apartment complexes in the business-class and economy-class segments on the outskirts of Moscow, he said in the report.

Temporary apartments have a special legal status under Russian law that, among other things, forbids permanent registration at the location.

According to the report, there were 680 temporary apartments, or 121,000 square meters, in residential complexes at the beginning of April.

Premium-class apartments made up 65 percent of that number, while 23 percent and 12 percent were in the business-class and economy-class segments, respectively, the report said.

Temporary apartments are often part of multifunctional complexes, such as Gorod Stolits and Imeria Tower in Moskva-City, that also include offices, hotels and retail spaces.

The major customers buying temporary apartments in the premium-class and business-class segments are Russian and foreign companies that aim to provide housing for their staff, the report said.

Such apartments are also popular with Russian and foreign businessmen who regularly visit the capital on business trips, as well as those who commute fr om outside the city but sometimes need local housing.

Customers prefer such temporary apartments because of convenience, prestige, proximity to the office and the ability to buy additional housing space while remaining registered at another location, the report said.

"For most customers, such housing is first of all a trendy purchase — often used to conduct company business," it said.

At the same time, buying an economy-class temporary apartment may be a lucrative deal, since prices for temporary apartments are usually lower than those for ordinary ones.

Apartments in business complexes are in especially high demand, since they are located in the same building as the offices, the report said.

Businessmen, mostly men ranging in age fr om 35 to 50, as well as top managers of large companies and government employees are the main demographics purchasing temporary apartments, the report said.

But demand for temporary housing in Moscow is still very lim ited because customers are concerned about the legal status of such apartments and the inability to get permanent registration at these locations, the report said.

"Therefore, the targeted consumers of temporary apartments are substantially more restricted than those of ordinary apartments," it said.

Moscow Times: Novolipetsk's Lisin Says Russia Over-Regulates http://www.themoscowtimes.com/business/article/novolipetsks-lisin-says-russia-over-regulates/405283.html

04 May 2010Reuters

Reducing regulation is key to stimulating Russia's domestic growth after the recession, Novolipetsk Steel Chairman Vladimir Lisin said Friday.

"In my opinion, the biggest problem is stimulating production growth," Lisin, ranked Russia's richest man by Forbes magazine, said in an e-mailed response to questions. "And how to stimulate [production] when business is regulated so tightly."

The executive joined the chorus of prominent Russian businessmen who have echoed calls by President Dmitry Medvedev to modernize the economy and fight corruption to spur growth.

The economy is expected to return to growth of about 4 percent this year, but the raw material and oil-fueled expansion masks domestic stagnation.

The manufacturing purchasing managers' index stood at 50.4 in the first quarter, indicating a slight expansion after contracting for 16 of the 17 months up to December 2009.

"If they have decided to modernize the economy, then it is necessary, in succession … to modernize industrialization, industrial policy … and continuing, without pause, education, tax policy, customs, the legal system and so on," he said.

Lisin, a career steel man in an industry run by financiers, graduated from a Siberian steel institute and became a senior steel plant manager in the late 1980s.

As a junior partner to the powerful Cherney brothers, Mikhail and Lev, Lisin helped their TransWorldGroup, a metals trader with links to the political elite surrounding then-President Boris Yeltsin, gain control of some of the country's most lucrative metals assets.

The steel baron's fortune was estimated at $15.8 billion by Forbes earlier this month, putting him more than $2 billion ahead of his closest Russian rival, Mikhail Prokhorov.

Lisin acquired Novolipetsk Steel, or NLMK, in part through buying out a large stake from U.S. financier George Soros, and floated the company in London in 2005.

It is consistently one of the most profitable in the Russian steel sector, posting a net profit of $215 million on sales of $10.6 billion in 2009, while larger rivals such as Evraz Group and Severstal stayed in the red.

Lisin said the company has succeeded in part because it avoided the type of expensive foreign acquisitions that have landed rivals billions of dollars in debt.

"In the final analysis, acquiring noncore assets that have no synergies with the core business, and at the same time increase borrowings extraordinarily, acts as a ballast on growth in our sector," he said.

NLMK, Russia's fourth-largest producer, had debts totaling $2.5 billion at the end of last year, compared with leading producer Severstal's $7.2 billion and number two Evraz's $7.9 billion.

Lisin also said NLMK plans to expand value-added production and to ship more crude steel to its rolling mills abroad.

The company wants to increase annual crude steel output to 12.4 million metric tons at its main production site in Lipetsk by next year, up from 8.5 million metric tons in 2009.

"We will continue to expand our capacity to produce steel at low cost, we will build new blast furnaces and modernize steelmaking capacity," Lisin said.

NLMK ships Russian slabs to its DanSteel operation in Denmark and also operates a joint venture with Luxembourg-based Duferco.

It has production assets in several countries including Belgium, France and the United States.

Aton: Rostechnology's buys an additional 12.12% stake in KAMAZ

http://www.businessneweurope.eu/dispatch_text11607

Aton, RussiaMay 4, 2010

Autos: Vedomosti writes today (4 May) that Rostechnology's supervisory board has approved the purchase of an additional 12.12% stake in KAMAZ, thus increasing its holding to 49.9%. Rostechnology expects to finance the deal using loans from VTB and VEB. No potential timing or pricing were disclosed. We believe the news could provide a shortterm boost for KAMAZ's share price, though we maintain our SELL rating for the mediumand longterms.

