Russia 091021

Basic Political Developments Reuters: PRESS DIGEST - Russia - Oct 21 KREMLIN: ANNOUNCEMENT.On October 21, 2009, Dmitry Medvedev will

have a conversation with Indian Minister of Foreign Affairs Somanahalli Mallaiah Krishna.

RIA: Vienna talks on processing Iran's LEU to continue on Wednesday RIA: Russia submits draft UN resolution against arms race in space Helsingin Sanomat: Putin promises speedy decision on wood tariffs - Vanhanen

to meet with Russian PM on Sunday Itar-Tass: Lavrov lauds Russian, Finnish ability not to view history thru modern

politics prism B92: Dodik: Russia to guarantee Dayton - Republic of Srpska Prime Minister

Milorad Dodik says Russian President Dmitry Medvedev told him that Russia was one of the guarantors of the Dayton Accords.

B92: MPs discuss Medvedev visit - MPs have told B92 that the visit of Russian President Dmitry Medvedev and his address to the national parliament were very important for Serbia.

Reuters: Russsia's Medvedev appeals to history to woo Serbs Emportal: Dusan Reljic: Construction of South Stream Pipeline uncertain Nasdaq: Vietnam Aims To Maintain Energy Ties With Russia – Ministry Today’s Zaman: Ankara moves toward ‘privileged partnership’ with Moscow Today’s Zaman: Gül discusses Karabakh dispute with Medvedev Today’s Zaman: Russia to conduct geological exploration in Turkey’s Black Sea WorldTribune.com: Iraq to replace Russian weapons destroyed by U.S. invasion

with . . . more Russian weapons Russia Today: Russian security companies demand legislative support to work in

Iraq UkrainianJournal.com: Conflict with Russia over Crimea is ‘impossible,’ says

speaker Georgian Daily: Rather than Invade, Moscow Will Seek to Destabilize Ukraine

from Within, Georgian Official Says RIA: Two soldiers injured by militants in Chechnya Itar-Tass: Two servicemen injured in Chechnya Georgian Daily: Another Soviet Practice Seen Returning as Moscow Installs a

Russian as Number 2 in Ingushetia RIA: Russian Communists seek election chief's resignation over fraud RIA: Communists to return to State Duma after walkout Interfax: Liberal Democrats, other opposition activists to stage protests against

"rigged elections" RIA: Russian trade union set to refer debt ship case to prosecuto RIA: Two ferries collide in Siberia, casualty reports vary The Financial: Russia falls to 153rd in press freedom index The Moscow Times: New Judge Selected Ahead of Yukos Case FT.com: Mixed messages revive art of Kremlinology - By Charles Clover

RIA: Russian govt. ready to force firms to invest in technology RFERL: Cash-Strapped Russian Science Looks To Government Support NY Times: Lifting the Lid on Russia’s Art of Lavish Gift Giving The Moscow Times: The Dragon and the Amoeba - At a meeting in New York in

September, President Dmitry Medvedev and Chinese President Hu Jintao signed a wide-ranging cooperation agreement through 2018. It calls for Russia to become a raw-materials appendage of China. Russia will provide China with raw materials such as coal, iron, gold and manganese, and China-based factories will process it all.

National Economic Trends WSJ: Russia Doesn't Rule Out RUB26/$1 In 2010 If Oil Price Rises Central Banks projects capital inflow in Q4 2009 Bloomberg: Russian Inflation Provides Opportunity to Cut Rates Further WSJ: Russia's Ulyukayev: 2009 Inflation May Be Less Than 10% RIA: Russian economy likely to rebound in 2010 - Kremlin economist Interfax: Econ Ministry forecasts GDP to rise 3%-4% in Q4 compared to Q3 (Part

2) Citi: Likely eurobond sale highlights improving environment Bloomberg: Russia’s Planned State Asset Sales to Outshine Peers (Update1) The Moscow Times: UBS’s Russia Chief Urges Clarity in Sell-Offs

Business, Energy or Environmental regulations or discussions Bloomberg: Evraz, Gazprom, Lukoil: Russian Equity Preview for Oct. 21 Reuters: Russian markets -- Factors to Watch on Oct 21 RenCap: Russian weekly outlook - 21-27 Oct Bloomberg: Polyus Gold Rated ‘Buy’ as BofA Merrill on Gold Reserves, Growth RenCap: RusHydro CEO: Ten years to recover Sayano-Shushenskaya repair cost Offshore Shipping Online: Falcon ROV for Russian icebreakers PRESS RELEASE: Wärtsilä Delivers Total Propulsion Package To Russian

Shipyard Bloomberg: JPMorgan, Interros to Form $1 Billion Investment Firm (Update2) The Moscow Times: JPMorgan, Potanin Start $1Bln Fund Reuters: Russia's MMK says Q3 output rises 31 pct from Q2 Citi: Audit Chamber to review compliance of banks that received state support Reuters: UPDATE 1-Russia's VTB posts Q2 loss, beats forecasts Russia Today: VTB posts 1H 2009 Net Loss of 31.5 billion Roubles VTB Capital: Siberian Cement attempts to recover USD 75mn from Italcementi The Moscow Times: Svyazinvest OKs Rostelecom Merger WSJ: High-Speed Rail Keeps Train Makers on Track - Ten years in the making,

Russia's state-owned railway is testing eight aerodynamic trains that in December will rush travelers from here to Moscow in less than four hours. With fancy kitchens and leather seats in first class, the Sapsans (Russian for peregrine falcons) mark a change in Russia's egalitarian rail tradition.

The Financial: Peugeot, Mitsubishi to start output in west Russia in 2010 Reuters: UPDATE 2-Tele2 Q3 beats forecast, speeds up Russia launches Reuters: COLUMN-Russia's foreign investment revival?

Businessneweurope: Russia's first post-crisis IPO

Activity in the Oil and Gas sector (including regulatory) Interfax: TNK-BP to invest $180 mln to develop Russkoye field in 2010 Your Oil and Gas News: Rospan May Invest $5 Billion into Yamalo-Nenets

Autonomous District Increasing Gas Production Up to 15 Billion Cubic Meters a Year

SmallCapNews: Matra Petroleum still waiting for final nod ahead of Sokolovskoe drilling

Steel Guru: Bashneft sets up oil and gas production company EurActiv: Bulgaria ousted from Russia's South Stream pipe  WSJ: Russian Pipelines Win Key Approvals EurActiv: Regulator: Renewed gas crisis 'likely' 

Gazprom Reuters: UAE's Taqa, partners to invest 800 mln euros in gas deal - Abu Dhabi

National Energy Co TAQA.AD (Taqa) said on Wednesday it had agreed with partners to invest 800 million euros ($1.20 billion) to jointly develop a gas storage project in the Netherlands with Russia's Gazprom

Upstreamonline: Bergermeer spend set at $1.2bn - The Bergermeer consortium partners and Russian giant Gazprom have signed off on an initial €800 million ($1.2 billion) spend for the Dutch project, set to become Europe's largest gas storage development.

Bloomberg: Aladdin to Start Russian Gas Output After Gazprom Network Deal Upstreamonline: Shtokman gas headed for US - Russian monopoly Gazprom

plans to ship 80% to 90% of the fuel from its Shtokman project in the Arctic to North America as recovery of the world’s largest economy spurs energy use.

RIA: Gazprom subsidiary, France's EDF agree on trans-Atlantic gas swap

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Full Text Articles

Basic Political Developments

Reuters: PRESS DIGEST - Russia - Oct 21http://uk.reuters.com/article/idUKLL68348520091021

Wed Oct 21, 2009 8:39am BST

MOSCOWN, Oct 21 (Reuters) - The following are some of the leading stories in Russia's newspapers on Wednesday. Reuters has not verified these stories and does not vouch for their accuracy.

KOMMERSANT

www.kommersant.ru

- Denmark has given its stamp of approval on the building of a 87.7 kilometers-long section of the Nord Stream pipeline in its territorial waters of the Baltic sea.

- Two top police officials of the republic of Buryatia, which borders Mongolia, have been arrested and charged with being involved in smuggling consumer goods.

VEDOMOSTI

www.vedomosti.ru

- Russia's Economy Ministry suggests excluding amendments fixing the dominance threshold for retailers at 25 percent from the draft law.

- Russian engineering firm Power Machines (SILM.MM: Quote, Profile, Research) may get a 21 billion rouble ($715.5 million) contract to supply new turbines for the Sayano-Shushenskaya dam of RusHydro (HYDR.MM: Quote, Profile, Research), the daily reports.

ROSSIISKAYA GAZETA

www.rg.ru

- Russia is coming out of the recession, Finance Minister Alexei Kudrin is quoted as saying.

- Head of Russia's audit chamber, Sergei Stepashin, has suspected most of Russian companies of paying off dozens of billion of roubles as shares revenues during the crisis and afterwards appealing to the government for support.

NEZAVISIMAYA GAZETA

www.ng.ru

- The situation in Russia's banking sector is very obscure as commercial banks are concealing true facts concerning their bad credits to avoid bankruptcy, the daily says, quoting analysts.

- The government is planning to spend more money on buying cars than on supporting industrial regions affected by the crisis, the daily says.

http://eng.kremlin.ru/text/news/2009/10/222251.shtml

October 20, 200915:20

ANNOUNCEMENT.On October 21, 2009, Dmitry Medvedev will have a conversation with Indian Minister of Foreign Affairs Somanahalli Mallaiah Krishna.

Mr Krishna is in Moscow to take part in the 15th session of the Russian-Indian Intergovernmental Commission for Trade, Economic, Scientific, Technological, and Cultural Cooperation.

RIA: Vienna talks on processing Iran's LEU to continue on Wednesdayhttp://en.rian.ru/world/20091021/156536564.html

01:2721/10/2009

VIENNA, October 21 (RIA Novosti) - Talks on processing Iran's low-enriched uranium (LEU) in Russia and France will continue in Vienna on Wednesday, a source close to the negotiation process told RIA Novosti.

It was earlier announced that the Iranian delegation withdrew from the talks on Tuesday to protest against France's participation.

Delegations from Iran, the United States, France, Russia and Iran met on Monday in Vienna to discuss proposals for France and Russia to enrich uranium for Iran in order to ease international suspicions of a covert Iranian atomic weapons program. Iran already produces low-enriched uranium (up to the 5% level), but says it wants to buy higher-enriched fuel (up to 20%) for a research reactor in Tehran.

On Monday, however, Iranian state media said that Tehran had excluded France from a list of potential suppliers of highly-enriched uranium as Paris had not fulfilled "previous obligations regarding nuclear cooperation with Iran." On Tuesday, Iranian Foreign Minister Manouchehr Mottaki said there was "no point" in France taking part in the talks.

The U.S. mission to the IAEA said its delegation had held a bilateral meeting with Iranian representatives later on Tuesday, but refused to give any further details.

RIA: Russia submits draft UN resolution against arms race in spacehttp://en.rian.ru/world/20091021/156538973.html

07:4921/10/2009

NEW YORK, October 21 (RIA Novosti) - The Russian delegation to the United Nations has submitted to the UN two draft resolutions on confidence-building measures and on the prevention of arms race in space, a RIA Novosti correspondent reported on Wednesday.

The resolution has to be approved the General Assembly's First committee, charged with issues of disarmament and international security, before being submitted to the General Assembly.

The document, co-authored with 58 states, will be discussed by the committee in October. If approved, the draft will be submitted for vote to the General Assembly in December.

Three similar resolutions have already been adopted on the Russian initiative in recent years. Last year, the resolution was adopted by 168 "yes" votes.

The U.S. traditionally opposes such resolutions, apparently because its missile defense program envisages the deployment of some elements in space.

Nearly 10 countries worldwide are now capable of independent satellite launches and more than 130 countries are engaged in peaceful space-related activities

Helsingin Sanomat: Putin promises speedy decision on wood tariffshttp://www.hs.fi/english/article/Putin+promises+speedy+decision+on+wood+tariffs/1135250157344

Vanhanen to meet with Russian PM on Sundayussia is to make a decision in the near future on the future of its tariffs on raw timber, promised Prime Minister Vladimir Putin in a cabinet session on Monday.      "In 2010 we will be operating on the basis of a real situation", said Putin, according to the news agency Ria Novosti.      According to Putin, any decision will take account both of the interests of Russian timber producers and foreign partners. One of these partners is Finland, although admittedly the demand for wood from Russia has declined of late.      Last November, Putin postponed the implementation of export tariffs on the sale of raw timber, on the occasion of a meeting with his Finnish counterpart Matti Vanhanen in Moscow.      This week Putin has an opportunity to repeat the exercise, as he will be seeing Vanhanen in St. Petersburg at a forest summit on Sunday.      As Putin sees it, the financial crisis cannot be permitted to hinder the modernisation of the Russian forest industry, but rather Russia must be able to have competitive production for the international market.      "We can no longer continue with the present trading model of selling raw timber for exzport and buying back building materials, furniture, and paper", said Putin, quoted by

the Interfax news agency.      Russia also initially justified its timber tariffs on the grounds that it was thinking by raising the cost of timber to encourage foreign forest industry players to invest in Russia.      The Moscow-based newspaper Gazeta wrote on Monday that the Russian Ministry of Trade and Industry was unhappy with the way foreign investors, including Finland, had stepped up to invest in the domestic forest industry.      From the Finnish side, the feeling is that the industry has already invested quite significantly.      The Finnish Ministry of Employment and the Economy has calculated that the aggregate value of Finnish forest industry companies' investments in Russia over the last fifteen years comes close to one billion euros.

Itar-Tass: Lavrov lauds Russian, Finnish ability not to view history thru modern politics prismhttp://www.itar-tass.com/eng/level2.html?NewsID=14451977&PageNum=0

20.10.2009, 22.03

MOSCOW, October 20 (Itar-Tass) -- It is a big achievement that Russia and Finland do not view history through the prism of modern politics, Russian Foreign Minister Sergei Lavrov said in his greetings to delegates to the international scientific conference entitled “Russia and Finland in the Multipolar World: 1809-2009”. The conference is underway in Petrozavodsk.

“It is a big achievement of our peoples that we can discuss the past openly and calmly, that we can respect each other and never try to view history through the prism of modern politics,” he said. “The common history shows that each other’s interests must be taken into account. The broad and multifaceted cooperation, business and humanitarian contacts are our common treasure, which promotes similar interests of Russia and Finland in every sphere, from security to the response to the world financial and economic crisis.”

“The forming multipolarity has a positive effect on international relations, as they are ridding from Cold War prejudices,” Lavrov said. “That factor, together with the common need to react to global threats and challenges, creates additional incentives for our involvement in European and world affairs.”

“Symbolically, the forum takes place in the year of the 200th anniversary of the formation of the Finnish autonomous duchy within the Russian empire. The period of the existence of the Grand Duchy of Finland is one of the brightest pages in the common history, the period when fundamentals of the Finnish statehood and national mentality were laid down. It is not accidental that Finland lives through the jubilee year under the ‘The Nation Outset’ motto,” he said.

As for modern bilateral relations, Lavrov said, “We are not just good neighbors but also reliable partners that interact bilaterally and on various international floors. Consolidation of this relationship is a strategy of the Russian Federation.”

“This conference will contribute to further deepening of mutual understanding and trust between the two countries and to the boost of various spheres of Russia-Finland cooperation,” he said.

B92: Dodik: Russia to guarantee Daytonhttp://www.b92.net/eng/news/politics-article.php?yyyy=2009&mm=10&dd=21&nav_id=62488

21 October 2009 | 09:37 BELGRADE -- Republic of Srpska Prime Minister Milorad Dodik says Russian President Dmitry Medvedev told him that Russia was one of the guarantors of the Dayton Accords.Dodik said that Medvedev had informed him that Russia “had nothing against what the Republic of Srpska might agree to at the Butmir talks, but without force or imposed solutions.”

The RS leader said that he had briefed Medvedev on the current situation in the entity and in Bosnia-Herzegovina, adding that the Russian president had shown “a high degree of knowledge of the situation and understanding.”

He said that he had also spoken in Belgrade with Russian Foreign Minister Sergei Lavrov and Serbian President Boris Tadić.

Dodik was in Belgrade to attend a special event commemmorating the 65th anniversary of the liberation of Belgrade in World War II.

B92: MPs discuss Medvedev visit http://www.b92.net/eng/news/politics-article.php?yyyy=2009&mm=10&dd=21&nav_id=62489

21 October 2009 | 09:55 | Source: B92

BELGRADE -- MPs have told B92 that the visit of Russian President Dmitry Medvedev and his address to the national parliament were very important for Serbia.The view was echoed by both the government and opposition.

“We see that at least seven agreements between the two countries were signed during the visit, which is very important. Better cooperation is being sought because there is always room for better cooperation,” G17 Plus official Suzana Grubješić said, adding that Medvedev’s address to parliament had been very “stately.”

“His speech stayed within the bounds of what was expected. One new and interesting thing in the speech was his mentioning of a need to open discussions—first and foremost he meant Russia—with Europe regarding a new security framework,” said Democratic Party of Serbia MP Miloš Aligrudić .

“I think that this is the first and most important step in future cooperation between Serbia and Russia, especially since a majority in parliament and MPs were united in their stance on cooperation with Russia, that this is the future for Serbia, and what is most important is the possibility of economic cooperation that can be achieved with Russia,” said Serb Radical Party deputy leader Dragan Todorović .

Reuters: Russsia's Medvedev appeals to history to woo Serbshttp://in.reuters.com/article/worldNews/idINIndia-43310820091021

Wed Oct 21, 2009 9:47am IST

By Oleg Shchedrov

BELGRADE (Reuters) - Russian President Dmitry Medvedev sought to sustain Serbian loyalty on Tuesday, declaring the two countries, both seeking to reassert themselves in Europe, should unite in pride at their roles in World War Two.

Moscow views Serbia as a future hub for its planned South Stream pipeline which would deliver Russian gas to southern Europe; a plan viewed as a rival to Europe's Nabucco project.

Serbia's President Boris Tadic said Medvedev backed Belgrade's plea for a big loan, although no firm commitments were made and it remained unclear whether Russia was ready to lend the 1 billion euros ($1.50 billion) Serbia wants.

But pressed by lucrative offers by the likes of China, Medvedev appealed to history to prove the special links between the two Slav nations.

"Russia and Serbia are united today by common spiritual values ... including by our desire to defend an honest assessment of history," Medvedev said at Soviet-style gala night marking 65 years since Red Army and Yugoslav forces freed Belgrade from Nazi occupation.

The anniversary is seen as a source of pride by Russia, and by Serbia which was humiliated by NATO bombings 10 years ago and Western recognition of independence last year of its breakaway region of Kosovo.

Russian leaders have reacted angrily to European criticism of the wartime role of Soviet dictator Josef Stalin whose troops invaded eastern Poland in 1939 under a deal with Nazi Germany whose forces swallowed up the western half of the country.

The pact between Germany and the Soviet Union was broken when Nazi forces attacked the Red Army in 1941.

Some 27 million Soviets died in the war, as well as 1.7 million Yugoslavs.

"Serbs do not need to be told whose was the right cause," Medvedev told Serbian lawmakers.

"You courageously fought the Nazis, but such resistance was not offered everywhere," he said. "Some states not only backed Nazis, but also fought on their side, some chose collaboration."

Medvedev said some forces in the West were seeking to revise history to achieve political goals; a clear hint at former Soviet eastern European allies which have now joined NATO.

