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Russia ReviewRussia ReviewRussia ReviewRussia ReviewRussia ReviewGRIFFIN CAPITAL

20 February 2000

page 1 of 31Vol. III, No. 2

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Griffin Capital New York +1 212 759-6678/fax 759-6783 [email protected] material is compiled for the private information of the recipient, and neither Griffin Capital nor its affiliates are soliciting any action ormaking any recommendations based upon it. This material is based on information provided by sources we deem reliable including Reuters,Bloomberg, PRNewswire, Prime-Tass, Kommersant, Interfax Vremya, The Moscow Times CentreInvest Research,Euroweek, ABN AMRO, com-pany data and other sources, but we do not represent that it is accurate or complete and it should not be relied upon as such. This informationdoes not have regard to the specific investment objectives, financial situation or the particular needs of any individual or entity who may receivethis material. Investors should seek financial advice regarding the appropriateness of investing in any securities or implementing investmentstrategies discussed or recommended in this material and should understand that statements regarding future prospects may not be realised.

“L’empire c’est la paix”[The Empire means peace]

Louis Napolean, 1852

Russia and the WestLook Ahead Together

Good news continues to dominate Russian me-dia as the March presidential elections drawnear.

From the routing of Chechen “bandits” to visitsby foreign dignitaries, Russia’s electorate is be-ing fed a steady diet of positive developmentswhich make all but certain Putin’s election aspresident in the first round of elections on 26March. However, the rhetorical demands of theUS presidential campaign will effectively cutRussia off from any large-scale IMF financing.

Recent opinion polls give acting president Putinabout 58% of the vote. Russia’s Central Elec-toral Commission rejected the application ofVladimir Zhirinovsky the leader of the LiberalDemocratic Party, who polls suggest would onlyreceive 4 percent of the vote.

The west is anxious to discern the policies ofthe Putin administration. Following the visit ofNATO’s General Secretary Robertson, the headof Britain’s Foreign Office, Robin Cooke, an-nounced plans to visit Moscow this 21-22 Feb-ruary. EBRD President Horst Keller added hisvoice to those westerners seeking a more stablerelationship with Russia, calling Russia’s eco-nomic growth in 1999 “important and hopeful.”

As NATO faces up to a costly and protractedpresence in Kosovo, and England is preoccu-pied its own internal conflict in Ireland, Russiahears fewer objections to the management ofits recurring Chechen conflict, the west’s mainargument for withholding promised IMF funding.

However, with America’s own presidential elec-tion on 7 November, we expect the Clinton ad-

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ministration will hedge itself and, in particular,candidate Vice President Al Gore, against fur-ther criticism of its ineffective policy in Russiaand indefinitely delay approval of further IMFdisbursements.

In the lead up to its presidential elections,Russia’s government continues to tighten its gripon the mass media, thereby ensuring everyoneis singing to the same tune. New legislation hasbeen introduced in the Duma to restrict Rus-sian broadcasters’ use of satellite transmissioncapacity to Russia’s underutilized, aging satel-lite fleet, controlled ultimately by the Kremlin.After resigning from NTV last month, ostensiblyover editorial issues regarding the Chechenconflict, Oleg Dobrodeyev, among Russia’s mosthighly respected journalists and one of NTV’sfounders, has been handed the chalice of run-ning a new state controlled media group whichis rumored to include broadcasters RTR and TVCentre. And after first arresting Andrei Babitsky,a particularly irritating and tenacious Radio Lib-erty journalist covering Chechnya, Russia’s armyreleased him to Islamic Chechen rebels in ex-change for three captured Russian soldiers.Whether or not Babitsky was seeking a sensa-tional scoop in the bargain, he is not expectedto be found alive anytime soon. Following thebarter of Babitsky, Putin instructed Russian se-

curity services to find and safeguard the jour-nalist. In spite of this noble gesture, the devel-opment and nourishment of an independentmedia does not appear to be one of the Kremlin’spre-election policy priorities.

The AP reported about 7,000 Chechen rebelsare holding out amid continued strikes by Rus-sian forces to destroy the few pockets of resis-tance left in the breakaway republic after fivemonths of conflict. Citing Interior MinisterVladimir Ruchailo, Interfax reported Chechenfighters shot down a Russian helicopter on Fri-day, killing 15 people,

In the 21 month war of 1994-1996, 3,963 sol-diers and officers were killed, working out to 188deaths per month. After about 6 months of re-newed fighting in Dagestan and Chechnya, 1,173have died or 204 a month. There have been3,487 wounded and 53 people are missing.

Throughout February, news media reports dis-puting official figures have come more and morefrequently, and the government’s new informa-tion center, Rosinformtsentr, appears to be mak-ing an effort to demonstrate official openness.The center’s new director, SergeiYastrzhembsky, set up the new press-center atilitary headquarters in Mozdok. First DeputyChief of Russian Staff General Valery Manilovwill direct the center.


20 February 2000


The conflicting casualty figures came asYastrzhembsky, an aid of Acting PresidentVladimir Putin, attempted to coordinate newscoverage of the conflict and smooth relationswith the media. Yastrzhembsky said Thursdaythat the government will issue an official toll ev-ery Friday.

Yastrzhembsky said 93,000 troops are now serv-ing in the North Caucausus region: 57,000 fromthe Defense Ministry and 36,000 from the Inte-rior Ministry.

On Tuesday, the government raised its estimatefrom 900 dead to the 1,173 figure, with officialsattributing the higher number to close-quarterstreet fighting in Grozny and other towns.

Russian media’s tepid criticism of the war inChechnya is rising as casualty figures are soar-ing, often faster than the government admits.

Interfax, which previously reported only officialcasualty figures, reported that 1,152 Russiansoldiers have been killed and 3,246 woundedas of 25 January. Russian television station NTVsaid casualty figures could be ten times as highas government figures.

Doubting official statistics is no longer confinedto veteran government critics such as humanrights groups. Even hawkish former InteriorMinister Anatoly Kulikov has joined in.

IN BRIEF (C IN BRIEF (C IN BRIEF (C IN BRIEF (C IN BRIEF (Continued)ontinued)ontinued)ontinued)ontinued) “I watch television just as you do,” he said in aninterview with the Segodnya newspaper theweek of 28 January. “One officer says that inthe past day the losses are five dead, 10wounded. Another, ten dead, 12 wounded. ButI haven’t lost professional connections. I talkedwith an officer who came here for vacation andhe says that in such and such brigade, 26 peopleactually perished.”

“That is why I am seriously afraid that the infor-mation on losses is seriously understated.”

Colonel Viktor Baranets, former spokesman forthe Defense Ministry and now a journalist forthe Komsomolskaya Pravda newspaper, in a 14January report estimated the number of casual-ties to be at least 1,300 troops killed, 5,000wounded and 300 missing in action and kid-napped.

Lieutenant General Alexander Mikhaikov, aspokesman at Rosinformtsentr, said he does not

Chechen refugees awaiting passage at Shatili, Chechen-GeorgiaBorder, 14 December 1999. By Eddy Van Wessel/

[email protected]

believe that official figures on casualties arebeing distorted. “There is a special technologyfor reporting on casualties,” Mikhailov said. “Aperson who is being put in a helicopter just barelyalive is not considered dead, but wounded. Ifhe dies in that helicopter, he is registered asbeing a hospital loss.”


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“I can’t tell you whether and how those lossesare counted, and whether they are added to thelist of the dead,” Mikhailov said.

Valentiva Melnikova, spokeswoman for the Mos-cow-based Soldiers’ Mothers Committee, saidon the “Glas Naroda” program on NTV that “thenumber of the perished and those who died ofwounds the military reduces by at least threetimes. The number of wounded is being reducedby at least two times.”

“I am sure about his because every day we getback questionnaires from our regionalbranches.” The committee assists parents ofdead and missing soldiers.

Whatever the casualty figures, they are unlikelyto have an adverse impact on the rating of act-ing President Putin. Russians are much lesssensitive to war casualties than audiences in theWest. Moreover, when Russia began to losethe greatest number of casualties during fight-ing in Grozny, its pliant media refocused thepopulation’s attention on the Duma crisis.

McDonald’s celebrated its tenth anniversary inRussia on 31 January. It opened the world’slargest McDonalds, at 28,000 square feet, onMoscow’s Pushkin Square shortly after the fallof the Iron Curtain. The location is also theworld’s busiest McDonalds, serving over 80 mil-lion customers since opening. McDonalds hascontributed over US$4 million to numerous Rus-sian charities for projects ranging from the pur-chase of medical equipment to providing mealsfor those in need.

Putin Mentor Sobchak Dies

20 Feb: Anatoly A. Sobchak, former mayor ofSt. Petersburg’s and mentor to Vladimir Putin,

The late A Sobchak with V Putin in the background in earlier days.

died early Sunday at 62. In the early 1990s,during the heady upward swing of his career,

Sobchak was a heroic defender of democracy,a man many thought would rise higher. ButSobchak sank fast in an ignominious spiral:Sobchak grew unpopular, was voted out of of-fice in 1996 and was dogged by a corruptioninvestigation.

In the end, it was not Sobchak but his formerdeputy and right-hand man who was to makethe dizzying rise: Vladimir V. Putin, namedRussia’s acting president New Year’s Eve andexpected to win the presidential election March26.

When Putin took office, Sobchak, after severalyears of relative obscurity, suddenly was soughtafter. His star was seen as being on the riseagain. He was stationed as Putin’s campaignmanager in Kaliningrad, on the Baltic coast,when he died, reportedly of a heart attack. Adoctor who treated him for a major heart attackin 1997, Nikita Semigolovsky, said Sobchak hadbeen seriously ill for two and a half years andcould have died at any time.

The 1997 attack, his third, came while he wasbeing interrogated about corruption charges byofficials from the St. Petersburg prosecutor’s


20 February 2000


POLITICS AND GOPOLITICS AND GOPOLITICS AND GOPOLITICS AND GOPOLITICS AND GOVERNMENT (CVERNMENT (CVERNMENT (CVERNMENT (CVERNMENT (Continued)ontinued)ontinued)ontinued)ontinued)office. Sobchak’s opponents sneered that hewas faking the illness.

After he flew to Paris for further medical treat-ment, critics contended that he was fleeing toavoid prosecution. Sobchak did not return toRussia for two years, during which time the pros-ecutor filed bribery charges against him, rein-forcing the critics’ view. When Sobchak returnedto Russia from Paris last summer, Putin - by thendirector of the FSB, the main successor agencyto the Soviet KGB - was there to meet him at theSt. Petersburg airport in a gesture of protectionand support.

Sobchak was born in Chita, in eastern Siberia.He was a law professor at Leningrad State Uni-versity before going into politics. One of his stu-dents was Putin. When Sobchak became mayorof St. Petersburg, then still called Leningrad, in1991, he made Putin his deputy.

After Sobchak lost office in 1996, Putin went toMoscow. But Sobchak, like other pro-Western“reformers,” was tainted by the 1997 allegationsthat he had taken bribes in the form of propertyfrom a real estate company.