Financial Times: Aeroflot seeks to ditch poor Soviet-era imagehttp://www.ft.com/cms/s/0/2341ae46-56d8-11df-aa89-00144feab49a.html

By Richard Milne and Neil Buckley in London

Published: May 3 2010 20:33 | Last updated: May 3 2010 20:33

As the volcanic ash plume grounded airlines across Europe last month – but spared Russia – Vladimir Putin, the prime minister, was ready with a trademark quip: “If this continues, then there won’t be any airlines left in Europe apart from Aeroflot.”

That vision might not be popular with passengers who were stranded in Moscow by the ash and complained of difficulties in finding hotels and even of having armed guards posted outside rooms.

But Vitaly Saveliev, Aeroflot’s chief executive for just over a year, insists big efforts are under way to revitalise the airline and jettison its image of Soviet-era awfulness.

He also claims the ash saga was in fact an example of the progress the Russian carrier is making on service. Aeroflot, he says, kept on flying over the North Pole to the US, while providing temporary accommodation for 5,000 people in Moscow and Europe. Any guards posted in hotels were not put there by Aeroflot, the company adds.

Mr Saveliev’s proudest boast is that Aeroflot came first on customer service among European airlines in the SkyTeam alliance – such as Air France-KLM and Alitalia – in an onboard survey last year.

“I believe the negative stereotype which was predominant with relation to Aeroflot for pretty long will be buried and passengers will be able to appreciate the service we currently offer,” he said in an interview in London.

It has been a long haul back. The Soviet Aeroflot monopoly was the world’s largest airline, flying 130m passengers a year. But after the Soviet collapse the Russian airline industry fragmented into 300, mostly regional, “babyflots”. Even after some re-consolidation, Russia has 170 carriers.

Now back under state control, Aeroflot carries 11m passengers but is not even Russia’s biggest carrier on domestic routes – that is rival Sibir. But it has the goal of getting back into Europe’s top 10 carriers.

It is set to move closer to that aim by absorbing six struggling and debt-laden domestic airlines in a state-brokered deal. The six were originally due to be merged to form a rival national carrier, under the umbrella of a state conglomerate that took control of them during the financial crisis.

In February, however, the government U-turned and said they should go to Aeroflot.

Mr Saveliev is keen to present this as positive: “We understood that organic growth would not allow us to get enough passenger growth ... I don’t think it would be expedient for the government to create two national carriers.”

Instead he suggests the six airlines could serve different purposes, with one becoming a charter carrier and one even a low-cost service. “Thus we would be represented in all niches of the market.”

He seeks to play down suggestions Aeroflot could become over-burdened by the debt of the six airlines – Rossia, KavMinVody, Vladivostokavia, Orenburg, Saratov and Sakhalin. “It depends on the way we restructure the current debt burden. We are surely not going to absorb all this debt,” he says. He suggests that little, if anything, may be paid for the assets.

What the airlines do bring is 7m passengers a year, helping Mr Saveliev towards his goal of transporting 20m passengers as early as next year. Russia’s total of 45m passengers last year was lower than British Airways’, he pointedly notes.

Mr Saveliev, a veteran of Russian businesses such as Gazprom and Sistema, was brought in to fulfil Mr Putin’s desire to see Aeroflot become a globally competitive carrier, drawing on an 87-year history.

He is particularly proud of its new outfit for cabin staff: “Our uniform is the best.” But he admits the task is challenging. “It is probably too early and naïve to [suggest we could enter] the top five ... But Russia features an unprecedented logistical position and can easily become a bridge between Europe and Asia.”

Moscow Times: Is There a Panacea for Tax Issues of Foreign Pharmaceutical Companies? http://www.themoscowtimes.com/business/business_for_business/article/is-there-a-panacea-for-tax-issues-of-foreign-pharmaceutical-companies/405307.html

04 May 2010Salans

The Russian government’s increasingly vigorous regulation of pharmaceutical pricing has put a squeeze on foreign pharmaceutical companies’ profits from their Russian operations, with adverse tax consequences.

Foreign drug manufacturers now face a new requirement when they begin working on the Russian market: They must register the maximum prices they may charge when selling many pharmaceutical products to Russia. Onward distribution is also under tight state control, with regional governments allowed to establish and enforce the maximum wholesale and retail margins that wholesale distributors and retail chains may charge on top of the prices set by the manufacturers. The vast majority of foreign pharmaceutical companies have no logistical capability to directly supply retail chains in the regions and

are therefore essentially dependent on Russian regional distribution channels. It is no surprise then that relatively little margin is left in the hands of the Russian branches and/or subsidiaries that foreign pharmaceutical companies use to channel wholesale distribution in Russia as well as promote their products, especially after accounting for all the additional sales and marketing costs incurred locally.

As a result, these branches/subsidiaries increasingly find themselves reporting losses on their Russian tax returns but meet with little sympathy from the Russian tax authorities, with their ingrained skepticism toward loss-making businesses. Thus, foreign pharmaceutical companies ultimately often find themselves between a rock and a hard place, with no avenues for profit expansion and apparently no means fully to bear costs and suffer losses.