"No one can dare idealising the Stalin's regime," Medvedev said. "But it was not the Soviet Union that started the war."

(Editing by Jon Hemming)

Emportal: Dusan Reljic: Construction of South Stream Pipeline uncertain http://www.emportal.rs/en/news/serbia/101877.html

21. October 2009. | 05:52

Source: Beta

The third round table within the project dubbed "Monitoring Russian-Serbian Relations" opened in Belgrade on Oct. 19, with the promotion of the sixth report of the Energy Sources in South East Europe Project and the study titled "Russia and the Western Balkans," by Dusan Reljic.

The third round table within the project dubbed "Monitoring Russian-Serbian Relations" opened in Belgrade on Oct. 19, with the promotion of the sixth report of the Energy Sources in South East Europe Project and the study titled "Russia and the Western Balkans," by Dusan Reljic.

Project chief of the International Security Affairs Center Zarko Petrovic said the project aimed to assess relations between Serbia and Russia at the "real, factual level" and "analytically, without any myths."

He pointed out that the deepening of cooperation between Russia and Serbia in the energy sphere is especially important and will most likely be given a boost by Russian President Dmitry Medvedev's visit to Belgrade.

Dusan Reljic, a senior scientific researcher at the Berlin Institute for International and Security Issues, recalled that Russia is this region's chief energy supplier and an increasingly important investor and trade partner.

In his study, Reljic said that both Serbia and Russia harbor political interests in further deepening relations, adding that the Russian side's interests can be viewed in the context of "Moscow's fear of being surrounded."

"Russia wants to foil the growing sphere of influence of the U.S. and NATO. This (the Western Balkans) was once a region of the non-aligned, whereas now all countries except Serbia and Bosnia-Herzegovina are under the influence of the U.S. and NATO. That is why Russia wants to strengthen its political, economic and military presence in South East Europe," Reljic said.

He added that Russia's influence in South East Europe will have a real and long-term foundation if the South Stream natural gas pipeline is built.

Head of the Russian Energy and Transport Research Center Igor Tomberg said that, in the short term, he was pessimistic about the implementation of the South Stream project, since an investment of EUR25 billion was at the moment too big even for Gazprom. "South Stream might be built sooner or later for political reasons, but for the time being I am pessimistic," Tomberg said.

Central European University's Andras Deak said that the financial resolve to build the natural gas pipeline was not visible at the moment, but highlighted that politics could have a great impact on the project, adding that much had been done concerning the construction of the Nabucco gas pipeline.

Nasdaq: Vietnam Aims To Maintain Energy Ties With Russia – Ministryhttp://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=200910210423dowjonesdjonline000421&title=vietnam-aims-to-maintain-energy-ties-with-russia-ministry

HANOI -(Dow Jones)- Vietnam aims to maintain close and effective energy ties with Russia, the Vietnamese Ministry of Industry and Trade said Wednesday.

Close cooperation in the oil and gas industry will be the foundation of overall relations between the two countries, the ministry said in a statement.

Vietnam also wants to boost cooperation with Russia in power, coal mining, mechanical, automobile, telecom and aviation projects, it said.

Trade between Vietnam and Russia in the first eight months of this year fell 5.2% from the same period last year to $1.16 billion. Last year, two-way trade rose 62.4% to $1.64 billion.

-By Vu Trong Khanh, Dow Jones Newswires; 844 35123042; trong-khanh.vu@ dowjones.com

Today’s Zaman: Ankara moves toward ‘privileged partnership’ with Moscowhttp://www.todayszaman.com/tz-web/news-190549-100-ankara-moves-toward-privileged-partnership-with-moscow.html

Turkey, which has already announced its intention to hold a joint cabinet meeting with Russia similar to those recently held with Iraq and Syria, hopes to hold such a meeting with its Black Sea neighbor in early December.

“We have proposed a similar step [to the joint cabinet meetings with Syria and Iraq] with Russia, but there is nothing being implemented at the moment,” Prime Minister Recep Tayyip Erdoğan said last week before departing for a visit to Iraq, during which he and the nine ministers accompanying him held a joint cabinet meeting with the Iraqi government. Erdoğan and his Iraqi counterpart, Nouri al-Maliki, co-chaired the meeting of the Turkish-Iraqi High-Level Strategic Cooperation Council.

Earlier last week, a ministerial-level meeting of the Turkish-Syrian High-Level Strategic Cooperation Council was held in the Syrian city of Aleppo and the Turkish city of Gaziantep. At the time, Erdoğan said an agreement to initiate a similar mechanism with Russia was signed when Russian Prime Minister Vladimir Putin visited Ankara in August, when Turkey and Russia signed about 20 agreements on cooperation in a number of areas, including, most notably, energy. “We will put into force a similar mechanism with Russia.”

The timing of the meeting planned to be held with Russia has been found particularly interesting as it comes just before a December summit of the European Council. Observers suggest that the planned meeting with Russia is a message to European Union members who offer a “privileged partnership” to Turkey instead of full EU membership. Turkey will show how a privileged partnership is constituted through the meeting with Russia, the same observers argue. Turkey firmly rejects any option that falls short of full EU membership.

The EU opened accession talks with Ankara -- an EU candidate since 1999 -- in October 2005, but they have been progressing slowly amid opposition from France and Germany. The unresolved Cyprus dispute and a slowdown of reforms in Turkey are other factors hampering the accession process.

French President Nicolas Sarkozy and German Chancellor Angela Merkel are the most high-profile European politicians opposed to Turkey's accession. Sarkozy claims Turkey does not belong in Europe, while Merkel promotes privileged partnership, an option Ankara categorically rejects. In Berlin in May, Merkel and Sarkozy made a joint statement declaring that they shared a common position regarding Turkey's accession to the EU, in that it should be offered a privileged partnership, not full EU membership.

The first step toward holding a joint cabinet meeting with Russia was taken on the sidelines of the United Nations General Assembly in New York in September, with Russian Foreign Minister Sergey Lavrov responding positively to a proposal by his counterpart, Ahmet Davutoğlu. Moves to organize the joint meeting have been continuing since then. The meeting between Russia and Turkey is planned to be held at a ministerial level. Meetings with Iraq and Syria, on the other hand, are chaired by the prime ministers.

Today’s Zaman: Gül discusses Karabakh dispute with Medvedevhttp://www.todayszaman.com/tz-web/news-190549-100-ankara-moves-toward-privileged-partnership-with-moscow.html

President Abdullah Gül had a phone conversation with Russian President Dmitry Medvedev about the situation in the Caucasus on Monday, sources at the Turkish Presidency announced.

President Gül reportedly asked Russian President Medvedev to boost efforts to solve the Nagorno-Karabakh conflict, a territorial dispute between Azerbaijan and Armenia.

During the phone conversation, Gül asked the Russian president to accelerate the process to find a lasting solution for the Nagorno-Karabakh dispute, adding that the determinant actor in the South Caucasus is Russia. Presidential sources labeled the Gül-Medvedev talk a “long, comprehensive and useful conversation to make stability and peace in the South Caucasus dominant.”

Pointing to the troubled South Caucasus region, political commentators argue that even positive gestures could destabilize the region. Amid a growing crisis with Azerbaijan due to the Turkey-Armenia rapprochement, President Gül is working hard to push international actors to work for a solution to the problem. 

While the process of the ratification of the protocols to normalize relations between Turkey and Armenia is in progress in both the Turkish and Armenian parliaments, President Gül also met with the Minsk Group's French, Russian and American co-chairs, who have striven for 17 years to solve the problem, during October to ask them to intensify peace negotiations to find a solution for the Nagorno-Karabakh conflict.

During the conversation, Medvedev and Gül also reportedly spoke of Turkish-Armenian relations, and Gül explained how the Karabakh conflict impacted relations between Azerbaijan, Armenia and Turkey. “We need your support. We want you to continue your support of the preservation of the peace and stability in the region,” Gül said to Medvedev. In turn, Medvedev promised Gül that Russia would always support peace efforts in the region. Gül and Medvedev also spoke of the South Stream gas project, which is planned to transfer Russian gas under the Black Sea. Medvedev thanked Gül for allowing the use of Turkey's territorial waters in the Black Sea.

Gül also recently addressed the same issues while speaking with US President Barack Obama. In addition, during his visit to France Gül asked French President Nicolas Sarkozy to do what he could to accelerate the Azeri-Armenian peace process. “Solve the Nagorno-Karabakh conflict, and let's open the borders together. Let the honor of this be yours,” Gül was quoted as saying to Sarkozy. Süleyman Kurt Ankara

21 October 2009, WednesdayCELIL SAĞIR  İSTANBU

Today’s Zaman: Russia to conduct geological exploration in Turkey’s Black Seahttp://www.todayszaman.com/tz-web/news-190565-105-russia-to-conduct-geological-exploration-in-turkeys-black-sea.html

Turkey has decided to allow geological exploration in its Black Sea economic zone as part of the South Stream project, Russia’s Itar-Tass news agency claimed on Tuesday.

According to the agency’s report, President Abdullah Gül had a telephone conversation with Russian President Dmitry Medvedev on Monday. “In accordance with the earlier understandings reached at the top and high levels, the Turkish government has made all the necessary decisions to issue permissions for geological exploration in Turkey’s exclusive economic zone in the Black Sea for the sake of the South Stream gas pipeline project,” Gül was reported as saying to Medvedev. In response to Gül, Medvedev reportedly said the decision will facilitate the further strengthening of the strategic relations between Russia and Turkey. The two presidents also discussed the global agenda and cooperation in international organizations, according to the report.

Russia’s Kommersant daily also reported yesterday that Turkish Energy Minister Taner Yıldız informed Russian Deputy Prime Minister Igor Ivanovich Sechin of Turkey’s decision “unofficially” in Milan on Monday, prior to the signing of a memorandum of understanding on the Samsun-Ceyhan oil pipeline by Turkey, Russia and Italy.

The South Stream project is to be built by a joint venture between Russia’s Gazprom and Italian oil group Eni. The 900-kilometer pipeline is set to eventually run from Russia to Bulgaria under the Black Sea before delivering gas to consumers in Europe. The pipeline, with an annual capacity of 63 billion cubic meters, is planned to be operational in 2016, costing $11.6 billion.

21 October 2009, WednesdayTODAY'S ZAMAN WITH WIRES  İSTANBUL

Tuesday, October 20, 2009

WorldTribune.com: Iraq to replace Russian weapons destroyed by U.S. invasion with . . . more Russian weapons

http://www.worldtribune.com/worldtribune/WTARC/2009/eu_russia0819_10_20.asp

BAGHDAD — Iraq has been preparing to negotiate a major weapons contract with Russia."A large delegation from the Iraqi Defense Ministry will travel to Moscow soon for talks on arms purchases [from Russia]," Iraqi parliamentarian Abbas Al Bayati said.

Most of the Soviet-supplied Iraqi military was destroyed in the U.S.-led invasion in 2003.

Officials said the Defense Ministry was was interested in Russian helicopters, armored combat vehicles and air defense systems.

In an interview with Al Iraqiya television, Al Bayati said the Defense Ministry planned to sign major contracts with Russia as well as other countries by 2012. He said Baghdad has decided to diversify its military suppliers while maintaining its largely Russian-equipped army. "The military experience of the Iraqi army is based primarily on the Russian weaponry," Al Bayati said on Oct. 16.

Russia has been a major supplier of Mi-17 helicopters for the Iraq Air Force. The Iraqi military and security forces still use the AK-47 assault rifle despite plans to increase the presence of the U.S.-origin M-16.

Officials said the Defense Ministry was also planning to conclude military purchases from France, Germany, Serbia and the United States. They said the deals were meant for both the Iraqi military and security forces.

In April 2009, Iraq and Russia discussed the renewal of defense cooperation and weapons deals.

Russia Today: Russian security companies demand legislative support to work in Iraqhttp://russiatoday.com/Top_News/2009-10-21/russian-security-companies-demand.html/print

21 October, 2009, 10:00

A Russian private security company is calling on lawmakers to provide legal support for their operations abroad in countries like Iraq, where it could do a much better job of protecting Russian staff and property there.

Russian companies are finding opportunities to profit in Iraq, recovering from decades of conflict, but there are risks.

“I think this will be a serious problem. Coalition Forces are leaving Iraq gradually, but as a result of this period of ‘imported democracy’, people there have changed,” says Oleg Maslov, coach at Oryol anti-terror training centre. “Now they have bandits at a whole new level; now they have world-class terrorists. So this will be a problem.”

An Anti-terror Center, Oryol is a leading private security team made up of former Russian special forces officers and secret service agents. An international law requires businesses in Iraq to provide their own security. Their mission is to keep Russians working in Iraq safe. Those who work for this exclusive group say they are part of a long-standing tradition of Russians protecting their own.

In 1943 near Oryol, there was an epic battle, a major turning point in WWII, where the Red Army faced off against Hitler’s troops, protecting Moscow from invasion. In some ways it is poetic that a company which has Russians protecting other Russians chose this area as their headquarters.

“At the core, everything is the same as it was during WWII,” believes Sergey Epishkin, head of Oryol anti-terror training center. “The heart of an officer, the frontline brotherhood – these things are still here. And it did not start during WWII. It goes back to the times of Aleksandr Suvorov [an 18th Century general] and so on.”

But when it comes to Iraq, the desire to protect is not enough in itself – the logistics of working there can be complicated.

“We need support from the Foreign Ministry and our embassy there,” outlined Epishkin. “We already have a good, friendly relationship with our diplomats there, but when it comes to official support, there may be some problems with that.”

Unlike their American counterparts Blackwater, Anti-terror Oryol cannot be designated as a private security force. Instead they work in Iraq as “consultants”.

“We have no status there, no rights. If a person asks me, “Why are you armed?” all I can say is I need to protect myself,” laughs Oleg Pyrsin, one of the Centre's instructors. “We are not allowed to use weapons except for self-defense. In case something happens and we have to open fire, I cannot even imagine how we can explain this later.”

These complications have forced the Oryol group to work differently from the controversial Blackwater organization, relying more on cultivating relationships and less on weapons and force. As a result, Anti-terror Oryol stands out in a positive light against concerns about their Blackwater colleagues using the excessive force, and even killing civilians with little regard.

However, even with their successes, those who are charged with keeping people safe say they need more support, calling on the Russian parliament to find ways to give Russian private security companies more freedom to operate.

State Duma deputy Gennady Gudkov says, “We suggest that Russian regulations for private security companies should cover Russian companies working outside the territory. I mean jets, ships and objects that are outside the country, but still belong to us. It might become law if it is put in the right form.”

Hopefully, this will open the door for better security option for Russians helping a country to rebuild.

UkrainianJournal.com: Conflict with Russia over Crimea is ‘impossible,’ says speakerhttp://www.ukrainianjournal.com/index.php?w=article&id=9285

Journal Staff Report

KIEV, Oct. 20 – A Ukrainian-Russian conflict over the Crimean peninsula is impossible, Ukrainian Parliament Speaker Volodymyr Lytvyn said in London at a meeting with the members of the Foreign Affairs Committee chaired by MP Mike Gapes.

"A repetition of a similar conflict in Crimea is absolutely impossible," he said while commenting on the hypothetical possibility of a Ukrainian-Russian conflict in Crimea similar to conflicts that have occurred in the Caucasus.

Georgian Daily: Rather than Invade, Moscow Will Seek to Destabilize Ukraine from Within, Georgian Official Says

http://georgiandaily.com/index.php?option=com_content&task=view&id=15324&Itemid=65

October 20, 2009

Paul Goble

The Government of Georgia is convinced that Russia will not invade Ukraine, a country immeasurably stronger than Georgia, the vice premier of that South Caucasus republic said yesterday, but rather that Moscow will employ “the most clever means” of destabilizing Ukraine from the inside during the ongoing presidential campaign there.

Georgy Baramidze, who also serves as Georgia’s minister for European and Euro-Atlantic integration, said that Russian forces could not hope to defeat Ukrainian ones and therefore will “attempt to blow up [the Ukrainian] state with [Ukraine’s own] forces’

(ru.tsn.ua/ukrayina/gruziya-predupredila-chto-rossiya-poprobuet-podorvat-ukrainu-iznutri.html).

Moscow, he said, will try to “create controlled chaos and an atmosphere of hatred,” to play off one group of Ukrainians against another in order to “inflame” the situation. Indeed, Baramidze said, “Russia will support everyone who supports the escalation of the situation and all who pour grease into the fire.”

The Russian authorities can do this in many ways: distributing Russian passports as they did in Abkhazia and South Ossetia and are now doing in Crimea and eastern Ukraine, playing up ethnic and language differences, promoting now one and now another political leader, and putting money in various media projects, all steps designed to exacerbate the situation.

In addition to its own weakness relative to Ukraine, Baramidze continued, Moscow has two other reasons for adopting such an approach. On the one hand, few in the West and indeed many in Ukraine itself are likely to recognize that Moscow is behind many of these covert actions, finding it more convenient in both cases to blame one or another group of Ukrainians.

And on the other, he insisted, “Russia needs chaos in order to be able to say to the West: ‘Here, you see, we turned out to be right – Ukraine can’t live independently. Give it to us. Under us, it will live normally and will live quietly in the future. You don’t understand that they are not Europeans; these are our brothers, not yours. And we will deal with them.”

But if Moscow's first targets in this campaign are Ukraine itself and its Western supporters, Baramidze concluded, people in Kyiv and the West must recognize that ”Ukraine is the key to Eastern Europe.“ If Ukraine does not hold out against it, then ”Russia will have carte blanche“ to dominate the entire region, which is Moscow's strategic geopolitical goal.

RIA: Two soldiers injured by militants in Chechnya http://en.rian.ru/russia/20091021/156540113.html

10:5321/10/2009MOSCOW, October 21 (RIA Novosti) - Two contract servicemen were injured in Chechnya when unidentified militants opened fire on their vehicles, a police source said.

The soldiers were traveling in a truck and an armored vehicle in the North Caucasus republic's Vedeno district on Tuesday.

The attackers "fired with grenade launchers and automatic weapons", the source told RIA Novosti.

Also on Tuesday in the neighboring republic of Ingushetia, militants opened fire on a policeman, but he was not injured in the incident, a local police source said.

The militants shot at the officer's car with automatic rifles as he was approaching his house. He returned fire, and the attackers fled the scene.

Russia's North Caucasus republics, in particular Chechnya, Dagestan and Ingushetia, have seen an upsurge of militant violence this year, with frequent attacks on police and officials.

Itar-Tass: Two servicemen injured in Chechnya

http://www.itar-tass.com/eng/level2.html?NewsID=14452984

21.10.2009, 10.06

GROZNY, October 21 (Itar-Tass) - Two Russian servicemen were injured in a shootout in Chechnya, a source in the republican law enforcement agencies told Itar-Tass on Wednesday.

“On Tuesday, two kilometers away from Khatuni, Vedeno district, unidentified gunmen fired from under-barrel grenade launchers and automatic firearms at an Ural truck and a multi-purpose armored tracked tower carrying Russian servicemen dispatched for forest cutting,” the source said.

Two contract servicemen – a sergeant and a private – were injured in the gunfire. Medical aid was given to them.

Georgian Daily: Another Soviet Practice Seen Returning as Moscow Installs a Russian as Number 2 in Ingushetia

http://georgiandaily.com/index.php?option=com_content&task=view&id=15323&Itemid=65

October 20, 2009

Paul Goble

Moscow’s installation of an ethnic Russian as the second-ranking official in Ingushetia is intended to improve the central government’s control over the distribution of assistance there, something that Ingushetia President Yunus-Bek Yevkurov says he very much favors because of the rampant corruption left over from his predecessor’s reign.