Like retired President Yeltsin, Sobchak hadworked to pull down the Communist Party in thelate 1980s, but he was more eloquent and cere-bral than Yeltsin. As a member of the Congressof People’s Deputies, the Soviet parliament, hetook on Communist hard-liners in televised de-bates. Later, during the hard-liners’ attemptedcoup in 1991 against then-President Mikhail S.Gorbachev, he mobilized tens of thousands ofpeople in the streets and refused to let troopsenter St. Petersburg.

While Sobchak was mayor, Leningrad revertedto its old imperial name and many architecturaltreasures were restored. But people who hadrallied behind his democratic banner complainedthat he neglected basic social services, like col-

lecting garbage. He set his sights high, aimingto make St. Petersburg an international city, thedoorway to Europe. But his efforts, and those ofhis deputy, Putin, to build the city as a financialpower to rival Moscow failed, and St. Peters-burg also fell short of expectations as a touristdestination. What it did become, on their watch,was one of the most criminalized cities in Rus-sia.

Determined to hold onto power in the May 1996elections, Sobchak resorted to media manipu-lation in a negative campaign that many saidsoiled his reputation as a democrat. He tried fora seat in the Russian parliament in lastDecember’s election but lost. Sobchak’s for-tunes and his fall trace those of democracy it-self in Russia. By the time he lost office, “demo-crat” was a pejorative term.

“He in fact symbolized the Russian epoch of thelast decade with all its contradictions and com-plexities. He was a man who fulfilled his taskwhen it was somewhat easier and when it wasquite difficult,” said Anatoly B. Chubais, one ofSobchak’s supporters and another discredited“reformer” from St. Petersburg who heads Uni-fied Energy Systems of Russia, the electricpower monopoly. Sunday night, Chubais spokebitterly about those who pursued Sobchak forcorruption, claiming that they had hounded himto his grave.

Pavel I. Voshchanov, a journalist with the dailyTribuna, is one of those pursuers and is writinga book on what he says were Sobchak’s crimes.Also speaking Sunday night, Voshchanov said:“If Sobchak symbolized anything, it was the falsedemocracy built in Russia, based on all-embrac-ing corruption and total lack of morals ... He andmany other so-called liberal politicians effectivelycounterfeited democracy in Russia.”

The gulf between the two viewpoints representsthe legacy of men like Sobchak and Yeltsin: anation deeply divided about the merits of the trailthey blazed.


20 February 2000


POLITICS AND GOPOLITICS AND GOPOLITICS AND GOPOLITICS AND GOPOLITICS AND GOVERNMENT (CVERNMENT (CVERNMENT (CVERNMENT (CVERNMENT (Continued)ontinued)ontinued)ontinued)ontinued) MAMAMAMAMACROECCROECCROECCROECCROECONOMYONOMYONOMYONOMYONOMYPutin Opposes Monopoly Breakups

16 Feb (Reuters): Acting President VladimirPutin has announced that he is against the break-up of natural monopolies RAO Gazprom, RAOUES and the Railway Ministry into several sepa-rate companies. …Comment : This is positiveshareholders as earlier rumors about the possi-bility of demonopolisation produced a drastic de-cline in share prices.

Moscow Cops Bust Highwayman

11 Feb (Vremya): Russian police said yester-day it arrested Oleg Khomenko, director of SU-802 and one of the main contractors in chargeof reconstruction of Moscow’s ring road MKAd,suspected for stealing 103 billion rubles ($359.4million) of the city’s money, Russia daily Vremyareported.

The authorities claim Khomenko paid the moneyto fictional companies under non-existing con-tracts and transferred it abroad. Khomenko’scompany had won the city’s work in a tender.The investigators claim the stolen money couldhave been used to expand the 109 kilometerhighway by an additional 15 centimeters in width,the paper said.

Moscow’s three-year reconstruction of the MKADhighway built in 1961 included widening it andrebuilding more than 70 bridges, 70 crossing,12 tunnels and 46 junctions.

25 Jan (www.interfax.ru): The first post-Yeltsinsummit of the Commonwealth of IndependentStates (CIS) took place in Moscow Tuesday,bolstering the presidential election prospects ofRussian leader Vladimir Putin with his unanimousappointment at the organization’s new chairman.On Monday, Georgian President EduardShevardnadze said that he would like to see Putinas CIS Chairman.

Money Supply Rose 57% in 1999

17 Feb (Prime-TASS): Russia’s M2 money sup-ply rose 57.2% in 1999 to 704.7 billion rubles.…Comment : The rise in M2 exceeds the 37.6%increase in CPI for 1999. This is most likely theresult of increased currency barriers which theCentral Bank imposed in the spring of 1999.These currency barriers resulted in a decline inthe velocity of money of approximately 15% lastyear. The barriers “made” Russian companiesand consumers “trust” the ruble by making themhold more of the currency in bank accounts orcash. The IMF had imposed, as an additionalcondition of funding, that the Central Bank liftmost of these barriers by the end of 1999. Withthe barriers largely lifted, CentreInvest Researchpredicts that money circulation velocity will notfall further in 2000 but, more likely, will increase.As a result, the inflation rate may exceed theincrease in the money supply.

Russia Pays $325 million to IMF

11 Feb (Interfax): Russia made a $125 millionpayment to the International Monetary Fund onits loans today, Russian news agency Interfaxreported.

Russian made a $200 million payment to theIMF on Tuesday, part of the $3.6 billion it owes

“The impulse for developmentof the economy

is investment. We cannot count

on raising it in Russia- most of those resources

- must come from abroad.”

Mikhail KasyanovFinance Minister1 February 2000


20 February 2000


MAMAMAMAMACROECCROECCROECCROECCROECONOMY (CONOMY (CONOMY (CONOMY (CONOMY (Cont’d)ont’d)ont’d)ont’d)ont’d)to the fund this year on its total debt of about$15 billion. Last year, Russia paid $3.61 billionto the Fund, the agency reported.

Direct Investment to Rise in 2000

9 Feb (Bloomberg): Russia may receive about$5 billion in foreign direct investment in 2000,said Russian Minister of the Economy AndreiShapovalyants.

Russia saw $3.1 billion in FDI in the first ninemonths of 1999, more than double the amountof foreign investments for all of 1998.Shapovalyants didn’t say how much FDI flowedinto Russian for the full year.

Capital Flight Declining

4 Feb (Bloomberg): Bank of Russia DeputyChairman Viktor Melnikov, speaking at a pressconference, said $15 billion was taken out ofRussia last year compared with $25 billion in1998. Currently, capital flight is about $1 billiona month.

“We are doing our best to maintain the trend andprevent capital flight,” he said. “We hope we willsucceed.”

“If we can solve these problems we can pay ourdebts,” he said. “Capital flight will continue, butwe are taking steps to fight the problem.”

Capital flight includes citizens holding savingsin dollars and exporters failing to repatriate for-eign exchange earnings. However, only 3 per-cent of foreign exchange earnings on exportsare not being repatriated to Russia, Melnikovsaid.

ECONOMIC INDICATORS 18 February:(Interfax, Bloomberg)

••••• Russia’s GDP could grow 2.5 percentto 3 percent in 2000 instead of 1.5 per-cent as earlier forecast, according toRussian First Deputy Prime Minister ofFinance Mikhail Kasyanov. He added“If the tendency of growth of tax collec-tions will persist, then no noe would talkabout an unreal budget.”

••••• The foreign trade surplus rose to $42.2billion in 1999 from $16.9 billion in 1998.

••••• Russia’s monthly inflation rate for thefirst half of February was 0.8%. Janu-ary inflation was 2.3 percent.

••••• Russia’s foreign currency and gold re-serves rose by $300 million to $13.4billion in the week ending 11 Febru-ary . The reserves fell by $200 million inthe previous week. Russia’s reserves in1999 reached a low on 1 April, when theywere about $10.8 billion in April. About2/3 of reserves are in cash and 1/3 inprecious metals.

••••• Russia’s January budget revenue to-taled 61.1 million rubles whereas spend-ing totaled 61.4 million rubles, making abudget deficit of 300 million rubles.

• Russia’s Tax Ministry reported that Janu-ary federal budget tax collections were40.4 billion rubles, which is 27.4 percentabove the target set by the government.The Ministry said it collected 337.4 bil-lion rubles in taxes in cash in 1999, morethan double the amount collected in1998. The Tax Ministry aims to collect390 billion rubles in taxes in 2000.

••••• Russia’s money supply grew by 7 bil-lion rubles ($244 million), or 2.3 per-cent , to 307 billion rubles in the weekended 7 February.


20 February 2000


FINFINFINFINFINANANANANANCECECECECEKolotukhin Appointed

Deputy Finance Minister

18 Feb (www.Interfax.com): Russia’s SergeiKolotukhin, the advisor to the board of TroikaDialog in Moscow, has been appointed Russiandeputy finance minister, news agency Interfaxreported.

Kolotukhin graduated from Moscow FinancialInstitute in 1983. “Kolotukhin probably will be incharge of the department for macroeconomicpolicy and issues connected to international fi-nancial organizations, notably the IMF,” theagency said, citing an unnamed Finance Minis-try spokesman.

On 10 January, Russia’s acting PresidentVladimir Putin promoted Finance Minister MikhailKasyanov and Emergency Situations MinisterSergei Shoigu in the first government reshufflesince he took over as acting presient on NewYear’s Eve.

18 Feb (Interfax): Russia’s Sobinbank and Fla-mingo Bank had been laundering money via theBank of New York, the Interior Ministry said onFriday. The two banks’ involvement in “irretriev-able multimillion payments via the Bank of NewYork is a proven fact,” Yuri Demidov, head ofthe Interior Ministry’s economic crime depart-ment said at a meeting at the Tax Ministry.

Government to Issue Treasury Bills

16 Feb (Bloomberg): Russia announces plansto sell 5 billion rubles ($174m) of Treasury billson February 23. …Comment : The governmentexpects this issue of new ruble-denominatedsecurities will cover the federal budget deficit,expected to be approximately 5 billion rubles inFebruary. The move is intended to reduce gov-ernment money emissions, with offered rubleyields at about 25%. However, if the practice of

“This is definitely a tactical victory,because investors

wanted this debt restructuring.But in three to five years ahead,

this even makeseconomic growth more difficult.

This agreement, I think,is not a final

restructuring of Russia’s debts.”

Mikhail ZadornovFinance Minister

14 February 2000Radio Ekho Moskvy

borrowing continues through the year, whensome decline in oil prices can be expected, yieldsmay go up and significantly complicate attemptsto cover the budget deficit by non-inflationarymeans.

Russia Stuffs London Club

11 Feb (Bloomberg): Russia has agreed withthe London Club of creditors to reduce its $31.8billion debt and extend payments over a 30-yearperiod. …Comment : The restructuring deal callsfor a $10.6 billion debt write-off. Russia gavethe London Club no other choice than to acceptthose restructuring terms referred by Russia.According to media sources, after seven roundsof negotiations failed to produce a consensus,Russia decided to offer the London Club just onemore round while threatening a unilateral restruc-turing if consensus was not found n the finalround. This forced the London Club to acceptterms much closer to Russia’s initial proposals.