Some Possible Solutions

While no universal cure-all exists to remedy the above tax-driven problem, and each case should be addressed on its own merits, it is nevertheless possible to suggest a general approach to improving the position of foreign pharmaceutical companies in Russia.

As a starting point, costs incurred by the Russian branch/subsidiary of a foreign pharmaceutical manufacturer, in particular sales and marketing costs, need to be analyzed to ensure that they are favorably allocated. In nearly all cases, the sales branch or subsidiary will bear rent both of office space and storage facilities, advertising and promotion costs, including the sales staff payroll and necessary expenses such as cars, and currency exchange fluctuations. If the above costs are not fully absorbed by the margin available to the branch or subsidiary, it would be logical to consider moving some of these costs outside the sales division by redistributing certain functions between the foreign pharmaceutical company and its branch or subsidiary. It is abundantly clear though that certain costs such as storage facility rental and sales management payroll costs are intrinsic to the business of the sales branch or subsidiary and cannot be moved without impacting the activities of the business.

On the other hand, marketing and advertising costs, primarily advertising fees charged by third-party advertising service providers, are relatively easy to redirect from the sales division back to the foreign manufacturer or to a dedicated marketing division, which would generally be expected to be a noncommercial representative office of a foreign legal entity.

Redistribution of costs is just one of many possible solutions. Apart from decreasing the costs of a Russian sales branch/subsidiary, attributing additional income to this sales division should be considered an extra tool to better cover the costs incurred.

In particular, the sales branch or subsidiary could be viewed as an agent of a separate marketing division of the group (in the case of a Russian sales branch) or the parent manufacturing company (in the case of a Russian sales subsidiary) that is involved in purchasing third-party advertising and marketing services for the benefit of the marketing

division (parent manufacturing company). This should allow the sales unit to earn extra income as agency fees and thus accommodate its incurred costs more comfortably. In practice, the scope of agency activities may be extended to include obtaining marketing authorization for product distribution in Russia.

Although now probably of reduced importance given the increased stability of the Russian ruble, the negative effects of foreign currency fluctuations could be mitigated by fixing the purchase price between the sales branch/subsidiary and suppliers in Russian rubles. Some companies already employ this practice.

Of course, the above steps rest on one very important assumption that the foreign manufacturer as a group is willing to accept and bear economically the excessive costs of business in Russia, as both redistributing functions and attributing additional income to Russian sales divisions are merely tools for shifting the economic burden within the group. If no such cost-sharing policy is acceptable for the foreign pharmaceutical manufacturer, then recovery of the situation would most likely be a long and arduous one and may still ultimately end in disappointment.

Russia Today: Advertising recovery underwayhttp://rt.com/Business/2010-05-04/advertising-recovery-underway-russia.html/print

04 May, 2010, 11:15

The Russian advertising sector is showing signs of a turnaround after taking a battering during the economic downturn.

After a 17 fold increase between 1999 and 2008, Russian advertising had become one of world's top ten markets. The ensuing 2 years have been tough but analysts are now predicting a return of double digit growth.

The famous saying in advertising is that half of the dollars are wasted; you just don’t know which half. That becomes even more of an issue when money is tight, and the crisis has forced companies think more carefully about how they spend their budgets, according to Sergey Veselov, Head of Marketing Research at ACVI.

“One of the main consequences of the crisis is that the companies might have to revise their marketing strategies. Earlier even the middle level agency thought that a client needs mixture of ad tools – TV, press, outdoor advertising, and communication events. Now they will have to decide what they need more.”

The Russian advertising market plunged 26 % last year. Internet and television suffered less than other segments. Cheaper online advertising attracted clients, while expensive televison benefited from its huge reach – especially important when it comes to fast-moving consumer goods.

TV increased its market share from 50-56% during the crisis, and is still the most important medium, says Dmitry Bartenev, Presdident of OMD MD & PHD Group

“The specific of Russian market is that it’s a big country. Top advertisers are FMCG brands which are distributed nationally, therefore you need to be nationally present and TV is the only media to do so, and another point is the cost per contact with the consumer is relatively low next to other European and world countries.”

None of Russia’s top foreign advertisers left the market during the recession, unlike the previous crisis of 1998. In fact- almost half the top ten advertisers increased their budgets.

“In the last crisis several big advertisers left the market. And later it was very difficult for them to win back their positions which had been occupied by their competitors. This time, many companies understood there was an opportunity to take the lead,” says Veselov.

By 2012 the advertising market is expected to have returned or even surpassed its pre-crisis level. Analysts say it will remain attractive and unsaturated, and they predict continued strong growth.

BNE: Corporate funding in Q1 - mixed messages, mixed fortuneshttp://www.businessneweurope.eu/storyf2088/Corporate_funding_in_Q1__mixed_messages_mixed_fortunes

Guy Norton in Moscow May 4, 2010

Though funding conditions for all types of borrowers from Central and Eastern Europe may have eased considerably since the first quarter of 2009 when investor and lender sentiment towards the region was at its nadir, the experience of corporates in first three months of this year has proved to be much like the proverbial curate's egg - good in parts, bad in others.

One corporate that typified that experience was Russian aluminium titan Rusal. Its $2.2bn IPO of a 11% stake on the Hong Kong Stock Exchange in late January was arguably a hit for majority owner Oleg Deripaska, but a flop for investors.