But because of the difficulties such outsiders have faced in Chechnya, South Ossetia, and Daghestan, and because this practice of having a Russian “minder” in non-Russian republics recalls the practice of the late Soviet period, the newly installed Ingushetia prime minister, Aleksey Vorobyev, faces an uphill task.

Moreover, it is even possible that his appointment, which was confirmed by the republic’s parliament today, may exacerbate the negative feelings many Ingush already have about what they see as Moscow’s clumsy interference in their republic under Murat Zyazikov, the previous president whom Vladimir Putin imposed on Magas.

In some respects, Vorobyev is less an outsider than many others. He served in MVD units in the Caucasus 1988 to 1992 and then worked in the Russian interior ministry, the Federal Protection Service, and the State Customs Committee where he rose to the rank of major general. But since 2008, he has been in Ingushetia.

In 2008-2009, Sobkorr.ru reports today, he was an advisor to the Ingushetia president on work with law enforcement agencies and led the apparatus of the Anti-Terrorist Commission of that republic. More recently, he has been secretary of the Security Council of Ingushetia and for the past two weeks acting prime minister (www.sobkorr.ru/news/4ADD7ACFDEE2D.html).

In supporting Vorobyev’s candidacy, Yevkurov noted that “everyone knows him. He has been working year for the same time I have,” adding that the new prime minister “has interacted with the population and understands its mentality, traditions, and customs.” Consequently, Yevkurov said, he has been able to provide “enormous help” in the force structures.

Vorobyev’s past experience in Ingushetia may lead some to discount the extent to which he is likely to be perceived locally as an outsider and by Moscow as someone who can be counted on not to go local, at least in comparison with the ethnic Russian second secretaries that the CPSU routinely installed in non-Russian republics to control them.

But assumptions in that regard may be wrong. On the one hand, many of the ethnic Russians who were named to be second secretaries often had spent time earlier in their careers in the places to which they were assigned. And on the other, as Kasparov.ru observer Yury Gladysh notes, Vorobyev’s appointment is the third of its kind and appears to represent a trend.

As Gladysh points out, in the autonomous republics of the Russian Federation, “the position of prime minister does not mean what it usually does in sovereign countries.” Instead, “the ideal premier” from Moscow’s perspective at least, is someone who knows how to control financial aid coming from the center to make sure it goes to where it is intended.

Like its Soviet predecessor, the Russian Federation government likes to have its own people in these posts. And over the last year, it has employed this tactic twice before in the North Caucasus, but the results of these efforts, Gladysh notes, have not always been as successful as the center hoped, largely because of the resistance of local people.

Neither Chechnya nor South Ossetia was willing to put up with a Moscow-selected prime minister, and there was the infamous case, albeit at a lower level, when Russian efforts to

install its own candidate in a Daghestan position led to a situation in which local officials resisted his installation with arms in their hands.

Given the level of corruption in Ingushetia at present, Gladysh says, one can only hope that Vorobyev will have better luck, something the support he now appears to enjoy from Yevkurov may help but is far from providing an absolute guarantee in what is now the most unsettled republic of the North Caucasus.

Russian Communists seek election chief's resignation over fraud http://en.rian.ru/russia/20091021/156541565.html

12:1221/10/2009

MOSCOW, October 21 (RIA Novosti) - Russia's Communist Party, which earlier walked out of the lower house of parliament in protest against alleged election violations, demanded on Wednesday that the country's election chief resign.

On October 14, three opposition parties in the lower house of parliament left a State Duma session in protest against alleged fraud in the October 11 local elections, which the ruling United Russia party won by a landslide.

"We would not want our country to find itself in a political deadlock after it has found itself in a raw materials deadlock," Communist leader Gennady Zyuganov told the lower house of parliament.

The Communists are demanding that Vladimir Churov, chairman of the Central Election Commission, and Leonid Markelov, governor of the Volga Republic of Mari El, resign over alleged election fraud.

Zyuganov said the Communists have prepared a program for the country to get out of the current political deadlock, which they intend to discuss with Russian President Dmitry Medvedev soon.

The opposition has demanded a meeting with Medvedev to discuss electoral violations. The meeting, initially scheduled for October 27, could be held this week.

The ultranationalist Liberal Democratic Party demanded a nationwide recount and State Duma Speaker Boris Gryzlov's resignation. It also said the polls in Moscow, Central Russia's Tula Region and the Volga Republic of Mari El should be declared invalid, and a new vote scheduled for March 2010.

RIA: Communists to return to State Duma after walkouthttp://en.rian.ru/russia/20091021/156538334.html

06:1521/10/2009

MOSCOW, October 21 (RIA Novosti) - Lawmakers of Russia's Communist party, who have walked out of the lower house of parliament in protest against alleged election violations, announced they would return on Wednesday.

The nationalist Liberal Democratic Party (LDPR) and the Kremlin-backed A Just Russia ended the boycott last Friday.

"Tomorrow we will... take part in the chamber's session," Communist leader Gennady Zyuganov said.

A lawmaker for the A Just Russia party said that many demands of the opposition have been met.

"The opposition has insisted on a meeting with the president - it has been appointed. The chairman of the Central Election Commission was invited to the State Duma. We have also prepared amendments to the State Duma's rules of procedure," Gennady Gudkov said.

On October 14, three opposition parties in the lower house of parliament walked out of a State Duma session in protest against alleged violations in the October 11 local election, which the ruling United Russia party won by a landslide.

The opposition demanded a meeting with Russian President Dmitry Medvedev to discuss electoral violations. The meeting, initially scheduled for October 27, could be held already this week. They also urged resignation of the Central Election Commission chairman, Vladimir Churov.

The LDPR demanded a nationwide recount and State Duma Speaker Boris Gryzlov's resignation. It also sayd the polls in Moscow, Central Russia's Tula Region and the Volga Republic of Mari El should be declared invalid, and a new vote scheduled for March 2010.

Interfax: Liberal Democrats, other opposition activists to stage protests against "rigged elections"http://www.interfax.com/3/524522/news.aspx

MOSCOW. Oct 21 (Interfax) - The Russian Liberal Democratic Party(RLDP) is planning to join the protests in Triumfalnaya Ploshchad onOctober 22 initiated by the Communist Party and other opposition forces. "The RLDP leader, Vladimir Zhirinovsky, and party activists willtake part in the protests against the falsification of the October 11elections," the party's faction in the State Duma said in a pressrelease obtained by Interfax on Tuesday. The RLDP is not renouncing its earlier demands, the statement said.

"We are saying: no to mass falsifications! The RLDP is for honestelections across the country!" the statement said. On October 14 three opposition factions, the Communists, theLiberal Democrats and the Fair Russia, walked out of a State Dumaplenary session in sign of protest against the October 11 elections. TheRLDP and Fair Russia factions went back to business as usual lastFriday. Communists announced their preparedness to go back to the StateDuma sessions on Tuesday.

RIA: Russian trade union set to refer debt ship case to prosecutohttp://en.rian.ru/russia/20091021/156537606.html

03:5721/10/2009

VLADIVOSTOK, October 21 (RIA Novosti) - The Far Eastern department of Russia's seamen trade union is to seek assistance of a local prosecutor's office in helping the crew of a debt ship to obtain their wages, a trade union spokesman said on Wednesday.

Fourteen Russian seamen, who worked at the Igor Belyansky vessel, informed their trade union that they were stranded in China after their employer had sold the ship in the southern Chinese port of Beihai. The vessel's owner reportedly owes the crew $100,000 in wage arrears.

Several days later the crew was repatriated to Russia with the help of Russian authorities and diplomats, but did not receive their wages.

"The vessel has already been sold to another company and there is not many ways to persuade the employer [to repay debts]. Probably the Russian authorities, who assisted in repatriation, would help in returning the money," the source said.

RIA: Two ferries collide in Siberia, casualty reports varyhttp://en.rian.ru/crime/20091021/156538064.html

05:2521/10/2009

YAKUTSK, October 21 (RIA Novosti) - Two ferries have collided in poor visibility on the Lena River in northeastern Siberia's Yakutia, an emergencies ministry spokesman said on Wednesday.

The ferries hit each other with their loading stages in thick fog on Tuesday evening. The reports about damage and casualties vary.

"A 24-year old man received a slight injury to his face, seven cars were damaged. No casualties were reported on the other ferry," the source said.

Eyewitnesses said, however, that several cars fell overboard in the accident, and people inside drowned.

The ship's owner said, citing unofficial reports, that one person was killed in the accident.

The Financial: Russia falls to 153rd in press freedom indexhttp://finchannel.com/news_flash/World/49874_Russia_falls_to_153rd_in_press_freedom_index/

21/10/2009 10:25 (00:13 minutes ago)

The FINANCIAL -- According to RIA Novosti, Russia fell to 153rd place in the latest Reporters Without Borders report on press freedom, published on October 20.

Russia has dropped 12 places since 2008, and is now below neighboring Belarus for the first time.

"The reasons for this fall, three years after Anna Politkovskaya's murder, include the continuing murders of journalists and human rights activists," the organization said. "They also include the return with increasing force of censorship and reporting taboos and the complete failure to punish those responsible for the murders."

Denmark, Finland, Ireland, Norway and Sweden are joint top of the press freedom index.

Turkmenistan (173), North Korea (174) and Eritrea (175) occupy the last three places, and are described as countries "where the media are so suppressed, they are non-existent".

Despite the U.S. moving from 36th to 20th place, "the attitude of the United States towards the media in Iraq and Afghanistan is worrying," Reporters Without Borders said.

The Moscow Times: New Judge Selected Ahead of Yukos Case http://www.themoscowtimes.com/news/article/new-judge-selected-ahead-of-yukos-case/387814.html

21 October 2009By Alexandra Odynova

A new judge has been appointed to represent Russia in the European Court of Human Rights ahead of a trial in the case filed by former Yukos management.

“Andrei Bushev has been commissioned a judge in the Strasbourg court for the hearing over the Yukos complaint,” a source in the Justice Ministry said, Interfax reported Tuesday.

Bushev’s predecessor as ad hoc judge in the court, Valery Musin, resigned after being appointed as a board member of Gazprom.

Musin was the second judge representing Russia in the court to withdraw from the case of Yukos vs. the Russian government. Judge Anatoly Kovler earlier quit the court.

The court was to hold its first hearing on Yukos on Nov. 19, but it might now postpone it because of the switch in judges, according to the court’s web site. Russia has the right to ask for a delay when a new judge is appointed.

Former Yukos managers are seeking $100 billion in damages for the Russian government’s 2006 bankruptcy of the oil company, once Russia’s biggest. Former Yukos CEO Mikhail Khodorkovsky is serving an eight-year prison sentence for fraud and tax evasion and is on trial again in Moscow on related charges. He and his supporters say the charges are politically motivated.

The European court, which has ruled against the Russian government in many cases in recent years, cannot force a country to comply with its decisions but can expel it from the Council of Europe. Each of the 47 member states of the Council of Europe has a judge seated in the European Court of Human Rights.

Musin, who left the court for Gazprom, is a professor of civil law at St. Petersburg State University and a former teacher of President Dmitry Medvedev and Prime Minister Vladimir Putin. In June, Gazprom’s shareholders elected Musin as an independent board member, replacing Boris Fyodorov, a former finance minister who died last year.

Bushev, his replacement at the European court, is a professor of commercial law at St. Petersburg State University and studied law there at the same time as Medvedev. He graduated in 1988, one year after the president, Kommersant reported.

FT.com: Mixed messages revive art of Kremlinologyhttp://www.ft.com/cms/s/0/041ce51a-bd92-11de-9f6a-00144feab49a.html

By Charles Clover

Published: October 20 2009 17:28 | Last updated: October 20 2009 17:28

It is ever harder to tell when a Russian leader is on message, off message, or even if there is a message. On a host of issues such as Iran sanctions, US missile defence and entry to the World Trade Organisation, there is a growing perception that the Kremlin either can’t make up its mind or is playing an elaborate game of pretending that it can’t.

After four months of apparent dithering, the Kremlin last week seemed to have reversed its position for a second time on a policy of trying to enter the WTO as a collective trade bloc with Kazakhstan and Belarus, saying it would apply independently.

Russia’s attitude to western sanctions on Iran, meanwhile, is especially hard to fathom. China, which opposes sanctions, and the US, which supports them, seem to be under the impression that Russia supports their view.

In semantic terms, the positions of Dmitry Medvedev, the president, Vladimir Putin, the prime minister, and Sergei Lavrov, the foreign minister, are basically the same but differences of emphasis make Russia’s line difficult to grasp.

All seem to say sanctions are a possible last resort: Mr Medvedev opposes sanctions but said last month they could be used in extremis . Mr Lavrov declared sanctions “unproductive” but added last week that they could be unavoidable in some cases. On Wednesday Mr Putin said talk of sanctions was “premature” in what was seen as a rebuke to Mr Medevdev.

Whether this amounts to a different opinion is unclear. One diplomat thought the disagreements were choreographed; another called the Medvedev-Putin routine “good cop, bad cop” while another said it resembled a “Punch and Judy” show.

So do the different messages reflect the two mens’ different approaches?

Mr Putin is nationalistic and statist and Mr Medvedev more western-oriented but both routinely blur the boundaries of the constitutional division of labour between them. Mr Medvedev summons ministers and publicly gives them instructions on the economy, which is Mr Putin’s job, while Mr Putin makes foreign policy, which is Mr Medvedev’s.

“Between them, it is difficult to be certain what behaviour and statements to ascribe to a good cop/bad cop routine to personal ambitions or to real policy differences” write Dimitri Simes and Paul J. Saunders in an article to be published in National Interest journal.

The WTO application seems to have been one case of clear disagreement The attempt to join the trade bloc was on track to be completed this year. But in June, Mr Putin said Russia would withdraw its application and seek to join with Kazakhstan and Belarus. Judging by their stunned reactions, Mr Medvedev and most senior officials were taken aback.

Then, Mr Medvedev said separate entry would be “simpler”. Maksim Medvedkov, the chief WTO negotiator, confirmed on Thursday that Russia would seek entry independently of its customs union partners, though their applications would be “synchronised” a word left purposefully vague.

If this policy sticks, it would mark a significant setback for Mr Putin, the first time he has failed to prevail in a issue of this magnitude.

Elsewhere, there seems to be a split between hardliners and liberals within the Kremlin. When Dmitry Rogozin, Russia’s ambassador to Nato, said last month that a new US missile defence plan represented a threat to Russia, a Kremlin “source” was quoted disowning the comments. That appeared to lend more weight to the notion of a rift. Kremlinology has never been an exact science but it has rarely yielded such diverging results.

Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

RIA: Russian govt. ready to force firms to invest in technology http://en.rian.ru/business/20091021/156541409.html

11:5421/10/2009MOSCOW, October 21 (RIA Novosti) - The Russian government may introduce measures to oblige companies to invest in energy efficiency and other technology projects, a Kremlin aide said on Wednesday.

"Russia must see a many-fold increase in investment in modern energy, including nuclear power engineering, and technologies relating to better energy efficiency, and also in telecommunications," Arkady Dvorkovich told an annual conference sponsored by UBS.

Dvorkovich said the government will do everything possible to ensure that investment in these areas starts to rise over the coming months, and will provide support for investors.

However, "In some cases, obligatory measures will have to be used," he said.

Russia, whose economy depends heavily on revenue from the sale of raw material commodities - mainly oil and gas - has so far failed to diversify its economy and create competitive value-added and high-technology industries.

Dvorkovich agreed with the view of other speakers at the conference that higher production efficiency, in particular labor productivity, will be long-term factors for the economy's growth.

"This will help us diversify the economy more quickly," he said.

RFERL: Cash-Strapped Russian Science Looks To Government Support http://www.rferl.org/content/CashStrapped_Russian_Science_Looks_to_Government_Support/1856561.html

October 20, 2009 By Kevin O'FlynnMOSCOW -- Marine biologist Andrei Sazhin's office in Moscow's Institute of Oceanology may be well-decorated, but matters aren't as rosy as they seem.

Sazhin earns 18,000 rubles ($600) a month, far less than the average Muscovite. He gets by thanks to the decision by his wife, a former scientist, to leave the profession for a better-paid job.

He says he also supplements his income with foreign grants and work abroad. "You travel abroad a couple times, then you can return and work as a scientist, as if it were a hobby," he says. "I repaired this office with my own money."

It's a typical story. The Soviet Union may have sent the first man into space, but Russian science today is in a dismal state, and it's been generating a lot of talk in recent weeks. Earlier this month, a group of emigre scientists raised the issue in an open letter to President Dmitry Medvedev and Prime Minister Vladimir Putin.

"We consider it our duty," they wrote, "to draw attention to the catastrophic conditions of fundamental science in the country. Matters are deteriorating and the size and seriousness of the danger is underestimated. The level of financing for Russian science is far lower than other developed countries."

One of the biggest effects, the scientists said, is a "massive outflow" of scientists abroad.

More than 170 scientists signed the letter, which called for a greater government role in science, more financial transparency, higher wages, and better strategic planning.

Medvedev responded by initiating work on a plan for developing Russian science, according to the president's press office.

The Nobel Gap

But Ivan Sterligov, director of research at the Open Economy fund, tells RFE/RL's Russian Service that Russian science will probably continue to lag further.

Sterligov says a "key indicator" is scientific publications: "how many are published and how they're quoted. Other countries are steadily overtaking us. If we were in third or fourth place at the collapse of the Soviet Union, Russia is now 15th."

Russia's failure to win any Nobel Prizes for science this year hit a nerve in Moscow. The issue featured on a popular prime-time chat show, which called its discussion "The Nobel Myth."Some participants put the paucity of Russian Nobel Prize winners down to politics and a liberal Western bias among members of the Swedish committee.

One panelist pointed to the case of Nikolai Bogolyubov, awarded the Nobel Prize in physics in 1973. The prize was later withdrawn at the last minute after he published a letter attacking dissident Andrei Sakharov.

But Yelena Lozovskaya, editor of "Science and Life" magazine, says it's up to Russian scientists to follow international practice by publicizing their own work.

"If scientists fail to report the results of their work at conferences or publish them in journals read by all scientists," she asks, "how can anyone know about their work? Our scientists have to be more active."

Post-Soviet Brain Drain

International companies such as Intel and Boeing have set up offices in Russia to exploit the vast technical skills Russian scientists still possess 20 years after the Soviet collapse.

But according to one estimate, 200,000 scientists have left Russia since the end of communism for better-funded jobs abroad. Sazhin says scientists in physics and other fields that require the use of expensive equipment are the most likely to leave.

"I asked a colleague who had moved to the United States whether she had any language problems," he recalls. "'Problems?' she said. 'Of the 15 people in our department, there are eight Russians, two Poles, and three Ukrainians. That's what's called an American university.'"

Sazhin's Institute of Oceanology is better off than many other institutions because it's able to rent research ships to tourists. Director James Cameron used the institute's "Mir" submersible to film the wreck of the Titanic for his blockbuster movie.

The government has significantly increased funding for science in recent years. But massive corruption in government bureaucracy makes it unclear how much of the money is actually getting to scientists.

Sazhin says a grant he's applying for would provide less than $1,600 per person for months of work. He says a previous project he completed for a state-owned natural resources company paid him virtually nothing.