Hansa AG Buys 5% Troika Dialog

7 Feb (Bloomberg): Hansa AG, a Swiss-basedprivate investment company, bought a 5 percentstake in Troika Dialog, a Moscow-based broker-age and asset management company, to expand


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FINFINFINFINFINANANANANANCE (CCE (CCE (CCE (CCE (Continued)ontinued)ontinued)ontinued)ontinued)its Russian investments.

“Our investment in Troika is a foothold,” saidHansa owner Georg von Opel . “We expect todiversify in private equity in smaller companies.This is where we particularly need Troika’s team.”

Troika, whose main shareholder is Bank of Mos-cow, which handles the city’s accounts, ex-panded is Western and Russian client base lastyear an earned a profit in 1999, beating earlierprojections, said Troika Dialog President RubenVardanian.

“We believe that Russia is going to make tre-mendous progress,” von Opel said.

4 Feb (Vedomosti): Vnesheconombank ,Russia’s state-owned bank, is suing AO Sibur ,Russia’s No 1 gas refining holding, over its sub-sidiary OAO Sibneftegazpererabotka’s 60 mil-lion rubles ($2.1 million) of debts, said Russiandaily Vedomosti. Vnesheconombank receivedSNGP promissory notes worth 32.6 million rublesafter bankruptcy proceedings started abainstRussia’s Bank Imperial in 1998.Vnesheconombank also plans to claim 23.8 mil-lion rubles interest on the debts, said the news-paper.

24 Jan (Bloomberg): Bank Austria AG, thatnation’s largest bank, said its Russian retail-banking unit returned a profit in 1999 as an im-proving economy helped it attract more custom-ers.

Bank Austria Creditanstalt (Russia) LLCposted preliminary profit of 128 million schillings($9.3 million) in 1999 after a 403 million-schillingloss the year before. The unit also doubled itsassets to about 2.25 billion schillings, said BankAustria Creditanstalt International AG, whichoperates the bank’s business outside Austria.

The bank opened three retail branches in Mos-

cow in September to fill a gap left after manyRussian rivals went bankrupt when the govern-ment defaulted on $40 billion in debt in August1998.

Shares of Bank Austria, which opened its fourthbranch in Moscow this month, rose 1 euro, or 2percent, to 51.40 euros today.

MONEY MARKETS (Bloomberg, at the close oftrading, 18 February)

The Bank of Russia’s overnight deposit ratewas fixed at 1 percent , down from 3 percenton Wednesday. On 20 January, the rate was5%.

One-day rates on the Moscow Interbank Cur-rency Exchange, Russia’s main currency ex-change, were bid at 5.8 percent , compared with5.6 percent on Thursday. They were offered at11.4 percent, compared with 11.2 percent onThursday.

The official CBR exchange rate was set at28.74 rubles per dollar for Saturday comparedwith 28.79 rubles per dollar today. The rate wasset at 28.51 rubles on 20 January.

The refinancing rate was set at 45% on 24January.

Iridium to be Scrapped

20 Feb: Eagle River Investments, the invest-ment group led by cellular phone magnate CraigMcCaw , has reduced its proposed financing sup-port to Iridium from US$74.6 million toUS$5 million. This amount would keep the ill-fated mobile satellite telephony venture operat-ing through mid-March instead of mid-June aspreviously announced. Eagle River Investmentsplans to sell the company on auction by mid-April for at least US$600 million. Iridium still holds


20 February 2000


MEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND COMMUNICOMMUNICOMMUNICOMMUNICOMMUNICAAAAATIONS (CTIONS (CTIONS (CTIONS (CTIONS (Continued)ontinued)ontinued)ontinued)ontinued)contracts for satellite launches on Rokot, Delta 2and CZ-2C/SD vehicles.

Iridium LLC today secured new interim financ-ing on 17 February in an effort to expedite thetransition of its assets and personnel to a newoperating company.

The motion, approved by the U.S. BankruptcyCourt for the Southern District of New York, pro-vides the company a total of $5 million fromEagle River Investments LLC, telecommunica-tions pioneer Craig McCaw’s investment com-pany, and Motorola to finance the continuedoperation of the company through March 6,2000.

The plan approved by the Court todaysupercedes the proposal for debtor-in-posses-sion (DIP) financing filed with the court last week.The company advised the court that it anticipatesthat an investor group led by Eagle River willmake a near-term proposal for the purchase ofIridium’s assets under Section 363 of the Bank-ruptcy Code.

Iridium LLC expects to file a motion with the courtby early March to establish procedures for theSection 363 sale and to secure additional DIPfinancing for the period March - April, lookingtoward completing the sale by mid-April. Thecompany expects an Eagle River-led investorgroup to submit a bid similar to the terms con-templated in the DIP financing documents filedlast week with the court. The procedures wouldallow other potential offers to be made for the

assets, as required by Section 363.

Iridium CEO John Richardson said: “We arepleased by this new development. This approachshould result in a more expeditious transition toa new operating company, which will benefit ourcustomers.”

Iridium LLC filed for Chapter 11 bankruptcy pro-tection on August 13, 1999.

Iridium LLC became the world’s first global sat-ellite phone and paging company on November1, 1998. Its network of 66-low earth orbiting sat-ellites combined existing terrestrial cellular sys-tems, enables customers to communicatearound the globe. Iridium World Communica-tions, Ltd. (IRIDQ) is the public investment ve-hicle of Iridium LLC.

Advertising Market Declines 43%

20 Feb (Russian Research): The expert evalu-ation of the Russian advertising market in 1999was $760 million total with the TV share of 25%($190 million). Compared to 1998, the total vol-ume of the Russian advertising market in 1999was 43% down.

During the parliamentary election campaigns,the 5 major television channels and networksbooked political advertising time by party or blocas shown on the following chart. Medved rankedfifth. No revenue figures were available. It isexpected that even smaller advertising budgetswill be allocated for Presidential elections.

“Space junk ... It’ll be a hell of agarage sale.”

Paul KaganIndependent Telecom Analyst

Regarding Iridium Bankrupcty filingand planned liquidation sale

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20 February 2000


MEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND COMMUNICOMMUNICOMMUNICOMMUNICOMMUNICAAAAATIONS (CTIONS (CTIONS (CTIONS (CTIONS (Continued)ontinued)ontinued)ontinued)ontinued)The preceding chart shows the Volume of Politi-cal Advertising by Party or Bloc on National Tele-vision for 5 Major Channels and Networks from28 November through 18 December 1999.

Call Metering Mandated in Russia

18 Feb (Interfax, Prime-TASS): Deputy Telecom-munications Minister Yuri Pavlenko announcedat a press-conference that local call metering isto be introduced everywhere and for all catego-ries of subscribers in Russia’s telephone net-works.

MGTS, controlled by AFK Sistema , a holdingcompany with interests in telecom, banking,media, oil and insurance sectors, previouslyannounced on 15 February it would finalize theintroduction of per-minute billing for local callsby April 1, 2000.

MGTS (and PTS) are set to gain the most fromsectorwide implementation of per-minute localcall billing in 2000-2001.

According to CentreInvest Research, about 80%of MGTS’s corporate clients are charged for lo-cal calling service at the following monthly rates:165 rubles ($5.70) for private business entitiesand 55 rubles ($1.90) for public sector users.However, per-minute metered subscribers willenjoy up to 613 minutes free of charge, afterwhich each additional minute will be charged tothe monthly bill of private sector subscribers atthe rate of 0.40 rubles (1.4 cents) and publicsector customers at 0.11 rubles (0.4 cents).

According to MGTS statistics, about 65% ofmetered subscribers do not exceed the 613-minute limit in the course of normal businessactivity. On the other hand, MGTS specialistsestimate that only 25 – 30% of residential sub-scribers will exceed the 613-minute limit, in par-ticular those who do business from home by tel-

ephone. This caller group may consist largelyof the growing number of both teenage and adultInternet enthusiasts rather than on-line business-men, who mostly prefer logging on from the of-fice. MGTS expects approximately 15% of sub-scribers will pay twice (about 100 rubles or $3.5)the current monthly rate of 52 rubles ($1.8) forunlimited telephone use. It is still an open ques-tion as to how soon MGTS will introduce per-minute billing for residential subscribers, whoaccount for about 80% of the company’s cus-tomer base. The determination of MGTS tocharge residential customers on a per-minutebasis is shared by the Antimonopoly Ministry andthe idea is widely supported in both the Ministryof Telecommunications and Svyazinvest. TheMoscow city government, however, opposes per-minute billing of local calls for city residents. Inaddition, the public itself will strongly resist anysuch move. Considering that Moscow city hall,rather than Svyazinvest, has retained a control-ling stake in MGTS via AFK Sistema,CentreInvest expects to see a struggle over thisissue, the outcome of which is highly uncertain.Rates for per-minute metered telephone serv-ices are still subject to discussion and compro-mise between federal authorities and local gov-ernments.

Vimpelcom Soars

18 Feb (Vimpelcom): AO Vimpelcom shareshave soared 146 percent in three months andare set to rise further as Russia’s largest mobilephone company offers cheap handsets to newcustomers, who will make more calls as theeconomy improves.

Vimpelcom, the first Russian company to list onthe New York Stock Exchange, cut prices to winback users it lost in 1998 when the ruble fell andbanks crashed. The company’s new prepaidphone service and handsets priced as low as$50 have attracted new customers as the ru-ble’s decline has slowed in recent months aftera decline of more than 75 percent. Vimpelcom


20 February 2000


MEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND COMMUNICOMMUNICOMMUNICOMMUNICOMMUNICAAAAATIONS (CTIONS (CTIONS (CTIONS (CTIONS (Continued)ontinued)ontinued)ontinued)ontinued)has almost tripled its customers in the past year,to 352,000 from 124,000.

“As real incomes rise, the segment they’re grab-bing will get wealthier,” said Tim McCarthy, port-folio manager of the $120 million LexingtonTroika Dialog Russia Fund, in which VimpelComaccounts for about 8 percent. “Middle classRussians are emerging slowly. By 2001, they’llhave a much bigger subscriber base.”

Russia’s market for cellular communications isexpected to expand as incomes rise and con-ventional phones requiring installation of newlines can’t keep up with demand. VimpelComwill double its subscriber base this yea, accord-ing to Moscow brokerage Troika Dialog.

VimpelCom’s long-term credit rating was raisedyesterday by Standard & Poor’s to ‘CCC+’ from‘CCC’. The outlook for the company was re-vised to positive from stable .

The company’s market value has jumped to$1.7 billion from $695 million in three months.

“Because Russia’s fixed-line infrastructure re-mains poor, nascent growth and economic sta-bility have renewed demand for cellular serv-ices,” S&P said.