BNP Paribas and Credit Suisse were global coordinators on the groundbreaking transaction - the first by a Russian company on the Asian bourse - alongside Bank of China International, Bank of America Merrill Lynch, Nomura and three Russian firms Renaissance Capital, Sberbank and VTB Capital. But the rumour on the street, be it in Hong Kong or Moscow, is that the lead managers were effectively bystanders on the trade, with cash-strapped Deripaska effectively running the show himself in search of the billions of dollars he requires to keep his lengthy list of creditors at bay.

Judged by how much was raised, the IPO can be adjudged a triumph for Deripaska, but in the short term at least something of a disaster for the 300 or so investors who bought into the trade, including New York hedge fund bigwig John Paulson, Hong Kong's richest man Li Ka-Shing and English financier-socialite Nathaniel Rothschild alongside Russian development agency VEB and Russia's leading lender Sberbank.

Priced in the middle of its HK$9.10-12.50 target range at HK$10.80 a share, the Rusal transaction has to date never even remotely looked like being a money spinner for stockholders. Rusal traded down 11% on its first day of trading and at one point was down by a third. By the end of April, the stock was quoted at HK$8.50. The deal has underperformed both the underlying Hong Kong market and peer group stocks such as China's Chinalco and Alcoa of the US.

With Deripaska having drummed up over $2bn of cash with which to help trim Rusal's weighty debt burden to $12.9bn, company executives were arguably justified in claiming the deal had succeeded in its primary goal, placating Rusal's creditors. "The successful IPO helped the company to raise funds that allowed us to significantly reduce our debt," says Oleg Mukhamedshin, Rusal's capital markets director. "We are confident that the right choice of strategy to overcome the consequences of the global economic downturn and the strengthening of our competitive advantages will enable us to pay off the remaining debt in the shortest possible term to provide for the active development of Rusal and increase of the company's value in the interests of all our shareholders."

Minority shareholders surely feel less sanguine. Commenting on the deal, Florian Fenner, managing partner at Deutsche UFG Asset Management in Moscow, says: "For the record we did not participate and could not short it, as liquidity was insufficient. We acknowledge that the participating banks investment banks produced the most leveraged warrant on aluminium prices ever, but wonder why a bank would want to be associated with an IPO where under almost all scenarios the equity would be wiped out or at least severely diluted."

"While we have nothing to say about the prestige of the participating banks and the quite detailed risk factors in the prospectus, we just hope that investors who will undoubtedly lose a lot of money will not blame it on Russia. The company could not sustain the debt load during extremely prosperous times and we wonder what will happen during less prosperous times," he says.

The underwhelming response to the issue is widely regarded as having put a kibosh on other Russian corporates' plans to list on Hong Kong, with the likes of Russian miner Petropavlovsk (formerly Peter Hambro Mining) likely to hold off on a possible listing of its iron ore business separately or the business as a whole in Hong Kong. According to Barry Ehrlich, mining analyst at Alfa Bank, a listing of the iron ore business could see it valued at over $2bn.

Mongolian coal

One company that did impress on the Hong Kong Stock Exchange is Mongolian coal miner SouthGobi Energy Resources, which raised C$459m at the end of January with the sale of 27m shares at C$17 apiece via Citigroup and Macquarie Capital and secured a Hong Kong listing alongside its existing quotation on the Toronto Stock Exchange. The company will use the proceeds from the offering to raise production at its Ovoot Tolgoi mine, which lies around 40 kilometres north of the Mongolia/China border. The shares in the Hong Kong listing were significantly oversubscribed on the back of strong investor demand, with the Chinese and Singaporean sovereign wealth fund China Investment Corporation and Temasek both subscribing for shares as cornerstone investors. "By listing in Hong Kong, SouthGobi has dramatically increased its investor base and enhanced its valuation premium," says Alisher Ali Djumanov, chief executive of Eurasia Capital Management (ECM), which launched the first Mongolia-dedicated hedge fund in 2008. Eurasia has a 'Buy' recommendation on the stock with a target price of C$24, implying a 35% upside from trading levels at the end of March.

Meanwhile, Petropavlovsk, whose primary listing is in London, enjoyed success on the equity-linked front with the launch of $380m of convertible bonds due 2015. They paid a 4% coupon and offered a conversion price of £12.93 - a 32.5% premium to its outstanding stock. The deal, which post-greenshoe represented roughly 7.5% of the total share capital share, was joint lead managed by JPMorgan Cazenove and Citigroup. Sentiment towards the deal was boosted by the company's forecast of a rise in gold production and promise to reinstate dividends. The proceeds have been earmarked for exploration and development purposes as well as to fund future investments. In December, the company called an existing $140m convertible in December to give it a net debt position of just $24m at end-2009.

Meanwhile, VTB Capital lead managed a $412.5m convertible bond for pipemaker TMK in early February. The five-year bonds paid a 5.25% coupon and are convertible into four of TMK's London-listed global depositary receipts (GDRs) at a strike price of $23.075%, representing a 30% premium to outstandings. Proceeds from the deal will be used to pay down existing debt. Given cautious optimism in the market about Russia, VTB Capital's head of debt capital markets Andrey Soloviev says the TMK issue offered investors an attractive combination of downside protection from the fixed-income element and upside potential from the equity element. In February, the TMK board had already agreed to increase the company's share capital by almost 10% through a placement of 86m or so additional shares at RUB10 apiece. It later sanctioned a further issue at RUB133 a share to boost the firm's share capital to RUR873m ($296.5m).