"I spent a week on it and received a symbolic amount," Sazhin says. "At each step of the process, there are so many middlemen and each takes some of the money. The person who does the real work gets only a tiny percentage."

Despite the difficulties, Sazhin says he's not considering leaving Russia. But as long as others continue to look abroad for work, few expect Russia will be winning many Nobel Prizes soon.

RFE/RL's Russian Service contributed to this report

Moscow Journal

NY Times: Lifting the Lid on Russia’s Art of Lavish Gift Giving http://www.nytimes.com/2009/10/21/world/europe/21voltaire.html

By ANDREW E. KRAMERPublished: October 20, 2009

MOSCOW — Until recently, Aleksandr Y. Khochinsky occupied a special niche in this capital, known as much for its corruption as for its wealth. He was an antiquarian who specialized in providing high-class grease for the best-connected palms in the government and other high-level circles.

Harried businessmen would rush in off the streets to his gallery here, Bogema, and think nothing of spending tens of thousands of dollars for the right item to delight the powerful, whether a set of dueling pistols, a suit of armor, antique Rolex watches or a $2 million seascape by the Russian artist Ivan Aivazovsky.

Mr. Khochinsky prided himself on his talent for finding the perfect gift. “Tell me only a few details about the man,” he said in a recent telephone interview. “Is he a hunter, a fisherman, does he chase women? I can find a gift.”

Normally, the world Mr. Khochinsky navigated so successfully is hidden from view. But now, after a very delicate transaction that he says went horribly wrong and left him accused of blackmail by a powerful figure, he has decided to lift the veil on the cozy world he knows so well.

There is little chance that the dispute that has embroiled him and forced him to leave the country will be resolved; in Russia, high-level spats like this seldom are. But the deal, as described by Mr. Khochinsky, illuminates an aspect of life here for people at the intersection of business and politics at the highest levels, including the most powerful politician of them all: Prime Minister Vladimir V. Putin.

The current entanglement began with the purchase, in 2006 at a Sotheby’s auction in Paris, of 26 letters written by Voltaire to Catherine the Great, dating from 1768 to 1777. Mr. Khochinsky said he bought them for $869,000 — a world record for 18th-century handwritten texts, according to Sotheby’s — for a Russian billionaire who had made his money in banking and real estate.

Handing a little something to a bureaucrat is an old tradition in Russia — popularly known as giving “greyhound puppies,” a reference to a Nikolai Gogol character who accepted only puppies as gifts.

Sergei V. Bobovnikov, a dealer in late imperial and Soviet-era decorative art, says artwork and antiquities make fine gifts for bureaucrats today, either to keep or to donate to museums. Bureaucrats, he said, “are buried in these gifts on their birthdays, anniversaries and so on.”

Mr. Khochinsky’s client wanted to give the letters to Mr. Putin, who was then president, with the idea that he could then donate them to a Russian library. In this, the billionaire was following a more recent tradition of currying favor with the Kremlin by returning cultural and historic artifacts to Russia. In the most prominent instance, Viktor F. Vekselberg, an oil and aluminum magnate, returned the Forbes family collection of Fabergé Imperial Easter eggs to Russia in 2004, at a cost of $100 million.

Mr. Khochinsky said he saw special value in the letters as a gift to Mr. Putin. Voltaire, though critical of the 18th-century French monarchy, had famously praised Catherine the Great as an enlightened despot.

In the letters Mr. Khochinsky purchased, Voltaire also wrote in support of Russian military campaigns in what is now Ukraine and Poland. In essence, here was a pre-eminent European philosopher supporting a leadership role for Russia in eastern Europe, an idea back in vogue in Moscow these days.

But now, Mr. Khochinsky says, the letters have vanished and he is out the $869,000 purchase price because the gift was not delivered. He says the letters disappeared sometime after he gave them to Russia’s Channel One, a state television outlet, to arrange a televised transfer of the documents to Mr. Putin.

A spokesman for Mr. Putin said that the prime minister “never saw these letters, and nobody ever gave him anything like this, or will give it to him. I don’t know who bought these letters, but they don’t have anything to do with Putin.”

Mr. Khochinsky said he filed a complaint against the station and asked the police for help in finding the letters, despite the authorities’ notoriously poor record in solving high-level disputes. In their report, the police say Channel One’s director, Konstantin Ernst, denied that the station had ever received the letters, and accused Mr. Khochinsky of trying to blackmail him by trying to tie him to their theft. Mr. Khochinsky has denied that allegation.

While it is doubtful anyone will ever know what happened to the letters, one thing seems certain: Mr. Khochinsky’s line of work, if not Mr. Khochinsky himself, will continue to play an important role in Russia. And that is not entirely a bad thing, says Mr. Bobovnikov.

“Galleries don’t survive on collectors,” he said. “The sweetest scheme is when you have businessmen who need items for gifts. Not for collections. But for gifts. The antiquarian should know what to give. He should understand.”

The Moscow Times: The Dragon and the Amoeba http://www.themoscowtimes.com/opinion/article/the-dragon-and-the-amoeba/387812.html

21 October 2009By Yulia Latynina

At a meeting in New York in September, President Dmitry Medvedev and Chinese President Hu Jintao signed a wide-ranging cooperation agreement through 2018. It calls for Russia to become a raw-materials appendage of China. Russia will provide China with raw materials such as coal, iron, gold and manganese, and China-based factories will process it all.

In reality, though, this is only a preliminary agreement because the Kremlin has a compulsive fear of China. Russians love conspiracy theories, and they avidly read the apocalyptic prophecies of Alexander Khramchikhin about how China will one day dismember Russia.

The problem is that such prophecies are self-fulfilling. Oedipus is a good example. His greatest fear was that he would murder his father and sleep with his mother, and that is exactly what ultimately happened.

Beijing follows two basic rules when buying raw materials from abroad. First, it buys primarily from states and not from private companies. Second, when buying from African dictators, it does not give them lectures on human rights but often pays off the dictator along with the rights to the mineral deposits.

In other words, China is behaving just as the 18th- and 19th-century Europeans behaved toward Beijing. China is following the example of Europe during its heyday of military triumphs and expansion. Today, China is the only colonial power left in the world.

An influx of foreign capital is an advantage for `a strong country and a disadvantage for a weak one. At the same time, the desire of the weak country to keep foreigners out is not an obstacle in this case. It is just the opposite.

For example, consider China’s recent history. At the beginning of the 20th century, China was de facto occupied by the world’s major powers: Britain, the United States, France and Russia.

This was not because the Chinese government had good relations with foreigners. On the contrary, Empress Dowager Cixi had extremely bad relations with foreigners during most of her reign from 1861 to 1908. The problem was that China was a failed state at the time. Cixi was primarily concerned with establishing the legitimacy of her rule. In addition, the officials serving her also hated foreigners, although the bureaucrats were more than willing to take bribes from them.

Russian regions bordering China are threatened with the same fate under Prime Minister Vladimir Putin as Chinese provinces bordering Russia suffered under Empress Cixi. Russia has the same weak bureaucrats who hate foreigners and take bribes from them. Russia also has a large number of poor people who hate foreigners. If they had the chance, they would wage a pogrom against them, even knowing that the result would mean a harsh retaliation from the foreign government and perhaps even foreign occupation of the country.

Russia is doomed as long as the Kremlin continues its current course. Fortunately, nothing lasts forever, as Empress Cixi showed. Although Cixi’s reign ended, China remained.

One day, Putin too will be out of office. Hopefully, he will replaced by a leader who is truly interested in running the country’s affairs and not only his personal offshore accounts. Russia is too great a country to die like an amoeba.

Yulia Latynina hosts a political talk show on Ekho Moskvy radio.

National Economic Trends

OCTOBER 21, 2009, 4:11 A.M. ET

WSJ: Russia Doesn't Rule Out RUB26/$1 In 2010 If Oil Price Rises http://online.wsj.com/article/BT-CO-20091021-702956.html

MOSCOW (Dow Jones)--The Russian currency could strengthen to 26 rubles against the dollar if the oil price rises, the country's Deputy Economic Development Minister Andrey Klepach said Wednesday.

Asked about the effect of a stronger ruble on the recovery of Russia's commodity-driven economy, Klepach said that a rate of "RUB26 to RUB27 against the dollar could be dangerous."

Oil prices were lower early Wednesday as investors took profits after a recent rally triggered by expected demand sent prices to $80 for the first time in a year, analysts said. New York's main contract, light sweet crude for December delivery, fell 47 cents to $78.65 a barrel.

Company Web site: www.economy.gov.ru

-By Will Bland and Jacob Gronholt-Pedersen, Dow Jones Newswires; +7 495 937 8445; jacob.pedersen@dowjones.com

Central Banks projects capital inflow in Q4 2009

http://www.rbcnews.com/free/20091021101950.shtml

      RBC, 21.10.2009, Moscow 10:19:50.The Bank of Russia expects private capital inflow at $15bn-$20bn in the fourth quarter of 2009, First Deputy Chairman of the Bank of Russia Alexei Ulyukayev told journalists today. "I believe Russia will enjoy capital inflow in October, and the trend is likely to persist until the end of the year," he asserted.

      Ulyukayev also indicated that the regulator sustained its forecast regarding net capital outflow in the amount of $42bn for 2009. "We do not plan to change the forecast, as our expectations are currently in line with the official forecast," he observed.

      The Central Bank's original capital outflow forecast for 2009 stood at $70bn.

Bloomberg: Russian Inflation Provides Opportunity to Cut Rates Furtherhttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=aT1CHLVhMB6Y

By Alex Nicholson

Oct. 21 (Bloomberg) -- The current level of inflation and interest rates in Russia provides an opportunity to cut rates further, Alexei Ulyukayev, first deputy chairman of the central bank, said today at a conference in Moscow.

To contact the reporter on this story: Alexander Nicholson in Moscow at anicholson6@bloomberg.net

Last Updated: October 21, 2009 02:13 EDT

OCTOBER 21, 2009, 2:04 A.M. ET

WSJ: Russia's Ulyukayev: 2009 Inflation May Be Less Than 10% http://online.wsj.com/article/BT-CO-20091021-701429.html

MOSCOW (Dow Jones)--Russia's inflation could be less than 10% this year, Alexei Ulyukayev, First Deputy Chairman of the country's central bank, said Wednesday.

"We think that the risk of (accelerated) inflation isn't high," Ulyukayev said. "We are guaranteed to have less than 11% (inflation), and I think we may have less than 10%."

Last week, Ulyukayev said the country's inflation could be as low as 8% in 2010, its lowest reading in 10 years.

Web site: www.cbr.ru

-By Will Bland, Dow Jones Newswires; +7 495 937 8445; william.bland@dowjones.com

(Jacob Gronholt-Pedersen in Moscow contributed to this story).

RIA: Russian economy likely to rebound in 2010 - Kremlin economist http://en.rian.ru/business/20091021/156539949.html

10:4121/10/2009

MOSCOW, October 21 (RIA Novosti) - A second crisis wave in Russia is unlikely, and the economy could switch to sustainable growth as early as 2010, a presidential economic aide said on Wednesday.

Arkady Dvorkovich told an annual conference held by UBS in Moscow that economic activity in Russia would stay at a low level for several more months before the economy starts showing sustainable growth.

Dvorkovich said anti-crisis measures taken by the governments of Russia and other countries have contributed to positive changes in the global economy and increased demand for Russian commodities.

Russia's gross domestic product (GDP) increased 0.6% quarter-on-quarter in July-September 2009, showing growth for the first time since the second quarter of 2008, the Economics Ministry said on Tuesday.

"For the first time since the second quarter of 2008, GDP registered positive quarter-on-quarter dynamics. Net of seasonal factors, GDP grew 0.6% in the third quarter compared with the second quarter, or by annualized 2.4%," the ministry said.

Year-on-year, Russia's GDP declined 9.4% in the third quarter and 10.9% in the second quarter, the ministry said.

However, Russia's GDP decline decelerated to an estimated 8.6% in September, year-on-year. Net of seasonal factors, GDP grew 0.5% during the month, the ministry said.

Russian economics and finance officials said in September that the third quarter would see the start of Russia's exit from recession but added that it was still premature to consider the economic crisis over.

Central Bank First Deputy Chairman Alexei Ulyukayev said on Tuesday that Russia's 2009 inflation could be below 10.3% compared with the projected figure of 11%.

Interfax: Econ Ministry forecasts GDP to rise 3%-4% in Q4 compared to Q3 (Part 2)http://www.interfax.com/3/524569/news.aspx

MOSCOW. Oct 21 (Interfax) - Russian GDP will grow 3%-4% in thefourth quarter of 2009 compared with the third quarter, Deputy EconomicDevelopment Minister Andrei Klepach said in Moscow on Wednesday at aconference hosted by UBS.

"We expect strong [seasonally adjusted] growth in the fourthquarter, from 3%-4% compared to the third quarter," Klepach said. That result will put the GDP decline in 2009 at about 8.5%. "Ourforecast is for the contraction to total 8.5%, but the possible range is8.3%-8.8%," he said. Seasonally adjusted GDP has been rising month-on-month since June,he said. Seasonally adjusted GDP in September was 0.5% higher than inAugust, and third quarter GDP was 0.6% higher than in the secondquarter. However, GDP in September was 8.6% lower than in the same monthlast year. Economic growth might pause in the beginning of 2010, Klepach said,but he doubts there will be a second wave of crisis. The GDP growth forecast for 2010 is 1.6%, "but there is a goodprobability growth will be about 2% or even higher," he said. If oil prices remain at current levels in 2011-2012, growth will be0.5-0.8 percentage points higher than the current official forecast, hesaid.

Citi: Likely eurobond sale highlights improving environment http://www.businessneweurope.eu/dispatch_text10238

CitiOctober 21, 2009

Deputy Finance Minister Dmitry Pankin confirmed that Russian officials are to meet bond investors on 5 November in London (Interfax, 19 October). The team will be led by Finance Minister Alexei Kudrin and will meet with Eurobond investors as part of a non-deal road show for the sale of foreign currency debt.

We believe there could be a positive surprise (2-3% of GDP) on the budget this year on the back of stronger-than-budgeted oil revenues and next year because of stronger growth performance. The resulting fiscal deficit is likely to be smaller than the current forecast, which in turn would reduce Russian risk premium and thus stimulate capital inflows. With oil and gas accounting for about 50% of revenues and VAT and import duties making up most of the remainder, a stabilisation of oil prices and a pick-up in domestic consumption would, in our view, result in a stronger fiscal outcome in 2010. Nevertheless we do remain concerned over structural growth issues.

Bloomberg: Russia’s Planned State Asset Sales to Outshine Peers (Update1)http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agAUNSXARKTk

By Paul Abelsky

Oct. 20 (Bloomberg) -- Russia’s plans to sell state assets next year will lure investors eager to take advantage of the country’s attractive valuations compared with its peers in the region, according to East Capital Asset Management.

“From our point of view it’s very easy -- we think Russia is always more interesting as we look at valuations,” said Peter Elam Hakansson, chairman of East Capital, a Stockholm- based fund manager investing in eastern Europe with about 3 billion euros ($4.5 billion) in assets under management.

Russia wants to sell state energy and transport holdings to help plug its first budget deficit in a decade and to speed up the makeover of its aging infrastructure. The state has earmarked about 5,500 enterprises for divestment and will sell shares in companies that are already publicly traded, including OAO Rosneft, the country’s biggest oil producer, First Deputy Prime Minister Igor Shuvalov said on Sept. 22.

“There’s a different type of attraction for different types of investors,” Hakansson said. “As Russia is maturing in its market development, you will see more” institutional investors interested in stable cash flow. “They will welcome things other than oil and gas to invest in.”

Russia’s 30-stock Micex Index gained 0.8 percent to 1375.84 at 4:05 p.m. in Moscow, the highest level in almost two months. The ruble added 0.6 percent to 29.1393 per dollar, and was heading for its strongest close since Dec. 26, 2008.

Economy Grows

Gross domestic product grew 0.6 percent in the third quarter from the previous three months, the Economy Ministry said today, citing preliminary figures. The annual decline eased to 9.4 percent, according to the ministry, compared with a record 10.9 percent contraction in the second quarter.

The government wants to generate 70 billion rubles ($2.4 billion) in 2010, 10 times the original target, by selling all or part of state stakes in 450 enterprises. Sales will consist mainly of airports and river and sea terminals.

The world’s biggest energy exporter needs the funds after the global recession undermined commodity demand and pushed Russia’s economy into its worst contraction on record. Prices for crude oil, 30 percent of the country’s output, slumped by more than two thirds from its peak in July 2008 until the beginning of this year.

Modernization

While the government needs to finance the budget shortfall, Russia also is seeking to attract private investors to help modernize derelict infrastructure. This adds to the appeal for investors, East Capital’s Chief Economist Marcus Svedberg said, because it increases growth potential. East Capital will target shares in assets linked to domestic demand, rather than stocks that track energy prices.

The fund lowered its holdings of oil and gas stocks to 37.7 of the total at the end of June, compared with 48 percent at the end of last year. It also increased holdings in banks, and bought up shares in the metals and mining industry.

Russian officials including Prime Minister Vladimir Putin have said they want to use crisis measures to overhaul infrastructure and become less reliant on oil and gas exports.

The country needs to spend $875 billion on developing its transportation network, Renaissance Capital said last year. Private investors may finance 80 percent of the $1 trillion the government predicts will be spent on an infrastructure overhaul until 2020, according to Standard & Poor’s.

Traffic Delays

Moscow and the surrounding region lose 400 billion rubles a year from traffic delays, while drivers waste more than 12 1/2 hours in congestion each month, the Transport Ministry estimates. The capital has an average of 650 traffic jams a day. Gridlock can only worsen as the number of cars is set to double by 2015, the ministry estimates.

Russia isn’t the only former communist country resorting to divestments to bolster finances. Poland plans a record $10 billion of asset sales through next year, offering stakes in power, oil, copper, phone and insurance companies to help plug a deficit the European Commission estimates will reach 7.3 percent of GDP in 2010. Belarus has targeted 2011 for selling a number of state-run companies.

Lower Valuations

“Most of the time Russia has lower valuations than Poland, for right or wrong, but that’s the case,” Hakansson said. “One reason is that there are very strong pension funds in Poland pushing up the valuations. But if you have the same rates of growth, but you have a lower price in Russia, we will be buying Russian assets.”

The ruble-denominated Micex Index, which has surged 120 percent this year as crude oil jumped above $80 a barrel, is priced at 13.39 times earnings. Poland’s WIG20 Index is traded at 16.32 time earnings, according to data compiled by Bloomberg.

“A number of these countries need to bring down debt, balance the budget or reduce the deficit. For Russia it’s not necessarily that. They are not that pressed for money in the short term,” Svedberg said. “There is a clear understanding that Russia needs more technology.”

As of the end of 2008, East Capital’s Russian fund, which oversees about 2 billion euros, returned 5.1 percent on average in the previous five years and brought in an average return of 17.2 percent since its inception in May 1998. It lost an average 18.8 percent in the past three years. The fund gained 53.6 percent in the first six months of this year,

compared with a 56.9 percent jump in the benchmark RTS stock index during the same period, according to the fund’s first-half report.

Svedberg says investors can expect more privatization throughout the region as opportunities to buy into assets whose growth had been restricted by state ownership spreads.