About 6 percent of Moscow residents, and 1percent of Russia’s 130 million people, use amobile phone, compared with more than 60 per-cent in Finland. About 20 percent of Moscowresidents will use mobile phones in 2002, esti-mated Moscow brokerage United FinancialGroup.

“When the political an economic situation getsstabilized, there will be essential growth,” saidVeli Lane, director of Nokia’s Russian networkoperations.

VimpelCom will probably report a profit this year

from a loss last year, according to Troika Dialog,which rates the stock “long-term outperform.”

Foreign investors are taking up stakes in theindustry, betting on market growth. Telia AB ,Sweden’s largest phone company, bought a 29.5percent stake in Russia’s First National Hold-ing, for 700 million Swedish kroner ($80.4 mil-lion). First National Holding owns 51 percent ofSt. Petersburg-based Telecominvest , whosesubsidiaries include North-West GSM, a St.Petersburg-based digital cellular phone opera-tor.

Sonera Oyj , Finland’s top phone company, isconsidering applying for a cellular phone licensein Moscow. Sonera already owns a 23 percentstake in North-West GSM.

VimpelCom attracted Telenor East Invest AS ,a unit of Norway’s state-owned phone companyTelenor AS, which bought 8.9 million newVimpelCom shares in May 1999 for $162 mil-lion, giving it a 25.7 percent voting stake and31.6 percent common stock ownership. Man-agement owns 40 percent of VimpelCom.

Telenor appointed senior executives toVimpelCom’s management and introduced anaggressive marketing strategy that’s helpedbroaden the client base.

“What makes VimpelCom stand out is its man-agement,” said Tom Adshead, senior analyst atTroika Dialog. “There is no other situation inRussia where a foreign investor takes a minor-ity stake and revamps the management style.”

VimpelCom, which sells its services under thebrand name “Beeline”, introduced dual-bandGSM service, the most popular digital system,on July 5th, allowing the phones to be used morewidely in Russia and abroad. Previously, it op-erated only DCS 1800 and DCS 900 services.

GSM subscribers rose to 132,000 from 21,000in 1998.


20 February 2000


MEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND COMMUNICOMMUNICOMMUNICOMMUNICOMMUNICAAAAATIONS (CTIONS (CTIONS (CTIONS (CTIONS (Continued)ontinued)ontinued)ontinued)ontinued)VimpelCom also recently signed an agreementwith Nokia to deliver a general packet radio serv-ice core network in central Russia, allowingmobile phone access to the Internet.

The company is also offering multipurposephones from France’s Sagem SA, the world’snumber 6 mobile phone maker, that function asdigital cordless phones near their base and asGSM mobile phones away from home.

The company is also expanding its GSM serv-ice to Russia’ regions, including Voronezh, Tver,Samara, Rostov and Novosibirsk through localpartners.

VimpelCom said it is in negotiations with Telenorand other possible partners to finance a newproject to expand coverage in Russia’s re-gions costing about $500 million. VimpelComwould contribute cash and its licenses, while itspartner would contribute cash.

Still, while the number of VimpelCom’s subscrib-ers has increased, ARPU (average monthlyrevenue per subscriber) has fallen to $99 in1999 and $68 in the fourth quarter, down from$215 in 1998.

VimpelCom is trying to counter the decline inARPU by marketing to high-end small-businessand corporate subscribers in a broad range ofindustries, offering volume discounts of 50 per-cent on tariffs for users of more than 20 hand-sets, according to United Financial Group.

VimpelCom is competing for clients with privatelyowned Mobile TeleSystems (MTS) , which holdsalmost an equal share of the market and wasthe first to receive a GSM license. MTS said itwill start building networks in the regions in thefirst quarter, putting pressure on VimpelCom tomove forward with its expansion plans. MTSalso is considering an initial public offering.

“Even when this IPO does happen, we do notexpect that it will draw money away fromVimpelCom,” said Adshead. “VimpelCom hasproved there’s a mass market in Russia formobiles .”

Golden Buys Sovam Teleport Kiev

18 Feb: Golden Telecom Inc (GTI) (NASD:GLDN), a leading facilities-based provider of in-tegrated telecommunications and Internet serv-ices throughout Russia and other countries ofthe Commonwealth of Independent States (CIS)today announced that its Ukranian subsidiary,Golden Telecom LLC, has acquired the outstand-ing interests in Sovam Teleport Kiev, increasingits ownership position from 49 percent to 100percent.

The merger of Sovam Teleport Kiev, a leadingprovider of data and Internet services acrossUkraine, with Golden Telecom LLC, a leadingindependent provider of international telephonyto Kiev-based businesses, allows the combinedcompany to be the first digital telecom networkin Ukraine to offer integreated voice and dataservices on a nationwide basis.

Stan Abbeloos , GTI’s chief operating officer,said; “The integration of Sovam Teleport Kievand Golden Telecom LLC better positions us toprovide our clients with telecommunications toolsneeded to conduct and grow their businesses.We find our clients want imaginative, forward-looking, integrated telecommunications solu-tions. Our combined experience in the Ukrain-ian telephony and data markets, together withthe introduction of new IP-based products andextended geographic coverage, ensures we arethe best provider to meet this need.”

Golden Telecom LLC’s new integrated productportfolio is unique within the Ukrainian telecom-munications industry. Businesses can now ben-efit from an independent national corporate voiceand data network, which offers international data


20 February 2000


MEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND COMMUNICOMMUNICOMMUNICOMMUNICOMMUNICAAAAATIONS (CTIONS (CTIONS (CTIONS (CTIONS (Continued)ontinued)ontinued)ontinued)ontinued)services based on frame relay and private leasedcircuits, digital telephone lines, ISDN, bankingservices and countrywide high-speed Internet.Stewart Reich , GTI’s chief executive officer,said; “This acquisition and integration is consist-ent with our strategy of streamlining operationswhile offering integrated solutions where GTIdoes business.”

Sistema Reports $180 million Profit

17 Feb (Moscow Times): AFK Sistema, a hold-ing company with interests in Russian telephone,banking, media, oil and insurance companies,reported a $180 million net profit for 1999 andassets of $2.8 billion, the Moscow Times re-ported, citing Sistema Vice President AnatolyAdamishin who spoke at a presentation to in-vestors in Paris.

The holding is seeking partners in telecommu-nications, electronics, machine building and con-sumer goods production, Sistema spokesmanGennady Talalayev said. The company is alsoseeking to expand its foothold in retail gasolinesales in Moscow, where it has about 7 percentmarket share the paper said.

Sistema owns a stake in AO Moscow City Tel-ephone Network, the phone company for theRussia capital known as MGTS.

Increased Revenue forGolden Telecom

14 Feb (Interfax): Golden Telecom (GTI)(Nasdaq: GLDN), a leading facilities-based pro-vider of integrated telecommunications andInternet services throughout Russia and othercountries of the Commonwealth of IndependentStates (CIS), announced results for Q4 and FY1999. …Comment : The company reported con-solidated 99FY revenues at $97.9m or 14%higher than in 1998. Meanwhile, annual EBITDA

showed a positive figure of $16.4m versus $2.8mlosses recorded a year ago. In the fourth quar-ter of 1999 EBITDA grew 23% from their 3Q99number due to increased contributions from longdistance and data transmission services. How-ever, revenues from mobile telecommunicationsdeclined, reflecting the negative effect of recenttariff reductions, which failed to generate addi-tional sales proceeds from an increased cus-tomer base as had been expected.

Golden Telecom has concentrated its core busi-ness in the most lucrative areas of the telecom-munications market. Moreover, the company isworking aggressively to expand its market sharein other areas through tariff wars and the acqui-sition of its closest competitors in order to attaina dominant position in the respective market.Telecom services presuppose high profit mar-gins (St. Petersburg Internet providers can makeup to 200% of their operating profit margin) andpromise accelerated sales, which keep far aheadof expenses. CentreInvest Research expect thatthe company will expand into the area of on-linemass media by purchasing advanced Russianweb-sites and offering web-hosting and web-de-sign services. In addition, the company has asubstantial market capitalization (currently $630million at $27.7 per share), which has risen 73%since the company’s IPO on NASDAQ, as wellas sufficient share liquidity enhanced by wideexposure to world markets.

Proton K Rides Again

13 Feb (Bloomberg): Lockheed Martin Corp .,the world’s number one defense contractor, saidit successfully launched a satellite on a RussianProton rocket , resuming a business stalledsince last year by investigations of two crashes.

GKNPTs Khrunichev supplied the three-stageProton K vehicle while the Block DM3 upperstage was manufactured by RKK Energiya .After three burns of the DM3 upper stage, thesatellite, called Garuda 1, was released onto a6,233 x 35,946 km geostationary transfer orbit


20 February 2000


MEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND COMMUNICOMMUNICOMMUNICOMMUNICOMMUNICAAAAATIONS (CTIONS (CTIONS (CTIONS (CTIONS (Continued)ontinued)ontinued)ontinued)ontinued)inclined 16 degrees on the Equator.

The International Launch Services joint ven-ture, known as ILS, yesterday put into orbit the$600 million mobile telephony satellite built byLockheed Martin Commercial Space Systemsfor Asia Cellular Satellite International, or ACeS,which plans the first Asian regional satellite tel-ephone service. Garuda 1 is the heaviest sin-gle commercial satellite launched on a Proton,weighing 4.5 tons. ILS plans up to eight Protonlaunches this year.

Satellite makers “continue to demand servicesfor larger and heavier satellites,” said AnatolyKiselev , director of Krunichev Space Center,which produces the Proton. “Our Proton launchvehicle is uniquely capable of supporting (those)requirements.”

Officials blamed the earlier crashes, in July andOctober, on a faulty engine constructed shortlyafter the breakup of the Soviet Union in 1991when quality controls were weak. Yesterday’slaunch used engines produced in 1998.

ILS is planning another satellite launch on a Pro-ton rocket in April for US-based Sirius SatelliteRadio Inc., which plans to broadcast music froma satellite network to cars.

ACes’s regional-based satellite telephone serv-ice in Southeast Asia will compete withGlobalStar Telecommunications, which began aworldwide service 1 January with a network of48 satellites, and Iridium LLC, with a 66 satelliteglobal phone network. GlobalStar, 45-percentowned by Loral Space & Communications Ltd.,also used Russian rockets to launch satellites.

ACeS shareholders include Lockheed MartinGlobal Telecommunications, Philippine LongDistance Company, Jasmine International Pub-lic Co. Ltd. Of Thailand and Pasifik SatelitNusantara of Indonesia.

ACeS plans to provide commercial satellite com-munications service on GSM mobile phonesbeginning in August. The project needs 120,000subscribers to break even and expects to signup that number within a year of operations.

Russia earned US$900 million from its commer-cial space launch activities in 1999 according toInterfax (see below).

Svyazinvest Projects Big Profits

10 Feb (Interfax, AK&M): OAO Svyazinvest, theholding company for Russia’s phone operators,estimates its net profit in 2000 will total 13.9 bil-lion rubles ($484.8 million), Russian newsagency Interfax reported. That represents a 12percent increase from the previous year. Thecompany expects gross income of 66.8 billionrubles this year, the agency said.