The equity offerings were launched in the wake of an agreement with VTB, whereby the state-owned bank agreed to an extension on a $450m loan. The original one-year facility was provided by VTB back in August 2009 to fund the buyback of TMK's 2011 loan participation notes. The revision to the facility allows for an initial three-year extension with an option to extend up to five years. As a no doubt grateful TMK chief executive Alexander Shyryaev observed: "TMK continues to optimize its loan portfolio while emphasising the use of long-term instruments. As a next logical step in the development of our mutually beneficial partnership with VTB, this prolongation significantly improves

the maturity structure of the company's loan portfolio."

Meanwhile, in March TMK listed American Depositary Receipts (ADRs) on an over-the-counter (OTC) trading platform in the US. The ADRs will trade on the OTCQX International Premier trading platform, the OTC market's highest tier. Each ADR represents four ordinary shares. TMK officials say the decision to issue ADRs was a natural one for the company following its entry into the US in 2008 when it bought Ipsco Tubulars and NS Group. "TMK awareness has been steadily increasing ever since the company began operating in the US. We appreciate the interest of North American investors and plan to expand our presence in the world's largest financial market. The next logical step in our commitment to improve the company's transparency and stock liquidity was the listing of TMK ADRs on the OTCQX, which, in particular, provides access to a wider range of retail and institutional investors," says Vladimir Shmatovich, senior vice president for strategy and business Development at TMK. TMK's GDRs are currently traded on the London Stock Exchange while its common shares trade on Russia's RTS exchange.

Different fare

Away from the flurry of industrial plays that came to market, Russian eaterie chain Rosinter Restaurants Holding served up some different fare, literally and metaphorically offering investors a chance to play on the recovery in the Russia/CIS consumption theme. In a secondary offering, Rosinter sold 2.6m shares at $10.5 apiece to raise around $27.5m before fees and expenses. Sole lead managed by Renaissance Capital the sale represented around a 26.2% stake in the firm, Rosinter intends to use the proceeds of the capital increase primarily for debt reduction, business development and other general corporate purposes.

Commenting on the deal. Rosinter chief executive Sergey Beshev says: "We are very enthusiastic about the outcome of the offering in which more than 50 institutional investors demonstrated strong interest in our business. A wider shareholder base and an increase of our free float will generate enhanced liquidity of our shares. This capital increase will allow us to strengthen our leadership in the rapidly developing casual dining market in Russia and the CIS by taking advantage of macro recovery and further growth opportunities."

Rosniter IPO'd in June 2007 when it raised $60m. Its shares hit a peak of $61 in December 2007 before slumping to $5 in November 2008. By the end of March, the shares were at $12.25, up 55% year to date and whopping 310% in the previous 12 months. Natasha Zagvozdina, retail analyst at Renaissance Capital, which has a 'Buy' recommendation on the stock with a target price of $14, believes that the company is well placed to benefit from any uptick in consumer spending in the Russia/CIS region. "We forecast 2010 Ebitda growth at 52% [in ruble terms], thanks to the company's continuing, cautious approach to operating costs and slow expansion."

Rosinter reported a 0.7% sales increase last year despite opening new restaurants, while

suffering a 16.1% like-for-like fall as consumers reined in spending. Over the same period, it trimmed its debt by 12.5% to $72.5m, and is looking to reduce the burden further.

RTS and Micex-listed Rosinter is the leading casual dining restaurant company in Russia and the CIS, operating operates 350 outlets, including 95 franchised restaurants in 39 cities in Russia, the CIS and the Baltic countries. The company previously said it saw positive trends in guest traffic in the fourth quarter of last year after full-year 2009 like-for-like sales fell 16% as consumers cut back on spending.

Outside of Russia, the main source of corporate equity issuance was Poland where the government sold stakes in a number of firms as part of a concerted privatization drive. There was a notable transaction from Turkey however, with the TRY662.4m ($436m) flotation in early February of a 34.5% stake in Koza Gold - the IPO in Turkey since the $1.9bn Turk Telekom sale in May 2008.

Koza Gold's 1.8bn share offering was marketed at TRY36.80-46.00 per 100 ordinary Class B shares and was eventually priced by bookrunners Goldman Sachs and JPMorgan at the bottom end of the range, to give Koza Gold a market capitalization of TRY2.2bn ($1.5bn).

Although the company's shares ended the first day of trading down 9.5%, market participants are hopeful that the Koza Gold offering has set the stage for a revival in IPO activity. Deals in the pipeline from Turkey include an IPO of the country's largest lender, Ziraat Bank, while the government is also looking to sell further shares in Halkbank and Vakifbank, where the government sold 25% stakes in 2007 and 2005 respectively.

Debt issues

On the international bond market front, Russian oil company TNK-BP started the ball rolling at the end of January with a $1bn dual tranche offering via Barclays Capital, Credit Agricole and RBS. The deal, TNK-BP's first overseas bond since a $1.7bn five- and 10-year deal in October 2007, comprised a $500m, five-year tranche with a 6.25% coupon and a $500m, 10-year tranche with a 7.25% coupon. Given the relative dearth of Russian oil and gas deals since the onset of the credit crunch, the bonds attracted over $10bn worth of orders and so TNK-BP was able to price both tranches at relatively aggressive levels, with the five year element pitched at 406 basis points (bps) over US Treasuries and the 10-year piece at 385 bps over. Sentiment going into launch was boosted by the decision by Standard & Poor's to upgrade the company to 'BBB-' from 'BB+' in December. "The upgrade reflects our perception of material improvements in governance and shareholder alignment," said S&P credit analyst Karl Nietvelt.