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

Last Updated: October 20, 2009 08:27 EDT

The Moscow Times: UBS’s Russia Chief Urges Clarity in Sell-Offs http://www.themoscowtimes.com/news/article/ubs%E2%80%99s-russia-chief-urges-clarity-in-sell-offs/387842.html

21 October 2009By Alex Anishyuk

A plan to sell stakes in thousands of state-owned companies has piqued foreign investors’ interest, but they also want to see corporate balance sheets restructured and clearer indications of where their capital is welcome, said Steven Meehan, CEO of UBS in Russia.

The Swiss banking giant is also expecting an economic revival next year to pick up its investment operations in Russia, including new share listings and debt offerings, he said.

“The recent call for privatizations was very well received by market participants because that will increase the trading volume of the stocks that can be publicly held,” Meehan said in an interview with The Moscow Times. “I believe it will also be helpful to reduce the overall volatility in the Russian market.”

First Deputy Prime Minister Igor Shuvalov said during the Group of 20 summit in Pittsburgh last month that state stakes in 5,500 companies could be sold in the next three years, including more shares in state oil giant Rosneft. A week later, Prime Minister Vladimir Putin and Finance Minister Alexei Kudrin also got behind the plan, saying the state needed to start winding down its control of the economy as it returns to growth.

Some market watchers questioned the government’s intentions, however, saying the privatizations were aimed at plugging budget deficits rather than liberalizing the economy. The government expects to raise up to 7 billion rubles ($239 million) from stakes in more than 450 companies next year.

But the status of Russian companies’ balance sheets remains a big concern for investors, Meehan said.

“I think the restructuring of assets and liabilities is a key concern for foreign investment into Russia, but it’s often less discussed,” he said. “International investors … can be uncomfortable investing with short-term liabilities that are disproportionate to long-term assets. The asset and liability mismatching exists to a lesser extent in other markets.”

Russian companies have reduced their foreign debt — which exceeded $500 billion around the start of the year — to $303.5 billion as of Oct. 1, according to Central Bank data. Recapitalized state banks helped with refinancing, but the overall debt burden remains high.

Investors will also want more clarity on navigating the country’s bureaucracy and on which stakes will be sold and when, said Meehan, who took over as head of UBS in Russia and the CIS in March 2008.

“The government’s announcement is obviously not a signal that they’re ready to cede control of oil companies to foreign investors,” he said. “But it would clearly help if Russia could fully define to what extent foreign investment and foreign control is welcome.”

UBS is quite positive on Russia’s macroeconomic dynamics, though, which Meehan directly linked to the international recovery trend.

“A large part of the performance is related to a better-performing global economy, and the rebound of the oil price is also a big contributor,” he said. “The Russian stock market is one of the best performing stock markets in the world this year.”

Investors are interested not only in companies that are now public, but also in those that may have secondary offerings or private companies that could go public next year, he said. As a result, UBS could see a meaningful increase in its investment banking operations here, including new IPOs, eurobonds and internationally denominated debt.

“In the first half of 2010, we expect to see plenty of debt and equity issuance activity, and if the right companies move forward initially, we think IPOs will be very well received for 2010,” he said.

The 30-stock, ruble-denominated MICEX Index has gained about 120 percent this year, while the 50-stock, dollar-denominated RTS Index is up nearly 130 percent. But with crude prices nearing $80 per barrel, UBS and other banks still expect Russian stocks to perform well.

The MICEX remains 30 percent below its 2008 peak, while the RTS is still 40 percent off last year’s high.

“Our research analysts like the oil producers, since we think they are still relatively inexpensive at current price earnings multiples, and there could be some tax adjustments that will encourage the development of new fields and therefore provide further upside

potential,” he said. “Domestically, we like large state-run banks and retailers in terms of other sectors our analysts are over-weighting.”

The Russian economy has stabilized, but the recovery in the real economy may take some time to be fully visible to the public, Meehan said, praising the measures taken by the government to stimulate the banking sector.

“The economy has sustained itself, but this doesn’t mean it will continue to generate high growth and profitability,” he said. “The government performed very well last year, stabilizing the economy and addressing the banking sector as the main priority, because the banking sector is the heart of any economy.”

Meehan criticized recent talk that the BRIC concept might have lost its relevance, as the more diversified economies of Brazil, India and China suffered less during the global recession.

“In my view, you can’t have BIC without the “R,” he said. “If China and India are going to grow, and the global economy will grow, Russia will be crucial to this global growth. It’s the world’s largest exporter of natural resources across many commodities.”

Russia’s position as a “big fuel tank” for the other BRIC countries is only strengthening, particularly as Moscow and Beijing step up energy and other natural-resources ties. Putin signed $3.5 billion worth of contracts on a to China visit last week, as well as a tentative deal to start major gas exports there.

But more work remains to be done on another government priority: boosting financing to the real sector.

“The credit market continues below normal activity levels, and small- to medium-sized loans are generally inaccessible,” he said. “The good news is that interest rates have come down and inflation is down dramatically, which should allow for further rates cuts.”

The Central Bank has signaled that it could continue to cut its key refinancing rate as inflation falls. Alexei Ulyukayev, a Central Bank first deputy chairman, predicted Tuesday that the year-end figure may be below 10.3 percent, the lowest projection from a state official this year.

“Banks have to get into the business of providing loans, that’s crucial for the economy,” he said. “Banks want to give loans, but they don’t want to take risk. However, a loan without risk is not a loan.”

Business, Energy or Environmental regulations or discussions

Bloomberg: Evraz, Gazprom, Lukoil: Russian Equity Preview for Oct. 21

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aW3i2T08Bvg8

By Alex Nicholson

Oct. 21 (Bloomberg) -- The following companies may be active in Russian trading. Stock symbols are in parentheses and share prices are from the previous close.

The 30-stock Micex Index fell 0.3 percent to 1,361.75. The dollar-denominated RTS Index gained 0.9 percent to 1,446.14.

Evraz Group SA (EVR LI): The Russian steelmaker said it priced a 20 billion-ruble ($684 million) bond issue at a coupon rate of 13.5 percent per annum. It said the bonds will mature in 2019 and have a 5-year put option. The shares fell 0.5 percent to $32.00.

OAO Gazprom (GAZP RX): The world’s largest natural-gas producer sees U.S. demand for the heating and power-plant fuel “roaring back” as the world’s largest economy recovers. Implementation of carbon-emissions restrictions will contribute to demand growth because gas is a clean-burning fuel, John Hattenberger, president of Gazprom’s U.S. energy-trading unit, said in an interview at Bloomberg’s Houston bureau. The stock gained 0.3 percent to 196.17 rubles.

OAO Lukoil (LKOH RX): Crude oil fell from a one-year high as U.S. equities dropped and the dollar rebounded, reducing the appeal of commodities as an alternative investment. Oil fell for the first time in nine days after a disappointing report on U.S. housing starts. The shares of Russia’s biggest independent oil producer fell 1.3 percent to 1,923.23 rubles.

To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net.

Last Updated: October 20, 2009 22:00 EDT

Reuters: Russian markets -- Factors to Watch on Oct 21http://www.iii.co.uk/news/?type=afxnews&articleid=7584507&subject=markets&action=article

MOSCOW, Oct 21 (Reuters) - Here are events and news stories that could move Russian markets on Wednesday.

You can reach us on: +7 495 775 1242

STOCKS CALL (Contributions to moscow.newsroom@reuters.com):

Troika: The Russian equity market slipped in the last hour of trading yesterday on weakening oil price and disappointing U.S. economic statistics. We are opening our prices down 0.5-1.0 percent.

UralSib: We expect the market to open flat or slightly negative on slightly weaker oil, S&P futures and Asian markets this morning.

EVENTS (All times GMT):

MOSCOW - Russian President Dmitry Medvedev meets business lobby -0900. The lobby, RSPP, holds a conference on financial recovery and bankruptcy during the crisis. Top Kremlin aide on economics Arkady Dvorkovich and Economy Minister Elvira Nabiullina are also due to attend.

MOSCOW - Indian Foreign Minister S.M. Krishna meets Medvedev (1100) and Russian Foreign Minister Sergei Lavrov (1300).

MOSCOW - Two-day UBS business conference opens. Marcoeconomics, oil and gas, retail sectors represented.

MOSCOW - British-Russian Investment Forum RussiaTALK. Senior Kremlin economic aide Arkady Dvorkovich expected to participate.

MOSCOW - Tajik President Imomali Rakhmon in Moscow.

MOSCOW - Russian Finance Minister Alexei Kudrin will present a draft federal budget for 2010 at the Duma (1100).

MOSCOW - Oil and Gas transportation in the CIS and Caspian region 2009 Meeting (to Oct. 22).

MOSCOW - VTB, Russia's second-largest bank, to announce Q2 IFRS results -0600.

IN THE PAPERS:

Business daily Vedomosti reports that Russia's Economy Ministry suggests excluding amendments fixing the dominance threshold for retailers at 25 percent from the draft law.

Russian engineering firm Power Machines may get a 21 billion rouble ($715.5 million) contract to supply new turbines for the Sayano-Shushenskaya dam of RusHydro, Vedomosti reports.

TOP STORIES IN RUSSIA AND THE CIS: COMPANIES/MARKETS:

VW SAYS Q3 VERY GOOD, SEES DROP IN GERMANY 2010 JP MORGAN, INTERROS SET UP $1 BLN RUSSIAN FUND SVYAZINVEST BOARD APPROVES RESTRUCTURING SISTEMA MAY REDEEM $2 BLN LOAN BY YR-END SISTEMA: $300MLN SYNERGY IF MTS HAS ALL COMSTAR RUSHYDRO DELAYS NEW SHARE ISSUE FOR DAM TO 2011

MAGNIT SHARE SALE ROADSHOW STARTS OCT 21-SOURCES EVRAZ PRICES 20 BLN ROUBLE BOND AT 13.5 PCT SBERBANK NEEDS NO CAPITAL INCREASE -- C.BANKER ECONOMY/POLITICS: RUSSIA EXITS RECESSION, ROUBLE SETS NEW HIGHS RUSSIAN SOVEREIGN DEBT AT $38.1 BLN ON OCT 1 ENERGY: NORD STREAM GAS PIPELINE GETS DANISH CLEARANCE COMMODITIES: RUSSIAN BEET SUGAR REFINING UP 1.5 PCT ON YEAR

MARKETS CLOSE/LATEST:

RTS 1,446.1 +0.89 pctMSCI Russia 835.2 -0.20 pctMSCI Emerging Markets 965.8 -0.65 pct

Russia 30-year Eurobond yield: 5.513/5.476 pct

EMBI+ Russia 230 basis points over

Rouble/dollar 29.1911

Rouble/euro 43.7600

NYMEX crude $78.69 -$0.43ICE Brent crude $76.88 -$0.36

For Russian company news, double click on

Treasury news Corporate debtRussian stocks Russia country guideAll Russian news Scrolling stocks news

Emerging markets top news

Top deals European companies

Keywords: RUSSIA FACTORS/ (maria.kiselyova@reuters.com, +7 495 775 12 42, Reuters Messaging: maria.kiselyova.reuters.com@reuters.net)

RenCap: Russian weekly outlook - 21-27 Oct

http://www.businessneweurope.eu/dispatch_text10238

RencapOctober 21, 2009

Economic data due this week. We expect a quiet week, with September's Russian macro data having been released last week and yesterday (20 Oct). September's industrial production data were notable, showing a 9.5% YoY contraction vs the market's expectation of 12.1%. The drop was the smallest for 10 months, reflecting improvement in the domestic economy as it reacts to a pick-up in global demand. We attribute some of the sharp improvement to the base effect of weak car production in August and the substitution of capacity at Sayano-Shushenskaya. While the improvement is largely in line with our expectations, after a disappointing August we think the pace of recovery may be difficult to maintain in the months ahead.

Corporate events this week: In the real estate sector, LSR Group is set to report 1H09 results on 26 Oct. In the consumer and retail sector, X5 Retail Group will hold an analysts' day in Moscow on 23 Oct. In the transport sector, Aeroflot will release 1H09 results between 21-28 Oct (no firm date has been set for this). Among the banks, VTB is set to report 2Q09 IFRS results on 21 Oct.

Market-watch highlights: The MSCI Russia index outperformed the emerging-markets (EM) average last week, climbing 4.3% vs 2.1%; yet it underperformed the oil price, which had pushed north to $78.5/bbl by the week's end, climbing over 9%. The utilities, particularly OGK5 and OGK3, outperformed, and were the week's best performers on the MICEX, on the back of broker upgrades. Among Russian steel names, Evraz, our preferred play in the steel universe, added over 12%. Polyus Gold continued its strong run as the dollar weakened and the gold price consolidated around $1,050/oz. Banks generally underperformed last week as investors looked to fix profits. Sberbank lost 3.5% and VTB lost 8.9%. MICEX volumes picked up sharply last week to a daily average of $3.1bn, from $2.3bn the week before - significantly above the YtD average daily traded volume of $1.7bn. Risk levels remain subdued. EMBI spreads remain little changed from last week at 230, vs 299 for EM. CDS spreads on Russian five-year government debt continue to narrow, having fallen to 165 at the end of last week, from a high of 1,113 in October last year. In terms of fund flows, Russia-dedicated equity funds, for the week ending 14 Oct, saw inflows of $188mn (a 3% gain on the previous week). Russia's inflows, in percentage terms, remain robust in comparison with those of their BRIC peers. China saw inflows of $136mn (0.5%) last week, while Brazil and India saw inflows of $503mn (3%) and $186mn (0.9%), respectively.

Investment ideas: The MSCI Russia index is trading at round 12.5x reported earnings, representing around a 20% premium to its five-year average. This is, justifiably, making investors cautious at these levels, despite a benign backdrop to the Russian investment case. Last week we highlighted LUKOIL, which we regarded as positioned to capture some of the oil price rally. However, the stock only managed a 0.4% gain, suggesting the market is unwilling to commit and that, for investors, the risk of an oil price correction outweighs the upside potential. Indeed, with the oil price closing in on $80/bbl, we reiterate our recommendation to remain broadly underweight the Russian oil and gas

sector. Instead, we think it makes sense to look at names with upcoming catalysts, and that are plugged into the recovery of Russia's macro backdrop. Looking through the week, we think LSR Group's (BUY TP $9.00) 1H09 results, due on 26 Oct, will continue to attract attention to the name, which remains our preferred pick in the real estate universe.

Bloomberg: Polyus Gold Rated ‘Buy’ as BofA Merrill on Gold Reserves, Growth

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agrw5.N0X8LM

By Stephen Kirkland

Oct. 21 (Bloomberg) -- OAO Polyus Gold, Russia’s largest producer of the metal, was reinstated with a “buy” recommendation and price estimate of $34.40 at BofA Merrill Lynch Global Research on the outlook for earnings from its gold reserves.

“Polyus has the fifth-largest gold reserves globally,” the brokerage wrote in a report today. “New projects could add $1.7 billion to the top line by 2015.”

Last Updated: October 21, 2009 01:50 EDT

RenCap: RusHydro CEO: Ten years to recover Sayano-Shushenskaya repair cost

http://www.businessneweurope.eu/dispatch_text10238

RencapOctober 21, 2009

Event: RusHydro CFO Sergey Terebulin said in an interview with Reuters that RusHydro expects to recover the costs of repair at the Sayano-Shushenskaya hydro plant in around 10 years. According to Terebulin, the estimated repair cost of $1.4bn will be funded by the combination of a $200mn insurance payment, tariff increases, bank loans and an additional share issue. Elsewhere, RusHydro CEO Vasily Zubakin disclosed that a planned new share issue would be delayed at least until 2011. In the interim, he said, other financing sources would be utilised. Zubakin added that around RUB16bn ($550mn) of financing would be needed to fund repair costs in 2010.

Action: Neutral for RusHydro, supportive for InterRAO, in our view.

Rationale: We judge that in other circumstances, fully refurbished electricity generating capacity would be classified as new under market rules and would attract accelerated capacity payments, with pricing fully liberated from regulatory tariff constraints. However, in the situation in which RusHydro finds itself, with most of the output from Sayano-Shushenskaya sold to RusAl under what increasingly appear to be low-price contracts of indefinite duration, we see little prospect of this. The postponement of RusHydro's mooted additional share issue suggests to us that the sale of RusHydro's

OGK1 22% stake to InterRAO may be imminent, with the proceeds destined to be used for Sayano-Shushenskaya repairs.

Vladimir Sklyar

Offshore Shipping Online: Falcon ROV for Russian icebreakershttp://www.oilpubs.com/oso/article.asp?v1=8927

Vessel & ROV News - October 21, 2009

Two newly designed Russian icebreakers are sharing a Saab Seaeye Falcon ROV for pipeline operations in the Barents Sea.

Housed in a dedicated control container, the Falcon is passed between the ships as they undertake pipeline survey and inspection work, along with diving support tasks.

The specially designed container was created and manufactured by Tetis Pro, Saab Seaeye’s Russian distributor, and the largest company in Russia to specialise in the design, construction and supply of diving and subsea equipment.

The two new diesel-electric icebreakers, St Petersburg and Moscow, are built to an advanced hull design that improves seaworthiness in hostile sea-states and needs less power input during icebreaking operations.

The Falcon’s ability to work in demanding conditions and powerful currents, despite its compact size, is one of reasons why Tetis Pro chose this highly successful vehicle.

In addition to undertaking survey and inspection work, the Falcon supplied to the icebreakers is fitted with a detachable five-stage manipulator skid for light work tasks, along with preparing underwater cargo ready for lifting.

PRESS RELEASE: Wärtsilä Delivers Total Propulsion Package To Russian Shipyardhttp://www.easybourse.com/bourse/actualite/press-release-wartsila-delivers-total-propulsion-package-to-russian-shipyard-748032Publié le 21 octobre 2009Wärtsilä Corporation, Trade & Technical Press release, 21 October 2009 Wärtsilä, the marine industry's leading ship power systems integrator, has been awarded the contract to supply an integrated total electro-propulsion package for a Russian state owned ship. The package is to be installed in a Multipurpose Salvage Vessel (MPSV) being built by Russia's Nevsky shipbuilding and ship repair yard in Shlisselburg, close to St Petersburg. Wärtsilä's ability to supply integrated total propulsion was an important consideration for the shipyard when selecting the company as a partner for this project. Other important considerations for the shipyard were Wärtsilä's ability to meet the unique technical requirements of the vessel, and willingness to work closely with designers and the customer during equipment engineering. Wärtsilä will supply four 1370kW diesel

generator sets based on its well-established Wärtsilä 20 diesel engines, the main generators and the electro motors. The propulsion system is intended to generate enough propulsive power to deliver a service speed of 15 knots. This newbuilding has been contracted by the Nevsky shipbuilding and ship repair yard in accordance with an order placed by Federal State Enterprise "Gosmorspassluzhba". The design of the salvage vessel has been developed by the "Marine Engineering Bureau" of Odessa. When launched, it will be used for state marine pollution control, salvage and diving operations, offshore stand-by, and rescue services. The order was placed in August. The vessel's design is based around an overall hull length of 73m, a beam of 16.6m, and a design draught of 4.5m. It is scheduled to be delivered in November 2010, and will then join the "Gosmorspassluzhba" fleet. With a hold capacity of 98m3 and oil recovery capacity of 766m3, the 70t bollard pull vessel will be well equipped for providing technical support and assistance in hazardous operations, such as search, rescue and evacuation. The vessel's keel was laid in September, and the ship is being built to the classification requirements of the Russian Maritime Register of Shipping. The project is part of a state-funded programme to develop Russia's transport system over the next five years. Link to a picture can be found at the end of this release. Caption: The Multipurpose Salvage Vessel (MPSV) being built by Russia's Nevsky shipbuilding and ship repair yard will be equipped with an integrated total electro-propulsion package from Wärtsilä. Media contact: Ms Marit Holmlund-Sund Senior Manager, PR and Marketing Communications Wärtsilä Corporation Direct tel: +358 10 709 1439 Direct fax: +358 10 709 1425 e-mail: marit.holmlund-sund@wartsila.com Internet: www.wartsila.com Wärtsilä in brief Wärtsilä is a global leader in complete lifecycle power solutions for the marine and energy markets. By emphasising technological innovation and total efficiency, Wärtsilä maximises the environmental and economic performance of the vessels and power plants of its customers. In 2008, Wärtsilä's net sales totalled EUR 4.6 billion with 19,000 employees. The company has operations in 160 locations in 70 countries around the world. Wärtsilä is listed on the NASDAQ OMX Helsinki, Finland. www.wartsila.com This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement. http://hugin.info/131481/R/1348888/324820.jpg http://www.wartsila.com Copyright © Hugin AS 2009. All rights reserved. Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=FqNTrh%2BUclAcz4IyKu79dg%3D%3D. You can use t

Bloomberg: JPMorgan, Interros to Form $1 Billion Investment Firm (Update2)http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAkQCxCfo.QE

By Maria Kolesnikova and Alex Nicholson

Oct. 20 (Bloomberg) -- JPMorgan Chase & Co.’s private equity arm, One Equity Partners, and Russian billionaire Vladimir Potanin’s Interros Holding Co. plan to form a $1 billion investment company for Russian projects.