Mustcom Ltd., a Cyprus-based company that fin-ancier George Soros helped set up, bought a25 percent plus one share interest in Svyazinvestin 1997 for about $1.8 billion, later calling it oneof the worst investments of his career.

Svyazinvest is anticipating net income of 13.9billion rubles ($458 million) by year end 2000.…Comment : While this represents 12% growthin ruble terms, it implies a 13% decline in dollarterms due to a 25% ruble devaluation in 2000.Revenues will likely reach RUR 66.8b ($2.2b), a19% increase over the 99 FY result. Operatingprofits will likely amount to RUR18.3b ($603m),showing a 16% growth rate. Meanwhile, the lat-ter two figures when denominated in dollars in-dicate a 6% and a 9% decline respectively, whichcould be a benchmark for the sector’s averageperformance this year. Receivables (4.5 billionor $157 million) from state-financed subscrib-ers are of special concern for Svyazinvest.

9 Feb (Interfax): Russia’s regional telecomshave invested about $100 million into call


20 February 2000


metering equipment since 1992 . ... Comment :Local call metering is about to be introducedthroughout the country. According toSvyazinvest, installed meters cover about 15million out of Russia’s total network capacity of29 million access lines. During the coming threeyears the holding intends to spend an additional$100 million to equip another 12 million tel-ephone lines with time meters. It will requireroughly $500 million to replace outdatedswitches with electronic systems compatible withper-minute counting instruments. To date, thenumber of step-by-step exchanges totals twomillion access lines, including over one millionlaid in Moscow and St. Petersburg, where thenetwork digitization rate is particularly low. Whilethe overall effect of introducing a per-minute bill-ing principle to local networks is considered tobe conducive to profit generation, Svyazinvestwill not recommend this approach in rural areaswith smaller subscription rates and low traffic.

Golden Telecom Buys Fat Pipe toIncrease Data Capacity

7 Feb (Business Wire): Golden Telecom, Inc.(GTI) (Nasdaq: GLDN) announced today an-nounced that it has acquired STM-16 capacity(2.4 Gbps) from Moscow to Stockholm fromSonera Corporation (Nasdaq: SNRA). In Stock-holm, this capacity will connect directly to theGlobal TeleSystems network, providing accessto complementary broadband Internet and datanetworks in Europe and the United States.

Stan Abbeloos, GTI’s chief operating officer,said: “The acquisition of this capacity is strate-gically important to the development of both ourInternet and business-to-business data services.With the advent of multimedia streaming, Webcasting, multi-cast events and bandwidth-inten-sive ASPs, this broadband capacity will ensurethat GTI is well positioned for the foreseeablefuture to be the leading quality Internet and data

MEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND COMMUNICOMMUNICOMMUNICOMMUNICOMMUNICAAAAATIONS (CTIONS (CTIONS (CTIONS (CTIONS (Continued)ontinued)ontinued)ontinued)ontinued)service provider across Russia and the CIS.”

Golden Telecom’s Russia-On-Line service iscurrently the only dial-up ISP in Russia with over35 points-of-presence (PoPs) including Moscowand St. Petersburg. The recent acquisitions ofGlasnet, a Moscow-based ISP, and Nevalink, aSt. Petersburg ISP, have allowed GTI to con-solidate the bandwidth requirements of theseorganizations, which ultimately allows for signifi-cantly reduced access costs. GTI’s business-to-business data services currently operate morethan 100 PoPs across the CIS. This additionalcapacity will greatly enhance GTI’s ability to con-tinue to provide global connectivity to its cus-tomers. GTI will also have the ability to tie intoe-Business data centers and capitals through-out Europe and the United States. GTI acquiredthe capacity through a multimillion dollar 15-yearlease agreement that approximates an Irrevo-cable Right of Use (IRU) on the new Sonera fiberoptic network. Sonera’s Russian subsidiary hasa fiber network from Finland to Moscow usingutility-company rights-of-way. Sonera expectsthat the network will be commercially operationalduring the first quarter of 2000. Initially, GTI willactivate the equivalent of an STM-1(155Mbps) and will upgrade to STM-4 (622Mbps) and then to STM-16 as required.

GTI also announced the appointment of AshleyDunster, Izzet R. Guney, Stewart J. Paperin andJeffrey H. Von Deylen to its Board of Directorsin January 2000.

Launching BirdsYields Serious Money

7 Feb (Interfax): Russia earned $900 millionfrom commercial satellite launches last year,Russian daily Interfax reported, citing DeputyPrime Minister Ilya Klebanov. This is a “serioussum,” he said. Russian space companies areworking at full capacity, he added.

Last November, Lockheed Martin Corp., the


20 February 2000


MEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND COMMUNICOMMUNICOMMUNICOMMUNICOMMUNICAAAAATIONS (CTIONS (CTIONS (CTIONS (CTIONS (Continued)ontinued)ontinued)ontinued)ontinued)world’s largest defense contractor, delayed aplanned satellite launch on a Proton rocket fol-lowing the crash of a Russian Proton rocket, thesecond that year.

5 Feb (Interfax): Kazakhstan lifted a ban onRussian Proton rocket launches from itsBaikonur space center, Interfax reported, citinghead of Kazakhstan’s Aerospace CommitteeMeirbek Moldabekov. The country lifted its ban,imposed after a Proton rocket crashed in Octo-ber 1999, because it was satisfied with Russianmeasures to prevent future accidents,Moldabekov said. Russia paid Kazakhstan 57million tenge ($408,600) in damages the agencysaid.

US Company Invests in RussianCable and Internet Access

1 Feb (Wall Street Journal): Andersen GroupInc., a US company with stakes in a Russiantelecommunications and metal company, said itplans to a $350 million joint venture in Moscowto provide cable television and high-speedInternet access.

Andersen said its joint venture with Moscow Tel-ecommunications Corp ., an eight-year oldcompany started with support from the city gov-ernment, initially will target 1.5 million homes incentral Moscow. Each partner will provide $33million in equity for the project. Other financing,to be spread over four years, will come in partfrom US-supplied equipment and bank loans.

The 50-50 joint venture, to be called Comcor-TV, expects 70 percent of households in its cov-erage area to subscribe to cable TV and between5 and 8 percent to Internet coverage.

Andersen Group and its fellow investors arecontributing $33 million in cash to Comcor-TV,while Moscow Telecommunications is providing

access networks valued at $33 million; an addi-tional $100 million will be financed with debt andthr remaining $200 millionout of cash flow fromthe joint venture.

Andersen, based in New York, is counting on50,000 subscribers for its Comcor-TV service inthe first year alone, offering high-tech equipmentat higher rates than the lower-cost provider in acity of close to 10 million. Analysts said thatcould be difficult given the strength of AO Mos-cow City Telephone Network, which dominatesthe market.

“This is a very new venture and a very ambi-tious venture,” said Vladimir Bagrov, a telecom-munications analyst at CentreInvest Securitiesin Moscow. “The major problem is - how can Iput it - that the (Moscow) telecommunicationsmarket is a very hard one to break into .”

Comcor-TV will offer a wide range of cable TVand Internet access, and in the future will offersuch services as video-on-demand and on-linemarketing. Troika Dialog in Moscow is the in-vestment banker for the transaction withAndersen.

“There’s a huge economic opportunity in Mos-cow,” said Frank Baker, chairman of AndersenGroup. “This is an underserviced market.”

Return of KremlinSpinmeister Yastrzhembsky

24 Jan (The Moscow Times): Vladimir Putinappointed Sergei Yastrzhembsky, Kremlinspinmeister, with the unenviable task of spinningthe Chechen war, dealing with the media tosmooth over Russia’s tattered image. Accord-ing to the Kremlin, he will be in charge of “coor-dinating the flow of information concerningChechnya”.

A career diplomat, Yastrzhembsky is no strangerto handling tough public relations tasks. It was


20 February 2000


MEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND COMMUNICOMMUNICOMMUNICOMMUNICOMMUNICAAAAATIONS (CTIONS (CTIONS (CTIONS (CTIONS (Continued)ontinued)ontinued)ontinued)ontinued)he, after all, who had to clean up after Yeltsin’sfrequent public spectacles.

He is also adept at handling the media. Cover-ing Yeltsin and US President Clinton’s 1997 sum-mit in Helsinki, Yastrzhembsky oversaw a well-run press center and exhibited an uncanny abil-ity to spin the Western press. Foreign reporterswatched in awe as he fielded questions in sev-eral languages without a translator and withoutmissing a beat.

A Foreign Ministry spokesman and ambassa-dor to Slovakia, Yastrzhembsky is seen to beangling for the top job at the Foreign Ministry.This latest appointment by Putin has all the ap-pearances of a proving ground for that job.

Yastrzhembsky’s appointment comes at a timewhen the Chechen conflict - upon which so muchof Putin’s prospects rest - is reaching a criticalstage. On the battlefield, Russia troops are onthe verge of being bogged down in a drawn outbloodbath. Abroad, Moscow is facing increasedcriticism and possible isolation.

Perhaps Yastrzhembsky was recruited to helpclean up the diplomatic and public relations messas the Kremlin seeks a face-saving end to theconflict.

WAP and GPRS to be Introducedby Kuban-GSM

31 Jan (AK&M): Cellular operator Kuban-GSM ,a daughter company of Kubanelectrosvyaz,plans a sizeable expansion in 2000. …Comment:According to Kubanelectrosvyaz’ management,which holds 51% in Kuban-GSM, the joint ven-ture will further increase its mobile capacity inthe Kuban Region to 100 radio base stations(the 51 stations currently available cover about30% of the region). In 1999, the JV’s customerbase rose 154% to 27,000 subscribers and is

expected to reach 50,000 by the year end.

The company is preparing implementation ofadvanced value-added technologies, such asGSM-Internet using WAP (Wireless ApplicationsSystem) and GPRS (General Package RadioService) for wireless access to the World WideWeb and prepaid intelligent network services tobe introduced in 2000. The GPRS offers instantpackage-switched connections to data networksbased on the GSM technology. Besides fasterand easier access to the Internet (with trans-mission rates of over 150 Kb/sec.), the continu-ous connection enables the use of multimediamessaging, corporate wireless Intranet, remoteappliance control and maintenance, as well asnumerous monitoring and surveillance applica-tions. There are plans to further expand roam-ing potential, currently supporting operations inmore than 150 Russian cities and 37 countries.

Telco Operators ImprovePerformance in 1999

27 Jan (Interfax): The financial condition of nearlyall Russia’s telecom operators significantly im-proved in 1999. …Comment : Only MGTS, thelargest Russia’s local telephone operator, re-ported the 1999 loss, due to the remaining for-eign debt in the sector ($210 million). The com-pany’s prospects remain uncertain in the shortterm, considering its debt service obligations onits Eurobond maturing in 2001.