In 2008, TNK-BP was the subject of a long-running dispute over the company's strategic development plans between UK oil company BP and Russian investor group Alfa Access-Renova (AAR), which are joint owners. S&P's decision made TNK-BP a fully investment grade rated credit and placed its ratings on a par with those assigned by

Moody's and Fitch, which rate it 'Baa2' and 'BBB-' respectively. Consequently, January's Eurobond offering provided a litmus test of investor sentiment towards and appetite for TNK-BP debt, with the company boasting a combination of emerging market growth upside potential alongside the downside protection of investment grade risk. As such the deal attracted both existing emerging market accounts as well as new investment grade credit buyers. Jonathan Brown, head of European debt syndicate at Barclays Capital in London, says that by issuing early in the year, TNK-BP was able to capitalize on the positive ratings momentum following the S&P upgrade and the high level of liquidity at the start of the year, and thus ensure certainty of execution alongside tight pricing.

Meanwhile, after scrapping its plans for a $750m bond in late February when issuance terms failed to meet its expectations, in mid-March Stockholm-listed Alliance Oil issued a $350m, 9.875% 2015 Eurobond via BNP Paribas, Credit Suisse and JP Morgan. "The improved market conditions allowed us to successfully extend the maturity profile of our debt portfolio at attractive terms. In addition, this further increases our flexibility and at the same time strengthens our financial position," says Arsen Idrisov, managing director of Alliance Oil, a junior oil company with operations in Russia and Kazakhstan.

Stefan Weiler, executive director debt capital markets at JP Morgan in London says the fact that a relatively small, sub-investment grade operator such as 'B+'/'B' (S&P/Fitch) rated Alliance can tap the international bond markets "shows that weaker credits can issue as investors are looking for high-yield opportunities". Alliance will use the proceeds of the issue to expand production and upgrade a refinery in Khabarovsk in Russia's Far East.

Finally, debut issuer Russian Railways (RZD) made quite a splash at the end of the first quarter with the launch of a $1.5bn, seven-year bond via Barclays Capital, JPMorgan and VTB Capital that attracted $10bn of demand. The strong market reception enabled RZD to achieve the tightest launch spread for a Russian name in the last 18 months. At 245 bps over mid-swaps, the deal was priced well inside the initially indicated 275 bps over level marketing level, and tightened by 10 bps after launch.

Moscow Times: For the Record http://www.themoscowtimes.com/business/article/for-the-record/405314.html

04 May 2010

Tesoro said Friday that it was buying Eastern Siberia Pacific Ocean crude, or ESPO, for $2.50 a barrel less than other grades of oil, which is pushing the price for Alaska crudes lower. (Bloomberg)

Avangardco Investments Public, Ukraine’s largest egg producer, was almost two times oversubscribed at the price of $15 a Global Depositary Receipt, two people who worked on the sale said Friday. (Bloomberg)

Activity in the Oil and Gas sector (including regulatory)

News.am: Dates of gas delivery to Armenia unclear

http://news.am/en/news/20607.html

11:32 / 05/04/2010

It’s been already a week that Russian incoming gas to Armenia is cut due to landslides in Georgian Kazbegi region.

Despite the pledges by Georgian side to fix the failure till May 1, the pipeline is yet out of order.

ArmRosgazprom press secretary Shushan Sardaryan informed NEWS.am that gas from Russia to Armenia is not supplied, “but domestic demand is met without limitations out of the reserves.”

Replying to the question on terms of delivery resumption, Sardaryan said: “Our dispatchers liaised with repairing managers and learnt that the works are underway. As of now there are no concrete dates of restoration competion.”

04.05.2010

Oil and Gas Eurasia: Russian Energy Ministry To Propose Tax Breaks For Small Fieldshttp://www.oilandgaseurasia.com/news/p/0/news/7208

The Russian Energy Ministry plans to draft a proposal on the tax regime for small oil fields by the end of the year, Deputy Director of the Energy Ministry's Oil and Gas Refining Department Pavel Karchevskiy said during a roundtable on the Condition and Prospects for Developing Russia Oil Fields.Karchevskiy said the federal law, which would include tax breaks for subsoil production on small oil fields, could come into force in 2011. However, he added, in order for that to happen, the Russian legislature must first review the bill on introducing tax breaks for small fields this spring.Karchevskiy also said that the Energy Ministry was ready to develop proposals on offering tax breaks for fields with super-viscous crude.Copyright 2010, Vsluh.ru. All rights reserved.