The partners will each contribute $500 million to invest in consumer products, manufacturing and services in the country, Interros said in a statement today. The firm

will also seek to raise a “significant” amount of new debt to refinance and inject capital into the investment projects, it said.

“We will have the chance to lift part of the burden of refinancing companies from the state banks,” Anton Cherny, deputy general director for investments, said on Interros’s blog. “We believe that this is the right strategy -- putting money into the Russian economy.”

Russia emerged from recession last quarter, Finance Minister Alexei Kudrin said today. The world’s largest energy exporter is benefiting from a revival in commodity demand that helped lift industrial output. Declines in factory production, which have extended for 11 months, dropped into single digits last month for the first time since the end of last year.

The fund will invest in at least three to four projects next year and is aiming to spread the money between a total of as many as 15, Cherny said. JPMorgan and Interros will avoid investments in “strategic sectors” of the Russian economy such as oil and gas production, mining or news media, he said.

Interros manages $12 billion in assets, ranging from metals and mining to media, real estate and tourism, it said. One Equity Partners manages $8 billion in direct private equity assets.

“We are also hoping to benefit from synergies which will arise from a combination of the successful experience of Interros’ investment activity in Russia and the high credentials and reputation of our partners,” Potanin, who is Interros’s president, said in the statement.

To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net, and Alex Nicholson in Moscow at anicholson6@bloomberg.net.

Last Updated: October 20, 2009 12:41 EDT

The Moscow Times: JPMorgan, Potanin Start $1Bln Fund http://www.themoscowtimes.com/business/article/jpmorgan-potanin-start-1bln-fund/387826.html

21 October 2009Reuters

Billionaire Vladimir Potanin and U.S. bank JPMorgan announced Tuesday that they are creating a $1 billion fund to invest in Russian companies and may attempt to take distressed assets off the hands of state banks.

Potanin’s Interros and JPMorgan investment fund One Equity Partners said in a joint statement that they would put $500 million each into the venture — the first significant Russia-focused fund since the start of the financial crisis.

The companies said the fund would invest in the consumer goods, manufacturing and services sectors, but a source close to Interros said it would avoid the country’s flagship industries of mining, oil and gas.

The source said the fund might try to bring some state-controlled firms back into private ownership, with debt financing on the agenda as well as growth capital. “The talk is … about a possibility to lift part of the company credit burden from the state banks’ shoulders. … There is an agreement that JPMorgan bank will help us secure debt financing,” the source said.

The source added that $300 million would be about the maximum spent on a single transaction, and that some projects were already in the works.

“This is an exciting time to invest in Russia alongside an experienced … partner,” said Michael Gregory O’Hara, a senior partner at One Equity Partners, adding the fund would provide growth capital and equity as well as debt relief.

Reuters: Russia's MMK says Q3 output rises 31 pct from Q2http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSLL69491420091021

Wed Oct 21, 2009 2:23am EDT

MOSCOW, Oct 21 (Reuters) - Russia's Magnitogorsk Iron and Steel Works (MAGN.MM: Quote, Profile, Research, Stock Buzz) produced 31 percent more steel in the third quarter than in the second, the company said on Wednesday.

Magnitogorsk, Russia's third-largest steel producer, said in a statement third-quarter crude steel output was 2.83 million tonnes, compared with 2.16 million tonnes in the second quarter.

Output of finished products rose 36 percent in the same period to 2.60 million tonnes in the second quarter.

Russian steel makers have seen production rebound in the third quarter as demand returns to levels close to those seen before the financial crisis.

Citi: Audit Chamber to review compliance of banks that received state support

http://www.businessneweurope.eu/dispatch_text10238

CitiOctober 21, 2009

The Audit Chamber will examine whether Russian banks that received state support have cut lending rates, Kommersant reports, quoting the head of the chamber Sergei Stepashin. The government requires banks to channel the state support funds to the real economy at interest rates not exceeding the refinancing rate plus 3%.

In accordance with the plan outlined last year, the Audit Chamber has already inspected Alfa Bank, Nomos-bank and Gazprombank and no violations were reported. Moreover, we believe that state-owned Sberbank and VTB fully comply with the requirements as they are an integral part of the state policy to boost lending. Both banks have lowered lending rates and interest rates on half of Sberbank's loan portfolio do not exceed 13%. We believe the audit is aimed at monitoring the situation and should not result in penalties. Further rate reductions will depend on the overall economic conditions including inflation and the speed of recovery.Simon Nellis

Reuters: UPDATE 1-Russia's VTB posts Q2 loss, beats forecastshttp://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSLL69664320091021

Wed Oct 21, 2009 2:34am EDT

* Q2 loss came in at 11 bln roubles, vs 17 bln forecasts

* Says expects signs of improvement in second half

(Adds detail)

MOSCOW, Oct 21 (Reuters) - VTB (VTBR.MM: Quote, Profile, Research, Stock Buzz), Russia's second biggest lender, beat analyst expectations with a net loss of 11.0 billion roubles ($374.8 million) in the second quarter of 2009, while signalling the worst is over.

"In the second half of the year, we expect to see signs of improvement and the benefits of a reinforced capital base... we believe we have now passed the lowest point of the economic cycle," VTB Chairman Andrei Kostin said in a statement on Wednesday.

Analysts had expected state-controlled VTB to post a net loss of 17.1 billion roubles in the second quarter and 38 billion roubles for the first six months as provisions for bad loans rose.

VTB said net losses for the half year totalled 31.5 billion.

Allowance for loan impairments was up to 6.9 percent of the gross loan portfolio by the end of the first half of 2009, from 3.6 percent at the end of 2008, VTB said.

(Reporting by Dmitry Sergeyev, Editing by John Bowker)

Russia Today: VTB posts 1H 2009 Net Loss of 31.5 billion Roubleshttp://russiatoday.com/Business/2009-10-21/vtb-posts-1h-2009.html/print

21 October, 2009, 11:10

Russia’s second largest bank, VTB, has posted a 1H 2009 Net Loss of 31.5 billion Roubles under IFRS.

The bottom line compares with a 16.3 billion Rouble net profit for 1H 2008, despite customer deposits rising 41% half on half to 1.6 trillion Roubles, and total loans rising 3% half on half to 2.7 trillion Roubles.

VTB attributed the net result to loan provisions. During the half it charged 96.6 billion Roubles, or 6.9% of the loan portfolio, compared with 3.6% at the end of 2008. In the same half the share of overdue and rescheduled loans rose from 2.4% at the end of 2008 to 9.4% at the end of 1H 2009.

VTB noted that 2Q 2009 losses of 11 billion Roubles, were markedly lower than losses of 20.5 billion for 1Q 2009 as core income and foreign exchange and financial instrument gains buoyed the income statement.

VTB President and Chairman of the Management Board Andrei Kostin was upbeat about both the 1H 2009 results and the outlook, saying a rebounding economy will build strength into the capital and asset base of the bank, after the focus on risks during the economic downturn.

“Against a difficult economic backdrop, we continue to manage the business with a focus on costs and risk. In the second half of the year, we expect to see signs of improvement and the benefits of a reinforced capital base and, while there is still some uncertainty, we believe we have now passed the lowest point of the economic cycle.”  

VTB Capital: Siberian Cement attempts to recover USD 75mn from Italcementi

http://www.businessneweurope.eu/dispatch_text10238

VTB CapitalOctober 21, 2009

money transferred as advance payment for Turkish assets- deal canceled, money lost -legal prospects unclear-return of money can become positive surprise-no lose game

News: According to Kommersant, Siberian Cement has initiated a lawsuit in Turkish courts to recover the EUR 50mn advance payment (about USD 75mn) made to Italcementi to purchase Turkish assets. The deal was cancelled by Siberian Cement,

which led Italcementi to recognise the amount as a one-off gain. Our view: While the legal prospects of the suit are unclear, we note that this litigation is likely to be an almost no lose game for Siberian Cement, given that the sum in question was transferred to Italcementi back in 2008. Should Turkish courts rule in favour of Siberian Cement, this may become a positive surprise. Elena Sakhnova,

The Moscow Times: Svyazinvest OKs Rostelecom Merger http://www.themoscowtimes.com/business/article/svyazinvest-oks-rostelecom-merger/387836.html

21 October 2009By Irina Filatova

The board of state-controlled telecoms giant Svyazinvest on Tuesday approved a plan to merge its seven regional fixed-line operators with Rostelecom by May 2011, Svyazinvest said in a statement.

Svyazinvest executives expect the restructuring to bring synergies in excess of 30 billion rubles ($1 billion). The merger must also be approved at the board meetings of the subsidiaries of Svyazinvest that will be held next summer.

The company will carry out a share appraisal, which will help establish the share-swap rations of the regional companies, by 2010. And to boost the liquidity, the merged company, which will offer a full range of services including broadband, fixed-line and mobile, will list its shares on Russian and foreign stock exchanges, the statement said.

Communications and Press Minister Igor Shchyogolev said earlier this month that the government would consider privatizing the restructured company and listing its shares in 2012.

Shares in Rostelecom skyrocketed 20 percent on Monday in anticipation of the meeting, but fell 6 percent Tuesday in a correction.

It may be too early to judge whether Svyazinvest’s restructuring will create the market-dominating giant the government is hoping for, analysts said.

“Svyazinvest used to dominate the market. But the mergers of MTS and Comstar and VimpelCom and Golden Telecom created strong new rivals for Svyazinvest,” said Philip Townsend, an analyst at Metropol. “Either Svyazinvest must increase its prices for local calls or it has to get cheap loans from the government. Otherwise the restructuring of Svyazinvest will fail.”

Nevertheless, the integrated company will be able to create inroads in regional markets and will present an attractive opportunity for investors when shares are sold.

“There are currently no fixed-line telephone operators in Russia that are structured regionally. The restructured company will dominate the Russian market,” said Alexander Kazbegi from Renaissance Capital.

“But any restructuring brings certain risks. The managers of the restructured company will have to show its potential and to prove that it will create additional value for the shareholders,” Kazbegi said.

OCTOBER 21, 2009

High-Speed Rail Keeps Train Makers on Track http://online.wsj.com/article/SB10001424052748703790404574473534243457304.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

By PAUL GLADER

ST. PETERSBURG, Russia—As an engineer pulls the throttle, villagers track side gawk at the bullet-shaped train as it gathers speed. Soon, forests and wooden shacks are a blur as a dashboard display reads 250 kilometers an hour (155 miles per hour).

Ten years in the making, Russia's state-owned railway is testing eight aerodynamic trains that in December will rush travelers from here to Moscow in less than four hours. With fancy kitchens and leather seats in first class, the Sapsans (Russian for peregrine falcons) mark a change in Russia's egalitarian rail tradition.

More broadly, though, Russia's new trains mirror a global push in high-speed rail that spans from China to the U.S., an effort that is buffering Siemens AG, Hitachi Ltd., Bombardier Inc. and other industrial giants against the economic slump.

Global spending on trains, tracks and equipment is expected to reach €122 billion ($182 billion) this year, flat with last year, but up 18% from 2004, according to Unife, an international trade association. It projects that the figure will rise to €150 billion by 2016, propelled by stimulus projects and environmental concerns.

Rail spending "has a short-term effect on unemployment as well as a longer-term effect on economic growth," says Michael Clausecker, Unife's director general. Rail lines, he says, tend to anchor development of new towns, companies and jobs while increasing travel between cities.

A high-speed rail link between Madrid and Barcelona that opened last year has stolen former air travelers, cutting daily flights between the cities in half to 35. Spain plans to surpass Japan with the world's largest network of high-speed routes in 2010, and India and China plan to surpass Spain before long. France hopes to double its high-speed track to about 2,500 miles by 2020.

Denmark is shifting transportation funding from roads to public transportation, the bulk of which will be spent on rail.In the U.S., President Barack Obama has vowed to spend $13 billion over five years to build high-speed rail links between major cities., including $8 billion under the economic-stimulus plan

The spending is aiding the fortunes of train makers.

Bombardier's rail-division revenue in the quarter ended July 31 rose 5% from a year earlier to $2.55 billion while total company revenue was flat. The Canadian manufacturer recently reported a $190 million order for 30 tram-trains for Karlsruhe, Germany, and a $2 billion contract to send 80 Zefiro high-speed trains to China by 2014.

China "is making the strategic investments" to build a high-speed rail network and sustainable transportation system, says Jianwei Zhang, president of Bombardier China. The country wants to build "the most advanced rail network in the world."

Japan's Hitachi shipped six high-speed bullet trains to the U.K. this summer and plans to build rail cars there. Revenue for the unit that includes rail rose 19% for the fiscal year ended March 31, making the business one of Hitachi's strongest.

Alstom SA's transportation sales increased 3% to a record €5.69 billion for the year ended March 31 as its order backlog climbed 13% to €19.51 billion. The transportation division, which makes up roughly 30% of Alstom's business, received a boost in train orders from Italy and the U.K. recently. The company projects continued strong demand, citing stimulus packages in the U.S., France and elsewhere in Europe, says Chief Executive Patrick Kron.Patrick Kron. The French company in March formed a joint venture to develop products in Russia, the largest railway market in Europe with 85,000 kilometers of electrified track and 1.3 billion passengers a year.

And while General Electric Co.'s rail operation primarily makes locomotives for freight trains, executives plan to sell fuel-efficient locomotives for faster passenger railroads in the U.S., Mongolia, Kazakhstan and elsewhere. GE wants to sell Amtrak more engines that go as fast as 123 mph, replacing "20-year-old locomotive clunkers," says Stephan Koller, a spokesman for GE Transportation. Trains that are even faster are further on the horizon as they would require expensive track upgrades.

For the Sapsan project, Russian Railways spent nearly $1 billion for its eight Siemens Velaro trains. "The market is really developing," says Edzard Lübben, the company's vice president for high-speed trains, sales of which are growing around 8% a year. "That's a huge growth rate during these times."

The Sapsans will trim the Moscow-to-St. Petersburg trip to three hours and 45 minutes from 4½ hours, running about 60 mph below their capacity because of difficulties upgrading tracks. The trip is expected to cost about $100 one way, which is roughly the same as the average plane fare.

"It makes everything more convenient," by removing airport security lines and the need to travel between an airport and the center of town says Irina Darienko, a delivery-operations specialist for Alcatel-Lucent in Moscow.She travels to St. Petersburg about three times a year for work and plans to ride the new trains.

Russian Railways says its eight-hour "night trains" between Moscow and St. Petersburg will continue to offer service to budget travelers. The Sapsans will replace the faster trains that run during the day.

"I'm sure they'll push away aircraft," says Alexander Dumnich, a captain of the famous Red Arrow train, which was introduced by Joseph Stalin in 1931 and pressed into military service during World War II.

Alexei Daibov, an auditor with PricewaterhouseCoopers in St. Petersburg, is more skeptical. "I travel by plane," he says, expressing but he hopes a price war will lower the cost of plane tickets.

Write to Paul Glader at paul.glader@wsj.com

The Financial: Peugeot, Mitsubishi to start output in west Russia in 2010http://finchannel.com/news_flash/Oil_&_Auto/49873_Peugeot,_Mitsubishi_to_start_output_in_west_Russia_in_2010/

21/10/2009 10:24 (00:16 minutes ago)

The FINANCIAL -- According to RIA Novosti, the French Peugeot Citroen auto conglomerate and Japan's Mitsubishi will start the industrial assembly of cars in southwest Russia from March 2010, the CEO of the joint venture in Russia said on October 20.

Didier Alton told Russian Prime Minister Vladimir Putin during a visit to an exhibition on investment programs in the Kaluga Region that the plant's initial capacity would be 45,00 cars a year.

In 2012, the Kaluga Region facility will roll out 150,000 cars a year and subsequently plans to bring capacity up to 300,000 autos, he said.

Alton said that the alliance of Peugeot Citron and Mitsubishi was continuing its projects in Russia despite the ongoing economic crisis and subsequent difficulties, with total investment in the project expected to hit 470 million euros ($705 million).

Also on October 20, Volkswagen's subsidiary in Russia announced the launch of full-cycle production of cars in the city of Kaluga.

Reuters: UPDATE 2-Tele2 Q3 beats forecast, speeds up Russia launcheshttp://uk.reuters.com/article/rbssTechMediaTelecomNews/idUKLL68308720091021

Wed Oct 21, 2009 8:10am BST

* EBITDA 2.4 bln SEK vs mean forecast 2.3 bln SEK

* Says adds 1.1 million customers in Russia

* To speed up new launches in key Russian market (Adds detail, analyst comment, background)

By Simon Johnson and Helena Soderpalm

STOCKHOLM, Oct 21 (Reuters) - Swedish telecoms firm Tele2 (TEL2b.ST: Quote, Profile, Research) posted a slight increase in third-quarter profit on Wednesday and said expansion in its key Russian market was going well and would be speeded up.

Tele2 said it planned to launch in up to 14 new regions in Russia this year, higher than its original plan of 12.

"It is a very strong report. What is really good are the 1.1 million new Russian customers," said one analyst who declined to be identified. "Russia looks really strong. Sweden looks kind of weak, but in total it's a very good report. I would expect the share to go up a few percent on this."

With its home markets mature and competition in Western Europe tough, Tele2 has sold off a number of assets in recent years, including operations in the Czech Republic and Switzerland. Earlier this month Tele2 sold its French operations to Virgin Mobile for 575 million Swedish crowns ($83.15 million).[ID:nLG136842]

It has focused much of its effort on Russia, where the company has 20 new mobile licences. Seven new regional mobile operations were launched in the third quarter.

The company now has 13.3 million customers in Russia after adding 1.1 million in the July-Sept period. Tele2's target is to have 18-19 million subscribers by the end of 2011.

Much of the growth will come from the new regional operations and Chief Executive Harri Koponen said all 20 should be operational during the first half of 2010. "Tele2's future growth lies within our emerging market footprint, with a strong emphasis on Russia," he said.