Urktelecom to Issue Eurobondsto Fund Partner Buy-out

27 Jan (Prime-TASS): Ukrtelecom , the majorUkrainian telecom carrier, plans to issue $40–50 million 2-3 year convertible Eurobonds in Q1‘00. …Comment : Funds will be used to pur-chase foreign partners’ stake in its 51% control-led JV, Ukrainian-American-German-Dutchtelecom operator Utel, a near monopoly in inter-national services with a 42% market share in


20 February 2000


MEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND CMEDIA AND COMMUNICOMMUNICOMMUNICOMMUNICOMMUNICAAAAATIONS (CTIONS (CTIONS (CTIONS (CTIONS (Continued)ontinued)ontinued)ontinued)ontinued)the domestic Ukrainian long distance market (theremaining 58% handled by Ukrtelecom).CentreInvest Research estimates Ukrtelecom’soutstanding debt to yield 25% interest to its hold-ers, while the Ukraine’s sovereign debt is cur-rently trading at approx. 30% interest. Ukraineplans to privatize the state-owned Ukrtelecom,thus in 2000 a blocking stake of 25% plus oneshare is expected to be traded on the open in-ternational auction with the starting price of $500million. For reference, the same blocking stakeof Svyazinvest was traded for $1.8 billion threeyears ago. Besides, Ukrtelecom’s charter capi-tal is about $456 million (2.5 billion hryvna) there-fore, the starting price seems to be overpricedwith a 440% premium for blocking participationin the company. This play is not for the faint ofheart.

Rostelecom Adopts MMT Staff

20 Jan (Rostelecom): The staff of Moscow MMTwas transferred to Rostelecom’s business struc-ture in January 2000. …Comment : Accordingto Moscow MMT management, the company’sstaff was transferred to Rostelecom’s newly cre-ated subsidiary, MMTS-10 in accordance withthe acquisition plan. In March–April the two op-erators intend to call a mutual general meetingwhere shareholders will vote for the final date ofthe share swap as well as approve the 2.41 to 1conversion rate. We expect that Moscow MMTwill remain a legal entity in the registry of theMoscow Registrar’s Office until its accounts arecancelled, presumably on the same date of theshare swap.

MGTS Muscles Competing ISPs

14 Jan (Internet sources): MGTS is using itsmonopoly position on the Moscow market ofpublic telecom services to influence competingInternet service providers (ISP). …Comment :As of January 1, 2000, Moscow GTS suspended

lending telephone channels to independentISPs—primarily because the company has be-gun to develop its own project to render fastInternet access using modern ADSL (Asymmet-ric Digital Subscriber Line) technology. MGTSwas the sole provider of cheap assigned cablechannels for Moscow ISPs (one copper twistedpair for $12 a month and $200-300/month to renta fibre-optic channel). It is possible several ISPswill file lawsuits with the Anti-Monopoly Com-mittee against MGTS’s actions, some of whomare likely to prevail despite MGTS’s significant


20 February 2000


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Russian Telecoms Proxies12 Months Through 20 February 2000

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Prepared by Griffin Capital

GTS GroupIFC InvestableRussia Index

Vimpelcom ADRs

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Golden Telecom

lobbying power.

The following graph shows the correlation be-tween five indicators of portfolio investment ac-tivity in Russia and its telecom sector based onpublicly quoted share and index values reportedfor the twelve months ending 20 February 2000.

The five indicators, charted on the basis of a 2-day moving average are i) the widely followedAK&M Index of Russian Telecom shares, ii)shares of Global TeleSystems, Inc., approxi-

mately half of whose revenue is derived from itsRussian network, iii) ADRs of VimpelCom,Russia’s largest mobile phone operator, iv) theIFC’s Index of Investable Russian shares and v)the Barclays Wireless index (scaled by a factorof 1/3).

On 1 October, Global TeleSystems listed its 65%owned Russian operations subsidiary on theNasdaq as “Golden Telecom” (NASD: GLDN),from which time we included those shares in ourmonthly report.


20 February 2000


ENERENERENERENERENERGYGYGYGYGY

“Gazprom will only improve its activity intrading and in management. We acquired

too many excessive assets,which we do not need.”

Rem VyakhirevChief Executive of Gazprom

4 February (Krasnodar)

18 Feb (Vedomosti): OAO Gazprom , Russia’snatural gas monopoly, said it plans to increaseits stake to 25 percent share in OAO PermskiyeMotory, a Russian engineering company minor-ity-owned by United Technology Corporation’sPratt & Whitney unit, together with OAOPermskiy Motorny Zavod and PAP Aviadvigatel,both close partners of Perm Motors, Russia dailyVedomosti reported. The gas company holds2.9 percent stake in Perm Motors, 16.3 percentin Aviadvigatel and does not have any share inPermskiy Motorny Zavod. Gazprom proposesto issue new shares at the three companies, saidthe newspaper.

Gazprom is a major client of the engineeringcompanies providing roughly 50 percent of theircontracts and about the same share of the plant’srevenue.

Gazprom to Buy Turkmen Gas

17 Feb (Bloomburg): OAO Gazprom chief RemVyakhirev said the company will negotiate a long-term contract tomorrow to buy gas fromTurkmenistan.

“We plan to discuss a long-term contract for gassupplies to Russia and its further possible tran-sit,” said Gazprom spokesman Igor Ivantsov.“The shipments will be handled by Itera,” a US-registered gas trading company.

The Russia company will discuss a possible 30-year gas contract with delivery of 20 billion cu-bic meters of gas annually, Russian news agencyInterfax reported, citing industry sources. The

contracted volumes could be increased to 50billion cubic meters of gas per annum.

Turkmenistan has refused to sign long-term con-tracts with Gazprom in the past, said DeputyChief Executive Yuri Komarov. Gazprom signeda one-year contract with Turkmenistan to pur-chase 20 billion cubic meters of gas for deliver-ies to Russia late last year. Itera handle thisyears supplies as well.

The gas is sold at the Turkmenistan-Uzbekistanborder for $36 per mcm. About 40 percent ofthe volumes are due to be paid in cash with therest to be offset in goods, Vyakhirev said earlier.

Turkmenistan has been competing withGazprom to deliver gas to Turkey under theCaspian Sea. But the former Soviet republicfaces extra competition from Azerbaijan offshoreprojects, which have essential gas reserves andare unwilling to export it to Turkey.

YUKOS Proposes ModernizingCroatia’s Adria Pipeline

14 Feb (Vedomosti): AO Yukos Oil Company,Russia’s number two oil producer, has proposedinvesting $20 million to modernize the Adria oilpipeline in Croatia to enable it transit crude fromSiberia to the Adriatic, Vedomosti reported. Theoil compnay also has committed to shipping 5million tons of oil through the 3,000 kilometerroute by the end of the year. The route, whichwill join the Druzhba pipeline, has to secure atransit tariff of $0.64 per ton of oil transportedper 100 kilometers to make the export of Rus-sian oil feasible, the paper said.

Yukos also has plans to participate in a construc-tion of a $1.7 billion oil pipeline from Russia toChina.

Why Does Putin Praise YUKOS?

10 Feb (NGV): Acting President Putin praised


20 February 2000


ENERENERENERENERENERGY ( CGY ( CGY ( CGY ( CGY ( Continued)ontinued)ontinued)ontinued)ontinued)YUKOS subsidiaries for their performance andcompliance with payments to the budget.…Comment: Earlier Putin praised subsidiariesof Surgut Holding in a similar way. Acting Presi-dent Putin appears to disagree with stock mar-ket sentiment and does not believe YUKOS isamong the worst managed companies. A sourceclose to YUKOS said that in early January,YUKOS CEO Mikhail Khodorkovsky signed twomemoranda with Chinese oil companies. TheChinese party committed itself to accepting 20mtonnes of oil from Russia by 2004. This meansa major breakthrough in YUKOS’ Russia-Chinaexport pipeline project, as the Chinese commit-ment is a prerequisite for getting project financ-ing from the banks.

This project is intended to enable the companyto increase output by one third, from the current45mt to 60mt annually. The project will be com-pleted, at earliest, in three years.

8 Feb (Bloomberg): OAO Gazprom sharestraded abroad tumbled 9.6 percent in two dayson concern Russia’s natural gas monopoly willsell an additional stake on foreign markets.

Gazprom, the world’s largest natural gas com-pany, is seeking government approval to sellAmerican depository receipts representing14.5 percent stake over three years , accord-ing to a December 17th proposal made publicSunday. The stake would be valued at about $3billion, based on today’s ADR price.

The ADRs traded in London fell 4.4 percent to-day to $8.68 after a 9 percent decline on Mon-day. One Gazprom ADR represents 10Gazprom shares.

“They plan to increase the volume of ADRs bymore than seven times and there is no marketfor that ,” said Steven Dashevsky, an analyst atAton brokerage, which changed its recommen-dation on Gazprom ADRs to “sell” from “hold”.

The government, which holds 38.4 percent ofthe company, is considering the plan. Gazpromor its major shareholders could buy back domes-tic stock, which trades at less than one-third theprice of the ADRs.

Gazprom domestic shares, which foreign inves-tors are excluded from buying, rose by 12.8 per-cent today, or 0.94 rubles, to 8.26 rubles ($0.29)traded at Moscow Stock Exchange.

Foreign investors are allowed to hold no morethan 20 percent of Gazprom under Russian law.Currently, 1.98 percent of the shares are tradedas ADRs while Ruhrgas AG , a German gas dis-tribution company, holds a 3.5 percent stake.

Igor Shuvalov, chairman of Russia’s FederalProperty Fund, said Gazprom’s proposal to selladditional ADRs is still under consideration.

According to Igor Shuvalov , chairman of theRussian Federal Property Fund, Governmentwon’t consider selling 14.5% until shares rise to$11.50, the price at which authorities have com-mitted themselves to sell the next stake. Thegovernment and Ruhrgas agreed the next salemust preserve the value of Ruhrgas’s invest-ment . The market could take half a year to reachthis level according to Olga Rybak, director ofthe Ministry of State Property’s Fuel and EnergyDepartment]. The company’s directors arescheduled to discuss the sale at their meetingon 14 February. The gas company plans topresent some terms of the selling terms if direc-tors approve the program. Gazprom also saidits board meeting would review the agenda forthe company shareholder’s meeting to be heldin western Siberia on 30 June. The Russiangovernment has nominated 11 candidates to theGazprom board, of which only five will secure aseat on the board. The state has six seats onthe Gazprom board at present.

The government plans to sell a 3.37% stake toforeign investors. The gas company also has


20 February 2000


ENERENERENERENERENERGY ( CGY ( CGY ( CGY ( CGY ( Continued)ontinued)ontinued)ontinued)ontinued)government approval to sell 6.02 percent abroad.It needs separate government approval to allowthe sale of a further 5.13 percent stake held bycurrent shareholders directly to foreign banks.