04.05.2010

Oil and Gas Eurasia: Putin Sets Zapolyarnoye-Purpe Oil Pipeline in Motionhttp://www.oilandgaseurasia.com/news/p/0/news/7211

Russian Prime Minister Vladimir Putin has signed instructions to design and build a trunk pipeline along the Zapolyarnoye-Purpe-Samotlor route, the Yamal Nenets governor's office reported in a news release. The pipeline will carry oil from the Yamal Nenets autonomous District and the northern part of Krasnoyarsk Territory. the project will be financed by Transneft and construction will take place in two stages. The first stage will cover the design and construction of the Purpe-Samotlor segment of the pipeline, while the second stage will cover the same for the Zapolyarnoye-Purpe segment.The Energy and Natural Resources ministries are to work with Transneft to submit a proposal to the government within three months on the throughput capacity of Zapolyarnoye-Purpe segment of the pipeline taking into account geological studies and the development of fields in Yamal Nenets and Krasnoyarsk.The Purpe-Samotlor pipeline which is to be launched in 2012, links the east and west directions of the trunk pipeline system. The Purpe-Samotlor segment is 429 kilometers long and has a throughput capacity of 25-50 million tons per year. The Zapolyarnoye-Purpe pipeline links fields in Yamal to the East Siberia-Pacific Ocean pipeline (VSTO). It is estimated that the first pipeline will cost 45 billion rubles and the second, 70 million rubles.Copyright 2010, Oil and Gas Information Agency. All rights reserved.

Bloomberg: Urals Discount Widens as Russia Boosts Output: Energy Markets http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aA5QAgx7iuLQ

By Christian Schmollinger

May 4 (Bloomberg) -- Russian and Mexican oil is trading at growing discounts to U.S. and U.K. crude benchmarks as production by nations outside OPEC reaches a record.

Russia’s Urals for loading in the Mediterranean trades at $2.22 a barrel less than Britain’s Brent crude, compared with a premium of 3 cents a barrel on July 24. The discount between Mexico’s Maya grade and West Texas Intermediate was at $10.82 a barrel on April 30, near the widest in 17 months.

Rising output from Russia and Mexico will push non-OPEC supplies up 1 percent this year to an average 52 million barrels a day, according to the International Energy Agency. At the same time, quota violations among members of the Organization of Petroleum Exporting Countries means global production will increase at a time when the need for oil is diminishing.

“Inventories are growing and non-OPEC supply is expanding and OPEC continues to leak,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “Market bulls should be concerned about the supply overhang.”

The U.S., Mexico, China and Russia have been responsible for most of the growth, boosting output for the past five consecutive quarters, according to an April 27 research note by Barclays Capital. Non-OPEC production reached a record high 49.6 million barrels a day in March, according to data from Energy Intelligence Group.

OPEC Less Needed

The IEA lowered its demand estimate for OPEC, which produces 40 percent of the world’s oil, by 200,000 barrels day to an average of 28.8 million barrels a day to balance supply and demand. The group currently pumps 29.2 million a day, according to Bloomberg data.

OPEC’s spare capacity levels have ballooned to 5.645 million barrels a day in April after falling as low as 2 million in July 2008, when crude hit a record $147.27. The group can produce a total of 34.84 million a day and may add 12 million barrels by 2015 by opening 140 new projects, Secretary- General Abdalla El-Badri said in February.

Russia, the world’s largest oil producer, pumped 10.14 million barrels a day in March, a post-Soviet Union high, according to official data. Mexico exported 1.33 million a day in March, the highest since January 2009, according to data from Petroleos Mexicanos.

U.S. production surged during 2009 and into this year as output returned from post-Hurricane Ike shut-ins in September 2008. The country has pumped an average of 4.482 million barrels a day in the first four months of 2010, up 6.6 percent from the average in 2006 and 2007.

Price Pressure

“If the positive momentum carries into the rest of 2010 and starts filtering through non-OPEC output views for 2011, this could result in a more significant source of downward price pressure along the curve,” said Barclays Capital analyst Costanza Jacazio in the note.

Crude oil for June delivery was at $85.94 a barrel at 10:28 a.m. Singapore time in after-hours electronic trading on the New York Mercantile Exchange, retreating from yesterday’s intraday peak of $87.15, the highest since Oct. 9, 2008.

“The pricing has been driven by the expectations of a tighter market over the long-term and the market has put aside the near-term supply overhang,” said Purvin & Gertz’s Shum.

The non-OPEC “momentum raises the crucial question of whether or not it is sustainable,” said Barclays. “If it fades quickly, as we expect, this will likely have limited implications for oil balances and prices, as OPEC stands in a position to handle a short-term rise in non-OPEC output by simply postponing any further increase in volumes.”

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

Last Updated: May 3, 2010 23:41 EDT

04.05.2010

Oil and Gas Eurasia: TNK-BP Begins Infill Drilling At Van-Yeganskoyehttp://www.oilandgaseurasia.com/news/p/0/news/7209

Varyeganneftegaz (a TNK-BP unit) has started an infill drilling program at the Van-Yeganskoye oil field, vsluh.ru reports. Six new wells are to be drilled in the coming weeks at one of the field's clusters. According to data from the geological service, each well will have a daily flow of around 42 tons.The Van-Yeganskoye field shows promise in potential zones of residual crude that were discovered in geological modelling. At the same time, TNK-BP reported in a news release that one support well in the cluster maintaining pressure in the deposit produced a flow of 50 tons of crude a day after hydraulic fracturing. Another cluster at the Van-Yeganskoye field is being back filled as part of the infill drilling program. Varyeganneftegaz plans to drill six wells at this cluster as well.Copyright 2010, Vsluh.ru. All rights reserved.