The roll-out of new regions in Russia has gone "in line with or better than our own expectations, the company said.

Group earnings before interest, tax, depreciation and amortisation (EBITDA) were 2.4 billion Swedish crowns ($347 million) versus a mean forecast in a Reuters poll of 2.3 billion and 2.2 billion in the year earlier quarter.

In Sweden, where Tele2 has said it aimed to raise its market share among premium customers, the firm said it had added 107,000 new customers, nearly half of whom were in the higher-revenue segment. Net sales, however, were flat year-on-year and EBITDA was down.

The company has said it expects its EBITDA margin in Sweden will drop in 2010 due to higher customer acquisition costs.

In the Baltic states, the company said the environment continued to be tough and recovery will be very slow. ($1=6.915 Swedish Crown) (Editin

Reuters: COLUMN-Russia's foreign investment revival?

Jason Bushhttp://www.forbes.com/feeds/afx/2009/10/20/afx7021183.html

10.20.09, 11:57 AM EDT

By Jason Bush

MOSCOW, Oct 20 (Reuters) - Foreign investment into Russia is on the rebound. This month, the Russian government predicts the country will see a small net inflow of capital. That's a big turnaround compared to a few months ago, when capital was pouring out of Russia. But all is not well. Foreign direct investment remains depressed, with growing signs that direct investors are cooling towards the risky Russian market.

First the good news. With oil prices heading upwards, and tentative signs of economic recovery, recent months have seen increasing evidence of improving investor sentiment. On Oct. 19 Deputy Economy Minister Andrei Klepach predicted the country may see a small capital inflow this month, and no net outflow in the fourth quarter. That compares with a net capital outflow of $31.5 billion in the third quarter. In September, the net outflow was $6 billion, down from $16 billion in July.

This indicates that foreign investors are returning to Russia's capital markets, while Russian companies and banks are increasingly able to access international markets. But this improvement isn't necessarily great cause for celebration. The increase in foreign investment is largely being driven by bank lending and portfolio investment, which can easily go into reverse.

Short-term capital inflows to emerging markets are a double-edged sword. Russia's heavy dependence on them goes a long way to explain why its economy and financial markets

were so heavily impacted by the crisis. The Russian Central Bank is already concerned about the rise in foreign borrowing, and is mulling restrictions that would make it harder for Russian companies to borrow abroad.

What's even more troubling is how the improving sentiment of foreign banks and portfolio investors doesn't seem to be matched by foreign direct investors, whose investment is far more crucial for Russia's long-term growth. During the first half of 2009 (the most recent data) foreign direct investment into Russia totalled some $6.1 billion, a 45 percent fall compared with the same period in 2008. That decline was a lot steeper than overall foreign investment, which fell by 30.9 percent to $32.2 billion.

t may be too early, of course, to expect any significant recovery. But recently there is evidence that multinational investors are cooling towards Russia. On Oct. 16, French retailer Carrefour made the surprise announcement that it was withdrawing from Russia, just three months after opening its first store. Carrefour cited 'the absence of sufficient organic-growth prospects and acquisition opportunities in the short and medium term'.

It's clear that Carrefour, a relative late-comer to the Russian retail market, was disappointed by the failure of a planned acquisition of Seventh Continent, a Russian supermarket chain. But local media have speculated that bureaucratic obstacles also contributed to the decision. For example, Carrefour's Moscow store was unable to receive a licence to sell alcohol, costing it an estimated 15 percent in revenues.

Just three days later Swiss engineering firm ABB ( ABB - news - people ), announced 'an in-depth review of its Russian operations' referring to 'the challenges of doing business in Russia'. The company revealed that demand for its products had slumped by 50 percent in the first half of the year, as the Russian government slashes expenditure on infrastructure. ABB also hinted at other difficulties, referring to 'questionable practices' in the country, as well as tax audits by local authorities.

It's not exactly news that Russia is a challenging place to do business. And it's too soon to say whether these changes-of-heart represent a more general disillusionment on the part of major foreign companies.

What is obvious, though, is that the risk-reward calculus facing investors in Russia has changed dramatically since the onset of the economic crisis. Even though Russia's economy is returning to growth, nobody is predicting a rapid return to the hectic growth rates of 7-8 percent. Meanwhile, the legal and political risks remain as challenging as ever.

That should be a warning for Russia's government, which needs to address the serious flaws in Russia's climate for long-term investment. Without it, there's every risk that the recent revival in capital inflows simply marks the beginning of yet another boom-bust cycle.

(Edited by David Evans) http://blogs.reuters.com/jason-bush/ Keywords: COLUMN INVESTMENT/

(email: jason.bush@thomsonreuters.com)

Businessneweurope: Russia's first post-crisis IPOhttp://businessneweurope.eu/story1836/Russias_first_postcrisis_IPO

Ben Aris in Moscow October 21, 2009

One of Russia's leading commercial biotechnology companies, Human Stem Cells Institute (HSCI), will become Russia's first post-crisis IPO when it lists on the Micex stock exchange at the end of January.

It will also be a pacesetter, as it will become the first high-tech (not to mention Russia's first biotech) company to list, just as the Kremlin is throwing billions of dollars of resources into creating a high-tech sector pretty much from scratch.

Not that the company has had any help from the state. Founded in 2003 as a private enterprise, the company's bread-and-butter business is the extraction and storage of stem cells from the umbilical cord of newborn babies. A technology that has been around for about a decade, parents of newborn babies can choose to have the stem cells in their baby's umbilical cord stored in case they are needed for medical treatments in later life; umbilical cord stem cells are amongst the most dynamic and versatile the body will ever produce, as their main job is building babies.

In 2003, HSCI set up Gemabank to create this industry in Russia and already has some 7,500 clients (or about 60% of the market), revenues of some $5m for this year and is now actively expanding into the Russian regions, Ukraine and Kazakhstan. "It is a fast growing business and we are putting in 60% growth a year," says HSCI General Director Artur Isaev. "In more developed markets like Germany and the USA, this type of service has been around for five and 10 years respectively, and provide the service to about 2-3% of new parents, so we are expecting a 10-fold growth in this business in the next five years."

HSCI has already set the price range for the offering of about 20% of the companies stock at between RUB9 and RUB11 per share, which values the company at between RUB675m ($22m) and RUB825m ($28m). The shares will be listed on Micex's newly created "Innovative & Growing Companies" section, which is designed to help small-cap companies list, and the money raised will be ploughed back into development. Alor Invest is the manager and bookrunner for the offering.

The offer prices values HSCI's shares at about five times current revenues, which is on a par with peers in the West, however Isaev points out that these companies are operating

in saturated markets whereas HSCI is only just starting to develop a massive market.

The kicker to the company is that unlike its counterparts in the West, it also has three commercial products in development, based on its expertise in stem cell technologies: a gene therapy that promotes growth in the vascular system; another gene therapy that treats post-heart attack problems; and cellular treatment for rejuvenating aging skin aimed at the beauty products market. All three treatments are in the clinical trial phase now and if any of them prove to be a success, they could send the company's revenues through the roof.

Activity in the Oil and Gas sector (including regulatory)

Interfax: TNK-BP to invest $180 mln to develop Russkoye field in 2010http://www.interfax.com/3/524491/news.aspx

NOVY URENGOI. Oct 20 (Interfax) - TNK-BP (RTS: TNBP) will invest$180 million in development of the Russkoye field in 2010, the head ofthe Russkoye project, Sergei Biryukov, told journalists. He recalled that the TNK-BP board approved $400 million ininvestment to develop fields in Yamalo-Nenets autonomous district andnorthern Krasnoyarsk territory at a meeting on October 8. Russkoye willreceive the $180 million in 2010 and early 2011, he said. TNK-BP has already invested roughly $100 million in the Russkoyedevelopment. There are currently 10 wells at the field, including fourproduction wells. After several more wells are drilled next year andtheir results studied, work will begin on preparations for full-fledgeddevelopment, as well as confirmation of reserves. Seismic work indicatesthat there are promising oil deposits near the boundaries of the licenseterritory, he said. The company plans to test the steam-assisted gravity drainagetechnique at the field in 2010. It will also test experimental equipmentto lower oil viscosity directly in the well. If it is effective, thetechnology will be introduced at other fields. Full-fledged development of the field will depend on oiltransportation capacity from the field. TNK-BP has laid considerablehope on the comprehensive program for developing the Yamal Peninsula,which is expected to be approved in the first quarter next year. The government is also discussing the issue of transferring theVankor-Purpe pipeline, which currently belongs to Rosneft (RTS: ROSN),to Transneft (RTS: TRNF) and subsequently boosting capacity on thepipeline. Given that the transportation problem is solved, the active phaseof Russkoye's development would begin in 2011, formally coming on-stream

in 2014. Peak production of 7.5 million-10 million tonnes a year wouldbe reached in 2012-2020.

Your Oil and Gas News: Rospan May Invest $5 Billion into Yamalo-Nenets Autonomous District Increasing Gas Production Up to 15 Billion Cubic Meters a Yearhttp://www.youroilandgasnews.com/rospan+may+invest+$5+billion+into+yamalo-nenets+autonomous+district+increasing+gas+production+up+to+15+billion+cubic+meters+a+year_40400.html

Wednesday, Oct 21, 2009

The closed joint-stock company Rospan International, a subsidiary of TNK-BP producing gas in two areas in the Yamalo-Nenets Autonomous District, may invest $5 billion into the region for increasing its gas production up to 15 billion cubic meters a year, Dmitry Orlov, General Director of Rospan International, said to the press on Monday.

Currently, the capital investments of TNK-BP into the Rospan project vary in the range $60–120 million a year and run up to $100 million this year.

The producing potential of Rospan is approximately 15 billion cubic meters of gas a year. Actual production of gas hinges upon agreements with Gazprom for access to the Unified Gas Supply System of Russia.

“Investments will be substantial if we reach such agreements. The total sum runs up to $5 billion. These investments will be stretched over several years,” said Mr. Orlov and explained that investments will be made in several stages and take some five years.

In response to a question on the progress of negotiations with Gazprom for tying into the Unified Gas Supply System, Mr. Orlov noted that “there are some positive tendencies.”

In early September 2009, TNK-BP reported about reception of technical documentation for Rospan from Gazprom for construction of a tie-in to the trunk gas pipeline. To construct a gas pipeline from the field to the tie-in point, the company will also need technical specifications for crossing the infrastructure of third parties.

Rospan is planning to produce 2.3 billion cubic meter of gas this year and maintain the same level of gas production next year, said the General Director. Currently, the gas produced by Rospan is sold through a joint venture of the company with Mezhregiongaz, a 100% subsidiary of Gazprom.

According to Mr. Orlov, Rospan is satisfied with its cooperation with Mezhregiongaz and may somewhat increase its annual gas production in the framework of this cooperation this or next year even without access to the Unified Gas Supply System.

Rospan International is exploring and developing the Vostochno-Urengoisky and Novo-Urengoisky license areas in the Yamalo-Nenets Autonomous District. The processing capacity of the company amounts to 3.2 billion cubic meters of natural gas and 870,000 tons of gas condensate a year. In December 2004, the Rospan International’s reserves of category C1+C2 were estimated at 901 billion cubic meters of gas and 51.51 million tons of oil.

Source: TNK-BP

SmallCapNews: Matra Petroleum still waiting for final nod ahead of Sokolovskoe drillinghttp://www.smallcapnews.co.uk/article/Matra_Petroleum_still_waiting_for_final_nod_ahead_of_Sokolovskoe_drilling/7931.aspx

21 October 2009

Matra Petroleum which has been waiting for an interim generator to arrive on site at Well-13 on the Sokolovskoe field in Orenburg, Russia in order to get drilling underway, has announced that it has not arrived and in fact the rig has been now hooked up to the local electricity supply.

At the end of September the company reported that it was very close to being ready to drill but that an interim generator for the rig was being sourced by the contractor from another site.

Matra said the rig has been made ready for spud and the the only outstanding issues are a final inspection of the rig and electricity supply by local regulatory authorities.

Matra noted that while those final approvals are anticipated later this week the timing is outside the company's direct control.

Well-13 is targeting what is estimated at 65 million barrels of oil in the Sokolovskoe field.

Steel Guru: Bashneft sets up oil and gas production companyhttp://steelguru.com/news/index/2009/10/21/MTE3MDQ3/Bashneft_sets_up_oil_and_gas_production_company.html

Wednesday, 21 Oct 2009

Interfax reported that Bashneft has set up a 100% subsidiary Bashneft Production LLC.

A company official said "The goal of forming the production segment into a separate company is to raise the efficiency of product flow management in oil production. Bashneft will retain ownership of all licenses to oil and gas properties.

The new company was registered on October 15th.

AFK Sistema is currently in the process of forming the Bashkortostan energy company assets into a vertically integrated oil company. It has transferred the function of managing the assets to Bashneft.

Sistema acquired controlling stakes in Bashneft, Ufaneftechim, Novoil, Ufaorgsintez, Ufimsky NPZ and Bashkirnefteproduct.

(Sourced from Interfax)

EurActiv: Bulgaria ousted from Russia's South Stream pipe   http://www.euractiv.com/en/energy/bulgaria-ousted-russia-south-stream-pipe/article-186583

Published: Tuesday 20 October 2009   

Russia has obtained all the permits necessary to build its 'South Stream' gas pipeline through Turkish territorial waters, discarding Bulgaria as one of the project's transit countries, the Russian press writes today (20 October).

Taner Yildiz, Turkey's economy minister, has granted all the necessary authorisations for the South Stream project to run through Turkish territory, the Russian daily Kommersant writes. 

The event, which was hosted by Italian Economy Minister Claudio Scajola in Milan on Friday (19 October), eliminated Bulgaria as a transit country for the Gazprom-favoured pipeline, the daily writes. Bulgaria was also evicted from the Burgas-Alexandroupolis oil pipeline project, the newspaper adds. 

Milan 'intrigue' 

There was "intrigue" at the Milan meeting, Kommersant writes. Officially, Russia came to discuss its possible involvement in the Samsun-Ceihan oil pipeline project, which is designed to bring crude from a Turkish Black Sea terminal in Samsun to the Turkish Mediterranean oil terminal in Ceihan, bypassing the Bosporus. Kommersant writes that the Turkish-Italian project came under scrutiny, as until now Russia had not shown an interest in it. In such circumstances, there was not enough oil to fill the pipe, the daily explains. 

In fact, Russian negotiators were not as interested in the Samsun-Ceihan pipe as they were in securing Turkey's blessing to build the South Stream pipeline through Turkish territorial waters. The move would also help bypass Ukrainian territorial waters, one of Russia's aims with South Stream (EurActiv 21/08/09). 

In this context, Russia apparently suddenly became interested in Samsun-Ceihan, abandoning earlier plans to build the Burgas-Alexandroupolis oil pipeline, which would bring crude from the Bulgarian port city of Burgas to the Greek port of Alexandroupolis in the Aegean. 

By eliminating Bulgaria both from the gas and oil pipelines, Russian Prime Minister Vladimir Putin gave a clear answer to new Bulgarian Prime Minister Boyko Borissov, who recently told him that his government "needed time" to decide on major energy projects with Russian participation (EurActiv 02/09/09). This statement, according to Kommmersant, infuriated Putin. The Russian daily adds that the result of the Milan meeting will be "good for all sides except Bulgaria". 

The Burgas-Alexandrupolis pipe would be much shorter than Samsun-Ceihan, but seven years of procrastination by Bulgaria over the project was too much for Putin, the daily writes. 

Dnevnik, EurActiv's partner in Bulgaria, writes that the Burgas-Alexandroupolis pipe lacks popular support due to environmental concerns. Mayor of Burgas Dimitar Nikolov recently declared that "the city doesn't want the pipeline". 

Russian President Dmitry Medvedev thanked his Turkish counterpart Abdullah  Gül for the Milan deal, the Kremlin website wrote yesterday. 

OCTOBER 21, 2009

WSJ: Russian Pipelines Win Key Approvals http://online.wsj.com/article/SB125605250259596613.html

By JACOB GRONHOLT-PEDERSEN

MOSCOW -- Russia moved a step closer to realizing its two major export-gas pipeline projects under the Baltic and Black seas to Europe after receiving long-awaited approvals from Denmark and Turkey.

Denmark gave the green light Tuesday to construct the Nord Stream in its section of the Baltic Sea, becoming the first country to clear the project.

Countries bordering the Baltic Sea have worried that the pipeline would pose a threat to the environment, but Russia has said it expects the remaining countries -- Finland and Sweden -- to approve the project by year-end.

Russia's attempt to push through the second pipeline -- the South Stream pipeline under the Black Sea -- has proved more difficult. But after Turkey approved the project

Monday, Russia expects a feasibility study to be finished at the beginning of 2010, with construction likely to begin by year-end.

The pipeline is to supply gas from the Black Sea's Russian coast to a distribution point in Bulgaria.

Russia seeks to cement its role as Europe's main energy supplier by building the two gas-export routes bypassing countries like Ukraine and Belarus that it considers potentially troublesome.

Europe depends on Russia for about a quarter of its gas needs, and critics have said the new pipeline projects will increase Europe's dependence on Russia -- the world's biggest energy exporter. Confidence in the country as a reliable supplier has fallen since supplies to Europe were cut off in January during a pricing dispute with Ukraine, Russia's main transit route to Europe.

Russia on Tuesday also gained final approval from Serbia, a transit country for South Stream, during a visit to Belgrade by Russian President Dmitry Medvedev.

Last year, Russia's state-controlled gas monopoly OAO Gazprom bought Serbia's major oil and gas assets and agreed to route its South Stream gas pipeline through Serbia.

South Stream now appears closer to realization than the rival European Union-backed Nabucco pipeline project, due to ship Central Asian and Middle Eastern gas to Europe via Turkey -- and avoiding Russia. Nabucco, however, faces problems securing supplies from the region.

The willingness of individual EU members to expand energy ties with Moscow comes despite concerns in Brussels about growing dependence on Russian gas.

The Nord Stream pipeline was agreed between Russian Prime Minister Vladimir Putin and former German Chancellor Gerhard Schröder, who now heads the company behind the pipeline. German energy companies BASF AG and E.On AG are partners in the project.

Italian Prime Minister Silvio Berlusconi, meanwhile, is a strong supporter of the South Stream pipeline, which has ENI SpA as a partner.

EurActiv: Regulator: Renewed gas crisis 'likely'   http://www.euractiv.com/en/energy/regulator-renewed-gas-crisis/article-186570

Published: Tuesday 20 October 2009   

The likelihood of renewed gas supply disruptions in Europe this winter has serious implications for the image of gas in the long run, Walter Boltz, chair of Austrian energy regulator E-Control, told EurActiv in an interview.Walter Boltz is chairman of Austrian Energy Regulator E-Control. He chairs the Gas Working Group (GWG) of the European energy regulators (CEER/ERGEG).

He was speaking to Susanna Ala-Kurikka.

As the chairman of the CEER/ERGEG Gas Working Group, you have been busy compiling recommendations in the aftermath of January's Ukraine-Russia gas crisis on how the EU can avoid similar situations in the future. Where did things go wrong?

One of the conclusions in analysing the gas crisis was that more coordination between TSOs [transmission system operators] would have enabled a faster response: that the level of preparedness in different countries was very different. Some countries managed reasonably well the total fall of Russian imports, other countries had huge difficulties, and that had to do with being prepared, having gas in storage, having given thought to how to handle that.