Japanese Invest in Kazakh Refinery

3 Feb (Interfax): The Japanese Bank of Inter-national Cooperation has approved a $450 mil-lion project to rebuild the Atyrau Oil Refinery inKazakhstan, Interfax reported. The reconstruc-tion will boost capacity at the refinery to 4.5 mil-lion tons of oil a year; in the first 11 months of1999, it refined just over 1.7 million tons. Kazakhnational oil company Kazakhoil owns 86 percentof the refinery’s shares the agency said.

A Chevron-led group of companies and govern-ments is currently building a $2.4 billion pipelineto take Kazakh oil to international marketsthrough the Black Sea port in Novorissiysk, Rus-sia.

Gazprom Starts Blue Streem Build

3 Feb (Bloomberg): OAO Gazprom started con-struction of the $2.9 billion Blue Stream pipelineproject aimed a delivering gas to Turkey fromRussian under the Black Sea.

“The gas of northern Siberia will reach in a year’stime the coast of Turkey,” said Gazprom ChiefExecutive Rem Vyakhirev.

Gazprom, together with its trading unit and sub-contractors on the project, have a $25 billioncontract with Turkey’s Botas company to shipabout 360 billion cubic meters of gas to the capi-tal, Ankara, between 2001 and 2025. The firstshipment of 2 billion cubic meters will start toflow in 2001, with the full capacity of 16 billioncubic meters a year expected by 2010.

Saipem SpA , the oil services company partly

owned by Italy’s Eni SpA, said in November itwon together with partners a $1.7 billion con-tract to build the undersea pipeline for the project.Gazprom is working on the land portion of thepipeline, for which it received government taxbreaks.

Blue Stream Pipeline Co BV, equally owned byEni and Gazprom, has a contract with Saipem,Bouygues Offshore SA, Mitsui Co. Ltd.,Sumitomo Corp and Itochu Corp for the pipelineconstruction and tubulars.

Russia now sells 14 billion cubic meters of gasto Turkey through pipelines, which pass throughUkraine, Gazprom officials previously stated.

The total length of the pipeline will be 1,200 ki-lometers of which 380 kilometers will stretchacross the southern regions of Russia. Italy’sIlva SpA supplies pipe for the land-portion of thepipeline within Russia.

Energy Ministry ProposesGazprom Breakup

1 Feb (Bloomberg): OAO Gazprom, the world’snumber one natural gas company, should splittransport and gas production assets and giveup its monopoly, Russia’s energy minister said.

Russia’s government, owner of 38 percent ofGazprom, wants a more transparent companythat enables independent producers to accesspipelines, said Fuel and Energy Minister ViktorKalyuzhny. Gazprom’s Rem Vyakhirev, chiefexecutive since 1992 and opposed to such ashift, has offered only to break off service units.

Gazprom, which accounts for 30 percent ofWestern European gas imports and most of EastEurope’s, operates like a state within a state, aspoliticians fight for its billions of dollars of rev-enue and uncollected debt. The comany’s ex-ecutives include a former primer Minister andan ex-central bank chief.


20 February 2000


ENERENERENERENERENERGY ( CGY ( CGY ( CGY ( CGY ( Continued)ontinued)ontinued)ontinued)ontinued)

“The restructuring, if actually enacted, would beexcellent news,” said Eric Kraus, an analyst atNikoil Investment. “If even this cow is not sa-cred, then reform is truly on the way.”

Analysts said discussions on changingGazprom’s structure have gone on for two yearsand a change is certain.

“It will happen,” said Eric Wigertz, an analyst withMoscow based Brunswick Warburg brokerage.“They are serious about either splitting the com-pany or opening easy access of oil companiesto Gazprom pipelines.”

Splitting Gazprom would allow Russian oilcompanies, which also produce gas, to com-pete in the market . OAO Lukoil Holding,Russia’s number one oil producer, OAOSurgutneftegaz, Russia’s number three producerand others say they face problems gaining ac-cess to the Gazprom-controlled transport net-work to ship gas.

“We have to build relations with independent gasproducers,” said Kalyuzhny. “The have a po-tential of 30 to 70 billion cubic meters of gasproduction and we cannot neglect this.”

28 Jan (Bloomberg): Gazprom said it will spinoff its service units, turning them into contrac-tors to the producing units to save money, Rus-sian news agency Interfax reported.

Gazprom CEO Rem Kyakhirev said Gazpromwill move forward with the program this year, inremarks during a visit to Surgut in Western Si-beria.

“It sounds quite sensible,” said Jim Henderson,director of research at Renaissance Capital Bro-kerage. “If he’s talking about splitting the money-making side and the services side, that’s a posi-

tive sign. One of the problems with some Rus-sian companies is they’ve had divisions doingabsolutely everything, including the gardening,which are underutilized.”

Under pressure from the IMF, Gazprom earlierreorganized its 17 gas transport-subsidiaries intolimited liability companies owned by Gazprom.

“Gazprom’s restructuring program does not as-sume a spin-off of key producing and transpor-tation assets,” said Vladimir Nosov, an analystwith Moscow-based Fleming UCB investmentbank.

“The program is only to separate service units,while the pipelines and gas production will al-ways belong to Gazprom.”

Russia’s gas transport network and gas pro-duction units cannot be split under Russianlaw , said Nosov. Gazprom would possibly cre-ate a separate unit within its structure to moni-tor the transport subsidiaries without separatingthe company’s unified cash flow, analysts said.

“This is a positive development for Gazprom,”said Ivan Mazalov, an oil analyst at Moscow-based Troika Dialog brokerage. “Oil companiesdid similar service unit spin-offs last year to cuttheir produciton costs when oil prices were low.”

LUKoil Spurns Norsi Refinery Terms

3 Feb (Prime-TASS): LUKoil announced is wouldrefuse to buy Norsi refinery in Central Russiaunless its $200m debt is restructured, an alto-gether encouraging sign for LUKoil sharehold-ers.

2 Feb (Prime-TASS): LUKoil announced pre-liminary financial results. The company’s 1999consolidated net income is reported to be $1.3b,or $1.63 per share. …Comment : At the currentprice of $11.1 per share, LUKoil’s P/E ratio is6.8, considerably below that of its western peers.


20 February 2000


SPORSPORSPORSPORSPORTTTTTSSSSS

2 Feb (Reuters): YUKOS expects 1999 pre-taxprofits of about $600 million, according to thecompany’s CEO Mikhail Khodorkovsky said.…Comment : This is considerably below the es-timate of $800 million previously provided bycompany officials.

Currently, free float of company shares does notexceed 13%. The company said that its chartercapital structure is as follows: two banks ownedby Menatep group have 52% of shares, 11%belongs to the affiliated companies of theMenatep group, 19.8% belongs to the StandardBank of London, 2.6% is held by BCENEurobank (France), 2% belongs to the employ-ees, and 12.6% belongs to legal entities whichreceived these shares in exchange for the sub-sidiaries’ shares they previously held.

25 Jan (Bloomberg): A Russian court extendedbankruptcy proceedings against OAOChernogorneft , previously the biggest oil-pro-ducing unit of OAO Sidanco, until June, whilenew owner Tyumen Oil Co. negotiates its trans-fer back to Sidanco.

Chernogorneft was sold to OAO Tyumen Oil Co.for $176 million at a bankruptcy auction last yearthat was opposed by Sidanco shareholders. InDecember, Tyumen Oil and Sidanco sharehold-ers, including BP Amoco Plc agreed on return-ing Chernogorneft to Sidanco. In exchange,Tyumen would get 25 percent of Sidanco andwould participate in Chernogorneft’s manage-ment.

The agreement made possible the ending ofSidanco’s bankruptcy and will allow its share-holder BP Amoco, the world’s third-largest pub-licly traded oil company, to recover its $571 mil-lion investment in the Russian company.

“We’ll have more time to register the sale off toTNK-Nizhnevartovsk (Tyumen Oil subsidiary)

ENERENERENERENERENERGY ( CGY ( CGY ( CGY ( CGY ( Continued)ontinued)ontinued)ontinued)ontinued)

1 Feb (Soviet Sport): Former CSKA Moscowmidfielder Dmitry Ulianov has said he is keento play for Israel in the 2002 World Cup qualifi-ers, the Soviet Sport Daily reported.

Ulianov is playing with the Israeli top flight sideHapoel Haifa and married a local woman oneyear ago. He has applied for Israeli citizenship.

Ulianov said former Israeli national coachShlomo Sharf had told him he would like to seehim in the squad once the former Russianfootballer gets his citizenship.

“I understood that I will never fit [Russian coachOleg] Romantsev’s selection, so I have nothingto lose,” Ulianov said.

“Israel’s squad must be seriously changed aftertheir Euro-2000 fiasco and I think I have a muchbetter chance of becoming an Israeli nationalsquad player even though I did not talk to Nielsenabout it,” he added.

Former Denmark and Finland coach RichardMoller Nielsen succeeded Sharf as coach ofthe Israeli national side after Israel lost their Eu-ropean qualifier play-offs to Denmark 8-0 in theaggregate.

and to pay off the debts,” said Chernogorneftspokesman Kirill Nam. “We needed that bank-ruptcy extension because of technical grounds.”

Chernogorneft creditors hold company debtsworth 2.5 billion rubles ($87.9 million). The oilproducer also is a creditor of Sidanco claiming$35.8 million debts to the holding.

Chernogorneft assets will be transferred to TNK-Nizhnevartovsk which will become a Sidancosubsidiary according to the oil companies’ share-holders’ agreement.


20 February 2000


SPORSPORSPORSPORSPORTTTTTS (CS (CS (CS (CS (Continued)ontinued)ontinued)ontinued)ontinued)

Kafelnikov Falls to Agassi in Oz

Following his defeat by Andre Agassi in the fi-nals of the Australian Open, Yevgeny Kafelnikovranks second in the ATP Champions race for2000 with 166 points, close behind Andre Agassiwith 200 points.

Anna Blows It To Davenport

24 Jan: Anna Kournikova lost to No 2 seed Lind-say Davenport of the US in the fourth round ofthe Australian Open. Davenport won 6-4, 6-3as number 11 seed Kournikova committed 33unforced errors in the match.