Offshore: LUKOIL, Astrakhan agree joint Caspian programhttp://www.offshore-mag.com/index/article-display/1828710605/articles/offshore/field-development/russia/2010/05/lukoil_-astrakhan.html

Published: May 3, 2010

Offshore staff

MOSCOW -- LUKOIL has signed a cooperation agreement with the government of the region of Astrakhan, southern Russia.

The two parties plan to collaborate on projects aimed at exploration, development and production of hydrocarbons in the region, including the Caspian offshore. 

The agreement also covers potential cooperation in manufacturing, repair and supply of oil field equipment; research and engineering to support new developments; and technologies for oil and gas production, hydrocarbon processing, and oil and gas pipeline construction. 

Other goals of the accord include ensuring environmental safety and efficient environmental management. 

LUKOIL will provide funding for construction of environmental and offshore production facilities. It will also help establish an integrated monitoring system for bio-resources

located in the Astrakhan region, including satellite monitoring of the northern part of the Caspian Sea.

05/03/2010

Gazprom

Bloomberg: Gazprom May Buy Naftogaz for 5% of Own Shares, Kommersant Says http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4RwiKdw8_Yk

By Anastasia Ustinova

May 4 (Bloomberg) -- OAO Gazprom, Russia’s gas exporter, may acquire Ukrainian energy company NAK Naftogaz Ukrainy for about 5 percent of its own shares, Kommersant reported, citing Dmitry Peskov, spokesman for Prime Minister Vladimir Putin.

To contact the reporter on this story: Anastasia Ustinova at austinova@bloomberg.net

Last Updated: May 4, 2010 00:51 EDT

Businessday: Gazprom refutes allegations it wants to scuttle trans-Saharan gas project http://www.businessdayonline.com/index.php?option=com_content&view=article&id=10707:gazprom-refutes-allegations-it-wants-to-scuttle-trans-saharan-gas-project&catid=1:latest-news&Itemid=18

Tuesday, 04 May 2010 01:24 Ameto Akpe Says MoU with NNPC on NIGAZ not dead

The Russian government has again refuted negative speculations, which have resurfaced in the last couple of weeks, questioning the motive behind its proposed involvement in the trans-Saharan gas pipeline and the Nigerian oil and gas sector as a whole.

The trans-Saharan gas pipeline to be built and operated by Nigerian National Petroleum Company (NNPC), Sonatrach of Algeria and the government of Niger is a planned natural gas pipeline to run from Nigeria to Algeria and is seen as an opportunity to diversify the European gas supplies which is presently largely controlled by Russia.

Russian gas company, Gazprom, along with several other companies from India, Spain, France and Italy are in negotiations with Nigeria about possible participation in the project. Sources within diplomatic circles say that Russia seeks to either control or scuttle the trans-Saharan project as its success in what ever form would impact on Russia's

stranglehold of the European market. This sentiment is noted to have spurred reported statements from energy ministers of Algeria and Nigeria who said: "If things go well, there will be no need to bring international oil companies into the project" and "if the need for partnership in the project arises, not every partner

will be welcome on board on the project."

In a chat with BusinessDay, Valery Vozdvizhenskiy, head of economic department, Russian Embassy, noted that his government has no plans to create a sort of international gas union which would lead to a monopoly. "We are doing our best to ensure regular supply of gas to Europe. We are interested in additional options to provide Europe with gas. We would like to eliminate any trouble, that's why we don't consider Nigerian gas or NNPC gas as a competition. We are not afraid of African gas, no. To have LNG is vital for everyone; we will not like to arrange some kind of international gas union to create some monopoly, no.

"We are not interested in putting ourselves in getting some prime position. Our interest is for global cooperation, for mutual satisfaction for everybody. In this era of globalisation we are one family. We consider the trans-Saharan pipeline as a main part of this comprehensive system. We in Russia understand this," Vozdvizhenskiy stated.

Meanwhile, almost a year following the launch of NIGAZ, the joint venture arrangement between Russia's gas company, Gazprom and the NNPC, and the international attention it attracted because of its potentially offensive similarity to the word "niggar" and slang derivative of "niggaz", little has been heard of the group, which has prompted many to say the Memorandum of Understanding (MoU) signed in June 2009 is dead.

Gazprom, however, said that the MoU is not dead and insists the rumours are most likely from competitors, adding that Gazprom is a very large entity with a lot of experience. It said that the venture is to the benefit of the European market.

Messenger.com.ge: Gazprom increases Turkmen and Azeri gas purchase http://www.messenger.com.ge/issues/2097_may_3_2010/2097_econ_two.html

By Messenger Staff Monday, May 3 In 2010 Russian state owned company Gazprom plans to buy around 10 billion cubic metres of natural gas from Turkmenistan and possibly more Azeri gas from the Shah Deniz field. This was announced by Deputy Chairman of the company’s board Valery Golubev, who also stated that the company will give certain benefits to Ukraine as well.

The Russia-Turkmenistan deal was signed in December 2009. In that year Gazprom also signed an agreement with the Azeri state oil company SOCAR to purchase more Azeri gas. Azeri President Aliyev was prepared to sell more gas to Gazprom in the event of NABUCCO project delays but recently Baku and Ankara have struck a deal on the price of gas transported from Azerbaijan to Turkey and then on to Europe.