And that some of the pipelines were not able to adapt quickly to different flow directions. This was unfortunate, because Europe as a whole did not have insufficient gas: there was enough gas in Europe. It was just difficult to get it from where it was, which was North and Western Europe, to where it was needed, which was in South East Europe.

Those basically were the problems. And maybe finally that countries had started to act unilaterally, which made it even more difficult for one country to help another, because if every country tries to keep the gas it has in its own territory, then it's very difficult to send gas to where it might be needed.

Where are we now in terms of what has been done to secure Europe's gas supply and what remains to be done?

First of all, a lot of pressure was put on the TSOs to do a counter-flow study. The results are out now, and it's clear that it costs very little to make major pipelines technically able to transport in the opposite direction.

This is a very important step in increasing security of supply and making the system more flexible. Because that was obvious, the European Union has already committed some money from the recovery funds to finance some projects in Central and Eastern Europe, where TSOs might have more difficulty getting the necessary investment going.

So the investment project has already started in several countries. Not all of the investment will be done by this winter. Some of them will probably be concluded, others will take another year to do, because sometimes it's a little bit more difficult to do it in

some cases. But basically most of the counter-flow capability in the region in South East Europe will be implemented.

So that's one thing. The other thing is that the European Commission has now tabled the Security of Supply Regulation, which mostly draws on the conclusions of the gas crisis and tries to address the issues that are of relevance here. That is, it would oblige countries to prepare a plan for handling emergencies, it would oblige them to coordinate the plan with neighbouring countries, it would try to get a similar approach implemented on who the vulnerable customers are.

It offers flexibility at national level, but still there are some basic guidelines that each country has to define: which are my vulnerable customers, which I am not going to disconnect, and therefore should include household customers, but maybe also power plants that produce heat, or district heating, or industries that are crucial to feeding the population.

So that has to be defined. And there is a mechanism to ensure that there has to be a certain amount of coordination between countries. It would prohibit unilateral measures, so it would prohibit one country from saying: "I block all my borders, I don't let any gas out of the country even if that hurts the neighbouring country."

There has been some discussion now, some member states are objecting to the regulation, but there's not that much resistance because I think it's pretty obvious that you should have these things implemented quickly and that requires a regulation, because if it's a directive, we have after it's approved another 18 months before it's implemented. And some countries would probably - as we've seen in other areas - implement it slightly differently, which then gives rise to infringement procedures. I mean, it's a long way before you have a common legal basis for it.

It also includes certain solidarity actions, so if a certain threshold of import fall happens, then the European Commission would be able to organise some solidarity measures. That's basically the package.

I think what has happened in the meantime is that all countries have started to prepare, irrespective of these kind of technical EU developments, for a new crisis. So I guess if we were to have another disruption this winter, we would probably be able to handle it much better than last time.

How big a risk do you see for a renewed crisis this winter?

The basic situation between Ukraine and Russia has not improved a lot. The acute tension is maybe a little bit less but not much less, and the payment problem comes up every month.

It actually gets worse because Russia has paid in advance for all of the transit this year, sometimes beginning of the year, so they basically give liquidity assistance to the Ukrainians to move the gas.

Of course, the further the year progresses, the fewer of these reserves they have. So I think it's probably as likely as last year.

What might make both parties think again before they start such a controversial fight again is that gas prices have declined, consumption has declined. Gazprom has suffered quite a bit of reduced sales to Europe. They have probably in the first half of the year sold 40% less gas than the year before, which is a lot. And if you multiply that with the lower prices, I mean, Gazprom has a huge reduction in revenue from gas exports – and of course the Russian state as well – so they are probably sensitive to potential further problems.

I think the political situation, having elections in Ukraine in January, is not much better than one year ago. I would hope that people are restraining themselves and keeping emotions down, but especially before an election, God knows what will happen.

The Ukrainian economic situation is even worse than one year ago. There was the IMF emergency loan. The overall economic situation has deteriorated.

So overall I would say there is a fair chance that something similar might happen. I think it's totally impossible to predict if it will happen or not. I think different from last time, people are somewhat more aware of the negative consequences it might have, because last time I think some people involved in the controversy did not really assess how critical this would become, how serious the image of gas would be hurt in Europe.

What gas companies are telling us is that it's very difficult to sell nowadays gas applications to new customers. Very few people want to switch to gas because they still have this lingering memory that gas could be cut off.

That of course is very bad because gas has been living off its reliable supply image and environmental friendliness, and the reliable supply image is now gone. It will take, I don't know, five, six, seven years before people start to forget about it. Sure enough, if in the next five, six years nothing happens then gas will regain its image but not that quickly.

So I think that it is a serious risk for the whole gas industry if you jeopardise this reliability image once again. There could be a very strong move away from gas although logically from an industrial perspective, gas should have even more application than now, but if the image of being the reliable source of energy is proven to be totally wrong with yet another gas crisis, eventually people will just say, "I would love to use gas but it's not reliable enough so I'll stop using it."

Hard to say, but I think we should work on the assumption that it can happen.

Are there any reasons for optimism?

The advantage is that due to the economic crisis, we have less consumption, we are basically oversupplied heavily by LNG so technically there is much less of a problem than last year.

Today, all the storages are already in summer totally full. Normally they are only at 80% in Europe, but now they are almost 100% full.

And there is a huge oversupply of LNG available so we could very easily supply all of Europe from LNG in storage for quite a while. Of course, we would still have some transportation problems to get the gas to places, but some of the transportation bottlenecks have been identified and people know better how to deal with them.

A simple thing in Greece - because we are sitting here in Greece - Greece has an LNG terminal which was only built for smaller tankers, but during the gas crisis they found that they can also unload bigger ships. So now they know.

So if the crisis comes again, they can relatively quickly turn around the pipeline to Bulgaria and unload relatively big ships and pump LNG. So some things have improved at operational level.

The deal between Russia and Ukraine eliminated the intermediary company that buys gas in advance and stocks it for sale during the winter. What consequences does this have?

I think between Russia and Ukraine, it has not caused any problems. It has caused some problems between Russia and Poland, because Poland was receiving gas from Ukraine through this intermediary. I don't know what the status is now, but until very recently, there was no shipment of gas through Ukraine to Poland, because the intermediary says, "we have the contract, but we don't have any gas," so there's no solution to that.

But for Poland it's a relatively minor import volume so it's not a big thing for the Polish gas market. Otherwise, for the main gas transit, this has not caused too many problems.

The deal now is that Ukraine must pay in monthly installments, so every 6th or 7th of the following month, the bill from last month has to be paid. So far, Ukraine has always somehow managed to put together the money for it. 

But if you have read the financial papers recently, Naftogaz had to reschedule a 500-million-dollar bond which matured at the end of September, and it has defaulted on the bond, and I think they are now discussing with the bond holders how to restructure the bond.

This shows how tight the financial situation of Naftogaz is. Basically, they didn't start six months before but let it run very late, only then they hired investment banks to look

at how to restructure this bond but didn't manage it. I think the bond holders have agreed to hold back now any bankruptcy procedures.

I mean, this is a very, very tight liquidity situation for Naftogaz, so it will continue to be pretty tight. So the question always is – people are looking very carefully at Ukraine – is it possible to pay the next month's installment? So far they have managed, but that could change.

What is also important is that the Ukrainian gas transport system is not built in a way that you could take gas from Russia and transit it through Ukraine to Europe. It was built in a way that gas from Russia is put into storage in summer, and in winter it's taken out of storage and pumped to Western Europe.

So if Ukraine doesn't have sufficient storage levels, it will not be able to supply Europe in winter.

Now, how much storage they have is a state secret in Ukraine, so nobody knows how much storage they have. The Russians claim they don't have enough storage. I'm not in a position to know that, but it's not that you could detach transit from national consumption. It's interlinked.

When it was built, the system was part of the Soviet Union, so they said "we pump gas from the North into storage closer to Europe and when the winter comes, we supply Eastern Ukraine from Russia and this gas is pumped from Ukraine to Europe".

So if there's nothing in storage or not enough in storage then there's a problem. Currently, people keep their fingers crossed every month and so far nothing has happened.

Are you happy with the European Commission's proposal for a security of gas supply regulation?

We think it's a good proposal. It has all the elements that are necessary and possible. We have sent some comments to the Commission and to the Parliament but only minor things – some definitions probably need to be more precise, there are a couple of details that we would like to organise in a different way. But overall we think it's a good proposal and the regulators support it.

But you mentioned that some member states were less happy.

I think some member states are more on the fundamental level opposed to this being a regulation because it is directly applicable. And somehow member states have the feeling that the Commission wants to keep control of their energy laws and therefore they want to take the EU directive and transpose it into national law.

Since the member states have very often not done a very good job of doing so, I think there is a good case to have this as a regulation. We'll see what the Council and the Parliament finally decide.

I think that given the urgency and the natural delay that a directive would result in – this takes basically two years minimum before it is properly implemented everywhere – I think a directly applicable regulation is much better. And I hope that the Commission and the other member states can convince those states opposing that.

I don't think they have a real factual argument. It's more this emotional thing, "we don't want anyone messing around in our national laws or as little as possible, so we want to be able to jiggle around and implement it ourselves". 

But I think in this case the logic calls for a directly applicable regulation.

What role do you think gas hubs can play in securing gas supplies to Europe?

The problem is that we have a lot of long-term contracts in Europe and they're really out of money right now, because the long-term contract prices are twice the short-term spot market prices.

That means quite a big revolution for gas companies because we haven't had a situation with such a huge oversupply and such big price differentials since probably thirty or forty years ago.

I think it does show that the idea of having a very rigid long-term pricing mechanism for gas is not a good idea if you have fluctuating demand. If you have a very stable long-term demand development like we had in the past, then it's also a credible approach. But if you don't have that – and now it's the situation with the economic crisis and other changes – it is very typical that supply and demand are out of balance. 

Normally prices are there to balance supply and demand so if there is oversupply, prices drop and more people use gas, and they soak up gas. Now, if the long-term gas price remains high, then you do not motivate people, power stations and industry to use more gas.

So we have now this split market. In those countries where there is easy access to LNG, spot prices are very low and in those areas where it's not so easy to get LNG to the market due to transportation problems, contractual congestions and so on, you have a much higher price for gas and therefore you don't have a tool to increase consumption.

I think today for the first time companies realise that the long-term contracts they have defended for many years could be also averse, because they oblige [them] to buy a lot of gas for a very high price.

But of course the big customers – not the small customers because they don't know so much about that and it's not such a liquid and transparent situation – they know very well that the spot prices are extremely low. And I think that those countries that have not set the transport regime in a way that it is easy to get gas to their territory are paying the price for it now because they have to pay more for gas than otherwise.

In the second half of this year, I think we will see quite a number of companies running into problems. Because consumption is low, the storage is full, it is not so easy to offload the gas that they have contracted with Algeria, Russia and Norway.

It remains to be seen how flexible the various producers are in allowing to stretch the delivery of the gas volumes or to what extent they say, "we need the cash and we want it now, we don't care what you do with the gas".

Gazprom has just reduced the investment programme quite a bit, but the problem is that the investment in the North, in the Arctic, you cannot stop it, because if you do, all the investment is stranded because the equipment is ruined if you don't keep it functional, running, warm and so on.

In the desert you can basically turn off a well and in many cases next year it will still run with relatively little new investment, but not in the Arctic. There you need to keep it running before it's totally spoiled and you need to start from scratch. 

So they cannot reduce it to zero and I think they are struggling to finance these exploration projects. I think it's an interesting market situation for the next six to twelve months.  

Gazprom

Reuters: UAE's Taqa, partners to invest 800 mln euros in gas dealhttp://uk.reuters.com/article/idUKLL71248720091021

Wed Oct 21, 2009 8:21am BST

ABU DHABI, Oct 21 (Reuters) - Abu Dhabi National Energy Co TAQA.AD (Taqa) said on Wednesday it had agreed with partners to invest 800 million euros ($1.20 billion) to jointly develop a gas storage project in the Netherlands with Russia's Gazprom (GAZP.MM: Quote, Profile, Research).

It follows a memorandum of understanding between the companies signed in December last year. [ID:nL5387991]

"The Bergemeer Gas Storage Consortium will invest 800 million euros in teh construction and design of teyh gas storage facility between 2009 and 2013," Taqa said in a statement on the Abu Dhabi bourse website.

Gazprom will provide cushion gas for the project, which is necessary to ensure the reservoir has optimal pressure to start storage activities, in exchange for working capacity and a participating interest in the operator of the facility.

Taqa is working on the Bergermeer project with developers Dyas, Energie Beheer Nederland and Petro-Canada.

They aim to use a depleted gas reservoir north of Amsterdam for storage with a working volume of around 4 bcm and an extra 4.6 bcm of cushion gas to control the pressure.

(Reporting by Stanley Carvalho; writing by John Irish; editing by Amran Abocar)

Bergermeer spend set at $1.2bnhttp://www.upstreamonline.com/live/article196397.ece

By Upstream staff

The Bergermeer consortium partners and Russian giant Gazprom have signed off on an initial €800 million ($1.2 billion) spend for the Dutch project, set to become Europe's largest gas storage development.

In a statement released this morning, consortium operator Abu Dhabi National Energy Company (Taqa) said: “The Bergermeer gas storage consortium will invest €800 million in the construction and design of the gas storage facility between 2009 and 2013.

“Gazprom will provide a certain amount of cushion gas for injection into the Bergermeer reservoir and will receive working capacity and a participating interest in the technical operatorship of the facility.”

Taqa said it expects to receive all environmental and safety assessment permits for the project next year.

Work on the storage facility, in the Alkmaar region in the Netherlands, will start after the necessary permits have been granted. Commercial operations are due to start in 2013.

The Bergermeer storage scheme is intended to boost security of energy supply to Dutch and European customers and will have reserves equal to the annual gas consumption of about 1.6 million Dutch households.

The proposed 4.1 billion cubic metres of working gas volumes will also contribute to liquidity in North-west European gas markets.

Upstream earlier reported that Taqa set "beyond best-available-technology" as a standard for the project.

The gas treatment and compression facilities are being designed as a zero-emissions plant, which means there will be no emissions of hydrocarbons or carbon dioxide into the atmosphere.

Wednesday, 21 October, 2009, 07:41 GMT | last updated: Wednesday, 21 October, 2009, 08:21 GMT

Bloomberg: Aladdin to Start Russian Gas Output After Gazprom Network Dealhttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=aemQW.JHwLMs

By Anna Shiryaevskaya

Oct. 20 (Bloomberg) -- Aladdin Oil & Gas Co., an Oslo-based energy company, will start natural-gas production in Russia next month after reaching an agreement with OAO Gazprom, the gas pipeline monopoly, to use its network.

Aladdin signed a contract to sell 125,000 cubic meters of gas a day from the Middle Sediolskoye field in Komi, northern Russia, to Gazprom’s KomiRegionGaz unit, Chief Executive Officer Pal Nedrelid said in an interview last week. Aladdin holds the license to the field.

“We are now about to finalize the project,” Nedrelid said. “Our strategy is to connect existing discoveries to the same facilities.”

Independent gas producers in Russia are dependent on Gazprom for access to the national pipeline system. BP Plc’s TNK-BP Russian venture hasn’t yet been able to increase gas output at its Rospan project to a target of 15 billion cubic meters a year because of restrictions imposed by Gazprom, which also holds a monopoly on gas exports.

“At least it shows we had the right people on board to tackle these issues,” Nedrelid said. “There is also demand for local production in Komi.”

The agreement with KomiRegionGaz will last for five years, with volumes to be adjusted every quarter, he said.

Aladdin, which also has oil licenses in the Orenburg region, plans to produce a total of 2,650 barrels of oil equivalent a day in Russia next year, Nedrelid said.

The company has invested 375 million Norwegian kroner ($67.5 million) in Russia to date, Nedrelid said.

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

Last Updated: October 20, 2009 09:18 EDT

Upstreamonline: Shtokman gas headed for UShttp://www.upstreamonline.com/live/article196255.ece

Wire reports

Russian monopoly Gazprom plans to ship 80% to 90% of the fuel from its Shtokman project in the Arctic to North America as recovery of the world’s largest economy spurs energy use.

The company plans to sign 20-year contracts in the first half of next year to use gas-import terminals on the US Gulf and East coasts, said John Hattenberger, head of Gazprom’s energy-trading unit in Houston.

Shtokman will produce an estimated 1 billion cubic feet of LNG per day starting in 2014, followed by an additional 2 Bcfpd in about 2016 and 1 Bcfpd in 2018, he said.

“North America would be a key target market,” Hattenberger, president of Gazprom Marketing & Trading, said today in an interview at Bloomberg’s Houston bureau.

“If you take a long-term view of this, all the signals are there that say we need more gas.”

Gazprom’s LNG expansion is central to a plan to sell about 6 Bcf of gas per day in the world’s largest market for the heating and power-plant fuel within a decade.

Contracts for capacity at North American LNG terminals must be in place before Gazprom makes a final investment decision on the Shtokman project, Hattenberger said.

The company has a contract to import about 125 million cubic feet of gas per day from Sakhalin-2, at Sempra Energy’s Energia Costa Azul plant in Baja California, Mexico.

Gazprom, which holds 51 percent of Shtokman Development, operator of the project’s first phase, is looking to expand into LNG markets after relying on pipelines for decades.

The company is developing Shtokman, located in the Russian sector of the Barents Sea, jointly with Norwegian state-run StatoilHydro and French giant Total.

Gazprom began its own LNG production in the Russian Far East this year and plans to spend $45 billion on liquefying gas in the next 20 years.

It targets a 25% share of the world’s LNG market by 2020.

Gazprom Marketing & Trading, the Houston-based unit, will market Gazprom’s LNG, as well as gas it acquires from producers in the US.

The unit has 25 traders currently and plans to grow to 100 in five years, said Hattenberger.

US gas futures traded as low as $2.41 per million British thermal units last month, down from last year’s high of $13.69, as demand for the fuel slumped.

Some US LNG terminals stood idle much of this year as higher prices in other markets attracted cargoes.

Hattenberger said he sees US gas demand “roaring back” as the economy recovers. Restrictions on carbon emissions also will boost gas use because the fuel is clean-burning, he said.

Tuesday, 20 October, 2009, 19:25 GMT | last updated: Tuesday, 20 October, 2009, 19:25 GMT

RIA: Gazprom subsidiary, France's EDF agree on trans-Atlantic gas swaphttp://en.rian.ru/business/20091021/156537773.html

04:3321/10/2009

PARIS, October 21 (RIA Novosti) - Gazprom Marketing & Trading (GM&T), a subsidiary of the Russian energy giant Gazprom, and Electricite de France (EDF) have agreed to swap natural gas between the U.S. and European markets, the Russian company has said in a statement.

"Trading will deliver to Gazprom in the U.S. a quantity of 0.5 billion cubic meters of natural gas per year (about 50 million cubic feet per day) for the next five years. Gazprom will deliver to EDF Trading the same quantity of natural gas per year in the UK within the same time period," GM&T said on Tuesday.

"This agreement enables us to ramp up our U.S. operation and provides us with gas supplies in areas of strategic importance," the company's CEO, Vitaly Vasiliev, was quoted as saying.

Both companies said they plan to boost cooperation in the future.

Gazprom Marketing & Trading Limited is a UK-registered wholly-owned subsidiary of Gazprom, established in 1999. Headquartered in London, the company manages Gazprom's marketing and trading activities on European markets.

On October 1, 2009, GM&T announced the launch of its North American natural gas business.