20 February 2000


UPCUPCUPCUPCUPCOMINOMINOMINOMINOMING EVENTG EVENTG EVENTG EVENTG EVENTSSSSS

21-23 Feb: London Metropole: IIR’s Next Generation Internet : www.irr-conferences.com/isp/ngi/splashstatic.html

28 Feb-1 Mar: Anaheim Hilton Hotel and Towers: Ambit International’s 2nd Internet ASP Forum:Business without Barriers. Anytime. Anywhere. http://www.ambitsf.com/

28-29 Feb: Oslo, The Holmenkollen Park Hotel Rica: IBC’s 23rd Annual Conference and Exhibi-tion on Offshore Pipeline Technology : www.ibc-uk.com/

29 Feb: New York:, Patterson, Belknap, Webb & Tyler LLP, 9-10:30AM: “Recent Developmentsin Russia’s Finance Sector ”, with Oleg Sysuev, Vice Chairman Alfa Bank , Oleg Vyugin, Ex-ecutive Vice-President of Troika-Dialog Investment Bank and Otto Latsis Deputy Chief Edi-tor Noviye Izvestiya sponsored by Eurasia Group. Contact Arrun Kapoor, Eurasia Group, +1 212366-9560/fax 366-9699

3 Mar: New York:, Patterson, Belknap, Webb & Tyler LLP, 9-10:30AM: “Opportunities in Russia’sMining Sector ”, with Sergei Nedoroslev, President of Kaskol Group and Igor Ignatiev, Vice-President, Kaskol Group and former head of Press Service under President Yeltsi n, spon-sored by Eurasia Group. Contact Arrun Kapoor, Eurasia Group, +1 212 366-9560/fax 366-9699

6-7 Mar: New York, Eurasia Group - Boris Berezovsky - Member of Parliament. Contact ArrunKapoor, Eurasia Group, +1 212 366-9560/fax 366-9699

7-8 Mar: Los Angeles: LAX Sheraton Hotel “DBS 2000: The Five Burning Questions” spon-sored by The Carmel Group +1 831 643-2222/fax 645-1055: www.carmelgroup.com

8-10 Mar: London, One Whitehall Place: IBC’s Third Annual Global VSAT & IP Satellite Summitwww.ibctelecoms.com/ipvsat2000 or +44 171 453-5495

13-14 Mar: London, Mayfair Conference Center: Wireless Network Infrastructurewww.ibctelecoms.com/cr1304

14 Mar: New York, Eurasia Group: Sergei Kiriyenko - former Prime Minister of Russia and leaderof the Pravoe Delo Party. Contact Arrun Kapoor, Eurasia Group, +1 212 366-9560/fax 366-9699

14-16 Mar: Amsterdam: ISP 2000 Europe http://www.isp2000europe.com

14-16 Mar: Prague, The Hilton: IBC’s Second Annual International Conference on SDH & WDMin Central & Eastern Europe, Russia and CIS : www.ibctelecoms.com/sdhwdmcee

14-16 Mar: London Wembley Conference Center. “New Media Marketing” +44 (0) 20 89107887 [email protected] www.nmmexpo.co.uk


20 February 2000


16-17 Mar: Tbilisi, Georgia, Hotel Sheraton-Metechi: “Georgia as an Emerging InvestmentMarket ”, sponsored by Eurasia Group and Metromedia International. Contact Arrun Kapoor, EurasiaGroup, +1 212 366-9560/fax 366-9699

27-31 Mar: London Marriott Hotel: IIR’s ASP European Summit : www.asp-summit.com.asp2000.htm

10-12 Apr: London, Royal Lancaster Hotel: IBC’s Fifth Annual Mobile Internet 2000www.ibctelecoms.com/mi2000 or +44 171 453-5495

10-15 Apr: Rio de Janeiro ITU Telecoms Americas 2000 www.itu.int/Telecom

8-11 May: Cannes, Royal Hotel Casino: IBC’s Third Annual GPRS Conference :www.gprscongress.com

14-19 Jun: Silicon Valley, California: IEEE International’s 3Gwireless 2000 www.3Gwireless.com

15-17 May: London, The Dorchester Hotel: “Assessing International Broadband WirelessAccess Markets” IBC Conferences Limited +44 171 637-4383 www.ibctelecoms.com/bwa

UPCUPCUPCUPCUPCOMINOMINOMINOMINOMING EVENTG EVENTG EVENTG EVENTG EVENTS (CS (CS (CS (CS (Continued)ontinued)ontinued)ontinued)ontinued)


20 February 2000


INDEX TINDEX TINDEX TINDEX TINDEX TO THIS ISSUEO THIS ISSUEO THIS ISSUEO THIS ISSUEO THIS ISSUEA

Abbeloos, Stan 13, 16ACeS 15Adamishin, Anatoly 14Adshead, Tom 12AFK Sistema 11, 14Agassi, Andre 26AK&M Index of Russian Telecom 20AK&M Index of Russian Telecom shares 20Andersen Group 17Anti-Monopoly Committee 19AO Moscow City Telephone Network 14AO Sibur 9AO Vimpelcom 11AO Yukos Oil Company 21Asia Cellular Satellite Internationa 15ASPs 16Aton Brokerage 22ATP Champions 26Atyrau Oil Refinery 23Aviadvigatel 21

B

Babitsky, Andrei 2Bagrov, Vladimir 17Baikonur Space Center 17Baker, Frank 17Bank Austria AG 9Bank Imperial 9Bank of New York 8Baranets, Viktor 3Barclays Wireless index 20BCEN Eurobank (France) 25Beeline 12Blue Stream Pipeline Co BV 23Blue Stream Pipeline Project 23Botas Company 23Bouygues Offshore SA 23BP Amoco Plc 25Brunswick Warburg 24Budget Revenue 7

C

Call Metering 16Capital Flight 7Caspian Sea 21CBR Exchange Rate 9Chevron 23

Chubais, Anatoly 5Comcor-TV 17Commonwealth of Independent States (CIS) 6Croatia 21CSKA Moscow 25

D

Dashevsky, Steven 22Davenport, Lindsay 26Demidov, Yuri 8Dobrodeyev, Oleg 2Druzhba pipeline 21Dunster, Ashley 16

E

Eagle River Investments 9Eni SpA 23

F

Federal Property Fund 22First National Holding, 12Flamingo Bank 8Fleming UCB Investment Bank 24Foreign Currency and Gold Reserves 7Foreign Trade Surplus 7

G

Garuda 1 14, 15Gazprom 23, 24GDP 7GKNPTs Khrunichev 14Glasnet 16Global TeleSystems 16Global TeleSystems, Inc. 20GlobalStar 15GlobalStar Telecommunication 15Golden Telecom 14, 20Golden Telecom Inc 13Golden Telecom, Inc. 16GPRS (General Package Radio Service) 18Guney, Izzet R. 16

H

Hansa AG 8

I

IFC 20


20 February 2000


INDEX TINDEX TINDEX TINDEX TINDEX TO THIS ISSUE (CO THIS ISSUE (CO THIS ISSUE (CO THIS ISSUE (CO THIS ISSUE (Continued)ontinued)ontinued)ontinued)ontinued)IFC’s Index of Investable Russian shares 20ILS 15Ilva SpA 23International Launch Services 15International Monetary Fund 6Internet service providers (ISP) 19Iridium 9Iridium LLC 15Iridium World Communications, Ltd. (IRIDQ) 10Irrevocable Right of Use (IRU) 16Itera 21Itochu Corp 23Ivantsov, Igor 21

J

Japanese Bank of International Cooperation 23Jasmine International Public Co. Ltd. Of Thailand

15

K

Kafelnikov, Yevgeny 26Kagan, Paul 10Kalyuzhny, Viktor 23Kasyanov, Mikhail 6, 8Kazakhstan 17, 23Keller, Horst 1Khodorkovsky, Mikhail 22, 25Khomenko, Oleg 6Kiselev, Anatoly 15Klebanov, Ilya 16Kolotukhin, Sergei 8Komarov, Yuri 21Kournikova, Anna 26Kraus, Eric 24Kuban-GSM 18Kubanelectrosvyaz 18Kulikov, Anatoly 3

L

Lexington Troika Dialog Russia Fund 12Lockheed Martin Corp. 14, 16Lockheed Martin Global Telecommunications 15London Club 8LUKoil 24

M

M2 Money Supply 6Manilov, Valery 2

Mazalov, Ivan 24McCarthy, Tim 12McCaw, Craig 9McDonald’s 4Melniko, Viktor 7Melnikov, Viktor 7Melnikova, Valentiva 4Menatep Group 25MGTS 11, 14, 18, 19Mikhaikov, Alexander 3Mitsui Co. Ltd. 23MMTS-10 19Mobile TeleSystems (MTS) 13Moldabekov, Meirbek 17Money Supply 7Monthly Inflation 7Moscow GTS 19Moscow MMT 19Moscow Ring Road MKAd 6Moscow Telecommunications Corp. 17Motorola 10Mustcom Ltd. 15

N

Nam, Kirill 25natural monopolies 6Nevalink 16Nielsen, Richard Moller 25Nikoil Investment 24Nokia 13Norsi Refinery 24North-West GSM 12Nosov, Vladimir 24Novorissiysk 23

O

OAO Chernogorneft 25OAO Gazprom 21, 22OAO Lukoil Holding 24OAO Permskiy Motorny Zavod 21OAO Permskiye Motory 21OAO Sidanc 25OAO Surgutneftegaz 24OAO Svyazinvest 15One-day rates 9Opel, Georg von 9Overnight Deposit Rate 9


20 February 2000


INDEX TINDEX TINDEX TINDEX TINDEX TO THIS ISSUE (CO THIS ISSUE (CO THIS ISSUE (CO THIS ISSUE (CO THIS ISSUE (Continued)ontinued)ontinued)ontinued)ontinued)P

PAP Aviadvigatel 21Paperin, Stewart J. 16Pasifik Satelit Nusantara of Indonesia 15Pavlenko, Yuri 11Perm Motors 21Philippine Long Distance Company 15Political Advertising Time 10Pratt & Whitney 21Proton rocket 14, 17PTS 11

R

Refinancing Rate 9Reich, Stewart 14Renaissance Capital Brokerage 24Richardson, John 10RKK Energiya 14Romantsev, Oleg 25Rosinformtsentr 2Ruchailo, Vladimir 2Ruhrgas AG 22Russia-China Export Pipeline Project 22Russia-On-Line 16Russian Advertising Market 10Rybak, Olga 22

S

Sagem SA 13Saipem SpA 23Shapovalyants, Andrei 7Shevardnadze, Eduard 6Shoigu, Sergei 8Shuvalov, Igor 22Sibneftegazpererabotka 9Sidanco 25Sirius Satellite Radio Inc. 15Sistema, AFK 11, 14Sobchak, Anatoly 4Sobinbank 8Soldiers’ Mothers Committee 4Sonera 16Sonera Oyj 12Soros, George 15Sovam Teleport Kiev 13Standard & Poor’s 12Standard Bank of London 25Sumitomo Corp 23

Surgut Holding 22Svyazinvest 15

T

Talalaye, Gennady 14Taxes 7Telecominvest 12Telenor East Invest AS, 12Telia AB 12TNK-Nizhnevartovsk 25Treasury Bills 8Troika Dialog 8, 17, 24Turkmenistan 21Tyumen Oil Co. 25

U

Ukrtelecom 18Ulianov, Dmitry 25United Financial Group 12United Technology Corporation 21

V

VimpelCom 13, 20Vimpelcom 11Vnesheconombank 9Von Deylen, Jeffrey H. 16Voshchanov, Pavel 5Vyakhirev, Rem 21, 23

W

WAP (Wireless Applications System) 18Wigertz, Eric 24

Y

Yastrzhembsky 3Yastrzhembsky, Sergei 2, 17YUKOS 22, 25

Z

Zadornov, Mikhail 8Zhirinovsky, Vladimir 1

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